The budget deficit of the Philippines has been decried by some sectors as growing out of proportion. The most recent reports place our total outstanding national debt at P14.62 trillion as of the end of 2023 or 60.2% of GDP. However, Secretary of Finance Raphael Recto believes that this level of debt is not alarming. He is convinced that the continued growth of the economy can fund much needed state revenues. 

In fact, Secretary Recto was even so bold as to proclaim that it will not be necessary to introduce any new taxes until the end of the term of President Ferdinand Romualdez Marcos, Jr. in 2028. The key will be in tightening collection and plugging leakages. This is well and good as it will allow for better capital formation, increased consumption or a combination thereof. In fact, the reduced corporate and personal income tax rates under the CREATE Law are much anticipated, too.

I believe, though, that the rising national debt could be a cause for concern. The commonly recognized ideal level of debt as a percent of GDP is 60 percent. During the height of COVID-19, government had to increase borrowings very significantly in order to fund our pandemic needs. In the short span of three years, the percent of government borrowings to GDP shot up from a record low of 39.6% at the end of 2019 to 54.5% in 2020, 60.5% in 2021 and 60.9% in 2022. The DOF is convinced that this will fall below 60% sooner than later, but not to pre-COVID levels.

A growing population – albeit the youngest in Southeast Asia – requires the government to constantly step-up its public service on many fronts. Among others, these include the fight against poverty, assuring the adequate and affordable supply of food and staple commodities, providing basic and good quality education, constructing low-cost housing, rendering disaster relief and securing national defense, peace and order. 

There are also growing developmental needs that need to be funded in order to meet our sustainable goals. For example, we need to provide much needed infrastructure to assure connectivity throughout the country. We woefully need more roads, railways, bridges, air and sea ports to complement the growth in domestic production. Public transport and traffic management programs are needed in order to reduce productivity waste and logistics costs. A recent study by the Japanese International Cooperation Agency (JICA) showed that the Philippine economy loses at least P3.5 billion per day due to traffic congestion in Metro Manila alone. This could increase to P5.4 billion daily by 2035 with no intervention.

In addition to traditional infrastructure, we are confronted by a compelling need to grow our highly challenged digital network. The efficiency of our internet connectivity, for example, leaves much to be desired. The need for ramped-up computing power has also become even more pronounced especially with the advent of Artificial Intelligence (AI). In the race to information technology and global connectivity, we need a mega boost.

Yet another area that requires attention is the expansion of health care – upgraded facilities, affordable treatment, insurance coverage and emergency care. COVID exposed our lack of preparedness, needing to build or convert existing structures into health care facilities. We even had to import basic protective equipment, masks and syringes. Testing and disease control capabilities were stretched beyond limits.

As part of our competitiveness and sustainability goals, we will also need to spend heavily to assure energy security. No major power generation plant has been built in close to a decade. As well, the country needs to fund the development of alternative energy sources to mitigate climate change risks.

Indeed, the government has its plate full, to say the least, and it will need an extraordinary amount of funding for it to meet its tasks. Unless, perhaps, we can create a new framework that allows government to focus more on its priority programs while leaving others to the private sector.

It cannot be denied that through time, business continues to grow and accumulate capital. That is its mandate: to profit. Accordingly, it also has an inherent responsibility to reinvest its capital in order to, yes, further grow its returns. But as market and consumer needs are constantly exploited and plugged, the opportunity for business to redeploy its capital is potentially reduced. 

The reverse, however, can be said for our government. Over time, the demands of public service keep growing exponentially especially for developing countries like the Philippines. Deficit spending, however, is not the ideal path for sustainable development.

Given our limited economic resources, I believe it is important that we develop a new and robust construct that encourages public and private sector partnership. We do not have to crowd each other out. This will allow us to optimize the use of our consolidated capital and realize the delivery of much needed social and economic programs.

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