As he recognized the need to address the setback caused by the Covid-19 pandemic and other forces and to prepare for future shocks, President Ferdinand "Bongbong" Marcos Jr. has bared his administration's plans to promote the country's economy.
"We live in difficult times brought about by some forces of our own making, but certainly also by forces that are beyond our control. But we have, and we will continue to find solutions," he said in his first State of the Nation Address (SONA) on Monday, July 25.
In terms of the economy, Marcos said his administration would implement sound fiscal management. Tax reforms will be in place to increase revenue collection, expenditure priorities will be realigned, and spending efficiency will be improved to immediately address the economic scarring arising from the effects of Covid-19 and prepare for the future.
The President added that productivity-enhancing investments would be promoted by capitalizing on the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law and economic liberalization laws such as the Public Service Act and the Foreign Investments Act to make the Philippines an investment destination.
Marcos promised to fully support ecozones to bring in strategic industries such as high-tech manufacturing, health and medical care, and all emerging technologies to facilitate economic growth outside of Metro Manila.
Tax system
President Marcos said they would adjust the country's tax system to catch up with the rapid developments of the digital economy, including the imposition of value-added tax on digital service providers.
"The initial revenue impact will be around P11.7 billion pesos in 2023 alone," he said.
He vowed to simplify tax compliance procedures to promote the ease of paying taxes.
"We will pursue measures to determine possible undervaluation and/or trade mis-invoicing of imported goods," Marcos said.
"Through information and communications technology, the Bureau of Customs (BOC) will promote streamlined processes," he added.
Marcos has recently appointed former Philippine Drug Enforcement Agency-7 (PDEA-7) Regional Director Yogi Filemon Ruiz as Customs Commissioner.
Disbursements
Marcos said disbursements for 2022 to 2023 will be maintained at above 20 percent of the country's gross domestic product (GDP), or P4.955 trillion and P5.086 trillion, respectively, to ensure the continuous implementation of priority programs.
He added that disbursement will increase from P5.402 trillion or 20.7 percent of the GDP in 2024 to 7.712 trillion pesos or 20.6 percent of GDP in 2028.
According to President Marcos, the medium-term fiscal strategy of his administration seeks to attain short-term macro-fiscal stability while remaining supportive of the country's economic recovery and promoting medium-term fiscal sustainability.
"Fiscal policy aims to bring together the national government's resources so that these are mobilized and utilized in order to gain the maximum benefit and the high multiplier effects for our economy," he said.
Measurable objectives, by the numbers
The Marcos Administration's measurable medium-term macroeconomic and fiscal objectives include the following headline numbers:
- 6.5 to 7.5 percent real GDP growth in 2022
- 6.5 to 8 percent real GDP growth annually between 2023 and 2028
- 9 percent or single-digit poverty rate by 2028
- 3 percent national government deficit-to-GDP ratio by 2028
- Less than 60 percent national government debt-to-GDP ratio by 2025
- At least US$4,256 income per capita
- The attainment of upper-middle-income status by 2024
President Marcos said these figures are based on forecasts consistent with the guiding principles of coherence of strategies, policy discipline, and fiscal sustainability.
Medium-term Fiscal Strategy
According to Marcos, the aforementioned headlined goals summarized the objectives of his medium-term fiscal strategy (MTFS) being submitted to Congress for adoption.
"Once adopted, the MTFS will become an anchor for the annual spending and financing plan of the national government and Congress when preparing the annual budget and undertaking related appropriation activities," he said.
"It is, therefore, a forward-looking document that extends beyond the traditional three-year horizon to reach six years, coinciding with the six-year coverage of the Philippine Development Plan 2023-2028," he added.
Marcos said the MTFS promotes transparency and credible commitment to pursuing the indicated social macro-economic goals that optimize the government budget.
Inflation
Meanwhile, President Marcos recognized how the recent past and the Covid-19 pandemic had beset the macroeconomic environment with challenges and a series of external shocks.
He said inflation has accelerated in recent months due mainly to significant increases in international prices of oil and other key commodities. But despite this, he noted that the economic growth momentum remains firm, as demonstrated by the strong 2022 first quarter GDP growth at 8.3 percent.
However, the recovery process from the impact of the pandemic is still ongoing. Amid elevated uncertainty in the international economic environment, Marcos said revisions in the macroeconomic assumptions incorporate these challenges and the most recent economic developments leading to upper adjustments in the following:
- Inflation rate for 2022-2023
- Foreign exchange rate for 2023-2025
- Goods and services imports growth for 2022
According to Marcos, the economy is expected to grow by 6.5 to 7.5 percent this year as the country continues to reopen the economy while considering recent external developments.
"In the first quarter alone, GDP saw an increase in household consumption and private investments, along with the robust manufacturing industry, high vaccination rate, improved healthcare capacity, and an upward trend in tourism and employment. This is expected to continue for the rest of the year," he said.
The President claimed that strong economic growth would be sustained and expanded to 6.5 to 8 percent from 2023 until 2028.
He added that the average inflation for 2022 is projected to range from 4.5 to 5.5 percent following the uptick in fuel and food prices due to the ongoing Russia-Ukraine conflict and the disrupted supply chains.
"It is likely to become 2.5 to 4.5 percent in 2023 and is seen to return to the target range to 2.0 to 4.0 percent by 2024 until 2028," Marcos said.
President Marcos likewise noted that the Dubai crude oil price is expected to settle at $90 to $110 in 2022, down to $80 $100 in 2023, and even further down to $70 to $90 per barrel from 2024 onwards as oil supply is expected to catch up and stabilize over the medium-term.
Forex, imports
Marcos said the Philippine peso would average between P51 to P53 per US dollar in 2022 and P51 to P55 per US dollar from 2023 onwards due to aggressive monetary policy tightening by the US federal reserve, market aversion amid the Russian-Ukraine conflict, and the increased global oil crisis.
Meanwhile, the President said exports of goods are expected to grow by seven percent in 2022 and six percent from 2023 to 2028. On the other hand, imports of goods are expected to grow by 18 percent in 2022, six percent in 2023, and eight percent from 2024 to 2028.
President Marcos said he had instructed the National Economic Development Authority (NEDA) to coordinate with other agencies and work on the Philippine Development Plan for 2023-2028. He also tasked the agency to submit to him the complete blueprint and progress of its implementation by the end of 2022.