May 28th, 2021
Salceda says PH keeping its credit ratings shows economy “fundamentally strong;” House tax chief says government can afford to be more aggressive with household income support
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) says that the recent release by international debt watcher S&P Global of the Philippines’ investment grade credit rating of “BBB+” with a “stable” outlook demonstrates that the country’s economy is “fundamentally strong” and that the government has some space to expand its fiscal support towards economic recovery.
“We are still just one notch away from the coveted A-grade. Prior to the pandemic, the focus of the Committee on Ways and Means was to get us to the A-level. Now, our priority is to finance our economic recovery program without risking our fiscal strength. This confirms that we have been doing our job as a committee, and that the government has some fiscal space left for more fiscal support for households,” Salceda said.
From 34.1 percent in 2019, the Philippines’ general government debt as a percent of GDP, per S&P’s estimates, increased to 48.8 percent in 2020. This is much lower than S&P’s estimate for Malaysia’s (A-) at 74.6 percent, and comparable with Thailand’s (BBB+) 48.1 percent and Indonesia’s (BBB) 38.6 percent.
“Clearly, we still have plenty of fiscal space to use in helping our people. I urge the Senate to come up with its version of Bayanihan 3 so we can use some of that fiscal space,” Salceda added.
The credit rating agency also sees a strong bounce back for the Philippine economy. S&P forecasts that the Philippine economy will grow by 7.9 percent this year, a significant improvement from last year’s contraction and is higher than the government’s own projection of 6.0 to 7.0 percent.
“It’s a vote of confidence, and a much needed one, especially as we try to market the country through the Corporate Recovery and Tax Incentives for Enterprises or CREATE Act,” Salceda, who was the principal author of the law, added.
“In any case, we have to take advantage of this. The poor can’t eat credit ratings, but good credit ratings lower government borrowing costs and help us fund programs for the poor. So, we have to maximize the logical use for good credit ratings – expand strategic government spending to support Filipino families struggling during this pandemic.,” Salceda said.
Similar good news coming
“Earlier this month, I was also part of the government panel that talked to Fitch Ratings. I assured them that the House, where tax policy originates, is committed to really keeping the country’s coffers well-stocked. My committee initiated proposing P674 billion in revenue measures either for passage in the plenary, or waiting for Senate approval. We’re working very hard, and I think we were able to demonstrate that commitment,” Salceda said.
“I thus expect a good rating coming out of Fitch and the other rating agencies. The Committee on Ways and Means of the 18th Congress has been the most productive in recent memory. We will keep working to ensure that we can fund the people’s needs and keep our debts under control,” Salceda added.