The Department of Finance (DOF) said that careful balance between the need of economic concerns and the health requirements of COVID-19 will drive the Philippines back to its pre-pandemic path of rapid economic growth.
During the virtual Philippine economic briefing on Tuesday, Sept. 7, Finance Secretary Carlos G. Dominguez III said the country’s second-quarter economic performance has demonstrated the clear results of the government’s balancing strategy.
“In the second quarter of 2021, our economy grew by 11.8 percent over the same period last year. This is the best quarterly performance in more than 30 years,” Dominguez said at a virtual forum attended by over 300 Japanese business leaders.
“This strong rebound is driven by more than just base effects. This is the result of a better balance between meeting the exigencies of economic concerns and the health requirements of our COVID-19 response,” he added.
The finance chief also said the better than expected gross domestic product (GDP) underscored the strong capacity of the Philippines to return to the path of rapid expansion.
Moreover, Dominguez said “there is much economic energy waiting to be unleashed in the coming period,” with the Philippines’ recovery also getting a boost from the implementation of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law.
With almost P100 billion worth of tax relief to be granted to enterprises annually in the form of lower corporate income tax (CIT) rates, CREATE is the largest economic stimulus program for businesses in recent history, he said.
“In recent press releases of publicly listed companies, they always mention that CREATE helped them maintain or increase their profitability and their ability to cope with the pandemic,” Dominguez said.
Besides significantly lowering the CIT, Dominguez said CREATE enabled the Philippines to attract high-value investments by incentivizing industries that will introduce new technologies and innovations, and create more jobs through a rationalized fiscal incentives system.
Dominguez also cited the implementation of reduced personal income taxes for 99 percent of Filipino taxpayers starting in 2018 under the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
“Even as we intend to harness the trapped economic energy to produce rapid growth, we need to ensure that fiscal responsibility is constantly observed. We must be prepared to fight a long battle by conserving our resources well,” he said.
To strengthen the people’s defenses against the pandemic and pave the way for the economy’s reopening, Dominguez said the government has been beefing up its COVID-19 vaccination program, with 15.3 million Filipinos as of September 6 having been fully inoculated.
“So far, the Philippines’ vaccination program is in the right direction. We have been receiving a steady supply of vaccines from multiple sources and have been vaccinating our people apace,” he said.
Dominguez said the Philippines came fully prepared to meet the pandemic head on, given its strong fiscal position that is buttressed by its tax reforms and better tax administration.
This strong fiscal standing is supported by the Philippines’ highest ever revenue effort of 16.1 percent in 2019 from 15.1 percent in 2015, when the Duterte administration took office. Despite the pandemic, revenue effort remained high at 15.9 percent of GDP in 2020.
Prudent fiscal management, appropriate economic investments and improved revenue collection also brought the country to the highest credit ratings it has ever achieved, Dominguez said.