High growth, no new taxes, beautiful direction

A number of good news and beautiful reports that I read this week. See these stories in The Philippine STAR: “ No new taxes to be imposed, says DOF” (April 29), ‘Too early to tinker with growth targets’ (April 29), “Tax revenues hit P932 billion in Q1” (April 30).

Similar stories were also reported in BusinessWorld: “Pangandaman sees no need to revise DBCC growth target” (April 28), “DOF withdraws proposal to hike capital gains tax” (April 30), “Fitch Ratings affirms PHL ‘BBB’ rating” (April 30).

The Department of Finance (DOF) press release last April 29, “DOF: No new taxes, fiscal position remains robust” was great music to my ears. DOF Secretary Ralph Recto elaborated that “At this point, current revenues are more than sufficient to support our expenditure requirements. We are meeting our obligations, funding key programs, and growing the economy without having to impose new taxes on our kababayan. We are also decisively managing our deficit level, while maintaining a sustainable debt trajectory aligned with our Medium-Term Fiscal Framework (MTFF).”

Spot on, Secretary Recto, thank you. Fiscal sustainability and consolidation, better tax administration and avoidance of new taxes or tax hike. We need these along with spending control somewhere to reduce the need for more borrowings.

I checked the first quarter (Q1) 2025 Cash Operations Report by the Bureau of the Treasury, DOF, there were indeed a number of good news and beautiful numbers.

One, tax revenues is up to P931.5 billion vs. P820.4 billion in Q1 2024, or 13.5 percent higher this year. The BIR alone delivered a 16.7 percent increase.

Expenditures though have increased big, P1.477 trillion vs. P1.206 trillion in Q1 2024, or 22.4 percent increase. Interest payment alone rose to P241 billion vs. P193 billion in Q1 2024. Or an average of P2.7 billion/day this year vs P2.1 billion/day last year.

Two, budget deficit is down to P272.6 billion vs P478.8 billion in Q1 2024. Or a 75.6 percent reduction in the deficit, awesome.

Three, financing or borrowings is down to P280.8 billion vs P644.1 billion in Q1 2024. Or 129 percent reduction, beautiful.

On keeping our GDP growth target this year at 6-8 percent, and not target 5.8 percent or lower, I support the Development Budget Coordination Committee headed by DBM Secretary Amenah Pangandaman, along with Secretary Recto and Secretary of DEPDev Arsenio Balisacan.

Among the reasons for my optimism of at least six percent growth in 2025 are the following.

One, it is an election year, candidates and household spending is high, like 7.1 percent growth in 2016, 5.9 percent in 2019 and 8.3 percent in 2022. Since household spending or consumption is 74 percent of GDP, a big increase here pulls up overall GDP.

Two, inflation is decelerating, from six percent in 2023, 3.2 percent in 2024 and 2.3 percent in Q1 2025. Low inflation means higher consumer confidence, people spending more which encourages more domestic production of goods and services and pulling up overall GDP.

Three, our unemployment rate is also declining, from 5.4 percent in 2022, 4.4 percent in 2023, 3.8 percent in 2024, also 3.8 percent in February 2025. Low unemployment rate means more people have jobs, have stable income and higher consumer confidence, again pulling up overall GDP.

Four, another indicator or proxy of consumer confidence is higher sales in commercial vehicles, from 109,596 units in Q1 2024 to 117,074 in Q1 2025 or 6.8 percent increase.

Five, global energy prices are declining, getting cheaper. WTI crude was about $76/barrel in Q1 2024 and only about $68/barrel in Q1 2025. Coal prices are also lower, from around $125/ton in Q1 2024 to around $100/ton in Q1 2025. Cheaper energy means cheaper electricity, cheaper transportation of goods and services, land sea and air.

The tariff dispute and scare is generally short-term, will last for a few months only. It is our fundamentals – high consumer base due to big population, high growth momentum the past three years, declining inflation and unemployment, more economic liberalization, etc. – that will set the medium to long-term economic performance of the country and our businesses and job creators.

I keep my trust and confidence in the economic team plus the infrastructure team. That they will continue economic liberalization and competition, no new taxes or tax hikes,  spending control especially in endless subsidies and freebies, and keeping productivity-enhancing big infrastructure projects.