Next administration urged to preserve economic reforms

Two high-ranking economists have called on the next administration to continue and preserve the structural reforms being implemented to ensure that the Philippines will return to high productivity even after the pandemic.

During the economic briefing of the Management Association of the Philippines yesterday, the National Economic and Development Authority (NEDA) and the World Bank said the new government would have to sustain reforms started by the Duterte administration and even the past ones.

This would allow the economy to go back to its growth momentum of six to seven percent before COVID-19.

It should be noted that the economy since last year and in 2022 is already expected to post huge jumps in gross domestic product (GDP) amid a low base due to the pandemic.

Rong Qian, senior economist of the World Bank in the Philippines, said the country has been experiencing fast growth for the last 15 years largely due to better productivity.

Global experience, however, showed that productivity growth tends to slow down if no new reforms are being implemented.

“So to go back to six percent, we need to implement those structural reforms that this administration has already passed,” Qian said.

“The next administration needs to implement and continue those reforms that were started so we can continue to have the high productivity growth and grow at six to seven percent,” she said.

The Duterte administration has been known for its tax reform program, economic liberalization bills, and its focus on infrastructure through the Build Build Build program.

Socioeconomic Planning Secretary Karl Chua, for his part, said he hopes to have more discussions with the economic advisors of the presidential candidates to explain the reforms they have done.

“We have a very strong track record of managing the economy well over three administrations, and that should continue, that should not be reversed,” Chua said.

“The prudent discipline and management of fiscal resources should continue,” he said.

The NEDA chief noted that over six administrations have liberalized key industries such as rice and public utilities, among others.

While reforms have been slow in opening up certain sectors, Chua maintained that they did happen over time and these should not be reversed.

“Otherwise, you will have, I think, more challenging problems that will be faced. I hope we will have a chance to engage, listen, and share what the administration has done, which actually builds on top of previous administration’s successes and I hope the next administration will preserve and do more,” he said.

As part of its policy recommendation for the Philippines, the World Bank said the Philippines would need to start a gradual fiscal consolidation process to regain policy space.

Amid a rapid debt accumulation due to the pandemic, Qian said the government would have to use a combination of revenue and expenditure measures to reduce the debt-to-GDP ratio as relying on growth alone will not be enough.

She added that the pace of consolidation needs to be carefully studied as moving too fast would slow down growth while a slow pace would dampen confidence on the government’s commitment to consolidate.

Qian said policy options on the revenue side include new taxes, higher taxes for existing ones, and expanding the base, which means collecting better through tax administration measures.

On the expenditure side, the government can spend less in one area that produces less jobs and grows to spend more in other areas or through technical efficiency or getting the same outcome with less resources.

“A combination of policies to achieve fiscal consolidation is quite large. Finding the right mix to achieve the inclusive growth agenda needs to be a priority for the next government and be communicated well with the public,” Qian said.