Dominguez: We need to increase ‘horsepower’ of PHL economy

The Duterte administration’s policy of aggressive investments in both infrastructure and human capital development, which requires a manageable deficit spending strategy, is meant to increase the “horsepower” of the Philippine economy to enable it to operate at optimum capacity, according to Finance Secretary Carlos Dominguez III.

Dominguez said that instead of targeting a balanced budget, the government would resort to deficit spending to sustain high growth and remove “chokepoints” that continue to prevent the Philippine economy from reaching its full potential.

With the debt-to-GDP (gross domestic product) ratio steadily falling, Dominguez said the government on the Duterte watch will continue to maintain fiscal discipline in carrying out this deficit spending strategy.

“No, we will not have a balanced budget .... because we are a growing country, and we need to finance our growth, we need to finance our investments in infrastructure, we need to finance our investments in education, in defense,” Dominguez said during a recent Development Budget Coordination Committee (DBCC) briefing for lawmakers, in response to one solon`s query on whether the Duterte administration is targeting a balanced budget.

Dominguez said that to accomplish the Duterte administration’s goal of high and inclusive growth, the government would have to increase infrastructure spending from 2.2 percent of GDP in the past to up to 7 percent of GDP.

“Essentially, what we want to do is we want to increase the horsepower rating of our economy,” Dominguez said. “Right now, our economy is full of choke points that it cannot operate at full capacity, at the optimum capacity.”

He pointed out, for instance, that “we have a lot of traffic in Manila, we don`t have enough ports, we have a lot of delays in flights.”

“So our economy is being choked. In fact, my prediction is if we do not do any infrastructure, in five years` time we will choke to death,” Dominguez said.

To modernize the country’s infrastructure, Dominguez said revenue collections would have to be augmented with borrowings from both local and foreign sources.

He said the government’s fiscal standing is solid enough to enable it to borrow funds to finance its massive infrastructure buildup as he pointed out that the country’s total debt has now dropped to 42.1 percent of GDP from 70 percent in the past.

“So now, we are down to 42 percent, and we estimate that by 2022 we will be down to 38.6 percent of our GDP,” Dominguez said.

According to the Finance chief, the government expects tax revenues to grow by 12.7 percent in 2019 as the Bureaus of Internal Revenue (BIR) and of Customs (BOC) are expected to post collection growths of 13.1 percent and 11.3 percent, respectively.

Dominguez informed lawmakers that from January to June of this year, total revenue collection reached P1.41 trillion, which is 20 percent higher than the same period last year and exceeded the target by 8 percent or P105.7 billion.

He also assured lawmakers that the Philippines’ fiscal position remains strong, with revenues expected to be above target, the debt burden continuing its downtrend and the government’s spending program sustainable over the medium term.

To generate additional revenue streams that will enable the government to sustain its massive infrastructure buildup and increased spending on human capital development, Dominguez said the Duterte administration will push for the passage into law of the rest of the packages under its CTRP.