Zoilo “Bingo” Dejaresco III l 14 April 2022 l Business Mirror, FINEX Free Enterprise
THERE is always room to put in context economic figures as advanced by Finance Secretary Carlos G. Dominguez and Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno last week at the PICC (Philippine International Convention Center).
For instance, one can contextualize the (5.6 percent) gross domestic product (GDP) growth rate in 2021 in relation to a hefty negative(-) 9.6 percent economic drop in the previous year 2020 which means the 2021calculation came from a lower GDP base. Likewise, the speakers projected a 7.9-percent to 9-percent GDP growth rate in 2022, which has been scaled down by the World Bank to just 5.5 percent to 5.9 percent (best scenario) and 4.9 percent (worst case scenario), surely including the Ukraine backlash.
The Philippines may have survived Covid-19 but it has been recorded as having the longest lockdown in the world and one of the poorest responses to Covid 19 in Southeast Asia. Its economic fallout in 2020 due to Covid was also the worst in the region.
Meanwhile, the Duterte administration passed the Rice Tarrification Law and stabilized the availability and price of rice (for 109 million Filipinos) taming inflation but the taxes from rice importation meant to subsidize the rice farmers failed as agricultural cost inputs remained high and the weather bad.
The government’s hefty “sin taxes” on alcoholic beverages and tobacco (P504 million in four years) were channeled successfully to the Universal Health Care program of the government, which helped the destitute and senior citizens. Government-operated firms contributed a high P68.7 billion in 2021, a powerful non-tax revenue source.
Digitalization has resulted in the full automation of the graft-ridden Bureau of Customs (but why only now after all these years?) and improved the electronic tax payments from 1.9 million to 5.5 million payers in 2021. Because of this, too, the previously huge unbanked communities in the nation became bank users with 90.5 million now holders of “Basic Deposit Account.” The government expects that 50 percent of payment transactions will be digital in form by 2023.
The problem remains (despite these) since income levels of people have dropped as people “living below the poverty line” in 2021 have gone back to the 2017 level of 21 percent or 23 million Filipinos. Can they really use their bank accounts much less make digital payments given their poverty?
Because of Covid-19, the Philippines borrowed heavily P3-trillion for pandemic response, mainly vaccines, which placed the country’s total debt to an unprecedented P12-trillion, raising the debt-to-GDP ratios from 3.4 percent (2019), 7.6 percent (2020) and 8.6 percent (2021).
Fiscal strain will follow as government collections dropped during the pandemic and will only be able to raise to pre-pandemic levels this 2022 and our national budget has been growing.
On the other hand, because of Create, reforms in the Foreign Investments Act, Ease of Doing Business and Retail Liberalization Act, some new $10.5 billion in foreign direct investments have signed up. Due to unseen barriers, however, historically-registered investments do not always result in actual entry.
The “Build Build Build” program of the government has resulted in new 77 kilometers of new railways (2,186 new trains) and 1,219 kilometers of new roads since 2016. Dominguez cited 28 highly concessional BBB contracts including the Mega Manila Subway program. The government boasts of a 4.5-percent ratio of infrastructure to GDP but this is below the target of 5.0 percent to 5.5 percent to GDP ratio according to the government’s own medium-term economic plan.
Among the clearly commendable achievements of the Duterte administration should count the improved universal health care program, the Malasakit hospital packages, the improved PPP (Pantawid program), free secondary and collegiate public education, free irrigation for farmers and the increase of foreign reserves to a high $108 billion; unprecedented in amounts.
The government has increased the capitalization of Landbank (from P88 billion to P230 billion) making it the second-largest universal bank in the country. It helps the country in its massive lending to the rural banks that disperse wealth and opportunities to the countryside. The Development Bank of the Philippines (DBP) hiked its net worth from P37.9 billion to P76 billion.
Both Landbank and the DBP are chief lenders to different local government units (LGUs) in the country. But agribusiness, generally, has been a slowpoke here reflected in the anemic contribution of agriculture (always less than 20 percent contribution to GDP) and many LGUs really do not have “absorptive capacity” for projects even if financing is available.
The various reforms in government hoped to generate greater market confidence and stability in the credit and investment ratings of RP by international arbiters of risk and ample liquidity allows the BSP to control money supply-interest rates, in turn—and thus, inflation.
Diokno ended with a parable about how people in a community (like the Philippines) facing strong wind storms can take one of two options: build walls or windmills.
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Bingo Dejaresco, a former banker, is a financial consultant and media practitioner. He is a Life and Media Affairs Committee member of FINEX. His view here, however, are personal and do not necessarily reflect those of FINEX. E-mail dejarescobingo@yahoo.com.