Finance Secretary Carlos Dominguez III has recommended accelerating the implementation of the “Build, Build, Build” program and scaling up food production and its logistics chain as part of the five priority measures that the government needs to undertake to stimulate domestic consumption and get the economy back on track at the soonest.
Dominguez said President Duterte’s signature “Build, Build, Build” infrastructure modernization program is the “best driver of economic growth,” and, hence, should be restarted subject to compliance with minimum health standards, once the mobility restrictions are lifted and the coronavirus disease 2019 (COVID-19) outbreak is contained.
To reinvigorate consumer spending, Dominguez said the government should promote the manufacture of products that have “strong and inelastic demand,” notably by businesses involved in food production and logistics.
As part of these five “priority actions,” Dominguez said the government should also support the whole value chain of food production, including the establishment of food markets for efficient distribution—similar to the fruit and vegetable markets established decades ago in Japan—where farmers can directly sell their produce to consumers.
Completing Dominguez’s five-point program is his proposal on the mass hiring of contact tracers to boost the government’s efforts to stop the local transmission of COVID-19, while providing jobs; and the urgent passage of the Corporate Income Tax and Incentives Rationalization Act (CITIRA), which should now include “flexible tax and non-tax incentives” so that the government can better target specific investors that it wants to invest in the economy.
“We have to stimulate demand, and that's with ‘Build, Build, Build’ and push[ing] food production,” Dominguez said during the Monday night meeting of the Inter-Agency Task Force on the Management of Emerging Infectious Diseases (IATF) presided by President Duterte.
Dominguez pointed out that the infrastructure program “remains to be the best driver of economic growth because it has the best multiplier effects in terms of employment and shared prosperity.”
“The Duterte administration’s economic team and our legislators are finalizing an economic recovery program that will help us combat the pandemic and provide industries, especially micro, small, and medium enterprises (MSMEs), the assistance they need to get back on their feet and our fellow Filipinos back to work,” Dominguez said during the meeting.
A televised briefing of the May 11 IATF meeting was aired Tuesday morning.
But even before this economic recovery program is finalized, the government should take the lead in stimulating consumer demand to help businesses survive and keep the economy afloat.
Dominguez said it would be useless to provide relief to businesses if demand remains weak and consumers lack the means to buy their goods and services.
During the televised briefing, Dominguez asked the President’s support for the swift approval of the CITIRA bill, so that the Congress could pass it by June 3, or before the sine die adjournment of the Legislature.
The CITIRA bill was approved by the House of Representatives in September 2019, but remains pending in the Senate.
Enacting the CITIRA will attract foreign investors who want to relocate from other countries and are in search of resilient, high-growth-potential economies like the Philippines, Dominguez said.
The mass hiring of contact tracers, meanwhile, will help offset the impact of the estimated 1.2 million to 1.5 million job losses resulting from the economic fallout triggered by the COVID-19 pandemic.
“We need to hire enough contact tracers to match the numbers we expect that will come with more testing,” Dominguez said.
Dominguez remained optimistic that the economy can get back on its positive growth trajectory, even though first-quarter growth contracted by 0.2 percent, owing to the fact that the Philippines was the first country in Southeast Asia to impose strict community quarantine measures, in step with President Duterte’s priority goal of saving lives and protecting communities.
He said the Duterte administration must stay on course in continuing the bold reforms it has started to keep the economy resilient in the face of the global health emergency spawned by COVID-19.
Dominguez, pointed out, for instance, that the highly respected The Economist magazine ranked the Philippines sixth among 66 selected emerging economies in the world, and the best among those ranked from Southeast Asia, in terms of financial strength and economic resilience.
“This assessment shows that the country continues to enjoy the confidence of the international community, which will go a long way in bolstering our recovery efforts,” he said.
Dominguez said the President’s conservative economic policies and pursuit of economic reforms, such as tax reform, rice tariffication and the increases in so-called “sin” taxes, have kept the country’s financial position strong.
He said strengthening the country’s revenue flows from TRAIN (Tax Reform for Acceleration and Inclusion Act), followed by the “Sin” Tax adjustments, enabled the government to slowly bring down its debt to 39.6 percent of GDP, as of 2019. This is a significant improvement from the country’s 70 percent debt-to-GDP ratio in the past.
“This approach of saving for the rainy days has given us ample fiscal space to borrow money for programs to defeat COVID-19 and revive the economy,” Dominguez noted.
Under the Duterte administration, the Philippines was also able to secure a credit rating of ‘BBB+,’ the highest in the country’s history, which signals to the world that the Philippines is a “very worthy borrower.”
Dominguez said this, in turn, allows the government “to borrow more cheaply, and from a broader range of sources.”
Another notable reform is rice tariffication, which has allowed private traders to import rice, and thus, has continued to keep inflation, or the rate of price increases, “low and stable,” Dominguez said.
Inflation in April 2020 further eased to 2.2 percent, well within the target range of 2 to 4 percent.