Ten reasons why the 2024 outlook is better

Finance Secretary Benjamin Diokno cites ten reasons why this year’s outlook is going to be better than 2023’s performance:

1. The Philippines has the vote of confidence of multilateral organizations like the World Bank, the International Monetary Fund and the Asian Development Bank.

The economic managers designed a post-COVID recovery program called the MTFF – Medium Term Fiscal Framework.

For 2024, MTFF seeks to reduce the national government (NG) fiscal deficit-to-GDP ratio to 5.1 percent and the NG debt-to-GDP ratio to 60 percent. Infrastructure spending will be 5-6 percent of GDP, meaning the BBM administration will spend a total of P8.6 trillion for infra alone in six years.

2. For two consecutive years, the national budget was approved on time – a difficult feat under global uncertainties, but shows a very strong relationship between the Executive Department and Congress.

Government line agencies and government-owned and controlled corporations (GOCCs) have been told to make purchases early to prevent underspending that slows economic growth. Plus, in early 2024, government will ramp up spending to prevent catch-up spending towards yearend.

3. The Bangko Sentral’s inflation fighting measures – basically doubling up interest rates – “appear to be bearing fruit, with the inflation rate returning to the target range of 2 to 4 percent in 2024 until 2028.”

“Keeping the inflation rate within manageable levels to protect the Filipino people’s purchasing power and maintaining macroeconomic stability shall remain the government’s top priority,” Diokno assures.

4. The country’s investor-grade credit ratings are a vote of confidence in the economy.

In November, both S&P Global and Fitch Ratings affirmed the Philippines’ BBB+ and triple-B ratings with Stable outlook, respectively. The Japanese Rating and Investment Information Inc. (R&I) affirmed Manila’s triple-B plus rating and revised its outlook from stable to positive.

Credit rating agencies and market analysts remain confident in the country’s macroeconomic fundamentals due to the sustained economic recovery, strong external position, improving fiscal position with declining debt, sound banking system and stable political environment.

5. Heightened investment activities in the country with the enactment of the Public-Private Partnership (PPP) Code and the Maharlika Investment Fund (MIF).

The PPP Code ensures high-quality infrastructure and services in the country to reach the government’s target infrastructure spending of 5 to 6 percent.

The MIF the Philippines’ first-ever sovereign wealth fund, will support government infrastructure, create jobs, promote investments, strengthen connectivity, achieve energy, water and food security and support the government’s poverty reduction efforts by sustaining the economy’s high growth trajectory and ensuring sustainable development, with the end in view of promoting efficient intergenerational management of wealth.

Rafael D. Consing Jr. is the president-CEO of the Maharlika Investment Corporation (MIC). Four directors came from the private sector.

Reports Diokno: “The economic team continues to see possible improvements in the FDI prospects for the country along with game-changing structural reforms such as the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act and amendments to the Public Service Act, Retail Trade Liberalization Act, Foreign Investments Act and the revised implementing rules and regulations of the Renewable Energy Act.”

6. The BBM administration is keen to ease doing business and make service delivery efficient. The Anti-Red Tape Authority (ARTA) has been told to deliver.

ARTA’s approach has been meetings, more meetings – and more meetings. Expect a big meeting this January, featuring the new economic czar, Frederick Go.

Reports Diokno: “ARTA is improving and optimizing the regulation in sectors with significant impact on the economy, with the priority sectors being (i) Telecommunications and Connectivity, (ii) Energy, (iii) Logistics, (iv) Health, Food and Pharmaceuticals and (v) Infrastructure. ARTA is also actively monitoring and promoting government agencies to leverage technology to efficiently deliver services, citing digital solutions such as the eGovSuper App, the Philippine Business Hub, the Philippine Business Databank, the Electronic Business One Stop Shop and Tradenet.”

To me, the best way to cut red tape is cut processing of business permits to just – ten minutes. And order the banks to release as loans to one million SMEs P5.3 trillion of idle deposits.

7. The country’s external position remains strong to withstand external vulnerabilities.

The balance of payments will show a surplus at 0.1 percent in 2024. The peso will continue to be supported by structural inflows as BPO revenues grow by 7 percent, travel receipts expand by 50 percent and OF remittances maintain growth of 3 percent based on the latest BSP outlook.

8. The ratification of the Regional Comprehensive Economic Partnership (RCEP) and other Free Trade Agreements (FTAs), such as the Philippines and South Korea FTA, will facilitate trade diversification and expand the country’s market access for goods and services, attract more investments and create more and better jobs.

The Philippines’ participation in the Indo-Pacific Economic Framework for Prosperity (IPEF) will also help position the country as a reliable global partner and a prime location for businesses that seek to diversify and expand their supply chains for manufactured goods.

The government will continue to pursue the finalization of other trade agreements and ensure that negotiations under the ASEAN with Australia and New Zealand, China and other ASEAN-led FTAs will advance the country’s position in the region.

9. Diokno expects the passage of key tax reforms which are already in the advanced stages in Congress this year to help ensure sufficient government financing of the 2024 budget.

The DOF seeks passage of Package 3 or the Real Property Valuation and Assessment Reform (RPVAR), value-added tax (VAT) on non-resident digital service providers (DSPs), excise tax on single-use plastics and motor vehicle road user’s tax, among others. The Automatic Income Classification of LGUs Act was passed last year.

10. DOF will harness LGUs as engines of economic growth. They are being told to speed business permit processing. In ten minutes.

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