Finance Secretary Carlos Dominguez III said Friday the revival of private enterprises and consumer activity will propel the country to a sustainable recovery starting this year as he foresees encouraging prospects for the economy, especially with the negotiations for the purchase of COVID-19 vaccines and their delivery well underway.
Dominguez thanked both chambers of the Congress for ratifying on time two of the recovery measures that would both provide the private sector with the stimulus it needs to bounce back from the economic shock of the COVID-19 pandemic.
These are the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), which lowers the corporate income tax (CIT) and provides the government more flexibility in the grant of investment incentives to corporations; and the Financial Institutions Strategic Transfer (FIST) law, which was signed recently by President Duterte to let banks efficiently offload their bad loans and non-performing assets (NPAs) so they could lend more to pandemic-hit businesses.
These measures, along with the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) bill that aims to rescue strategically important companies with solvency woes, will complete the set of recovery measures needed to revitalize the private sector, Dominguez said.
While the economic team expects a strong gross domestic product (GDP) growth of 6.5 to 7.5 percent this year, Dominguez said the country cannot recover all that it had lost in 2020 in just one blow as “it will take us more years to nurse our economy to where it was before the pandemic struck.”
“However, the prospects for 2021 are encouraging. We have gone through the worst episodes of this pandemic. Medical science knows more about the virus. Vaccines are available. Public health protocols have been carefully studied. And we are ready to reopen the economy,” Dominguez said in this morning`s virtual Economic Forum hosted by the Manila Times.
Besides reinvigorating the private sector, Dominguez said the government will step up the implementation of its “Build, Build, Build” program, given that a large part of the 2021 national budget has been earmarked for infrastructure modernization, which will be “the cornerstone of our economic recovery.”
The wider rollout of this centerpiece program of the Duterte administration will be sustainably funded by revenue collections this year that are expected to dramatically improve with the digital transformation initiatives being undertaken by both the Bureaus of Internal Revenue (BIR) and of Customs (BOC), Dominguez said.
He said this set of stimulus measures being carried out by the government for the private sector to reenergize the economy is the more sustainable way for the country to recover from the pandemic.
“The present economic downturn cannot be fully confronted by throwing subsidies at everything in sight. This would only fuel inflation without driving expansion. It will bring us to a debt crisis farther down the road,” Dominguez said.
“The more sustainable path to recovery is to foster the revival of our enterprises and the restoration of consumer activity. A strong private sector is the key to our recovery strategy,” he added.
Alongside these economic recovery measures, Dominguez said the government is fast-tracking the rollout of its COVID-19 vaccination program to speed up the safe, full reopening of the economy.
The vaccine doses being procured are more than enough to inoculate 100 percent of the country’s adult population, which is approximately 70 million people out of the total of 110 million.
About 40 million of Filipinos who are of 18 years of age and below cannot yet be vaccinated according to medical experts.
Dominguez said the Philippines’ recovery will also hinge on developments in the global economy, which, if it remains sluggish, would pose headwinds to the country’s growth.
“Because of this, we have supported all efforts at building international solidarity both to defeat the virus and to revive the global economy. We are looking forward to all diplomatic initiatives to support a strong global economic recovery,” he said.
For instance, Dominguez said the Philippines’ membership in the Regional Comprehensive Economic Partnership (RCEP), which aims to deepen the engagement of Association of Southeast Asian Nations (ASEAN) member-economies with Australia, China, Japan, Korea and New Zealand, will help boost the country’s manufacturing and agriculture sectors.
RCEP will also benefit micro, small and medium enterprises (MSMEs) by integrating them into the global value chain through market access provided in goods and services, Dominguez added.
“With an open, fair and rules-based trading system, the RCEP will help restore business confidence and encourage more economic activity worldwide,” he said.
To complement the Philippines’ participation in the RCEP, Dominguez urged the Congress to pass “immediately doable” measures that aim to attract more foreign direct investments (FDIs) and help ensure the long-term recovery of our economy.
These include the proposed investor-friendly amendments to the Foreign Investment Act (FIA), the Public Service Act (PSA) and the Retail Trade Liberalization Act (RTLA), he said.
Being one of the countries most vulnerable to natural calamities, the Philippines would likewise have to ensure its sustainable growth over the long term by adopting climate-resilient and adaptation strategies, as well as by mobilizing investments in renewable energy, sustainable urban planning and climate-smart agriculture, Dominguez said.
“We also commit to deploy financial tools to build disaster resilience and climate adaptation from the household to the national levels,” he said.
The government can jumpstart its climate adaptation strategies by implementing a measure with immediate tangible benefits, which is the ban on single-use plastics, Dominguez said.
“As Chairperson-designate of the Climate Change Commission (CCC), I fully support the enactment of legislative measures banning single-use plastics,” he said.
“The Philippines is ranked as the world`s third-biggest plastics polluter in the oceans. The move to curb single-use plastics will be a crucial component in effective solid waste management and climate crisis action. Once passed, every Filipino, by not consuming plastics, is contributing to help save our environment,” he added.
He said the government will continue to dialogue with all stakeholders as it fine-tunes policies to encourage “the best conditions for our people and our environment to prosper.”
“The Duterte administration is doing its utmost to rebuild an inclusive, sustainable, greener, and healthier economy for the Filipino people,” he said.
Moreover, the Duterte administration is also committed to ensure that the country’s economic fundamentals remain strong and its fiscal resources sufficient and sustainable, Dominguez said.
Dominguez said the fiscally responsible policies of President Duterte and his push for tax reforms enabled the country to boost revenue collections, reduce its debt load to historic lows, reduce the poverty rate to a record 16.7 percent in 2018 or four years ahead of schedule, and finance his ambitious “Build, Build, Build” program.
These substantial gains, however, were nearly reversed by the pandemic. COVID-19 drastically increased the government’s financial requirements, but was swiftly addressed owing to the country’s strong fiscal position, Dominguez said.
Thus, he said, the government was able to swiftly deliver subsidies to vulnerable families and businesses, expand the country’s healthcare facility and undertake fiscal and monetary actions to keep the economy afloat and support recovery initiatives.
Dominguez said the government will maintain its policy of fiscal prudence, which has been well acknowledged by credit-rating agencies as shown by the Philippines’ high-investment-grade ratings despite the pandemic, and by foreign borrowers as demonstrated by the favorable terms of their loans.
“Through the darkest times of the pandemic last year, we were never under the illusion that this challenge will be short. We are prepared to fight a long battle, exercising prudence over the use of our fiscal resources,” Dominguez said.
“The worst we could do is to run out of water before the fire is out. We could, for instance, be administering vaccines for years until the virus is extinct. This is precisely the reason why I always emphasize the need to maintain fiscal prudence even as we try to stimulate the economy,” he added.
He reiterated his assurance that the government can easily fulfill its funding requirements this year on the back of the country’s healthy domestic liquidity situation, the availability of policy tools to sustain a low interest rate environment, and continued good access to official development assistance (ODA) and external commercial loans.