The next Department of Finance (DOF) head needs to keep a close eye on four pressing issues, such as public debt, inflation, exacerbated inequality and climate change, President Duterte’s chief economic manager said.
Eight months before the term of the Duterte administration ends, Finance Secretary Carlos G. Dominguez III revealed in a recent webinar hosted by The Asset that the DOF is preparing a transition document detailing his suggestions for his successor.
“We are right now preparing our transition papers, and among those transition papers will be a roadmap to basically fiscal re-consolidation. But I will include in there, that he has to keep an eye on four issues,” Dominguez said.
First on Dominguez's list is the accumulated government debt incurred during the COVID-19 pandemic.
“The first issue is to keep a close eye on is how to grow out of this debt. How to make sure that the debt that we accumulated is going to be a smaller and smaller part of our GDP ,” he said.
Dominguez estimated that the next administration should grow the economy by more than six percent to bring back the government’s debt-to-GDP ratio to a historic low again.
The government entered 2020 with a debt-to-GDP ratio of 39.6 percent. However, this grew to 60.4 percent as of end June 2021, slightly above the internationally accepted level of 60 percent.
The second issue that the next DOF secretary will have to deal with is inflation brought about by shortages around the world, he said.
“How will he deal with that issue right now? We have a problem of energy shortages, which has even cost China to reverse their commitment to reduce the use of coal. Price of fuel has gone up,” Dominguez said.
The third issue that Dominguez raised is the exacerbated inequality brought about by COVID-19 within Philippines and among countries.
He warmed that inequality could be the “big destabilizing factor” for the next administration.
“Fiscal consolidation and management of inflation will depend a lot on the political environment. Now, if the inequalities brought about by COVID persist, they will have a spillover effect on politics and the ability to manage those two other issues,” Dominguez said.
A changing global landscape also plays a factor for the Philippines, Dominguez noted.
“Some countries will go faster than others. What will that mean for our markets? Will we have to change our marketing strategies? Will we have to change our product mix? Those are things you have to think about,” he said.
The fourth issue is to pay attention to climate change, Dominguez suggested.
"Climate change is becoming a bigger and bigger factor in our daily lives. How they will start addressing climate change without stretching the fiscal space of the country is going to be very very tricky,” he said.
As early as now, the DOF chief disclosed that there is a growing lobby calling for fiscal incentives to lure investors into energy efficient systems.
“To put energy efficient systems in place, means reducing the imports of fossil fuels. Imports of fossil fuels generate a lot of excise taxes. So you're going to get a double whammy. Lower excise taxes, and lower revenues because of fiscal incentives,” he said.