Outgoing Finance Secretary Benjamin E. Diokno turned over the Department of Finance (DOF) on solid footing to the incoming finance chief.
Since taking the helm at the DOF on July 1, 2022, Secretary Diokno has committed to pursuing the Marcos, Jr. administration’s overarching goals of reducing the deficit-to-GDP ratio to 3.0 percent, achieving upper middle-income status by 2025, and bringing down poverty incidence to single-digit by the end of the President’s term.
Secretary Diokno led the economic team in crafting the Philippines’ first-ever Medium-Term Fiscal Framework (MTFF) during the Marcos, Jr. administration’s first month in office.
The MTFF embodies the government’s commitment to pursuing fiscal consolidation, ensuring that sustainability is given priority in the management of finances without sacrificing economic growth.
Improving revenue generation and boosting government spending are at the core of the MTFF.
For the first 10 months of 2023, the National Government (NG)’s actual revenue collection rose to PHP 3.2 trillion, higher by 9.4 percent compared to the same period last year.
Revenue collections also exceeded the target for the period by 5.2 percent due to better collection performance by the Bureau of Customs (BOC) and income from the Bureau of the Treasury (BTr).
Digitalization, which Secretary Diokno strongly advocated for, played a significant role in the improved revenue collection performance.
For instance, the Bureau of Internal Revenue (BIR) bolstered its Digital Transformation (DX) Program which provided taxpayers with modern, convenient, and accessible tools to elevate taxpayer experience, thereby increasing taxpayer compliance as well as transparency.
Similarly, the BOC has so far digitalized 161 out of 166 customs processes, resulting in a 97-percent digitalization rate. These efforts allowed the Bureau to enhance its trade facilitation.
The Development Budget Coordination Committee (DBCC) projects revenue collections to reach PHP 3.8 trillion by the end of 2023 and further rise to PHP 6.6 trillion in 2028 due to the anticipated implementation of priority tax measures over the medium term.
In the past year, Secretary Diokno has advocated for the passage of key reforms under the MTFF to boost revenue generation and tax administration.
Secretary Diokno previously vowed to broaden the tax base to ensure fairness where everyone can contribute their fair share of taxes.
These are Package 3 of the Comprehensive Tax Reform Program (CTRP) or the Real Property Valuation and Assessment Reform (RPVAR), Package 4 of the CTRP or the Passive Income and Financial Intermediaries Taxation Act (PIFITA), excise taxes on pre-mixed alcohol, sweetened beverages and junk food, and single-use plastics (SUPs), as well as the rationalization of the mining fiscal regime and the Motor Vehicle Road User’s Tax (MVRUT).
He also proposed to improve Philippine tax laws to be at par with international standards.
With this, Secretary Diokno led the DOF in its proposal to impose a value-added tax (VAT) on digital service providers (DSPs) to level the playing field between foreign and local digital service providers.
In the spirit of unity, Secretary Diokno has led the economic team to work closely with Congress, the private sector, and civil society towards achieving long-term economic growth.
The majority of the priority measures are already in advanced stages in Congress and were prepped to help finance this year’s national budget and attain the government’s 5.1 percent deficit-to-GDP target for the full year 2024.
NG deficit-to-GDP ratio for the first three quarters of last year decreased to 5.7 percent, which is below the 6.1 percent full-year deficit target for 2023.
Likewise, the debt-to-GDP ratio decreased to 60.2 percent, which is below the full-year target of 61.2 percent for 2023, signaling the overall effectiveness of the fiscal consolidation program.
In his ceremonial turnover speech in 2022 as incoming Finance Secretary, Diokno committed to stay in the middle of the pack among ASEAN neighbors in terms of debt ratios. General government gross debt in 2021 was at 53.5 percent.
Now, the Philippines’ external debt-to-GDP ratio was only 28.1 percent as of end-Q3 2023, the lowest among ASEAN-5 countries according to the latest available data (Indonesia at 28.9 percent and Malaysia at 69.0 percent as of end-Q3; Thailand at 38.4 percent as of Q2 2023).
Moreover, the Philippines was able to maintain its investor-grade credit ratings amid a sea of downgrades in other economies globally due to the government’s swift policy actions through the MTFF, the country’s sustained economic recovery, strong external position, improving fiscal position with declining debt, sound banking system, and stable political environment.
Inflation also continued its downward trend last year, averaging at 6.0 percent and meeting the DBCC’s assumption for full-year 2023 due to the government’s direct measures to mitigate the impact of lingering supply-side factors on inflation, and its strict adherence to the MTFF, which allowed fiscal policy to be consistent with the Bangko Sentral ng Pilipinas (BSP)’s monetary policies.
The Inter-agency Committee on Inflation and Market Outlook (IAC-IMO), which was co-chaired by Secretary Diokno, was created in May 2023 under Executive Order (EO) No. 28 as a proactive measure to fight inflation.
The IAC-IMO serves as an advisory body to the Economic Development Group (EDG) on measures that will keep inflation, particularly on food and energy, within the government’s target range.
Labor market conditions have also continued to improve with unemployment numbers reaching a record low of 3.6 percent in November 2023.
Poverty incidence improved to 16.4 percent in the first semester of 2023 from 18.0 percent in the same period of 2021, equivalent to 230,000 households lifted out of poverty. This also meant that there were 895,260 less poor Filipinos.
These positive developments were the result of robust economic growth. The Philippine economy grew by 5.9 percent in Q3 2023, the strongest among major economies in Asia, outpacing major economies in Asia such as Vietnam (5.3 percent), Indonesia and China (4.9 percent), Malaysia (3.3), and Singapore (0.7 percent).
In 2023, the DOF signed the Local Governance Reform Project (LGRP) and supported the ratification of the Regional Comprehensive Economic Partnership (RCEP), as well as the enactment of the Automatic Income Classification of Local Government Units Act, Maharlika Investment Fund (MIF) Act, and Public-Private Partnership (PPP) Code to boost economic growth.
“The Philippine economy has performed well despite a challenging economic and financial environment in 2023 beset by ongoing geopolitical tensions, imposition of trade restrictions, and extreme weather events resulting in high domestic commodity prices, especially for rice and fuel,” Secretary Diokno said earlier in a statement.
In his almost two-year tenure as Finance Secretary, Diokno has led 12 international Philippine Economic Briefings (PEBs) in Singapore, New York, Washington, D.C., Frankfurt, London, Tokyo, Toronto, Doha, Dubai, and San Francisco.
He also led 5 local PEBs in Manila, Davao, Cebu, and Laoag, as well as several other roadshows and investor dialogues where he consistently championed the Philippines’ improved investment environment and game-changing reforms to foreign investors.
Through these briefings, the country was able to garner support for the MIF from Saudi business leaders who were eager to learn more about the investment opportunities in the Philippines.
The briefings likewise helped the Philippines gather strong support for the issuance of its maiden USD 1 billion Sukuk bonds to cater to Middle Eastern and Islamic instrument investors.
Finally, Secretary Diokno pursued a holistic approach to economic development during his time as People’s Survival Fund (PSF) Board Chair.
The PSF Board approved an unprecedented PHP 579 million worth of new climate adaptation projects in 2023 to be implemented in climate-vulnerable areas nationwide.
Through his leadership, the PSF Board was able to expedite the approval of the projects, which allowed it to nearly utilize the PHP 1 billion allocated to the PSF, providing local governments with much-needed funding to implement their respective climate-related projects.
Recognizing the Philippines’ vulnerability to climate-related disasters, Secretary Diokno has championed climate finance in various high-level meetings and intergovernmental forums like that of the Group of Twenty (G20), Vulnerable 20 Group of Finance Ministers (V20) – Group of Seven (G7) Global Shield Against Climate Risks, and the 2023 United Nations Climate Change Conference (COP 28).
Secretary Diokno has expressed his confidence in incoming finance chief and current House Deputy Speaker, Ralph G. Recto, saying, “I am pleased to announce that I will be turning over my seat as Finance Secretary to Deputy Speaker Ralph Recto.”
“I am proud knowing that I will be leaving my post at a time when the Philippine economy, in general, and the DOF, in particular, are in a better state of affairs than when I inherited them,” Secretary Diokno said.