Philippines looking to cut poverty to 9% by end of Marcos’ term

The administration is looking to end President Ferdinand Marcos Jr.'s term with a single-digit poverty rate and a healthy debt-to-GDP ratio of 60%, his chief economic manager Finance Secretary Benjamin Diokno has said.

Diokno on Wednesday unveiled the administration’s economic targets for the next six years.

He said the Department of Finance had submitted to Marcos its medium-term fiscal framework for 2023 to 2028

“Our target is by the end of President Marcos’ term, poverty incidence will be down to a single digit, 9%,” Diokno said, pointing out that the poverty rate was at 25% during the Duterte administration’s first year in office.

The Duterte administration targeted bringing the poverty rate down to 15.5% to 17.5% by the end of its term, but the COVID-19 pandemic pushed 3.9 million more Filipinos into poverty due to hard lockdowns which halted economic activity.

As of the first half of 2021, poverty rate was at 23.7%, higher than the 21.1% recorded in the same period in 2018.

For the full-year 2018, the poverty rate declined to 16.7% from 23.5% in 2015.

Diokno admitted that the COVID-19 pandemic caused a “slight backsliding” in the previous administration’s goal of bringing down the poverty rate.

The Finance chief served as former President Rodrigo Duterte’s Budget secretary and also as governor of the Bangko Sentral ng Pilipinas.

“On the debt, it will be down to 60% by 2025. Right now, it’s around 63%. It will be slowly tapering off to 60% by 2025,” Diokno said.

As of the first quarter of 2022, the government debt-to-GDP ratio — the amount of the state’s debt relative to the size of the economy — stood at 63.5%, its highest in 17 years and well over the internationally recommended threshold of 60% of the economy.

The previous administration is expected to incur P3.2 trillion in additional debt, bringing it to reach P13.1 trillion by the end of 2022, above the original plan of only around P9.9 trillion, due to borrowing efforts to boost the state’s war chest to respond and recover from the COVID-19 crisis.

The Marcos economic team is also targeting to reduce the government fiscal deficit-to-GDP ratio to 3%, according to Diokno.

The budget shortfall relative to GDP ballooned to 8.6% in 2021 as state spending for COVID-19 recovery measures exceeded revenue collections.

“Our target on the national government deficit will be 3% starting 2026, 2027, 2028,” Diokno said.

On GDP growth, the Finance chief said the administration is expecting the economy to grow by 6.5 to 7.5% this year.

Diokno said the Philippines’ GDP growth will be the highest growth rate for the next two years among ASEA Plus 3 countries — comprising 10 ASEAN-member states plus Japan, South Korea, and China.

“It will be followed by a growth rate of 6.5 to 8% from 2023 to 2028,” he said.

The Marcos administration’s GDP growth targets are lower than the previous government’s goal of 7% to 8% for this year, but are more ambitious than the Duterte economic managers’ expectation of 6% to 7% for 2023 to 2025. 

The Philippines opened the year with a faster-than-expected economic growth of 8.3%, which compares with the 7.8% in the fourth quarter and the -3.8% the first quarter of 2021.

On the Build, Build, Build program, the Finance chief said the Marcos economic team is committed to spend some 5% to 6% of GDP for infrastructure annually between 2023 to 2028.

Data from the Department of Budget and Management show that in 2021 infrastructure disbursements reached P1.12 trillion, equivalent to 5.8% of GDP.

“Finally, we want to achieve upper middle income status so that means we are shooting for a $4,046 per capita income for Filipinos by the end of the President’s term,” Diokno said.

The Duterte administration aimed to bring the country to an upper middle income by 2020 but the economy has entered a recession due to the pandemic.

As of 2019, the Philippines was categorized as a lower middle income country with a GNI per capita of between $1,006 and $3,955.

Under the World Bank standards, an upper middle-income country is that which has a GNI per capita of between $3,956 and $12,235.

“So those are the main targets of this medium term fiscal framework. I cannot talk about more details, because this is supposed he will present this during his SONA (State of the Nation Address). He will spell out the specifics on this,” Diokno said. —NB, GMA News