The Philippines should increase investments to at least 30 percent of the gross domestic product to attain the status of an upper-middle-income country like Thailand by 2022, the National Economic and Development Authority said over the weekend.
Economic Secretary Ernesto Pernia said total investments by the public and private sectors should be increased from the current 24 percent to 30 percent to make the vision of transforming the Philippines into an upper-middle-income economy under the Duterte administration a reality.
Pernia said of the total investments, the public share of investments needed to rise from 5.4 percent of GDP this year to 7 percent of GDP onwards until 2022.
He said that beginning this year, the budget for public infrastructure would be increased to 5.4 percent of GDP, or equivalent to about P861 billion, while private investment was expected to contribute 18.6 percent of GDP, for total investments equivalent to 24 percent of GDP.
“This is a significant improvement from historical lows, but this level will not be enough to help the country achieve its vision of eradicating poverty and becoming a high-income economy, where Malaysia is nearly right now, by 2040,” Pernia said.
“Hence, an ambitious program focusing on infrastructure is necessary not only to raise the government’s contribution to investments, but also to fill the country’s massive infrastructure backlog that has been inherited from past governments,” Pernia said.
“In order to raise enough revenues to fund the government’s unmatched public spending plan, it needs to implement broad and deep reforms in tax policy and administration. Without the tax reform, we will not be able to fund the needed increase in infrastructure spending beginning 2018,” he said.
Budget Secretary Benjamin Diokno said the total infrastructure budget, both national and local, was projected to grow from P861 billion in 2017 to P1.898 trillion by 2022, or from 5.4 of GDP to 7 percent of GDP.
“These record levels of spending will align our country with its more vibrant neighbors and put us on track to achieve our vision of eradicating extreme poverty and transforming our economy into a high-income one by 2040,” Diokno said.
Diokno said the unprecedented levels of public spending in the years ahead could only happen if the government were to raise a lot more revenues, which would require major reforms in tax policy and administration.
The first package of the Comprehensive Tax Reform Program crafted by the Finance Department was submitted to Congress on Sept. 26.
Finance Secretary Carlos Dominguez III said the agency welcomed the recent statement of Rep. Dakila Carlo Cua, who chairs the House ways and means committee, that the first package would likely be approved by the panel this month.
Dominguez said that in the medium-term, tax reform was expected to help reduce the poverty rate from 21.6 percent in 2015 to 14 percent in 2022, lifting some six million Filipinos out of poverty, and helping the country achieve upper middle-income country status where per capita gross national income would increase from $3,550 in 2015 to at least $4,900 by 2022, or close to where Thailand is today.
“If this momentum is sustained, the country would be well on its way to becoming a high-income economy by 2040 with a per capita gross national income of a least $11,000, which is where Malaysia is right now,” he said.
