former BSP Deputy Governor Diwa C. Guinigundo As 2019 ends, we have witnessed three and a half years of governance by the Duterte admin­istration. The administration began with an 8, then a 10-Point Program, correctly focusing on what ails a lower-middle-income country like the Philippines. This is the large gap in infra­structure, both hard and soft. There used to be 75 flagship projects. However, several proj­ects were dropped, including Phase 2 of the Mindanao Railway Project, and the Bohol-Leyte Link Bridge. New projects were consid­ered for inclusion, including the New Manila International Air­port, the Cavite-Bataan Interlink Bridge, and the MRT 7. There have been quick wins, but infra projects were not ex­actly among them, so much so that Senator Frank Drilon has described “Build, Build, Build” as a “dismal failure.” As we indicated in a previous column, this should be taken as a challenge. The infra gap did not start in 2016, but much earlier when the republic was born after two de­structive wars in 1946. It is a tall order to expect catching up with a 70-year delay in three and a half, and even, in six years. First, the infra deficit is just too large to be shored up in one political term. Second, infra proj­ects take time to complete. Third, there is really no end to putting up infra for any country aspiring to achieve a more sustainable and more inclusive economy — much more, to be an upper middle-income country. As administrations begin, they each inherit shortfalls of its pre­decessor. The Duterte adminis­tration is not an exception. Much has fallen on its shoulders. This is a scourge of any new govern­ment. In its proper context, with previous decades in mind, one would objectively see that ini­tial progress has already been achieved in this area. Moreover, even completed projects need to be sustained and maintained as a perpetual gov­ernment agenda. The population grows. Centers of economic ac­tivities shift. Value chains change. Demands for new platforms of production and distribution emerge. New territorial frontiers are developed. These require basic transport and communication. Even infra for agriculture needs constant improvement as food should be made available. Failure to do this translates to lost op­portunities. As one travels abroad, the imperative of reinvention and self-renewal becomes even more obvious. On soft infra, the Duterte ad­ministration has made tertiary education free in state universi­ties and colleges. Recently, I wrote about the most recent results of the PISA tests where young Filipino stu­dents fared poorly according to metrics and standards set by PISA. In another column, we pointed out that this should spur us to actualize PISA’s finding that “poverty is not destiny.” This could be achieved by teaching our children to be cre­ative and critical. It is essential that technical education and skills development through TESDA are strengthened at a higher level of competency and international recognition. Against this backdrop of infra dynamics, what then can we ex­pect of economic growth in 2020? What can go wrong? What needs to be maintained and balanced to achieve robustness of the mac­roeconomy and sustainability of output? A repeat of the delay in the budget process would be tragic. 2019’s lower-than-projected-output performance following nearly two quarters of budget delay, serves as a graphic warn­ing of how important it is for the whole machinery of government to judiciously support, rather than delay, fiscal policy implementa­tion. Assuming the budget promptly goes through the mill — the bud­get bill is up for the President’s signature this month — any red tape to execute public works proj­ects should be nipped. The econ­omy is rac­ing against time. In this regard, Con­gress should be commended for a law extending the use of allo­cations in the 2019 ₱3.7-trillion budget to the end of December, 2020. To fund the republic, there should be some balancing be­tween tax administration and the package of new tax measures on one hand; and public borrowing, on the other. Government may take advantage of the current “peacetime,” to implement new taxes and collect taxes due. But please, there should be no mercy for tax evaders and smug­glers. No mercy too for those who appropriate public money as if it was their own. Sadly, populist bills in Con­gress are receiving more prior­ity than tax reform bills. While populist bills are more likely to win votes, tax reform bills can win greater growth, an “a-credit-rating,” and lower spreads for external loans. Any shortfall in revenues can be covered by public borrowing. While a higher deficit to GDP ra­tio of beyond 3 percent remains suitable for an emerging market trying to promote higher growth, or a current account shortfall beyond the usual rule of thumb, these numbers should be carefully weighed against a possible surge in public debt to GDP ratio. We do not want the marginal cost of borrowing either by the government or the private sector to unduly rise beyond what the economy can gain by a more ag­gressive fiscal stance. My previous columns have always stressed the importance of the Bangko Sentral’s (BSP) anti-inflation mandate. But we have also argued that monetary policy cannot push on a string. More li­quidity and lower policy rates have not seen any significant increase in credit. Rather, these have only resulted in marginal expansion in credit. In the last two years, 2020 there has been very little decline in lending rates for some banks, and for the rest, they have remained high. The liquidity released by the BSP follow­ing the reduction in required reserves has just actually ended up with the BSP term deposit facility. This being so, BSP should perhaps examine its macro- and micro-prudential poli­cies and their impact on bank lending dynamics beyond simple regulatory compliance. While harvesting low-hanging fruits, perhaps the National Economic Development Authority (NEDA) can insist on adherence to the long-term development plan of Ambisyon 2040. Internal consistency should be promoted at all cost. For example, it was reported that farmers are get­ting ₱219 million “to take care of (them) and provide ₱5 thousand to those who have one half to two hect­ares of farmlands.” This should be considered in relation to the plan to develop agriculture and make farm­ers more globally competitive. The cash transfer program should also be appreciated within the broader context of a comprehensive human capital development. Government has huge political capital. This must be strategi­cally used rather than dissipated in the fight against illegal drugs, in thwarting bad governance in various public agencies, and in ex­posing and stopping use of public office for private political gains. Key structural and policy reforms previously identified should con­tinue to be pursued. These would make 7-8 percent growth for 2020 doable! Kahit magulo ang mundo, kering keri ito! How promising to end 2019 in contemplative hindsight, and to begin 2020 with so much aware­ness and hope! To dream is free, and while we are at it, it is always good to push our dreams to the limit.