By Chino S. Leyco
Finance Secretary Carlos G. Dominguez III said the Duterte administration is committed to fiscal discipline, noting the debt-watcher Moody’s Investors Service’s concern on the government’s revenue-raising capacity is now being addressed.
Dominguez also shrugged off Moody’s comment on the administration’s political issues, citing the continued strong investor confidence in the domestic economy despite the controversial programs of President Rodrigo R. Duterte.
The finance chief pointed out that the debt-watcher itself noted in its latest report that the Department of Finance’s (DOF) first tax reform law has already a “pronounced impact on the government’s revenue performance.”
He also cited Moody’s comment that the revenues from the Tax Reform for Acceleration and Inclusion Act (TRAIN) have “complemented faster implementation of infrastructure development.”
“Moody’s itself has virtually recognized that with President Duterte’s enactment of the TRAIN Law, the government has managed to put in place a steady revenue source for its ‘Build, Build, Build’ initiative, which will sustain the growth momentum and create a lot more jobs for Filipinos,” he said.
Within two years in office, Dominguez said the Duterte administration has significantly boosted the government’s revenue take through decisive tax reform and enhanced administrative efforts.
“The TRAIN – revenues from which help fund more big-ticket infrastructure and higher investments in human capital development – is proof of the political will and commitment to bring about a higher quality of life for Filipinos without compromising the government’s fiscal health,” he said.
“We duly recognize the benefits of maintaining a sound fiscal position as well as the adverse consequences of doing otherwise. Pursuing accelerated poverty reduction, widening of the middle class – while keeping the government’s finances healthy – is a strict policy of this administration,” he added.
With regards to Moody’s political concerns, Dominguez said that foreign direct investments (FDIs) continued to surge, citing the record $10-billion inflows in 2017.
Dominguez believes the robust FDIs proved that the political chatter emanating from “certain quarters has failed to dampen the interest of the international business community in the Philippines’ exciting growth narrative.”
Last Friday, Moody’s kept the Philippines’ “Baa2” rating and maintained the outlook at stable, citing “very positive credit features” owing to the economy’s strong growth momentum, ability to weather external headwinds, and improved fiscal strength.
The Baa2 rating is a step above minimum investment grade. The “stable” outlook indicates absence of material factors that can cause the rating to change, at least within the short term.
In its latest report on the Philippines, Moody’s said, “The credit strengths [of the Philippines] include a relatively large economy and high growth potential that support the economy’s capacity to absorb shocks.”
It added that, “large foreign exchange reserves and low economy-wide external debt contribute to macroeconomic stability.”
Moody’s also favorably cited the government’s tax reform, which is raising the government’s revenues and which provides support to its bold infrastructure development agenda.
Moody’s recognized that the Philippines’ credit profile, supported in part by a manageable debt level, “has a number of features which compare well” with those of economies assigned higher credit ratings.