September 29, 2022
Moody’s Investors Service; Chartered Financial Analyst Society Philippines; ladies and gentlemen; good morning.
Although I am unable to join you in person for today’s event, I am glad to have the opportunity to virtually share with you the economic outlook of the Philippines.
Despite a volatile global financial market and fierce economic headwinds for the past two years, the Philippines has maintained its strong financial footing.
Thanks to structural reforms instituted by past administrations, the Philippines enjoys much headroom for economic expansion.
For the first half of the year, the Philippine economy grew by 7.8-percent. This strong growth suggests that our full-year target growth of 6.5 to 7.5 percent is attainable.
Investor confidence is steadily climbing. In fact, just a few years after the COVID-19 pandemic swept the world, we reached our highest-ever foreign direct investment inflows at 12.4 billion US dollars.
We have successfully sustained this trend through this year. For the first half of 2022, FDI inflows amounted to 4.6 billion US dollars. This is 3.1 percent higher than last year’s level.
Our strong FDI performance signals global confidence in our long-term economic prospects. This will be supported by a growing domestic market and a more intensive regional integration among the Southeast Asian economies.
The Philippine labor market continued to record positive gains. The employment rate has picked up to 94.8 percent in July 2022, from 94.0 percent in the previous month.
Meanwhile, the unemployment rate drastically fell to 5.2 percent in July 2022 from 7.2 percent in the same period last year. This is our lowest unemployment rate since the pandemic hit.
As a result of these developments, the total number of employed individuals rose to 47.4 million, bringing the employment rate to 94.8 percent—the highest recorded since the start of the pandemic.
We’re on our way to our pre-pandemic growth path, and we expect to do even better in the coming years.
From 2023 to 2028, the economy is expected to grow by 6.5 to 8.0 percent. Analysts consider our near-term growth projections to be the fastest among the ASEAN+3 countries, which include Japan, South Korea, and China.
Indeed, our economic prospects are bright. But we will remain vigilant about emerging global risks.
Inflation is expected to remain elevated for as long as world prices of oil and other key commodities remain high. The effects of the pandemic linger while the global political economy remains unpredictable.
We are prepared to decisively address these challenges head on. The Marcos administration has laid out a comprehensive 8-point socioeconomic agenda that will steer the economy back to its high-growth path in the next six years.
In the near term, we will address the impact of rising commodity prices on vulnerable sectors, reduce economic scarring from the pandemic, and ensure sound macroeconomic fundamentals.
Over the medium term, the goal is to create more jobs – not just any other jobs, but quality jobs and green jobs. We will achieve this goal through higher investments in productivity-enhancing sectors.
Our 8-point socioeconomic strategy aims to propel the country to upper middle-income status by 2024, and bring down the poverty incidence to 9 percent by 2028.
Our recovery strategy will rest on the key pillars of fiscal prudence and extensive public investment in infrastructure modernization, digital transformation, and human capital development.
We will take advantage of the structural reforms already set in place to attract beneficial foreign investments and create high-value jobs for the Filipino people. These include the Corporate Recovery and Tax Incentives for Enterprises Act and amendments to the Public Service Act, Retail Trade Liberalization Act, and Foreign Investments Act.
As we improve the investment attractiveness of our domestic economy, I am confident that we will be able to meet the growth targets indicated in our Medium-Term Fiscal Framework.
This Framework charts out a clear path to maintaining our fiscal health while remaining supportive of economic recovery. Its main goals are to reduce the fiscal deficit, promote fiscal sustainability, and enable robust economic growth.
The Framework puts a sharper focus on improving tax administration, enhancing the fairness and efficiency of our tax system, and promoting environmental sustainability to address climate change.
Measures under the Framework include the imposition of value-added tax on digital service providers and the imposition of excise tax on single-use plastics to curb plastic pollution in favor of more sustainable alternatives.
To show our commitment to the continuity of significant policy reforms, we will also pursue the remaining tax reform packages of the previous administration.
The Real Property Valuation and Assessment Reform Bill will improve the quality, reliability, and transparency of our local government units’ property valuations. This will have a favorable impact on both local and national revenue generation and resource mobilization.
Meanwhile, the Passive Income and Financial Intermediaries Taxation Bill aims to support capital market development by simplifying the tax structure and making taxes on passive income more equitable across financial instruments.
All of these efforts will help us bring down our debt-to-GDP ratio to less than 60 percent by 2025 and cut the deficit-to-GDP ratio to 3.0 percent by 2028.
At the same time, we will sustain our massive infrastructure investments equivalent to 5 to 6 percent of our GDP annually. Its high-multiplier effects to the economy will catapult and enable us to join the ranks of our high-flying ASEAN peers.
As I close, I share with you the words of President Ferdinand Marcos Jr. in his first State of the Nation Address: the state of the nation is sound.
And we are ready to build a stronger and greener economy fit for the twenty-first century. We have the right people at the helm and we have a clear, focused plan to make this lofty goal happen.
Thank you.
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