Dominguez warns: Economy to ‘choke to death’ sans deficit-financed infra

The sustained growth of the Philippines demands that the government spend aggressively for key infrastructure projects that will remove “chokepoints” preventing the country from operating at optimum capacity, according to the head of the Duterte administration’s economic team.

Speaking before lawmakers last week, Finance Secretary Carlos Dominguez III said a manageable spending strategy that would “increase the horsepower” of the local economy was more important than attaining a balanced budget at this point.

“Our economy is being choked,” he said, noting the country’s capital was continually plagued by heavy vehicular traffic, congestion in sea ports and regular flight delays. “My prediction is if we do not do any infrastructure, in five years’ time we will choke to death.”

During a recent Development Budget Coordination Committee briefing for Congress, Dominguez said balancing the budget would not be ideal for an economy like the Philippines that needs to finance its growth, investments in infrastructure, education and defense.

With the debt-to-gross domestic product (GDP) ratio steadily falling, he reassured lawmakers the government under the watch of President Duterte would maintain fiscal discipline in carrying out this deficit spending strategy.

He also pointed out that in order to accomplish the administration’s goal of high and inclusive growth, the government would have to increase infrastructure spending to 7 percent from 2.2 percent of GDP in the past.

“Essentially, what we want to do is we want to increase the horsepower rating of our economy,” Dominguez said. “Right now, our economy is full of chokepoints that it cannot operate at full capacity, at the optimum capacity.”

To modernize the country’s infrastructure, Dominguez said revenue collections would have to be augmented with borrowings from both local and foreign sources.

This will be made possible by the government’s steady fiscal footing since the country’s total debt has now dropped to 42.1 percent of GDP from 70 percent in the past.

“We estimate that by 2022 [total debt] will be down to 38.6 percent of our GDP,” Dominguez said.

The government expects tax revenues to grow by 12.7 percent in 2019 as the Bureau of Internal Revenue and the Bureau of Customs are expected to post collection growths of 13.1 percent and 11.3 percent, respectively. To generate additional revenues, the Duterte administration would push for the passage of the entire tax reform package, he said.