Manila to stick to deficit spending until 2022

Manila

PHILIPPINE President Rodrigo Duterte's administration will stick to deficit spending until he steps down in 2022 to ensure sustainable economic growth beyond his six-year term, his budget minister told lawmakers on Monday.

The seven-week-old government has vowed to fix the country's infrastructure, create jobs and spread wealth more evenly in a country where over a quarter of the 100 million people are poor. "Having a balanced budget is not advisable. We need to invest in the future of our people," Budget Secretary Benjamin Diokno said as he led the economic team's presentation of the proposed 2017 budget of 3.35 trillion pesos (S$97 billion) at the House of Representatives.

The government has programmed a budget deficit of up to 478.1 billion pesos for 2017, or 3.0 per cent of gross domestic product (GDP), the highest in seven years and up from this year's deficit target of 388.9 billion pesos, or 2.7 per cent of GDP.

Finance Secretary Carlos Dominguez said he will soon submit to Congress a more detailed tax reform programme that includes lowering "oppressive" personal and corporate income tax rates and broadening the tax base.

While he expects 174 billion pesos in annual foregone revenues from the tax cuts, Mr Dominguez said removing exemptions from the 12 per cent valued-added tax and imposing taxes on sugary and fatty food products, among other reforms, could raise as much as 215 billion pesos a year. "The next six years can either continue along the path of high economic growth but high socioeconomic inequality, or chart a different path towards shared prosperity that will uplift all," Mr Dominguez said.

Next year's budget is anchored on an economic growth target of 6.5-7.5 per cent, faster than this year's 6-7 per cent goal.

Economic Planning Secretary Ernesto Pernia said the government aims to "stabilise" growth at 7-8 per cent between 2018 and 2022, with support seen from remittances by Filipinos working overseas, low inflation and interest rates and increased government spending, among other factors.

But he also sees downside risks from "fragile" growth in the country's top trade partners such as Japan and China, territorial disputes in South China Sea with the Philippines being one of the claimants, and the closure of mines that could result in "significant" job losses. REUTERS