Bernardo M. Villegas
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Philippine Economic Prospects 2023 -2024 (Part 2)

             Still using the 8-Point Socioeconomic Agenda presented by President BBM in his first State of the Nation Address (SONA) last year  (which were just reinforced in his second SONA this year),  Dr. Basilio grouped the 8 points into three categories, i.e. “Strengthening Purchasing Power of Filipino” through food security, improved transportation and affordable clean energy; “Reducing Vulnerability and Mitigating Scarring from the COVID-19 Pandemic” through Social Services, Health Care and Education; and “Ensuring Sound Macroeconomic Fundamentals” through bureaucratic efficiency and sound fiscal management.  A major reason for optimism about the next five years is that the Philippines continues to sustain growth despite external headwinds.   In fact, as many independent international sources of economic information attest to, the Philippines leads the East Asian economies in growth prospects in 2023 and 2024.  Economic growth is being driven by investment and consumption on the expenditure side and by industry and services on the production side.  Another positive trend is inflation continues to slow down.

            Several programs were implemented to protect the most vulnerable sectors affected by the repercussions of inflation.  Among these were the fuel subsidy program in which financial assistance of up to P6,500 was extended to qualified transport vehicles. To help small farmers and fisherfolks cope with rising costs of production, they received fuel discounts of up to P3,000.  Through a targeted cash transfer program, cash subsidy of P500 per month was given to the most affected individuals for six months.   Public Utility Vehicles (PUV) drivers were granted performance-based subsidies. These are concrete manifestations that the BBM government is not just concerned with GDP growth rates but with the alleviation of poverty, i.e. both sustainable and equitable growth.

            Another evidence that economic growth was trickling down to the masses was the significant improvement of labor market conditions, with unemployment rate easing way below the peak of 18% reached during the pandemic to 4.5 % in April of 2023.  Given these favorable conditions, the Department of the Budget assumed the following for the next five years:  Real GDP growth rate will growth at a range of 6.5 to 8.00%.  Inflation rate will be kept at 2.0 to 4.0 %.  Dubai Crude Oil (US$/bbl) will be between $60 to $80.  The foreign exchange rate will fluctuate within the range of P53 to P57 per $1.  Exports will be growing at an annual rate of 6.0 % while imports will increase at a yearly rate of 8.0%  Given these macroeconomic forecasts, the Medium-Term Fiscal Framework (MTFF) consists in the following targets: 9 % (i.e. single digit) poverty rate by 2028 from about 13 to 15% in 2023; 3% national government (NG deficit to GDP ratio by 2028; less than 60% NG debt-to-GDP ratio by 2025 and at least $4,256 income (GNI) per capita (attainment of upper-middle income status).

            The measures that will be implemented to support the MTFF are revenue mobilization, expenditure prioritization, digitalization of government processes, national government right sizing program, military and uniformed personal (MUP) pension reform, and passage of PBBM Governance Bill.  Higher tax revenues will be attained through digitalization and modernization efforts of the Bureau of Internal Revenue as well as the Bureau of Customs that has already been showing significant increases in collections thanks to its partnership with the Institute for Corporate Directors (ICD) to eradicate corruption by introducing good governance among its ranks.  Some of the specific measures are tax on digital service providers; excise taxes on single-use plastic and pre-mixed alcohol; excise tax on sweetened beverage; motor vehicle’s road user’s tax; and rationalization of the mining fiscal regime.  The highest priority will be given to the following expenditure items: infrastructures, human capital development, sustainable agriculture and food security, enterprise development, research and development and innovation, digital transformation, disaster resilience, and transition to full development.

            The reform in pension scheme of military and uniformed personnel (MUP) is aimed at mitigating the impact of ballooning pension requirements resulting from indexation scheme of pension to current salary rate of active servicemen.  Already there are 12 House Bills pending with House bills with House Committee on Public Order and Safety.  Another priority bill is the Progressive Budgeting for Better and Modernized (PBBM) whose aims are to improve government’s accountability to the people, empower people through Open Government Initiative, embed mechanisms to ensure fiscal responsibility, introduce digital transformation in public financial management and strengthen the Power of the Purse of Congress.