Economic managers on Tuesday vowed to keep the budget deficit program of 3 percent of the gross domestic product, despite the opposition to the second set of tax reforms being pushed by the Duterte administration.
Finance Secretary Carlos Dominguez III said while the tax reform package faced an ‘uphill climb’ in Congress, the government would not adjust the fiscal deficit target.
“We will not prejudice the economy by exceeding 3 percent or around that area,” Dominguez said during an economic forum organized by the Economic Journalists’ Association of the Philippines at Ayuntamiento de Manila in Intramuros, Manila.
Dominguez said contrary to the opinion of some quarters, the tax reform packages would have lasting effect on the economy.
“Surely, we are facing an uphill climb in the passage of succeeding tax packages,” he said. The first package or the Tax Reform for Acceleration and Inclusion took effect in January which slashed personal income tax but raised excise taxes on alcohol, tobacco, fuel and automobile.
Dominguez said the Finance Department submitted to Congress the remaining four tax reform packages in July.
Budget Secretary Benjamin Diokno echoed Dominguez’ statement, by saying that “we are committed to maintain fiscal deficit at 3 percent of GDP.”
Diokno expressed optimism that some of the packages would be signed by President Rodrigo Duterte before the end of 2018.
The economic managers earlier described as “tough advice” the International Monetary Fund’s recommendation for the government to adjust the budget deficit program to 2.4 percent of GDP this year and in 2019 from the current 3 percent.
Reducing the budget deficit was one of the IMF’s policy recommendations to help keep inflationary pressures in check and maintain economic stability.
The IMF said the adjustment in the fiscal deficit program would ease the burden on monetary policy in managing inflation.
Dominguez said it was a “tough advice,” given that the government was already proceeding full steam ahead in its infrastructure development program.
“Given deliberate improvements in our process, projects are in full steam to realize benefits envisioned in a timely manner. We do acknowledge that adjustments may be necessary to adequately respond to the changing macroeconomic landscape both internal and external,” Dominguez said.
Diokno cautioned against the implication of abandoning certain infrastructure projects.
“We will subject the IMF Staff proposal to a thorough review. Reducing the budget deficit program to 2.4 percent of GDP is feasible. However, the implication of abandoning some of our big-ticket infrastructure projects is something we are not comfortable with,” Diokno said.
“We are already gaining significant progress in our aim to accelerate infrastructure development to boost the country’s competitiveness and improve the quality of life of Filipinos. We do not intend to slide back,” Diokno said.”‹