In a virtual economic briefing to mark the 75th anniversary of the post-war bilateral relations between the Philippines and the United States, Finance Secretary Carlos Dominguez delivered his message right off the bat: “This pandemic is a test of fiscal stamina and it was fortunate that when it hit us, the Philippines was financially ready.”
First, the tax reforms initiated by the Duterte administration when it assumed office in mid-2016 assured a steady revenue flow to cushion the severe impact of a Luzon-wide lockdown at the onset of the outbreak in March 2020.
Second, “our record of fiscal discipline eased access to urgent financing as we battled the pandemic.” Despite the surge in the country’s debt-to-GDP ratio from the historic low of 39.6 percent in 2019 to more than 54.5 percent last year, “we had ample fiscal space to absorb the huge financial shock” brought on by the double whammy of unbudgeted spending and decline in tax collection.
Third, even amid the pandemic, the government passed the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) that has been hailed by the business sector as the most significant fiscal reform measure in the last three decades. He said this opens up an opportunity “to deepen our trade and investment partnership with the United States by incentivizing industries with higher value-added activities.”
Dominguez summed up his positive review thus: “Clearly, the game-changing economic and fiscal reforms we had institutionalized over the last five years cemented our overall macroeconomic stability and allowed us to respond decisively to this health crisis.”
No one would take issue with the finance secretary’s recitation on the administration’s commendable performance in building a strong foundation for sustained macroeconomic stability. But how many would give it similarly high marks for the manner in which it has managed the unprecedented health crisis?
Citing the Philippines’ COVID-19 mortality rate of 14 deaths per hundred thousand of population, he observed that “If the European Union had the same record as the Philippines today, it would have lost around 62,000 people due to COVID-19, and not the over 650,000 deaths we are seeing so far.” He said that 140 million doses had been ordered to meet the country’s target to immunize 70 percent of its adult population within this year: 15 percent would be delivered within the first half and 85 percent in the second half.
Dominguez summed up the government’s game plan: “In this battle against COVID-19, we are committed to continue striking a delicate balance between providing substantial support to the economy and maintaining our policy of long-term debt sustainability.”
Rather than focus on further stimulus programs to address the sluggish economy, he says that the government will stay the course and resume its aggressive Build Build Build program that is its “main strategy to help Filipinos lift themselves from poverty.”
Time will tell if this strategy will work. In just over a year, the Filipinos will render their verdict when they vote for a new President.