High debt load and low revenue collection will become bottlenecks to the country’s return to a rapid and sustainable economic growth path, the Department of Finance (DOF) said.
As the government transitions to the next administration, Finance Chief Economist Gil S. Beltran said that fiscal consolidation and improved tax collection will be very critical for the overall resilience of the economy.
Beltran pointed out that the government should commit fiscal stability, while taking steps in bringing back the economy to rapid and sustainable growth.
“The planned fiscal consolidation rests on restoring growth in tax collections after a hefty rate cut in corporate income tax and winding down in pandemic-related spending,” Beltran said in his DOF Economic Bulletin.
Last week, 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 debt problem.
Dominguez said 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 consist of relief measures that protect the vulnerable segments of the society from worldwide inflationary pressures through targeted subsidies.
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 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.