MANILA–Finance Secretary Carlos Dominguez III on Tuesday said fiscal consolidation will enable the Duterte administration reshape the country into an investment-led and more inclusive economy.
In his speech during the Dutertenomics Forum held at The Conrad Hotel in Pasay City, Dominguez said the investment-grade rating that the country currently enjoys “is a testament” of the positive impact of fiscal consolidation that started during the term of former President Gloria Macapagal Arroyo, who served the country from 2001-10.
“The debt burden is no longer a drag on our economic growth. We can now reshape our economic development so that it is investment-led. This, in turn, will open the door of ensuring an inclusive economy,” he said pointing out that “an investment-led growth pattern creates jobs and opens more economic opportunities for our people,” he said.
The Finance Chief said the inclusive growth bid was the reason why the Duterte administration vowed to increase infrastructure investments to above five percent of the annual national budget to help achieve a seven to eight percent growth, as measured by gross domestic product (GDP), by the end of the current administration in 2022.
He said the increased infrastructure spending aimed to revive the manufacturing sector and further boost the agriculture sector, among others.
The positive demographic profile of the country was considered as a plus for the economy but he pointed out that the government would only be able to maximize the benefit of this opportunity if necessary investments on human capital, educational system and quality health care are made.
“We must invest to make them globally competitive. We must prepare the economy to provide meaningful jobs for them or else risk building an alienated and discontented generation,” he said.
Dominguez said “the demographic sweet spot is both a challenge and an opportunity” and is a “test of our ability to govern and chart the nation’s future.”
“Seizing the opportunities offered by this demographic advantage requires reshaping our country’s economic development beginning at this time. We must build a truly inclusive economy. To do so our economy should be investment-led, creating new jobs and opening opportunities for all,” he said.
The finance chief said the country lost its competitiveness after past administrations decided to limit spending on infrastructure in reaction to the numerous financial crisis in the past decades, which eventually hurt the economy and discouraged investors to place their funds in the domestic economy.
Other factors that disheartened investors were the high tax rates, he said, thus, the proposed tax reform to align it with other countries in the region.
“Realigning our income tax rates is a measure intended not only to increase the disposable income of our workers but also to raise our economic competitiveness,” he said.
Dominguez said the proposed cut in both the income and corporate taxes were targeted to be countered by the introduction of new tax measures to ensure higher infrastructure budget.
“The comprehensive tax reform program therefore is a key link in the effort to breakout from the low growth and build a dynamic and inclusive economy for our people,” he added.