Let us now examine the record of the Benigno Aquino III  Administration (2011 to 2016) in fiscal management.  This Administration anchored its economic agenda on inclusive growth driven by good governance and anti-corruption reforms.  The central premise was that restoring credibility in public institutions would reduce fiscal leakages, create fiscal space and enable higher investments in infrastructure and social services, especially in education and health.  In turn, improved public finances and stronger institutions were expected to stimulate private investments and employment.  Investments targeted were primarily domestic because the country during that period was not welcoming to foreign investments, among others, due to  the unfortunate constitutional prohibitions limiting foreign direct investments.

              During the Noynoy Administration, fiscal outcomes followed a broadly consolidating trajectory.  Total revenues of the National Government rose from about PhP 1.36 trillion in 2011 to about PhP 2.20 trillion by 2016, driven mainly by improved Bureau of Revenue (BIR) and Bureau of Customs (BOC) collections and the positive impact of targeted reforms such as the “sin tax” law of 2012.  Government spending also increased steadily, from about PhP1.56 trillion in 2011 to roughly PhP2.55 trillion by 2016.  Early-term underspending—linked to procurement delays, institutional adjustments and disaster responses—was followed by a stronger spending push in 2015 to 2016, particularly for infrastructures and social services.

              As a share of GDP, revenue and expenditure efforts both trended upward.  The deficit narrowed to below one percent of GDP in 2014-2015 before widening again in 2016 as spending accelerated toward the end of the term.  Infrastructure spending, historically at a low level as compared to its peers who spend an average of 6 % of GDP in infrastructure, rose from about 1.6 % of GDP 2011 to about 3.9 % by 2016.  The debt-GDP-ratio declined from the high-40 percent range to the low-40 percent by the end of the term.  Taken together, fiscal outcomes presented steady growth, gradual spending expansion and improved dynamics, thanks to the Administration’s consolidation strategy.

              Spending composition shifted gradually toward development priorities.  The share of economic services rose from roughly one-fourth of total expenditures in 2011 to around one-third by 2016 while social services remained the largest spending component throughout the period.  Meanwhile, the shares of general public services and interest payments declined, thus suggesting a reduced relative burden of administrative and debt-servicing expenses.   As  regards variances between targeted and actual outcomes, macroeconomic results were broadly consistent with the PDP’s stability objectives but were less aligned with the high-growth scenarios.  Inflation generally stayed within or even below the target band, with deviations largely attributable to supply-side factors, including food-price disruptions and fluctuations in global oil prices.’

              Real GDP growth fell short of the  upper end of the targeted range in 2014 and 2015, partly because of weaker external demand.  Merchandise exports recorded shortfalls in years such as 2013 and 2015 because of weak global demand, slowdowns in major trading partners (e.g. China), and downturns in key export sectors, such as electronics.  On the fiscal side, deviations resulted from a two-part gap between programmed targets and implementation realities. First, revenues grew steadily but fell short of the PDP’s ambitious targets, possibly due to the Administration’s over-reliance on Administrative reforms rather than major tax policy changes.  Such an approach improved collections gradually but was constrained by institutional capacity.  Second, expenditures were below programmed levels for several years, particularly from 2013 onward, because of procurement delays, the perennial right-of-way obstacles and other implementation bottlenecks.  As a result, infrastructure spending increased at a faster rate than before but still below the target.

              These twin deviations account for the fiscal trajectory:  early-term deficits remained below program because of conservative spending.  By 2016, however, the deficit widened as spending accelerated  while revenue gains slowed down.  Overall, the variance outcomes suggest a more specific diagnosis than simple target underperformance.  Macroeconomic stability goals were largely achieved.  The PDP’s growth-and-investment thesis, however, was constrained by weaker external demand and domestic implementation limits that slowed down both revenue effort gains and the implementation of infrastructure programs.

              Fiscal management continued to be in the hands of the best and the brightest even in the politically troubled Administration of President Rodrigo Roa Duterte (which reminded me of the short term of President Joseph (ERAP) Estrada). The team was headed by Carlos (Sonny) Dominguez, a very experienced banker and agribusiness top executive.  President Duterte (2017 to 2022) was fortunate to inherit an economy with strong growth potentials and relatively stable macroeconomic fundamentals.  Building on this strong foundation, the government anchored its development strategy on NEDA’s “Ambisyon Natin 2040” and the PDP 2017-2022 which aimed to sustain high growth  while accelerating infrastructure and social investments. The overarching objective was to lay the foundation for a high-trust, inclusive, and globally competitive economy, with the goal of achieving a “matatag, maginhawa at panatag na buhay” for Filipinos.

              In macroeconomic terms, the plan targeted sustained  GDP   of 7.0 to 8.0 percent by 2022 while preserving price stability  and improving labor market outcomes.  On the fiscal side, the government programmed a significant increase in revenue effort—from about 14.2 percent to 17.0 percent of  GDP—coupled with a more expansionary program.  This implied a deliberate widening of the fiscal deficit towards three percent of GDP, even if the expectation was that the debt to GDP ratio   would decline over the medium term through stronger growth and revenue performance.

              To meet these targets, the Duterte Administration adopted a strategy centered on comprehensive tax reform, higher infrastructure spending (targeting the 6 % of GDP average among its ASEAN peers), macroeconomic stability, and external competitiveness.  On the revenue side, the Government pursued the Comprehensive the Comprehensive Tax Reform Program, led by the TRAIN law, which restructured personal income taxes, broadened the VAT base, and increased excise taxes on fuel, automobiles, and other goods.  These reforms were designed to raise revenues while improving equity  and supporting consumption.  On the expenditure side, the Administration implemented an expansionary fiscal program anchored on the much-vaunted “Build, Build, Build” infrastructure drive. Public infrastructure spending was programmed to rise toward 5 to 7 percent of GDP, significantly above historical levels.  Reforms in planning, budgeting, and project monitoring were introduced to address bottlenecks in implementation and to   improve absorptive capacity. 

              These measures were complemented by a medium-term debt strategy focused on maintaining sustainable debt levels, deepening domestic capital markets, and strengthening fiscal risk management.  Monetary policy remained anchored on inflation targeting, while external-sector policies emphasized exchange-rate flexibility, reserve adequacy, and prudent borrowing. President Duterte was fortunate to have some of the best and the brightest working on both fiscal and monetary management.  To be continued.