Marcos lays down goals: Smaller debt, fewer poor by 2028

President Ferdinand “Bongbong” Marcos Jr. on Monday laid down his economic goals during his first State of the National Address (SONA), looking to end his term with a single-digit poverty rate and reducing the size of the government's debt below 60% of the economy.

Marcos said his administration’s measurable medium-term macroeconomic and fiscal objectives included bringing down the poverty to “9% or single-digit poverty rate by 2028.”

The Duterte administration targeted bringing the poverty rate down to 15.5% to 17.5% by the end of its term, but the COVID-19 pandemic pushed 3.9 million more Filipinos into poverty due to hard lockdowns which halted economic activity.

As of the first half of 2021, poverty rate was at 23.7%, higher than the 21.1% recorded in the same period in 2018.

The President also said that the country’s debt would be less than 60% debt-to-gross domestic product (GDP) ratio by 2025.

As of the first quarter of 2022, the government debt-to-GDP ratio — the amount of the state’s debt relative to the size of the economy — stood at 63.5%, its highest in 17 years and well over the internationally recommended threshold of 60% of the economy.

Tax administration reforms will be in place to increase revenue collection, including taxing digital service providers, according to the President.

Marcos also said a rightsizing measure would enhance the government’s institutional capacity to perform its mandate and provide better services while ensuring optimal and efficient use of resources.

He called for a digital transformation with the national ID system playing a key role to ensure that Filipinos have seamless access to public services.

He then tasked agencies to finish the distribution of about 92 million IDs by mid-2023.

On healthcare, the President said he wants to establish a Center for Disease Control and Prevention, a vaccine institute, cheaper medicines, specialty hospitals in the provinces, and improve the welfare of doctors, nurses, and other medical personnel.

Marcos said that a stronger healthcare system is needed as the country could no longer afford to impose another lockdown due to the COVID-19 pandemic. 

"Wala na tayong gagawing lockdown. Dapat nating balansehin ang kalusugan at kapakanan ng ating mga mamamayan sa isang banda at ekonomiya naman sa isang banda," he added.

(Lockdowns won't be implemented anymore. We must strike a balance between people's health and safety and the economy.)

He also asked the public to get their COVID-19 booster shots.

The President, meanwhile, reiterated his objective of returning to full face-to-face classes safely, which his administration aims to achieve by November. 

He also pushed for a mandatory Reserved Officers' Training Corps (ROTC) program for senior high school students.

The K to 12 program is also under "careful review," he said.

On foreign policy, Marcos said the Philippines would continue to be a "friend to all and an enemy to none" even as he vowed not to preside over "any process that will abandon even a square inch of territory of the Republic of the Philippines to any foreign power."

He pledged to to sustain infrastructure spending at 5% to 6% of GDP, increase the country's use of renewable energy sources and issue an order imposing a one-year moratorium on the payment of land amortization and interest payments to aid land reform beneficiaries. 

Marcos also emphasized the need to fix the value chain in order to address short-term and long-term problems in the agriculture sector.

"We have assembled the best Filipino minds to help navigate us through this  global crisis that we are now facing," the President said. 

"We will endure. Let our Filipino spirit ever remain undimmed," he added.

"I know this in my mind, I know it in my heart, I know it in my very soul: the state of the nation is sound."

GDP growth

On GDP growth, Marcos echoed his economic managers’ target of 6.5% to 7.5% this year, to be followed by an ambitious goal of 6.5% to 8% economic growth annually between 2023 and 2028.

The Philippines has so far opened the year with a faster-than-expected economic growth of 8.3%, which compares with the 7.8% in the fourth quarter and the -3.8% the first quarter of 2021.

The President also said that the national government’s deficit-to-GDP ratio will go down to 3%.

The budget shortfall relative to GDP ballooned to 8.6% in 2021 as state spending for COVID-19 recovery measures exceeded revenue collections.

Upper-middle income status

Marcos said his administration was looking to bring the Philippines to “upper-middle income status by 2024” with “at least $4,256 income per capita.”

The previous administration aspired to bring the country to upper-middle income status by 2020 but the economy went into a recession due to the pandemic.

As of 2019, the Philippines has been categorized as a lower-middle income country with a GNI per capita of between $1,006 and $3,955.

Under the World Bank standards, an upper middle-income country is one with a GNI per capita between $3,956 and $12,235.

“The aforementioned headline goals summarize the objectives of this Medium-Term Fiscal Strategy (MTFF) being submitted to Congress, for its adoption and concurrence through a Concurrent Resolution by the Senate and House of Representatives,” Marcos said.

“Once adopted, the MTFF will become an anchor for the annual spending and financing plan of the National Government and Congress when preparing the annual budget and undertaking related appropriation activities,” he added.

Marcos described the MTFF as a forward-looking document which would extend beyond the traditional three-year horizon to reach six years, coinciding with the six-year coverage of the Philippine Development Plan (PDP) 2023 to 2028.

“I have instructed the NEDA (National Economic and Development Authority) to coordinate with other agencies and work on the Philippine Development Plan for 2023 to 2028 and to submit to me the complete blueprint and progress of its implementation not later than year-end," Marcos said.

Inflation

On inflation, Marcos mentioned the assumptions earlier presented by his economic managers.

“The average inflation for 2022 is projected to range from 4.5 to 5.5%, following the uptick in fuel and food prices as a result of the ongoing Russia-Ukraine conflict and the disrupted supply chains,” Marcos said.

“It is slightly adjusted to 2.5 to 4.5% in 2023, and is seen to return to the target range of 2.0 to 4.0% by 2024 until 2028,” he added.

Marcos said year-to-date inflation so far this year was at 4.4%, within the government’s target range.

June’s inflation print clocked in at 6.1%, the fastest since October 2018’s 6.9% rate.

Marcos said that Dubai crude oil price was expected to settle at $90 to $110 per barrel in 2022, $80 to $100 in 2023, and $70 to $90 per barrel from 2024 onwards.

He said oil supply was expected to catch up and stabilize over the medium-term, reflecting the Development Budget Coordination Committee’s (DBCC) macroeconomic assumptions.

“The Philippine peso is projected to average between P51 to P53 per US dollar in 2022 and P51 to P55 per US dollar from 2023 onwards due to aggressive monetary policy tightening by the US Federal Reserve, market aversion amid the Russia-Ukraine conflict, and again, increased global oil prices,” Marcos said.

Exports, imports

Marcos said exports of goods were expected to grow by 7% in 2022, and 6% from 2023 to 2028.     

“On the other hand, imports of goods are projected to grow by 18 percent in 2022, 6% in 2023, and 8% from 2024 to 2028,” Marcos said.

Marcos said the government would implement a sound fiscal management.

“Tax administration reforms will be in place to increase revenue collection. Expenditure priorities will be realigned and spending efficiency will be improved to immediately address the economic scarring arising from the effects of COVID-19 and also to prepare for future shocks,” he said.

The Chief Executive said government disbursements for 2022 to 2023 would be maintained at above 20% of gross domestic product or P4.955 trillion and P5.086 trillion, respectively to ensure the implementation of priority programs.

“Disbursement will further increase over the medium term from P5.402 trillion or 20.7% of GDP in 2024 to 7.12 trillion or 20.6% of GDP in 2028,” Marcos said.

Marcos said the medium term fiscal strategy of this administration sought to attain short-term macro-fiscal stability while remaining supportive of the country’s economic recovery, and to promote medium-term fiscal sustainability.

Investments, ecozones

Marcos said that productivity enhancing investments would be promoted during his administration.

“Our country must become an investment destination, capitalizing on Corporate Recovery and Tax Incentives for Enterprises or the CREATE law and economic liberalization laws such as the Public Service Act and the Foreign Investments Act,” Marcos said.

“Ecozones will be fully supported to bring in strategic industries such as those engaged in high-tech manufacturing, health and medical care, and all emerging technologies. This is also seen to facilitate economic growth outside Metro Manila,” he added. -NB/VBL, GMA News