FISCAL

DISCIPLINE
WILL SAVE US
CARLOS G. DOMINGUEZ
Secretary of Finance
Development Budget Coordination Committee
FY 2022 Budget Hearing
August 26, 2021
 With fiscal discipline and economic reforms that work,
the Philippines came fully prepared to meet the global health crisis head-on.

Early passage of bold tax Swift enactment of fiscally

reform measures responsible stimulus bills
(TRAIN Act, Series of Sin Tax (Bayanihan 1 and 2 Acts)
Reforms, and Tax Amnesty Act)

Immediate approval of reforms

that will enhance our path
to economic recovery
(CREATE Act and FIST Act)
Outline of Presentation

1. Context of Fiscal Strength: 2016 to 2020 Accomplishments

2. Restarting Growth: 2021 Fiscal Performance

3. Achieving a Solid Recovery: 2022 to 2024 Fiscal Program

4. Economic Priorities in the Remaining Months of President Duterte’s

Term
Context of Fiscal Strength
2016 to 2020 Accomplishments
 The passage of the tax reform packages helped the government to collect
revenues totaling P12.4 trillion from 2016 to 2020. This is 20 percent higher
than what the previous administration collected in its six-year term.

Total Revenue Collections (in PHP Billion)

13,000.00

20% increase or
12,000.00
P2.07 trillion more 12,411.7
In PHP Billion

11,000.00

10,000.00 10,345.2

9,000.00

8,000.00

7,000.00
Aquino Administration (2010 S2 - 2016 S1) Duterte Administration (2016 S2 - 2020)
Source: DFG
 The enacted tax reform packages collectively added P347.1 billion
more to our coffers from 2018 to 2020.
Revenue Performance of Enacted Tax Reform Packages (in PHP Billion)
160.00 144.0
134.7
140.00
4.0
32.1
120.00
6.0
In PHP Billion

100.00

80.00 68.4
130.7
60.00 105.9

40.00 68.4

20.00
2018 2019 2020
TRAIN Law Tax Amnesty Law Sin Tax Reform Laws
Source: SERG
 From 2016 to 2020, the Duterte administration’s revenue effort climbed to 15.9 percent
of GDP from an average of 14.0 percent of GDP during the previous administration.

16.50
Revenues as percentage of GDP
16.1
15.9
16.00
15.6
15.50
15.1 Duterte Admin Average:
14.9 15.9% of GDP
15.00
14.5 14.5
% of GDP

14.50 14.2
13.9
14.00
13.4
13.50 Aquino Admin Average:
12.9 14.0% of GDP
13.00

12.50
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: DFG
 Total dividends collected from GOCCs under President Duterte reached P317.5 billion.
This is almost double the collection level of the past administration.

Dividend Remittances from GOCCs (in PHP Billion)

350.00

300.00 93% increase or 317.46

P152.6 billion more
In PHP Billion

250.00

200.00

150.00 164.83
100.00

50.00
Aquino Administration (2010 S2 to 2016 S1) Duterte Administration (2016 S2 to 2020)

Source: BTR and CAG

 The Duterte administration maintained a prudent deficit level notwithstanding our large
investments in the Build, Build, Build program. The unplanned spending needed for
our pandemic response temporarily pushed up our deficit to 7.6 percent of GDP in 2020.

Infrastructure Spending and Budget Deficit as Percentage of GDP

Infrastructure Spending as % of GDP Budget Deficit as % of GDP

8.00 7.6

7.00
6.00 5.4
4.9 4.8
5.00 4.2
% of GDP

3.9
4.00 3.4
2.9 3.1
3.00 2.3 2.1
2.00
0.9
1.00
0.00
2015 2016 2017 2018 2019 2020

Source: DFG and DBM

Note: Estimation of the cash equivalent of the infrastructure program started only in 2015. Thus, there is no comparable data prior to 2015.
Prudent fiscal management, appropriate economic investments, and improved revenue
collection brought the country to the highest credit rating levels we have ever achieved.

Lianhe Credit Rating Co. Ltd. Affirmation of AAA, Stable Outlook (July 2021)

Japan Credit Rating Agency Upgrade from BBB+ to A-, Stable Outlook (June 2020)

R&I Affirmation of BBB+, Stable Outlook, (April 2021)

S&P Global Rating Affirmation of BBB+ rating, Stable Outlook (May 2021)

Fitch Ratings Affirmation of BBB rating, Revised Outlook to Negative (July 2021)

Moody’s Affirmation of Baa2 rating, Stable Outlook (July 2020)

 The achievement of high credit ratings translated into
lower interest rates on our borrowings.

Weighted Average Interest Rate (%)

6.50 6.3
6.1
6.00
5.9

5.5
5.50
5.4
5.2
5.1
5.0 5.0
5.00
4.9

4.50
4.2

4.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: BTR
 With abundant liquidity in our own financial system, we have continued
to source the majority of our financing from the domestic market.

Total Gross Financing for 2020 (in PHP Billion)

Domestic: Government
Securities
1,998.7 External: ODA and
27% Global Bonds
Total: 742.2

73% 2,740.9

Source: BTR
 The Duterte administration was able to bring down our debt-to-GDP ratio
to a historic low of 39.6 percent in 2019. The increase in our debt ratio
in 2020 is still within the prescribed bounds of fiscal viability.

National Government Debt-to-GDP Ratio

60.00

54.6
55.00

50.2
48.8 49.2
50.00
% of GDP

47.1

45.00 43.4 42.7

40.2 40.2 39.9 39.6
40.00

35.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: BTR
 Our fiscal resources are being directed towards productive
spending rather than debt servicing.

Interest Payments / Expenditure

21.00
19.3
19.00 17.9 17.6 17.2
% of Expenditure

17.00 16.2

15.00 13.9
13.00 11.9
11.0
11.00 10.2
9.5 9.0
9.00

7.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: BTR
Restarting Growth
2021 Fiscal Performance
 The Q2 2021 GDP growth of 11.8 percent underscores the strong capacity
of our domestic economy to return to the path of rapid expansion.

Real GDP growth rate (year on year)

15.0 11.8
6.9 7.4 7.3 6.9 6.4 7.2 7.5 6.6 6.5 6.4 6.1 6.4 5.7
5.4 6.3 6.7
10.0

5.0
-0.7
0.0
% Growth

-3.9
-5.0 -8.3
-10.0
-11.6
-17.0
-15.0

-20.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2016 2017 2018 2019 2020 2021

Source: NEDA
 Revenue collections in the first seven months of 2021 reflect the onset of recovery.
Actual Cash Operations Report
January to July (In PHP Billion)
Particulars 2020 2021 Diff YoY
REVENUES 1,687.8 1,746.4 58.6 3.5%
Tax Revenues 1,428.0 1,573.2 145.2 10.2%
BIR 1,115.4 1,202.6 87.2 7.8%
BOC 302.9 358.9 56.0 18.5%
Other Offices 9.8 11.7 2.0 20.2%
Non-Tax Revenues 259.7 173.2 (86.6) -33.3%
BTr 190.9 95.2 (95.6) -50.1%
Other Offices 68.8 77.9 9.1 13.2%
EXPENDITURES 2,388.4 2,583.7 195.3 8.2%
Interest Payments 247.1 267.6 20.5 8.3%
Others 2,141.3 2,316.1 174.8 8.2%
SURPLUS/ (DEFICIT) (700.6) (837.3) (136.6) 19.5%
Primary Surplus/ (Deficit) (453.6) (569.7) (116.1) 25.6%
Source: BTR
 In order to cover our budget gap, we needed to borrow more. With our high credit ratings
affirmed this year, we were able to negotiate better interest rates and terms.

Gross Financing for the First Semester of 2021 (in PHP Billion)

Domestic: Government
Securities
1,647.92 External: ODA and
Global Bonds
Total: 15% 284.95

85% 1,932.87

Source: BTR
Achieving a Solid Recovery
2022 to 2024 Fiscal Program
 With improving collections mainly through digitalization,
we expect to recover our pre-pandemic revenue levels in 2022.

Fiscal Program for 2022 to 2024

Particulars 2020 2021 2022 2023 2024
(in PHP Billion) Actual
Revenues 2,856.0 2,881.5 3,289.5 3,586.4 3,999.3
% of GDP 15.9% 14.5% 14.9% 14.8% 15.1%
Tax Revenues 2,504.4 2,714.8 3,125.0 3,419.9 3,830.7
% of GDP 14.0% 13.7% 14.2% 14.1% 14.4%
Expenditures 4,227.4 4,737.1 4,954.6 5,021.4 5,297.8
% of GDP 23.6% 23.9% 22.4% 20.7% 19.9%
Deficit (1,371.4) (1,855.6) (1,665.1) (1,434.9) (1,298.5)
% of GDP -7.6% -9.3% -7.5% -5.9% -4.9%

Source: BTR
 Gross borrowings are projected to decline beginning 2022.
Our debt ratio will start its downward trend from 2023 onwards.

Borrowing Program for 2022 to 2024

Particulars 2020 2021 2022 2023 2024
(In trillion PHP) Actual
Gross Financing 2.65 3.07 2.47 2.31 2.37
By Use:
(1.37) (1.86) (1.67) (1.43) (1.30)
Deficit
-7.6% -9.3% -7.5% -5.9% -4.9%
% of GDP
Total NG Financing 68:32 81:19 77:23 75:25 75:25
Mix (Domestic:
Foreign)
Total NG Debt-to-GDP
54.6% 59.1% 60.8% 60.7% 59.7%
Ratio
Source: BTR
To achieve a solid recovery, we need to ensure that
fiscal responsibility is constantly observed.
 We need to work together to fight the pandemic sustainably
by keeping our deficit and debt ratios within reasonable levels,
so that we can leave our finances in great shape for
the next administration and the future generation.
Fiscal discipline will save us from this
long battle against the pandemic.
Economic Priorities in the Remaining
Months of President Duterte’s term
 With increased vaccination of our people, we should be able to avert
severe spikes in the infection rate in the coming period.

Vaccine Shots Administered

as of August 24, 2021:

31.1 Million Doses

First Dose: 17.8 Million
Second Dose: 13.3 Million
Running Total of Vaccine
Supply Arrivals as of
August 22, 2021:

48.5 Million Doses

In the remaining months of 2021, we expect the arrival of an additional 147 million doses.
Source: DOF and IFG
 We will maintain the pace of our Build, Build, Build infrastructure program.

Infrastructure Spending as a Percentage of GDP

Disbursement Levels (PHP Billion) As % of GDP
7.0 1,600.00
5.8 5.1 1,400.00
6.0 5.4
5.1 5.3 1,352.16
4.9 4.8 1,269.97 1,276.11 1,200.00
5.0
4.2
3.9 1,000.00

PHP Billion
1,049.87 1,019.15
4.0
% of GDP

886.17 869.54 800.00

3.0
690.81 600.00
590.48
2.0
400.00
1.0 200.00

0.0 -
2016 2017 2018 2019 2020 2021p 2022p 2023p 2024p
Source: DBM
 We will continue investing in our young population,
which is our strongest asset.

The Philippines’ median age is 25.

According to the World Bank, the relatively
young population in the country augured well
for its economic development. The Philippines
is expected to experience ‘demographic
tailwinds’ that will boost economic growth.

Source: Photo icon from WHO Philippines

 We will rapidly modernize governance and continue
with the market-friendly reforms attractive to investments.
Digitalization Economic Liberalization Bills

Continue the ongoing Amendments to the Amendments to the

Amendments to the
digital reforms Foreign Investments Act Retail Trade
Public Service Act
Liberalization Act

Remaining Tax Reform Packages Pension Reform Capital Markets Reform

Tax Reform Package 3: Tax Reform Package 4: Capital Market

Military and Uniformed
Property Valuation Passive Income and Financial Development Act of 2021
Personnel Pension reform
Reform Intermediary Taxation
The Duterte administration will continue to work hard
until the very last minute of its term to ensure a
legacy of a dynamic and market-driven economy
for the Filipino people.
 FISCAL DISCIPLINE
WILL SAVE US
CARLOS G. DOMINGUEZ
Secretary of Finance
Development Budget Coordination Committee
FY 2022 Budget Hearing
August 26, 2021