Reducing infrastructure spending to temper the government's growing debt stock will be counterproductive in the long-run as far as economic recovery is concerned, the Department of Finance (DOF) warned.

While there is a need to gradually narrow the government’s budget deficit, Finance Chief Economist Gil S. Beltran explained that it should be done without sacrificing infrastructure spending.

“It is important that infrastructure investments be continued,” Beltran said. “Cutting infrastructure spending may narrow down the deficit momentarily but will definitely be counterproductive in the long-run as far as economic recovery is concerned.”

In 2021, fiscal deficit was estimated to be around 8.2 percent of the economy, or gross domestic product (GDP) and is programmed to fall down to 5.1 percent by 2024.

In contrast, infrastructure spending, in percent to GDP, increased to as much as 5.6 percent last year and is expected to inch up further to 5.9 percent, before settling at 5.4 percent by 2024.

Beltran noted that while tax reforms and liberalization “definitely” attract investor interest and enthusiasm, infrastructure projects that are left unfinished do not inspire investor confidence.

Among the reforms enacted during the Duterte administration include the Corporate Recovery and Tax Incentives for Enterprises act (CREATE), as well as amendments to the Retail Trade Liberalization Act, Foreign Investment Act, and Public Services Act.

Beltran said CREATE, economic liberalization, and infrastructure investment should be seen as key ingredients in a cocktail of economic recovery package that is most potent when all ingredients are available.

“Simply put, a half-finished bridge does not cut travel time even by a minute. Infrastructure projects have to be fully completed before they can increase the country's productive capacity and enhance its growth potential,” Beltran said.

“Infrastructure are hard assets with which the economy can bootstrap itself into recovery, which, in turn, is hastened with the implementation of CREATE and the structural reforms on liberalization,” he added.

Ultimately, the government’s recent tax and liberalization reforms as well as infrastructure spending will set in motion a higher growth rate in per capita income and a much more meaningful fiscal consolidation, the former DOF undersecretary said.

Earlier, Finance Secretary Carlos G. Dominguez III said there is a need to bring down the debt-GDP ratio through fiscal consolidation, or narrow the budget deficit, so that the Philippine economy can resume its vibrant growth.

Dominguez admitted that a high level of government debt stock, now equivalent to 60.5 percent of GDP, is not sustainable and should only be for temporary.

The Philippines’ debt-to-GDP ratio was slightly above the 60-percent threshold deemed as manageable for emerging markets.