Finance Secretary Carlos Dominguez III expects the domestic economy to gather steam in the second quarter, as the latest surge in coronavirus infections has now subsided and the government starts to rapidly expand its mass vaccination program against COVID-19.
Dominguez told a business forum that if overseas manufacturers are able to deliver the volume of vaccines as committed and planned, the Duterte administration will have enough doses to inoculate not only the 70 million Filipino adults, but also about 15 million teenagers once an anti-COVID-19 shot for them is approved by the Food and Drug Administration (FDA).
If this happens, then the country can expect a significant containment of infections by the second half of 2021, Dominguez said.
“There is good news on the horizon, however. In the second quarter of this year, we expect to begin growing our economy again. We see that the second wave of infections that started at the end of March has subsided dramatically. We hope that this will be the last surge,” Dominguez said in his speech during the virtual general membership meeting of the Pampanga Chamber of Commerce and Industry (PamCham) this afternoon.
He pointed out that vaccine deliveries have started to pick up, allowing the government to open the inoculation program to frontline workers in the essential sectors of the economy.
“We are also in the process of negotiating for the booster shots next year. The COVID-19 pandemic should soon be contained,” said Dominguez.
Dominguez assured Pampanga’s business community that the Duterte administration is fully supportive of small and independent businesspersons as the economy’s recovery relies on their “innovation, dynamism, and boldness in making investments.”
“I encourage you to continue your expansion plans and accelerate the shift to digitalization in order to meet the demands of the New Economy. I also urge you to start adopting measures that would make your businesses climate-resilient and a contributor to our climate mitigation initiatives,” Dominguez said.
He said the country is counting on micro, small and medium enterprises (MSMEs) to drive its post-pandemic recovery and bring down unemployment and poverty rates, as these businesses employ the majority of workers in our economy.
“Together, let us rise to the present challenges we are facing and build back a stronger economy and a more sustainable future for the Filipino people,” he said.
Dominguez said the government has long been supporting the business sector by ensuring fiscal stability, which has led to the country’s highest-ever sovereign credit ratings—a status that has ensured lower interest rates and cheaper, more accessible financing for enterprises.
Several game-changing reforms have also been passed under the Duterte administration that have allowed MSMEs in the country to flourish, with Pampanga as among the biggest beneficiaries of these measures.
These reforms, among others, are the Ease of Doing Business (EODB) Act to make it easy and convenient for people to start a business and encourage existing enterprises to expand their operations; the digitalization of the filing and payment of taxes in the Bureau of Internal Revenue (BIR); and the Tax Reform for Acceleration and Inclusion (TRAIN) Law that ensured a steady revenue flow for the government and boosted the disposable incomes of 99 percent of salaried workers through substantially reduced personal income tax (PIT) rates.
Higher disposable incomes for taxpayers meant increased consumer spending, which further invigorated the country’s robust retail sector, Dominguez said.
BIR’s digitalization initiatives, on the other hand, have resulted to 74 percent of taxpayers using the bureau’s Electronic Filing and Payments System in 2020, and a higher 93 percent in the first four months of 2021, as compared to only 25 percent in 2015, Dominguez said.
Almost 100 percent of the total number of annual income tax returns (ITRs) were filed electronically in the first four months of 2021 from just 10 percent in the same period in 2015, he added.
President Duterte’s signature program “Build, Build, Build,” meanwhile, has expanded economic opportunities for MSMEs, created more jobs and helped improve the quality of life, especially in the countryside.
Dominguez pointed out that “Pampanga has been one of the showcases of the massive infrastructure program through the development of the world-class Clark International Airport and other flagship projects in Central Luzon, such as the New Clark City.”
“It took a President from Mindanao for the biggest public and private infrastructure investments to come into this region,” Dominguez said.
Besides benefitting MSMEs, these reforms that were institutionalized over the last five years cemented the Philippines’ overall macroeconomic stability and allowed the national government to respond decisively to the pandemic-induced global crisis, Dominguez said.
With a strong financial and banking system, ample foreign reserves, and enough fiscal stamina, he said the government was able to quickly raise funds for COVID-19 response on the best available terms for our country.
As a result, he said, the government was able to provide direct subsidies to low-income families and workers, and fund fiscally responsible stimulus packages such as Bayanihan 1 and 2 laws that helped rescue the most vulnerable enterprises, preserve jobs and expand lending to businesses.
Dominguez said MSMEs and their employees were provided assistance amid the global health emergency through the following measures:
· The Small Business Wage Subsidy (SBWS) Program that gave out P46 billion-worth of subsidies to more than 3 million workers;
· Programs by the Land Bank of the Philippines (LandBank) and the Development Bank of the Philippines (DBP) that benefited more than 7,400 affected MSMEs through the grant of loans totaling P80.2 billion;
· The MSME Credit Guarantee Program launched in December 2020 by the Philippine Guarantee Corp. (PhilGuarantee), which last year assisted close to 3,000 MSMEs with a total of P324 million in loans guaranteed;
· Extension of the carry-over period of net losses in 2020 and 2021 from three to five years for businesses under Bayanihan 2; and
· The P55-billion capital infusion to LandBank, DBP, PhilGuarantee and the Small Business Corp. (SBC) to enable these government financial institutions (GFIs) to extend loans and subsidies to individuals and businesses affected by the pandemic.
Dominguez said that through these equity infusions, he expects LandBank and DBP to extend low-interest rate loans to more than 5,600 MSMEs amounting to P15 billion this year, and PhilGuarantee to cover more than 8,000 MSME beneficiaries with guaranteed loans totaling P3.9 billion.
As of April this year, he said PhilGuarantee already exceeded its target number of beneficiaries, which increased to 11,382 MSMEs with guaranteed loans totaling P1.63 billion.
This amount represents a remarkable 400-percent increase from the P324-million pilot guarantee portfolio.
Dominguez said that along with a national COVID-19 vaccination program, the Duterte administration continues to advance the policy reforms needed “to reignite business activity and restore consumer confidence” in the economy.
These policy reforms include the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which is the country’s largest stimulus program ever for businesses, Dominguez said.
CREATE significantly lowered the corporate income tax (CIT) rate from 30 percent to 20 percent for MSMEs and 25 percent for other firms, hence bringing them closer to the regional average.
In addition, CREATE rationalized the corporate tax incentives system to ensure that fiscal and non-fiscal perks granted to businesses are tightly targeted, performance-based, transparent and time-bound, he said.
For enterprises that undertake activities considered as priority by the government, CREATE provides a generous incentives menu that offers tax discounts on the basis of their strategic benefit to the country, such as their ability to create high-end jobs and promote countryside development, Dominguez said.
CREATE also expanded the powers of the Fiscal Incentives Review Board (FIRB) to oversee the grant of incentives to the private sector, in order to promote transparency and make businesses accountable for each peso of tax incentive they receive from the government.
The law provides incentives for upskilling and employee training; and for investments in less developed localities as well as in communities recovering from calamities or armed conflict.
“This will jumpstart economic activity in these areas and open more business opportunities for MSMEs,” Dominguez said.
Another key reform is the Financial Institutions Strategic Transfer (FIST) Law, which aims to protect the banking system from pandemic-induced market pressures by allowing banks to offload their non-performing assets, so they can lend more to businesses, especially MSMEs.
Dominguez said the Duterte administration is also pushing the swift passage of the proposed amendments to the Foreign Investments Act (FIA), Public Service Act (PSA) and Retail Trade Liberalization Act (RTLA) to enable the country to attract more foreign direct investments (FDIs) and sustain its long-term economic recovery.
The Department of Finance (DOF) is also working with the Congress in completing the final packages of President Duterte’s comprehensive tax reform program (CTRP) that aim to further expand the capital market and make the real property sector more efficient, Dominguez said.
He said the DOF is also supporting the proposed Capital Market Development Act to further deepen the domestic capital markets by building a sustainable Corporate Pension System.
Dominguez said that apart from these critical reforms, the government aims to drive up domestic economic activity by proceeding full-steam ahead with the “Build, Build, Build” program.
“We have kept our budget for infrastructure investments even with the ongoing pandemic. With its high multiplier effect, we are expecting the infrastructure program to be the main driver in rebuilding the domestic economy,” he said.
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