THE GOVERNMENT must avoid programs that are likely to generate a large subsidy bill in light of its limited resources and high debt load, a University of the Philippines (UP) economist said.
“It may best to adopt a conservative economic strategy to spend for enhancing productivity and future growth; (and) avoid fiscally risky programs and gambles that will require large state public subsidies,” UP School of Economics Associate Professor and Director for Research Dr. Renato E. Reside, Jr. said.
Speaking at a webinar on the economic recovery, Mr. Reside said that the government must spend some time to restore its fiscal room to maneuver.
“Basically, to rebuild a fiscal space that was lost because of the crisis. As you can see, it took a lot to eliminate the fiscal space that we have built over the years. So, we need to regain some of that in order to make us more resilient because there will be future crises for sure,” he said.
Mr. Reside said a growth strategy could eventually shrink the share of debt in the economy, while generating demand for sovereign bonds, the issuance of which “will also lower interest rates and support existing credit ratings. This strategy will also attract foreign and domestic investment, which will support aggregate demand.”
Mr. Reside advised the government to look for wins in tax administration and tax reforms with the potential to raise gross domestic product (GDP) growth by a quarter to half a percent a year.
He also backed a proposal of the Department of Finance to impose excise taxes on single-use plastics and electronic and digital services while recommending that the government manage its pension commitments to military and uniformed personnel (MUP).
“Raising (revenue) doesn’t always have to be about raising taxes; it can also be saving. Current annual expenditures to fund MUP pensions are more than half a percent of GDP,” he said.
The webinar, “Atin ‘to: Sustaining the economic recovery for all Filipinos,” was the last session of the Ayala-UPSE Economic Forum. — Keisha B. Ta-asan