The Department of Finance (DoF) said on Friday a wider budget deficit last year allowed the economy to stay robust amid a challenging external environment.
“Although the budget deficit incurred by the national government (NG) hit P353.4 billion in 2016, or P231.7 billion higher than the year-ago figure, it was well within the government’s aim start spending big on three priority areas to sustain high growth, attract investments and create jobs, accelerate poverty reduction and transform the Philippines into an upper middle-income economy by 2022,” Finance Secretary Carlos Dominguez 3rd said in a statement.
Malacañang’s push to ramp up spending on infrastructure, human capital and social protection at the onset of the Duterte presidency helped the economy sustain its growth momentum in 2016’s second semester, with the GDP expanding by 6.8 percent, from 5.9 percent the previous year, or on the high side of the government target of 6 to 7 percent, Dominguez noted.
“The Duterte administration’s decision to end years of public underinvestment and switch to higher deficit-spending mode has translated into more money spent on infrastructure; on education, health, skills training and other forms of human capital development, and on social protection for the poorest of the poor,” Dominguez said.
“This major policy shift, in turn, has allowed the NG to keep the domestic economy on the uptrend despite global market volatility,” he added.
Last year’s budget deficit “gives all the more reason for the Duterte administration to pursue the speedy congressional approval of its Comprehensive Tax Reform Program (CTRP) to raise enough revenues for the financial sustainability of its ambitious agenda to reverse years of official underspending, which has been responsible for the government’s failure to turn the economy into a truly inclusive one,” the Cabinet official said.
He said the government’s deficit spending policy is in sync with the government’s 10-point socioeconomic agenda to keep the high-growth pace, attract more private investments from here and abroad, cut the poverty rate from 21.6 percent in 2015 to 14 percent by 2022, and to turn the economy by then into an upper middle-income economy with a per capita gross national income of at least $5,000, or close to where Thailand is today.”
Package one of the CTRP is anchored on sizable cuts in personal income tax rates along with revenue-compensating measures like adjusting the excise tax rates on automobiles and petroleum products and expanding the value added tax (VAT) base. It is contained in House Bill (HB) 4774 that is now being studied by the House ways and means committee.
Quirino Rep. Dakila Carlo Cua, chairperson of the committee, has expressed the hope that his panel could pass HB 4774 before Congress takes its traditional Lenten break starting March 17.