Finance Secretary Carlos G. Dominguez III said the administration of presumptive president Ferdinand “Bongbong” R. Marcos Jr. needs to increase government revenues while eliminating wasteful expenditures to get ahead of the country’s debt problem.
After the Bureau of the Treasury reported that the government debt ratio ballooned to 63.5 percent in the first-quarter, Dominguez said that the incoming leader needs “a well thought out, closely coordinated, and efficiently executed economic program.”
At the same time, the new administration’s economic plan should also protect “the most vulnerable from worldwide inflationary pressures through targeted subsidies, fosters sustainable and inclusive economic growth, and maintains a healthy fiscal regime,” the finance chief said.
According to Dominguez, debt problem will be among the issues to be discussed between the transition teams of President Duterte and the presidential frontrunner.
He also added that the Department of Finance’s (DOF) fiscal consolidation plan, which may include several administrative and new tax measures, “will be ready in time to brief the incoming economic team.”
As of March, the outstanding liabilities of the national government hit P12.679 trillion, equivalent to 63.5 percent of the gross domestic product (GDP). This is higher than the 60.4 percent recorded at end-December 2021.
The latest debt-to-GDP ratio is also above the international threshold of 50 percent and the Duterte administration’s ceiling of 60 percent. It is the highest since 2005.
Since the pandemic began, the Duterte administration has tapped foreign and local lenders to bankroll the massive cost of the Covid-19 response and bridge its widening budget deficit.
Since 2019, the total debt of the national government ballooned from just P7.731 trillion, or 39.6 percent of GDP, to P12.679 trillion by end-2021.
In April, Dominguez said President Duterte’s successor should avoid accumulating additional debt and prioritize policies that will entice more economic activity.
Dominguez said the debt problem incurred during the more than two-year Covid-19 crisis will be the biggest challenge for the next administration.
“The biggest challenge for the next administration is really to grow out of the debt that we incurred during the pandemic,” Dominguez said.
“The next administration will have to design policies and stick to very strict fiscal discipline to grow out of this debt problem,” he added.
In particular, Dominguez said the Philippine economy should grow by at least six percent over the next five to six years to bring down the debt ratio.
“However, everything is in place in the Philippines to achieve that ,” the finance chief said, citing that the country managed to grow 5.7 percent last year and 7.5 percent in the first three-months of 2022.
But Dominguez also admitted that the ongoing geopolitical conflict in Eastern Europe would drag down the Philippines’ growth potential.
“We were well on our way to recovery, except now we have this Ukraine crisis, and that's going to weigh a bit heavily on us. Although we're not combatant, we’re affected by the increase in prices of fuel,” he said.
For 2022, the Duterte Administration is targeting to grow the economy by seven percent to nine percent.