“We return to normalcy”

Rapid rebound in revenue collection

Our revenue collection has shown signs of a rapid rebound, signaling a return to robust economic activity. The combined collections of our main revenue-generating agencies in 2021 were already 9% higher than the previous year. In fact, the Bureau of Customs’ collection already surpassed the pre-pandemic level.

The comprehensive digitalization of our collection systems helped us accomplish this feat. This year, we expect to fully bring back our revenue collection to pre-pandemic levels.

More bright spots have emerged.

Our total foreign direct investments in the first 10 months of 2021 already surpassed the full-year level for 2020. The Philippines’ total merchandise trade in 2021 already exceeded the pre-pandemic level.

Remittances from our overseas workers and our gross international reserves continue to rise. In November of last year, the unemployment rate was at its lowest level during the pandemic period. We expect these positive trends to continue through 2022.

Severe COVID infections and deaths limited

Despite the surge in infections due to the Omicron variant in early January, we have succeeded in limiting severe infections and deaths. This is due to the escalated pace of our vaccination program and the implementation of policies that allowed us to move from a pandemic to a more endemic paradigm.

As of February 4, our total vaccine arrivals already reached 217.8 million doses. We have successfully administered 129.1 million shots as of February 7. A total of 60.1 million Filipinos are now fully vaccinated while 8.2 million people have already received their booster shots.

Funding is already secured for more booster shots along with vaccine doses for children below 12 years old. On Feb. 7, 2022, we kickstarted the roll-out of the vaccination program for our kids.

Debt-to-GDP rises to 60.5%

Due to the unexpected costs of the pandemic, our debt-to-GDP ratio increased from a historic low of 39.6% in 2019 to 54.6% in 2020 and 60.5% in 2021.

However, if you net out our internal government debt to government agencies and social security institutions, our debt ratio in 2021 is projected at only 54.2% of GDP. This remains eminently sustainable.

The national government has started reducing our provisional advance arrangements with the central bank from P540 billion to P300 billion. This amount will be totally paid off by June of this year.

Despite the increase in borrowings, we have reduced the cost of public debt through judicious debt management. Our average annual interest rate continues to decline from 4.2% in 2020 to 3.9% in 2021. This is even lower than the 5.2% average annual interest rate in 2015, the year before we took office.

Lower fiscal deficit of 9.5% of GDP

Supported by the rebound of revenue collections, our fiscal deficit for 2021 is expected to be lower at 8.2% of GDP from the program of 9.5% of GDP for the year. In 2022, the fiscal deficit will continue its downward trend to 7.7% of GDP.

With the lower projected deficit outcome, we have the scope to reduce our gross borrowings beginning 2022.

This will allow us to peak our debt-to-GDP level to 60.9% this year, and drop it down starting 2023. We will continue to source more than two-thirds of our financing requirement from our very liquid domestic market.

We will continue exercising fiscal responsibility to let our growth outpace our debt over the near- and medium-term.

As I have emphasized many times, our goal is to keep our deficit and debt to GDP ratios at the median range of our neighbors and rating peers globally.

Duterte legacy

We are confident that the Duterte administration will leave a legacy of a vibrant and inclusive economy for our people. President Duterte has built a track record for completing critical reforms that proved difficult to enact. Many of the reform measures sat on the shelves for decades due to lack of the political will to break the congressional deadlock.

Most comprehensive tax reform program

For instance, the Duterte administration is the only one in our history that decisively passed and implemented the most comprehensive tax reform program ever. We lowered income tax rates twice in a single presidential term—first for our workers and then for corporations.

We are the only administration to raise excise taxes on sin products three times. These improved funding for the Universal Health Care Program—which is another landmark reform of this administration.

We made history by finally putting in place long-needed reforms in our country’s fiscal incentives system. To enhance tax administration, we embarked on a comprehensive digitalization program and strengthened tax enforcement. As a result of all these efforts, we have succeeded in maintaining our strong financial position despite the onslaught of the pandemic. In fact, the emerging revenue effort of 15.6% of GDP over the five-year periodunder the Duterte administration is the highest in over two decades.

Rice tariffication

The Rice Tariffication Law was finally achieved after more than 30 years of failed attempts under previous administrations. As a result, rice is no longer the main contributor to our overall inflation rate.

In 2020, we successfully resolved the issues that prevented the Real Estate Investment Trusts to flourish in the country for more than 20 years. In less than two years of its implementation, five REITs have already been established in the market with a total size amounting to $5.6 billion.

Reforms measures await Duterte signature

The amendments to the Foreign Investments Act and the Public Service Act now await the President’s signature. All of these set the economy firmly on the path of liberalization. These will hasten the country’s recovery and put the country back on its pre-pandemic growth rate.

We are determined to complete the fiscal and economic reforms the Duterte administration embarked on. The pending tax reform bills are already in the advanced stages of legislation and we will continue pushing for their approval until our last hour in office.

We are determined to return quickly to fiscal consolidation. Our fiscal consolidation plan will be ready by the time the Duterte administration completes its term. This will be part of our transition document.

The emerging package contains a combination of improvements to tax administration to plug existing leakages and updated tax policy proposals that build on our past reforms. The scope of these reforms is comprehensive. Some features are also designed to future-proof our tax system.

Build, Build, Build

Along with these, we will drive up domestic economic activity by proceeding full-steam with our massive Build, Build, Build infrastructure program. Infrastructure investments as percentage of our GDP are targeted to reach 5.6% in 2021 and 5.9% in 2022.

We will continue to modernize our governance system, strengthen our public health system, and invest more in our human capital. In addition, the Philippines has been very active in implementing climate change actions on the ground. In the coming weeks, we will issue our first-ever environmental, social, and governance sovereign bond.

All of these reforms and initiatives exemplify the Philippines’ strong commitment to stability, sustainability, a strong economic recovery, and the urgent transition to modern governance.

Elections

With the upcoming elections, we assure you that the transition of leadership will be smooth and guided principally by continuity in our fiscal and economic policies, in the same way that we have also carried out the important reforms of past administrations.

The Duterte administration is ready to assist the successor government in addressing key issues that will impact the Philippines’ economic stability.

They must ensure that we outgrow our debt and manage inflation brought about by shortages around the world. In particular, we should focus on containing food inflation by liberalizing the agriculture sector.

We must also deal with the exacerbated external and internal inequalities brought about by COVID-19 and address climate change without stretching the fiscal resources of the country.

Over the past five years, the Duterte administration has clearly laid down firm foundations that will allow the Philippines to meet the challenges of the future and build the inclusive economy our people deserve.

This year, we are more than ready for a big and strong comeback. We have what it takes to do this.

Thank you.