Keynote speech of Finance Secretary Carlos Dominguez
Joint Assembly of Financial Institutions held on Feb. 13, 2020
posted February 18, 2020 at 12:10 am
Thank you for inviting me to be with you tonight. It is always comforting to be in the company of professionals who appreciate the intricacies of our financial system and the opportunities we must seize to strengthen financial inclusion among the Filipino people.
As you may know, we grew our economy last year by 5.9 percent, slightly missing the lower bound of our target range. The main reason for the slower growth rate was the delay in the enactment of the 2019 national budget. Because of this delay, compounded by the ban on infrastructure projects during the election period, we lost nearly a whole percentage point in GDP growth. Had Congress passed the national budget on time, our GDP last year should have expanded by around 6.8 percent.
The year 2020 began with some unexpected challenges. The African Swine Fever forced us to cull thousands of pigs, resulting in huge losses for our hog raisers. However, the Department of Agriculture is on top of the situation, strictly enforcing biosecurity measures and setting up more quarantine checkpoints, as well as providing more disinfection facilities to manage, contain, and control the spread of the disease. An intensified anti-smuggling campaign and heightened meat inspection efforts are being implemented as well by concerned government agencies.
Meanwhile, the ongoing activity under Taal Volcano could still result in a larger eruption. However, unless and until this actually happens, we can only speculate on the full economic impact of a larger eruption. What I can assure you is that concerned government agencies and local government units are fast-tracking the release of production support, livelihood and financial assistance to affected farmers and fishers, and the implementation of recovery and rehabilitation plans for the affected areas.
The new coronavirus or COVID-19, on the other hand, might very well be at an early stage of its global outbreak. However, the government responded to this public concern decisively and continues to implement proactive measures to keep our people safe. We are consoled by the observation that the virus has no local transmissions here unlike other countries.
A significant impact on the economy will most likely be centered on the tourism sector, given the various levels of travel bans imposed by national governments and of voluntary decisions of airlines to cut flights to and from China. Our exports to and imports from China might likewise be briefly affected due to temporary closures of factories in Wuhan, which has been under lockdown in an attempt to contain the virus.
While these developments may dampen our growth somewhat, these threats are not enough to force a dramatic reduction in our growth estimates. The 2020 budget has been passed on time. A special law allows us to use the unexpended project funds from 2019. Greater public spending in infrastructure and social services, supported by an expansionary monetary policy and a benign inflation rate, should allow us to dramatically increase our pace of growth this year.
More than most others, you understand the power of prudence in managing other people’s finances, making investment decisions, and ensuring the sustainability of businesses.
In government, prudence is expressed in fiscal discipline. Ideally, governments should not spend what they have not earned or expect to earn. The sustainability of revenue flows ought to be the first consideration. Economic investments should be evaluated based on their potential contribution to productivity. We must ensure that public debt is taken on for investments that will enhance our ability to continue our economic growth.
By maintaining fiscal discipline, we have worked down our debt load to a sustainable 41.5 percent of GDP in 2019 from 44.7 percent in 2015. We continue to register remarkable improvement in our revenues even as we await the enactment of the remaining packages of the comprehensive tax reform program.
Comparing our revenues in 2019 versus those of 2015, our collections improved by 54 percent. Stronger revenue performance enabled us to fund President Duterte’s Build, Build, Build program. With enough fiscal space, spending on infrastructure dramatically grew by 42 percent last year compared to 2015. Clearly, improved revenue flows translate into greater economic investments.
Preliminary data show our tax effort improved from 13.6 percent of GDP in 2015 to 15.1 percent last year, our strongest performance in 22 years.
Dividend collections from government-owned and controlled corporations reached an unprecedented 69 billion pesos last year.
We also led a sustained campaign to crack down on errant Philippine Offshore Gaming Operators or POGOs and their service providers that evade proper taxation. We managed to collect a total of 6.42 billion pesos in taxes from POGOs in 2019—a 169 percent increase from the preceding year. We expect to collect significantly more this year as we properly document and audit the operations of these service providers.
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