The fiscal consolidation plan to be turned over by the Duterte administration to the next president will include proposed cuts in nonpriority budget items, the state planning agency National Economic and Development Authority (Neda) said.

The plan currently being crafted to repay the huge debt pile and narrow the record budget deficit caused by the COVID-19 crisis will not just contain new or higher taxes, Neda Undersecretary Rosemarie Edillon told a Go Negosyo forum on Thursday.

Referring to the policies for consideration, "many of them are really to cut off the fat in terms of the spending," Edillon said.

Last Tuesday, Finance Secretary Carlos Dominguez III said fiscal consolidation would entail targeted spending on more productive programs and projects like infrastructure.

"The only way to make this [fiscal consolidation] sustainable is by growing the economy faster and investing in the future. The fiscal deficit should be lowered to cover only infrastructure investments and not operational expenses," Dominguez told members of the Financial Executives Institute of the Philippines.

Candidates

The Department of Finance was spearheading the fiscal consolidation proposal, which Dominguez had said would be pitched to all presidential candidates.

Edillon said some proposals would be aimed at increasing economic activities so that there will be more tax and nontax revenues.

"It's also about attracting the right investments so that we can bring in the right kind of businesses that will allow other businesses to expand more," Edillon added.

Edillon said this was the reason why President Duterte's economic team pushed for the amendments to the antiquated foreign investments, public service and retail trade liberalization laws. The amended retail trade law was already enacted last year; the two other bills had been passed by Congress and were just awaiting the President's signature.

These three measures were expected to further open the economy to more foreign investors in a bid to generate additional jobs postpandemic, without touching the restrictions enshrined in the 1987 Constitution.

Edillon said the government was aware of the harder times wrought by the prolonged COVID-19 pandemic, hence will take it into consideration in the fiscal consolidation strategy. "We know that the first thing we have to do is to get the economy going," she said.

Economic recovery

Last year, the Washington-based Institute of International Finance (IIF) warned that emerging markets like the Philippines which wanted to ease their debt burden alongside economic recovery may face slower growth moving forward as they cut back on public spending.

In a Feb. 10 report, the IIF said "heightened social pressures and looming elections [including in Brazil, Colombia, Hungary, Kenya and the Philippines] limit prospects for implementing revenue-increasing structural reforms" to bring down debts and deficits incurred when governments spent more despite weaker revenues to fight COVID-19.

Barcelona-based FocusEconomics said in a Feb. 22 report that fiscal imbalances will be a major risk to the Philippines' economic growth this year. INQ