The inauguration of President Ferdinand R. Marcos, Jr. ushered in a new era for the Philippines, one that is focused on progress and prosperity. His grand vision is clear: to reduce poverty rates to single digits by 2028 and transform the country into an upper-middle-income economy by 2025. At the heart of this vision lies a fundamental requirement – the need for steadfast macro-fiscal stability.
In the hands of Benjamin E. Diokno, this mission finds a stalwart leader. His track record includes a stint as governor of the Bangko Sentral ng Pilipinas (BSP) from 2019 to 2022, during which he steered the central bank through the pandemic.
As the current Secretary of Finance and captain of the economic team, Diokno led efforts to turn the President’s vision into a reality. The economic team crafted the Medium-Term Fiscal Framework (MTFF)--the first of its kind in the nation’s history. This outlines the path to reducing the fiscal deficit, promoting sustainability, and enabling robust economic growth.
In 2022, the Philippine economy soared to a full-year growth rate of 7.6 percent, its fastest in 46 years. This not only surpassed pre-pandemic levels but also exceeded the year's targets and outpaced economic giants like China.
While the country’s growth slightly decelerated in the first half of 2023, it maintained its position as the fastest-rising economy among countries in the ASEAN with available data for the period. This places the Philippines on the path to achieving its growth targets of 6.5 to 8.0 percent from 2023 to 2028 under the MTFF.
The ASEAN+3 Macroeconomic Research Office (AMRO) expects the Philippines to be Southeast Asia's fastest-growing economy in 2023 and 2024. The World Bank Group echoes this forecast, seeing the Philippines outperforming emerging markets and developing economies in East Asia and the Pacific region this year.
Diokno puts a strong emphasis on exercising fiscal discipline. With this, the MTFF focuses on increasing revenue collections and maintaining a prudent deficit level notwithstanding large investments in infrastructure and human capital development.
In 2022, revenue effort reached 16.1 percent, surpassing the year's target of 15.2 percent. Similarly, tax effort outperformed, hitting 14.6 percent in 2022 versus the 14.4 percent target.
As of the first semester of 2023, the Philippines continued its impressive fiscal performance. The revenue effort of 16.2 percent outpaced the full-year 2023 target of 15.3 percent. The tax effort for the first half of the year stood at 14.5 percent, on track to meet the full-year target of 14.6 percent.
With a steady flow of revenues, the deficit-to-GDP ratio for 2022 was at 7.3 percent, outperforming the 7.6 percent target. In the first three quarters of 2023, the country recorded a deficit level of 5.71 percent of GDP, well below the full-year target of 6.1 percent.
Meanwhile, Diokno’s prudent debt management strategy led to the actual debt-to-GDP ratio for 2022 being significantly lower than the MTFF assumption, at 60.9 percent compared to 62.0 percent. As of September 2023, the national government debt stood at 60.2 percent of GDP, below the full-year target of 61.24 percent.
For growth to outpace debt, Diokno ensures that the country’s fiscal resources are being directed toward productive spending. Hence, the MTFF places high importance on sustaining massive infrastructure investments at five to six percent of GDP annually.
Under President Marcos, Jr.’s Build-Better-More Program, a total of 197 projects amounting to 8.7 trillion have been identified as Infrastructure Flagship Projects (IFPs) by the National Economic and Development Authority (NEDA) Board.
For 2022, infrastructure spending reached 5.8 percent of GDP, surpassing the annual target of 5.5 percent. As of the first semester of 2023, infrastructure spending as a percentage of GDP was at 5.3 percent, already meeting the target for the year.
Diokno’s emphasis on prudent fiscal management, appropriate economic investments, and improved revenue collections has resulted in a fiscal landscape that breeds confidence among international credit rating agencies. The Philippines has maintained its high investor-grade credit ratings from S&P, Moody’s, and Fitch. Recently, Japan-based debt watcher R&I has revised its outlook for the Philippines from stable to positive, while Fitch upgraded its outlook from negative to stable.
In the realm of policy reforms, Diokno’s legacy is etched in stone. From simplifying tax systems to pioneering internationally lauded procurement reforms, his initiatives from the many decades of public service have streamlined governance, enhanced transparency, and sustained economic growth.
As Secretary of Finance, Diokno delivered the measures tagged as urgent by President Marcos, Jr. Within the President’s first 100 days in office, Diokno took the lead in amending the implementing rules and regulations of the Build-Operate-Transfer Law to better leverage public-private partnerships (PPPs) in boosting the competitiveness of domestic industries and attracting a diverse range of investment opportunities.
Diokno likewise pioneered the establishment of the Maharlika Investment Fund — the country’s first sovereign investment fund. The Fund serves as a vehicle for driving long-term economic development through increased investments in high-impact sectors such as big-ticket infrastructure, green and blue projects, rural development, digitalization, sustainable development, and healthcare.
The DOF is actively working with Congress to legislate key tax and structural reforms that could help accelerate economic development by providing more resources for the government’s socio-economic spending as well as attracting more investments if the current institutional weaknesses are addressed.
The pending reforms include the introduction of VAT on digital service providers; real property valuation and assessment reform; passive income and financial intermediary taxation bill; excise taxes on single-use plastics; increase in the excise taxes on pre-mixed alcohol and sweetened beverages; among others.
Diokno and his team fervently do all of these while implementing the recently passed economic liberalization reforms to bring in more strategic investments and quality jobs for Filipinos. These measures include the amendments to the Retail Trade Liberalization Act (RTLA), Foreign Investments Act (FIA), and Public Service Act (PSA); the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE); and the liberalization of the renewable energy sector.
At the end of the day, Diokno seeks to go beyond economic expansion. For him, all development efforts are geared toward achieving the Marcos, Jr. administration’s ultimate goal of cutting poverty incidence to single digits, or eight and nine percent by 2028. Growth numbers must translate into tangible improvements in the lives of ordinary Filipinos through more and better jobs, higher levels of education, and healthier people, among other important development outcomes.
Diokno’s pivotal role as the architect of the Philippines’ strong economic resurgence is undeniable. With his expert guidance, the country is making significant strides toward greater economic recovery, stability, and progress. Indeed, his contributions to the nation through fiscal prudence and economic reforms that work lay a solid foundation for achieving a truly inclusive and sustainable economy that the Filipino people rightfully deserve.