Bangko Sentral ng Pilipinas Gov. Benjamin Diokno expects to prioritize the implementation of existing tax measures over pushing for new tax laws when he takes over as Secretary of Finance, having answered the call to lead incoming President Ferdinand Marcos Jr.’s economic team.
On Wednesday, Marcos Jr. also named Monetary Board member Felipe Medalla as Diokno’s replacement at the BSP.
Medalla, who was Economic Planning Secretary when Joseph Estrada was president, will serve out the BSP Governor’s term, which lasts until July 2023.
In a press briefing, Diokno emphasized the importance of policy continuity as he accepted his new post as Secretary of Finance.
“As the country transitions to the next administration, it is my view that continuity of sound macro and fiscal policies is important to achieve the stronger post-COVID Philippine economy that we all aim for,” he said. “As Finance Secretary, I will strive to continue prudently and carefully balancing the need to support economic growth, on one hand, and to maintain fiscal discipline, on the other,” he added.
Further, Diokno said he intended to retain “most undersecretaries” at the Department of Finance (DOF) as well as the National Treasurer, Rosalia de Leon
Fiscal consolidation
When asked whether he would take up the fiscal consolidation plan handed over by the outgoing administration, he said it was too early for him to make a position on whether or not to increase taxes, or push for new ones.
Still, Diokno said it was important to raise the growth momentum of the economy, because a strong growth would mean more revenues that the government could collect.
“We need a lot of money— first [in order] to continue our [economic] growth momentum and second to service our higher level of public debt,” he said.
Even then, Diokno said the first item on the agenda when he takes over the finance portfolio will be the sustainability of government debt.
At P12.7 trillion as of the end of March 2022, the national government’s debt stock represents just over 60 percent of gross domestic product (GDP)—the threshold which should not be breached based on international standards of prudent economic housekeeping.
But Diokno said this was not a cause for concern as long as the Philippine economy grows by 6 to 7 percent “on a sustainable basis.” The government expects Philippine GDP to grow by 7 to 8 percent in 2022.
“That said, it is also important that I should look at the sustainability of the debt to assure the domestic audience and the international credit watchers that we are serious about consolidating our fiscal resources so that we are able to reduce our debt and deficit-to-GDP ratio over time,” he added.
Prepandemic level
As of the first quarter this year, the government’s budget deficit was 6.4 percent of GDP. The goal is to bring this down to the prepandemic level of just 3 percent.
In a statement, the Bankers Association of the Philippines (BAP) welcomed the new appointments for both Diokno and Medalla.
“Drs. Diokno and Medalla are notable economists who have the scholastic distinction and extensive experience that transcend different administrations, making them the best candidates for these roles,” said Antonio Moncupa Jr., president of BAP.
Moncupa said the experiences of both Diokno and Medalla as economic managers in past administrations were valuable assets as the Philippines makes its way toward economic and postpandemic recovery.