Finance Secretary Carlos Dominguez III expects a “strong recovery” for the economy if mobility restrictions continue to be eased in the fourth quarter to allow more people to safely return to work while complying with minimum health standards.
Dominguez said he sees no need at this time for a third COVID-19 relief package after the enactment of the Bayanihan 1 and 2 laws that were designed to provide emergency assistance to pandemic-hit individuals and sectors, as he sees the economy making a strong comeback next year.
‘We are seeing a very strong recovery as we ease up the economy,” said Dominguez in a recent interview with Bloomberg Asia.
“We have a very good economy. Unfortunately, the contagion has forced us to throttle it down. But as we open up, we can see a very strong recovery through jobs,” he added.
Dominguez noted that when strict quarantines were in place, the unemployment rate spiked to 17.7 percent in April, but improved significantly to 10 percent in July when lockdowns were eased and more people were allowed to go back to work.
The government’s goal is to pull down the unemployment rate to 5 or 6 percent, he said.
Dominguez also assured Filipinos that the government will not impose any new taxes nor plan to sell off state-owned real estate assets to cover the revenue shortfall resulting from the coronavirus-induced lockdowns.
The government will instead tap the commercial market and possibly the Bangk0 Sentral ng Pilipinas (BSP) to raise more funds for its pandemic response and economic recovery program, he said.
“We are not really seriously considering any taxes,” Dominguez said. “Taxing our citizens when their incomes are down is not a good idea.”
Dominguez earlier said revenue collections as of September this year have dropped by around 12 percent compared to 2019, but the Bureaus of Internal Revenue (BIR) and of Customs (BOC) have both overshot the revised collection targets set by the Development Budget Coordination Committee (DBCC).
The combined BIR and BOC collections from January to September amounted to P1.82 trillion, which is 8.26 percent better than the DBCC target of P1.68 trillion, but 12.47 percent short of the actual 2019 collection of P2.08 trillion for that period.
While the government will continue to tap the commercial market to raise funds, Dominguez said crowding out private borrowers should not be a concern, because the BSP earlier moved to inject additional liquidity into the market by reducing the reserve requirement ratio (RRR) of banks from 18 percent to 12 percent.
Dominguez said bold reforms in tax policy and administration implemented by President Duterte over the past four years have resulted to a revenue effort of 16.1 percent of gross domestic product (GDP) last year—a significant improvement from the revenue-to-GDP ratio of 15.1 percent in 2015.
The 2019 revenue effort was also the government’s best performance in more than 2o years.
The Duterte administration has raised the government’s finances to support its ambitious ‘Build, Build, Build’ infrastructure program, which, in turn, placed the country in a strong fiscal position to meet the financial challenges of the pandemic, Dominguez said.
“So essentially, we are quite well-prepared for this (pandemic),” Dominguez said.
He underscored the Philippines’ high investment grade credit ratings, the government’s historically low debt-to-GDP ratio of 39.6 percent in 2019 (down from 42.7 percent in 2015), and its 20.2 percent external debt-to-Gross National Income (GNI) ratio, which is the lowest among the ASEAN-5 countries–which also include Indonesia, Malaysia, Singapore, and Thailand–as among the results of President Duterte’s prudent management of the country’s fiscal affairs.
Because of the country’s strong macroeconomic fundamentals, the Philippines was likewise able to secure financing support from its development partners and the commercial markets for the country’s COVID-19 response in the amount of US$9.9 billion to date, he said, at lower interest rates and longer repayment terms.
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