To our host, led by HSBC Asia Pacific Co-CEO Surendra Rosha and HSBC Philippines President & CEO Sandeep Uppal;
Distinguished leaders and members of the business community;
And to all participants of this flagship event, ladies and gentlemen, a pleasant afternoon to all.
Assalamu alaikum wa Raḥmatullahi wa Barakatuh.
First, I would like to thank HSBC Philippines for inviting the Department of Budget and Management to be part of this very promising conference that aims to explore the world of economic opportunities in the Philippines. We are likewise grateful to HSBC for being our partner and being part of the country’s growth story since 1875.
Today, I am eager to provide you with updates on the trajectory of the Philippine economy—which has become one of the fastest-growing emerging economies and investment hubs in Southeast Asia.
GDP Growth
Last year, the country registered its highest full-year growth in 46 years at 7.6 percent of GDP, even surpassing the government’s target for 2022.
For the first semester of this year, the economy continued to expand by 5.3 percent despite ongoing risks due to inflation and global uncertainties. This is much faster than other emerging Asian countries such as Indonesia, Malaysia, Vietnam, and Thailand.
Growth Projections
In fact, we have good reason to believe that near-term prospects for the Philippines remain upbeat as international financial institutions share our optimism.
Just recently, the Asian Development Bank affirmed that the Philippines’ growth story remains strong despite a forecasted 5.7 percent moderation in 2023 given strong domestic demand and robust infrastructure spending. This projection is also higher than the estimated growth of our neighboring countries such as Indonesia Malaysia , Singapore and Thailand.
The World Bank also expects the Philippines to achieve above-middle-income status by 2025 while S&P Global Market Intelligence forecast has declared that the Philippines is on its way to becoming a one-trillion-dollar economy in just a decade.
Credit Rating Updates
The Philippines also secured investment-grade credit rating from the top 3 rating agencies such as Moody’s, Fitch, and S&P Global. We even received upward revisions amid the expected global slowdown. And just last month, Japan-based debt watcher, Rating and Investment Information, Inc. (R&I) also affirmed our investor-grade credit rating at ‘BBB+’ and revised its outlook from 'stable' to 'positive' due to the country’s robust macroeconomic fundamentals and sound banking system, among other factors.
Medium-Term Fiscal Program
On the fiscal front, we remain on strong footing, guided by the Medium-Term Fiscal Framework. The MTFF serves as our economic blueprint in achieving fiscal stability.
As of end-July, total revenues reached Php 2.27 trillion, higher by 11.58 percent compared to collections for the same period in 2022. Government spending also started to pick up, increasing by 2.66 percent at Php 2.87 trillion. As a result of the higher revenue and expenditure outturn, the budget deficit dropped to Php 599.5 billion, 21.22 percent lower compared to last year’s level.
Over the medium term, revenues are also expected to increase annually by an average of 11.2 percent through revenue-generating measures and structural reforms. Government disbursements will be sustained above 20.0 percent of GDP on average, while the deficit will gradually decline to the pre-pandemic level of 3.0 percent of GDP by 2028.
Together with the rest of the economic team, we will closely monitor the developments on the international and domestic front and stand ready to make policy adjustments to ensure the attainment of our medium-term growth and fiscal targets.
FY 2023 National Budget
This year, our budget amounts to Php 5.268 trillion. It was carefully crafted to ensure social and economic transformation, aligned with the objectives and strategies of the 8-Point Socioeconomic Agenda, Medium-Term Fiscal Framework, and Philippine Development Plan 2023-2028.
To sustain the country’s high-growth and fiscal performance, the Department of Budget and Management has already released roughly 95.3 percent of the FY 2023 National Budget as of last August.
We have also directed all government agencies, especially those with low budget utilization rates to prepare and submit their spending catch-up plans to fast-track the implementation of their programs and projects for the rest of the year.
With sustainable and inclusive growth in mind, the Social Services sector—comprising Education, Social Protection, and Health—has been given the highest budget allocation with Php 2.0 trillion or 38.0 percent of the national budget. Meanwhile, the second highest share will go to the Economic Services sector with Php 1.62 trillion or 30.8 percent of the budget, as the government continues to push for infrastructure development.
FY 2023 Infrastructure Development
We are determined to maintain infrastructure spending at 5.0 to 6.0 percent of GDP over the medium term as set out in our MTFF. As such, infrastructure will be at the center of the administration’s growth strategy to create more and better jobs as likewise set out in our PDP Plan 2023-2028.
For this year, we have allocated 5.4 percent of GDP or 25.3 percent of the FY 2023 national budget for the Build-Better-More Infrastructure Program.
The bulk of the infrastructure budget for 2023 is intended for the development of physical connectivity infrastructure which includes the construction of road networks, railways, and flood control infrastructure. We have also ensured that we have significant allocations for social infrastructure such as school buildings, water supply systems, hospitals, and health centers.
Over the medium term, the government has already approved 197 high-impact infrastructure flagship projects (IFPs) on public road networks, tollways, green energy, water, agro-industrial ventures and telecommunications which have estimated high returns on investments and sizable socioeconomic impact. This has an indicative total investment of Php 8.71 trillion which will be financed through various means.
Public-Private Partnerships
Recognizing the important contributions of the private sector in steering economic growth, we are adopting diverse and innovative financing solutions to fund these infrastructure projects.
First, we will make strategic co-investments with the private sector through PPPs or Public-Private Partnerships. This will not only help boost financing but also harness advanced technical expertise for infrastructure development. Out of 197 Infrastructure Flagship Projects, we have 39 shovel-ready projects that will be undertaken through PPPs.
We are also proud to share that the PPP Act was recently approved. This will further simplify the evaluation process and create a unified system for investors to refer to when engaging in PPP projects. Ultimately, this shall establish a stable and predictable PPP policy environment to pave the way for high-quality and cost-effective infrastructure in the country.
FY 2023 Digitalization and CCET Budget
We are also keen on improving our digital infrastructure. We have provided Php 24.93 billion for the digital transformation of the bureaucracy under this year’s budget
Acknowledging the importance of sustainable economic growth, we have significantly increased the budget for climate change adaptation and mitigation measures by 60 percent. This includes investments in water sufficiency, renewable energy, and alternative resources.
FY 2024 National Budget
Looking ahead, the National Budget for FY 2024 will prioritize shovel-ready projects, investments in human capital development, sustainable agriculture and food security, and climate change adaptation and mitigation, among others. This will guarantee the continuity of gains from this year’s priority programs and contribute to securing a future-proof and sustainable economy.
To complement the implementation of these priority programs and strengthen our commitment to policy continuity, we have improved and introduced new structural reforms that promote sound fiscal management, digital transformation, and an open government. Let me cite some of these reforms.
Maharlika Investment Fund
First, as you know, we have successfully created the country’s first-ever Sovereign Development Fund through Republic Act No. 11954. Anchored on a development objective, the Maharlika Investment Fund will be utilized to generate optimal returns on investments, while contributing to job creation, poverty reduction, and sustainable economic development.
To hit the ground running, we have drafted the Implementing Rules and Regulations and opened the nominations and applications for the Board of Directors of the Maharlika Investment Corporation that will manage the MIF.
Economic Liberalization Reforms
We are also committed to further improving the country’s business environment through the implementation of economic liberalization reforms.
The landmark Corporate Recovery and Tax Incentives for Enterprises or CREATE Act introduced the largest fiscal stimulus for businesses in Philippine history. This lowered our corporate income tax rate, which used to be the highest in the region, to become comparable with our ASEAN peers.
We are also establishing a more favorable investment climate in the Philippines by welcoming greater foreign participation through the amended Public Service Act, Foreign Investments Act, and Retail Trade Liberalization Act.
The easing of foreign equity restrictions aims to attract more foreign investors, modernize several key sectors, improve public service delivery, and generate more quality jobs.
Open Government and Digitalization Reforms
Aside from being an attractive investment destination, the Philippines is also a prime mover in open government, with our transparency and digitization initiatives at the forefront of many of our reforms.
In fact, at the Open Government Partnership Global Summit held in Estonia last September 6 to 7, the Philippines was commended for institutionalizing the PH-OGP through Executive Order No. 31, s. 2023. This is a landmark Executive Order—a first since the OGP was founded in 2011 and unheard of in many countries—as it provides a solid legal framework to ensure that the open government principles of transparency and citizen participation are embedded in programs and policies at all levels and across national government agencies.
Several reforms and legislative measures that promote digitalization are also being pursued by the administration including the adoption of the Integrated Financial Management Information System (IFMIS), the relaunch of Project DIME or Digital Information for Monitoring and Evaluation, and the passage of the Progressive Budgeting for Better and Modernized (PBBM) Governance Bill which aims to strengthen the government’s accountability to the people through fiscal transparency and participatory reforms, as well as institutionalize the digitalization of the public financial management (PFM) system.
Procurement Reforms and Open Government Contracting
Moreover, the DBM is also advocating for amendments to the decades-old Government Procurement Reform Act (GPRA) which will digitalize and streamline the procurement process while paving the way for a greener, more sustainable, transparent, and participatory procurement process.
Just last week, we presented the proposed GPRA amendments to the Legislative-Executive Development Advisory Council (LEDAC) led by no less than our president, President Ferdinand R. Marcos Jr. It was then certified as one of the priority bills included in the Common Legislative Agenda (CLA) of the 19th Congress to further advance the attainment of our social and economic transformation agenda.
One of the proposed amendments is the establishment of the electronic Marketplace or eMarketplace which aims to do away with the long, tedious government procurement process that has caused delays in the government’s delivery of products and services.
Closing
These are just some of the programs, policy directions, and reforms that the current Administration is working on to achieve our economic transformation.
But through the help of our partners in prosperity such as HSBC and all of you leading corporations in the business community, I am confident that we can achieve our medium-term objective of becoming an upper-middle-income country by 2028 if not sooner! Onwards towards BAGONG PILIPINAS—a Philippines of new and better opportunities—that we are all aspiring for.
So TOGETHER, let us OPEN UP A WORLD OF OPPORTUNITY and make the Philippines an investment destination—that we may concretize our goal of securing a future-proof and sustainable economy, not only for the Filipinos of today but also for the future generations.
Thank you very much. Wabillahi Tawfiq Wal Hidaya, Wasalamu alaikum wa rahmatullahi wa Barakatuhu.
