Philippines’ middle-income goals achievable — CPBRD

THE PHILIPPINE government’s goal of becoming an upper-middle income country and having a predominantly middle-class society in the following years remains achievable, a congressional think-tank, noting this will require the government to improve fiscal consolidation efforts while upskilling Filipino workers to prevent economic backsliding.

“Scanning present socio-economic variables indicates that, although the country is not far from attaining these goals — especially becoming an upper middle-income economy — current headwinds could easily derail progress,” the Congressional Policy and Budget Research Department (CPBRD) stated in a December report by Elsie C. Gutierrez.

President Ferdinand R. Marcos, Jr.’s government has set its eyes on the Philippines becoming an upper-middle country by 2025, gearing towards a predominantly middle-class society by 2040.

An upper middle-income status means having an income per capita range of $4,466 and $13,845, while becoming a middle-class society requires the creation of better-quality jobs, controlled inflation levels, and stimulated economic growth.

Supporting sustained economic growth requires the government to achieve manageable debt levels while improving tax revenue collections, CPBRD said. Improving the country’s fiscal space would allow more funding for “productive and high-impact projects.”

Reforms to the country’s tax structure have been a priority for the Marcos administration amid a tight fiscal space due to borrowings made at the height of the coronavirus pandemic.

The country’s outstanding debt inched up to a fresh high of P16.02 trillion in end-October due to peso depreciation against the US dollar, with it expected to hit P16.06 trillion by yearend. The debt-to-GDP (gross domestic product) stood at 61.3%, above the 60% threshold by multilateral lenders.

The government aims to lower the debt-to-GDP ratio to 60.6% by the end of 2024.

Allowing the private sector to participate in more infrastructure projects should also be considered to reduce the country’s reliance on bilateral and multilateral loans, helping cut the national debt stock, the think-tank added.

“Instead of pursuing the passage of measures that would impose additional taxes on the people or resorting to borrowing to augment its resources, [the] government could perhaps focus on improving its tax collection efforts and maximizing the utilization of its budget,” it said.

The Department of Finance in August said the Bureau of Internal Revenue’s end-July collection stood at P1.68 trillion, missing its P1.83-trillion target by 8.2%.

The bureau reported in October that it expects to collect P332.17 billion during the month, P254.56 billion in November, and P210.89 billion in December. The agency has set a P3.05-trillion total collection goal during the year.

The government should also look at facilitating investments into vital agricultural infrastructures, such as irrigation, roads and innovative food technologies, to help mitigate inflationary risks, which the think-tank attributed to the price instability of rice products.

“The current high inflation that Filipinos are facing today stems from the current rice shortages,” it said. “Managing inflation would therefore necessitate the aggressive use of non-monetary measures that would address structural problems in the agriculture sector.”

Inflation rate accelerated by to 2.5% in November, faster than the 2.3% in October, according to the Philippine Statistics Authority, with rice inflation slowing to 5.1% from 9.6% during the same period.

Government policies should also focus on improving the country’s health and education systems and building a “well-functioning” labor market for the Philippines to reap the benefits of human capital investments, the CPBRD said.

Efforts must also center on boosting national productivity by supporting the industrialization efforts of local manufacturers, it added.

“Apart from developing human capital, productivity, especially within MSMEs (micro, small, medium enterprises), may be enhanced through the provision of appropriate machinery, equipment, tools, as well as skills and knowledge,” the report stated. — Kenneth Christiane L. Basilio