DOF chief assures portfolio investors of fiscal discipline in gov't spending

Finance Secretary Carlos Dominguez III assured local and foreign portfolio investors and fund managers that Philippine authorities will observe fiscal discipline alongside the push to raise public spending.

"In particular, the targeted budget-deficit ceiling of 3 percent of gross domestic product (GDP) up to 2022 will be religiously observed," the Department of Finance said on Monday.

“We are fortunate that the last two administrations have managed government finances well, as this has given us headroom for higher public spending," Dominguez told local and foreign investors in a conference call on August 16.

In coordination with the Investor Relations Office (IRO), the conference call was arranged by Credit Suisse for its clients and was participated in by over 70 financial market players from Manila, Hong Kong, Singapore, and Europe.

"We will absolutely make sure we do not breach the deficit ceiling,” Dominguez noted.

The administration's deficit-to-GDP ceiling of 3 percent is a percentage point higher than the 2-percent under the previous administration.

"That should help keep the economic momentum going, especially in infrastructure spending," Jonathan Ravelas, chief market strategist at BDO Unibank Inc., said.

The increased government spending will boost investments as "infrastructure projects would encourage foreign portfolio and direct investments," Ravelas.

The new economic team cited plans to significantly boost government spending on infrastructure, which Dominguez described as the country’s next pillar of growth, and social services for the decision to raise the deficit ceiling.

The Duterte economic team plans to significantly boost government spending on infrastructure— the country's next  pillar of growth—and social services in deciding to raise the deficit ceiling," Dominguez noted.

Significantly higher government spending is indispensable if the government is to make economic growth truly inclusive and to achieve reduction of poverty incidence form 26.3 percent in first semester of 2015 to 17 percent by 2022, DOF said.

Infrastructure spending will cover the sub-areas of logistics and transportation, information technology, telecommunications, and power. It will also focus on areas outside Metro Manila to achieve a more geographically broad-based economic growth.

To make sure the deficit ceiling is not breached despite an aggressive spending plan, Dominguez said, the Finance Department and its attached agencies have set their eyes on revenue-generation measures.

Among these is strengthening of anti-tax evasion efforts, such as pushing for the relaxation of the Bank Secretary Law and lobbying for including tax evasion among predicate crimes for money laundering.

At the same time, the DOF is keen on addressing red tape, including  at the Bureau of Internal Revenue and the Bureau of Customs, to make it easier for individuals and businesses to pay taxes and customs duties.

National Treasurer Roberto said in the same conference call that the targeted budget-deficit ceiling of 3 percent of GDP will be able to sustain the drop in the country’s debt ratios.

Tan noted the outstanding debt of the national government is projected to settle at 42.66 percent of GDP this year and 40.86 percent in 2017.

The debt-to-GDP ratio is projected to sustain the yearly decline until falling to about 35 percent at the end of the Duterte administration.

The national government debt as a proportion of GDP gradually dropped from 52.4 percent in 2010 to 44.8 percent by the end of 2015, the DOF said.

Dominguez took note that the plan to cut personal and corporate income tax rates will be matched with measures to offset the revenue loss to ensure government revenue will not be erroded. 

The DOF is eyeing to reduce VAT exemptions, adjusting for inflation of the tax on fuel, and rationalizing fiscal incentives. — VDS, GMA News