Department of Finance (DOF) Secretary Carlos Dominguez said reforms instituted ubder the Duterte administration has allowed the country to be resilient amid the pandemic,
In an interview over state-owned PTV-4, Dominguez likened an economy to a human body that needs to be healthy. “If you want to be resilient to disease, you need to exercise and keep healthy. That that requires sacrifice. So what we did from 2016 to 2019 is like exercising,” he said, referring to the tax reforms that eventually became laws.
One of these measures is the Tax Reform for Acceleration and Inclusion (TRAIN) law, which exempts workers with annual income below P250,000 from paying personal income tax.
The same law imposes excise taxes on cigarettes and sugary drinks, a move designed to address Filipinos’ consumption for sweetened beverages and lower their chances of having diabetes, among others.
Authorities said the government saves some amount from this law because there would be less people, particularly the poor, who will need hospitalization thus, less expense for the state.
Improvement in tax collections likewise enabled the government to increase revenues and have more funds for its infrastructure and social protection programs, among others, which allowed the government to be in a good financial position.
“Unfortunately, Covid-19 hit us, but because we were healthy financially, it did not affect us as much as it did tp other countries,” he said, noting that credit rating agencies downgraded the ratings of several countries because of the impact of the pandemic but the Philippines has been spared so far.
A credit rating downgrade is a disadvantage for a country vis-à-vis its capacity to borrow from fund sources. Lower ratings mean higher interest rates for loans.
Last July 12, Fitch Ratings affirmed its investment grade rating for the Philippines at ‘BBB,’ but changed the outlook from stable to negative because of the economic impact of the pandemic on the domestic economy.
Dominguez dubbed the ratings outlook change as “normal” because of the pandemic. “We maintain a good credit rating, which means we can borrow at very good terms for us so our children and grandchildren will not have to pay so high interest rates,” he said.
The domestic economy registered a contraction, as measured by gross domestic product (GDP), of 9.5% in 2020 due to the effects of the pandemic. In the first quarter of this year, the contraction was at 4.2%.
Economic managers recently maintained their 6% to 7% GDP growth target this year as the economy re-opens and recovery efforts are being implemented.