BWorld 768, My fiscal wish list

My fiscal wish list

January 7, 2025 | 12:02 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2025/01/07/644920/my-fiscal-wish-list/

 

“Leftists propose ‘redistribution of wealth’ because of their inability to create it.

 

“My dream is that when I finish my public service, Argentina is the freest country in the world.”

 

— Argentina President Javier Milei

 

The massive fiscal reforms in Argentina are good templates for countries suffering from sustained high budget deficits annually leading to high borrowing, high interest rates, and high interest payments. I went to Buenos Aires in December to attend the Tholos Forum 2024 along with fellow leaders of free market think tanks and country taxpayers’ associations.

 

Here are the key fiscal reforms enacted in Argentina.

 

1. President Javier Milei reduced the number of ministries from 19 to eight. Under former President Alberto Fernandez (President from December 2019 to December 2023), there were 21 ministries, later reduced to 19. Milei initially cut the 19 to nine plus the Chief of Cabinet. He later further cut it to only eight ministries plus Chief of Cabinet. The remaining eight ministries are: Economy; Foreign Affairs International Trade and Worship; Defense; Security; Health; Justice; Human Capital; and, Deregulation and State Transformation.

 

2. Milei and Minister of Deregulation Sturzenegger announced on Jan. 1 that new state employees can be hired only if three existing employees are fired within the same department for each new employee that is hired.

 

3. Milei announced on Dec. 11 that he will abolish 90% of taxes, not revenues, and keep only at most six taxes. My friends at the Argentine Asociacion de Contribuyentes (AAC, Argentina Taxpayers Association) said that since 2019 they had been proposing this abolition of 90% of taxes that contribute little to actual revenue collections. AAC is close to President Milei, and the latter has acted on the AAC proposal.

 

As of 2019, the Philippines has 13 types of business taxes while Argentina has nine. But there are many local taxes — provincial, city/municipal, barangay/village taxes — on top of national taxes and they can distort the overall tax and business environment.

 

Inspired by the fantastic fiscal reforms in Argentina, here is my 10-item fiscal wish list for 2025-2026.

1. That revenues reach P4.9 trillion in 2025 and P5.4 trillion in 2026. The Development Budget Coordination Committee’s (DBCC) medium-term revenue targets as of Dec. 2, 2024 were P4.6 trillion in 2025 and P5.1 trillion in 2026. The reason for my hopefulness is that there were significant increases in recent revenues — P3.55 trillion in 2022, P3.82 trillion in 2023, P4.1 trillion in January-November 2024, and likely to reach P4.4 trillion for the full year of 2024, or a P600 billion increase from 2023-2024. And I am only projecting an increase of P500 billion/year in 2025 and 2026.

 

2. That non-tax revenues, in particular, reach P650 billion in 2025 and P700 billion in 2026. Non-tax revenues were only P324 billion in 2022, P394 billion in 2023, P555 billion in January-November 2024, and likely at P607 billion for full year 2024. Finance Secretary Ralph G. Recto is largely responsible for this big increase because he increased the mandatory remittance share of government-owned and -controlled corporations (GOCCs) from 50% to 75% of their earnings.

 

3. That disbursements be controlled to only P6.2 trillion in 2025 and P6.4 trillion in 2026. The DBCC disbursement targets are P6.2 trillion in 2025 and P6.5 trillion in 2026. Actual disbursements were P5.16 trillion in 2022, P5.34 trillion in 2023, P5.28 trillion in January-November 2024, and will likely be P6 trillion in full year 2024. Budget Secretary Amenah F. Pangandaman will be more inspired to push the National Government Rightsizing Program (NGRP) bill to institutionalize spending control and, by extension, deficit control.

 

4. That the budget deficit be no more than P1.3 trillion in 2025 and not more than P1 trillion in 2026.The DBCC target deficits are P1.54 trillion in 2025 and P1.48 trillion in 2026. The actual deficit was P1.61 trillion in 2022, P1.51 trillion in 2023, P1.18 trillion in January-November 2024, and will likely be P1.58 trillion in full year 2024.

 

5. That financing or borrowings decline to P1.3 trillion in 2025 and P1 trillion in 2026. Financing was P1.97 trillion in 2022, P2.07 trillion in 2023, P1.24 trillion in January-November 2024, and will likely be P1.4 trillion in full year 2024. In the absence of any crisis — economic or virus — the government should focus on reducing the debt stock and hence, reducing interest rates and interest payments.

 

6. That interest rates for government 10-year bonds decline from around 6% in 2024, to 4.5% in 2025 and 4% in 2026. As public borrowings decline, the “crowding out” effect of government competing with private borrowings will simmer and so interest rates will go down.

 

7. That interest payment declines to P600 billion in 2025 and P500 billion in 2026. Interest payments were P503 billion in 2022, P628 billion in 2023, P705 billion in January-November 2024, and are likely to reach P760 billion in full year 2024. Reduced borrowing and reduced interest rates will contribute to this scenario.

 

8. That the inflation rate stabilizes at 2.5% to 3% in 2025 and be below 2.5% in 2026. The inflation rate was 5.8% in 2022, 6% in 2023, and 3.2% in January-November 2024.

 

9. That the overall GDP growth be 6.5% in 2025 and 2026. It was 7.6% in 2022, then lowered to 5.5% in 2023 and 5.8% in Q1-Q3 of 2024. Lower inflation and interest rates will improve consumer and investor confidence in the country, pulling up household consumption (about 73% of GDP) and capital formation or investment (about 25% of GDP) and hence, overall GDP.

 

10. That the endless, no time-table subsidies decline significantly. The government should focus on the rule of law, the public should focus more on personal and parental responsibility in running their own lives.

PhilStar 22, Top 10 investments and infrastructure news of 2024

Top 10 investments and infrastructure news of 2024

 

ENERGY, INFRA AND ECONOMICS - Bienvenido Oplas Jr. - The Philippine Star

January 2, 2025 | 12:00am

https://www.philstar.com/business/2025/01/02/2411190/top-10-investments-and-infrastructure-news-2024

 

Here is my list of five global investment and five Philippines infrastructure stories of 2024. For foreign direct investment (FDI), I use inward stock or inflows minus outflows per year accumulated through the years, and outward stock. Then I computed the net outward stock to reflect what countries are the net exporters of capital. A negative outward stock FDI means the country is net importer of capital. Data from UN Conference on Trade and Development (UNCTAD) World Investment Report (WIR) 2024 released last June or July.

 

One, the largest net exporters of capital in Europe are Germany, Netherlands, France, Luxembourg and Switzerland. Their respective net outward stock of FDI in 2023 were $1.051 trillion, $708 billion, $623 billion, $495 billion and $336 billion. The largest net importers of capital are UK with -$925 billion, Poland with -$297 billion and Spain with -$267 billion.

 

Two, the largest net exporters of capital in Asia are Japan, South Korea and Taiwan. Their respective net outward stock of FDI in 2023 were $1.886 trillion, $398 billion and $390 billion, The largest net importers of capital are Singapore with -$840 billion, China with -$721 billion, India with -$301 billion, Vietnam with -$215 billion and Indonesia with -$174 billion.

 

Three, in America the only net exporter of capital is Canada. Its net outward stock of FDI was $1.08 trillion. The largest net importers of capital are the US with  -$3.383 trillion, Brazil with -$632 billion and Mexico with -$556 billion.

 

 

So the Philippine economic team should target to attract investors from those capital-exporting countries in Europe, Asia and Canada. Investors from East Asian neighbors like Singapore and China should be encouraged to come here too.

 

Four, UAE, Qatar and Saudi Arabia are modest capital exporters too. Their respective net outward stock of FDI in 2023 were $37 billion, $23 billion and -$12 billion out of Saudi’s total outward stock of $204 billion. Many of their investments other than Europe and US are in Muslim countries in Asia. Muslim regions in Mindanao are good destinations for their capital.

 

Five, decarbonizing and deindustrializing Germany, UK, others in Europe suffering economically. The average GDP growth in Q1-Q3 2023 and 2024 were 1.1 percent and 0.5 percent for Italy, 0.6 percent and 0.6 percent for UK, zero and -0.2 percent for Germany. Many big German multinationals are cutting their operations in Germany and moving abroad, like BASF, Siemens and VW.

 

Six, private sector operations and management of the Ninoy Aquino International Airport (NAIA). The New NAIA Infrastructure Corp. (NNIC) led by San Miguel Corp. has officially took over O&M of NAIA last Sept. 14. NNIC offered the government the highest revenue share of 82.16 percent and upfront payment of P30 billion, plus annuity cost of P2 billion.

 

Seven, another private sector development and operation of Laguindingan International Airport, Bohol-Panglao International Airport. Aboitiz Infracapital got the contracts and the concession agreement for Laguindingan was made last Oct. 28, the concession agreement for Bohol was made on Dec. 18.

 

Eight, extension of the Tarlac-Pangasinan-La Union Expressway (TPLEX). An additional 59 kilometers to La Union will be constructed worth P23.36 billion. Signing of PPP contract between the Department of Public Works and Highways and San Miguel Holdings Corp. was made last July 10.

 

Nine, Cavite Extension Project Phase 1 of Light Rail Transit Line 1 (LRT-1). Five new stations from Baclaran were added up to Sucat, inauguration of Phase 1 was made last Nov. 15.

 

Ten, 43 out of 185 projects in the Infrastructure Flagship Projects or IFP are PPP. The indicative total project cost of these is P2.7 trillion.

 

I commend the Public-Private Partnership (PPP) Center headed by executive director Cynthia Hernandez. Plus the economic team NEDA, DBM and DOF for providing policy guidance, right of way acquisition funding, and fiscal incentives for the proponents and project implementors of these big private sector-funded infrastructure projects.

 

Ms. Hernandez is correct in her optimism in saying that “the PPP Center remains dedicated to advancing projects that are economically viable, environmentally sustainable, and socially inclusive. With the PPP Code already in place, we are set to transform the Philippine infrastructure landscape through innovative and impactful PPP projects that will significantly improve the lives of Filipinos.”

 

The national budget for 2025 was signed by President Marcos last Dec. 30. Budget Secretary Amenah Pangandaman said that P26 billion of DPWH projects and P168 billion of unprogrammed appropriations were vetoed by the President. That means P194 billion of spending cut for the 2025 budget. Good. We should cut spending to cut borrowings that until today is about P2 trillion/year.

 

Finance Secretary Ralph Recto said in a press statement that total revenue collection for 2024 is expected to reach P4.42 trillion, higher than the full-year target of P4.27 trillion. Good.

 

Great development in fiscal economics – actual revenues larger than target, and signed budget lower than proposed, P6.326 trillion approved vs. P6.352 trillion proposed. For more infrastructure development, no need to keep expanding the DPWH budget because there are lots of private sector interest to invest in infrastructures so long as the rules are fair and stable. 

BWorld 767, Top 10 economic developments of 2024

Top 10 economic developments of 2024

December 31, 2024 | 12:02 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2024/12/31/644019/top-10-economic-developments-of-2024/

 

Here is my list of the major economic developments in 2024; the first five are global and the next five are Philippines specific.

 

1. The top three fastest growing major economies are Vietnam, India, and Philippines. Major economies are those in the list of the Top 50 countries with the largest GDP size in the world. The average GDP growth of Vietnam, India, and the Philippines in the first three quarters (Q1-Q3) in 2024 were 6.8%, 6.6%, and 5.8%, respectively.

 

2. The slowest growing, and often contracting, major economies in the world were European. In particular Ireland, Austria, and Germany. Also, Russia’s neighbors Finland, Latvia, and Estonia contracted by -0.7%, -0.9%, and -1.2% respectively over the first three quarters (Q1-Q3) in 2024. Japan was the only major Asian country that experienced an economic contraction in 2024.

 

3. The inflation rate was decelerating in many countries (exceptions were Vietnam and Russia). Most European nations significantly reduced their inflation rate in 2024 relative to 2023 but suffered low growth or economic contraction in exchange (see Table 1).

 

 

4. The election of Donald Trump and more business optimism. The last time the US grew by 3% or higher was in 2018 (under the Trump administration) with 3% and in 2005 (the Bush Jr. administration) with 3.5%. The average US inflation in 2017-2020 (Trump) was 1.9%, and in 2021-2024 (Biden administration) it was 4.9%.

 

5. Continued wars abroad dampen global economic sentiments. I was expecting that the unwinnable war in Ukraine, the Israel-Hamas/Hezbollah war would end in the middle to late 2024. I was wrong. I can only hope that Trump’s “no new war” policy which he followed in his first term (there were no new US wars from 2017-2020) will kick off early because all the big wars in the world now have huge US involvement.

 

6. The Philippines’ GDP growth failed to reach the 6% target. The high inflation of 2023 dampened household consumption, which constitutes 73% of GDP, until 2024. But as shown in Table 1, the 5.8% growth in Q1-Q3 was still fast and strong by global standards.

 

7. Investments or capital formation recovered to grow by 8%. Investments constitute 24% of GDP. Construction, both government and private, maintained its double-digit growth.

 

8. Industry and services sectors pulled up overall growth as agriculture remained weak or understated. The series of strong storms with actual landfalls in September affected the country’s crops and livestock (see Table 2).

 

9. The Philippines Economic Briefing (PEB) abroad highlighted the country’s economic opportunities. The government’s economic team — composed of Finance Secretary Ralph G. Recto, Budget Secretary Amenah F. Pangandaman, Economics Secretary Arsenio M. Balisacan, Presidential Assistant for Investments Frederick Go, and Bangko Sentral Governor Eli Remolona — conducted a PEB in London and investors meetings in Washington DC last October. As shown in Table 1, the UK and many major European economies are either crawling or contracting, many companies there are shutting down or migrating abroad and Philippines should be one of their destination countries.

 

10. Large investment projects were encouraged by the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) law, the Public-Private Partnership (PPP) Code, and related legislation. CREATE MORE (RA 12066, November 2024) and PPP Code (RA 11966, December 2023) have expanded fiscal incentives like reduction in corporate income tax from 25% to 20%, and removed uncertainties in PPP infrastructure investments.

 

I commend the economic team, particularly Secretaries Pangandaman, Balisacan, Recto, Go, plus PPP Center head Cynthia Hernandez. We need more job-creating investments and infrastructure projects without the need for additional taxation, borrowing, and state-dependent welfare. 

Agri Econ 41, Metro Pacific's More Veggies Please project

A good business model in raising agri productivity, greenhouse corporate farming by the Metro Pacific Investment Corp. (MPIC) located in San Rafael, Bulacan. A friend, Atty. Mike Toledo wrote in his column in PhilStar.  

More science-based, energy-intensive corporate farming scheme for many crops. It should extend to cereals especially rice, then inland fishery and animal husbandry. It is possible to feed even 150 million, 300 million Filipinos. MPIC and other conglomerates should do more greenhouse and hydroponics farming. 

-------------

See also:

Agri Econ 38, Fermin Adriano article on "Full blown food crisis", September 26, 2022 

Agri Econ 39, Land conversion to solar farms contributing to high food inflation, December 28, 2023

Agri Econ 40, Food inflation higher than overall inflation, June 30, 2024

PhilStar 21, Top 10 energy news of 2024

Top 10 energy news of 2024

ENERGY, INFRA AND ECONOMICS - Bienvenido Oplas Jr. - The Philippine Star

December 27, 2024 | 12:00am

https://www.philstar.com/business/2024/12/27/2410377/top-10-energy-news-2024

 

Here is my list of the most significant power and energy stories for 2024. The first five are global and the next five are specific to the Philippines.

 

1. World coal consumption continues to rise.

 

Despite the Paris Agreement in 2015 and prolonged global anti-coal campaigns, world coal consumption remains on an upward trend. According to the Statistical Review of World Energy released by the Energy Institute in June 2024, global coal consumption increased from 113.4 exajoules (EJ) in 2003 to 157.2 EJ in 2015 and further to 164 EJ in 2023. (Note: 1 EJ = 277.78 TWh of electricity)

 

2. Same trend of rising global consumption of oil and gas.

 

Oil consumption grew from 160.5 EJ in 2003 to 183.5 EJ in 2015 to 196.4 EJ in 2023. In terms of million barrels per day, usage rose from 79.9 mbpd in 2003 to 92.8 mbpd in 2015, and to 100.2 mbpd in 2023. Natural gas consumption increased from 90.6 EJ in 2003 to 125.1 EJ in 2015 and to 144.4 EJ in 2023.

 

3. Nuclear energy consumption is flat; solar and wind are rising but insignificant.

 

Global nuclear use is generally flat from 26.5 EJ in 2003, 23.4 EJ in 2013 and 24.6 EJ in 2023. Solar increased from 1.4 EJ in 2013 to 15.4 EJ in 2023; wind increased from 6.2 EJ in 2013 to 21.8 EJ in 2023. But such expansion in solar and wind is simply add-on, not substitution, to continued use of coal and hydrocarbons gas and oil.

 

4. Election of Trump and resumption of US “drill baby drill,” “energy dominance” policies.

 

US LNG exports were only four billion cubic meters (bcm) at the end of Obama’s second term in 2016. Under Trump 1.0 it quadrupled to 17 bcm in 2017, 61 bcm by 2020. Under Trump 2.0, US LNG exports are expected to jump up to 160 bcm or more.

 

5. Decarbonization leading to degrowth is affirmed.

 

From 2010 to 2023, coal's share of total power generation declined significantly in Germany (41.5 percent to 24.9 percent), the UK (28.2 percent to 1.2 percent) and Canada (13.8 percent to 3.7 percent). Correspondingly, their GDP growth from 2013 to 2023 averaged only 1.1 percent, 1.6 percent and 1.8 percent, respectively.

 

In contrast, Asian countries, where coal usage increased, experienced robust GDP growth. From 2013 to 2023, average GDP growth was 6.1 percent in China, six percent in India and Vietnam, and five percent in the Philippines.

 

6. ERC chairperson Monalisa Dimalanta suspension and reinstatement.

 

Last September 5, the Ombudsman suspended ERC chair Monalisa Dimalanta following a flimsy complaint from a fake consumer group. Prominent professional and business organizations, such as the Philippine Chamber of Commerce and Industry and the Management Association of the Philippines, expressed concern over the decision, indirectly criticizing the Ombudsman. Dimalanta has since been reinstated.

 

7. NEA and inefficient electric cooperatives (ECs) highlighted.

 

In 2020 alone, the National Electrification Administration (NEA) used up P12.9 billion of taxpayers money, another P2 to P3 billion per year from 2021 to 2025, and sent to inefficient ECs nationwide. This year, issues with Batangas Electric Cooperative I and II and Northern Davao Electric Cooperative highlighted these inefficiencies.

 

8. Push for nuclear energy gains momentum.

 

In March, a Philippine Nuclear Trade Mission to Canada was organized by the Canadian Embassy in Manila. News stories this year highlighted significant developments, including Meralco’s nuclear energy initiatives and partnerships with South Korea’s Doosan Enerbility Co. and Samsung C&T Corp.

 

9. Collaboration on LNG development among top energy companies.

 

San Miguel Global Power, Aboitiz Power and Meralco Power Gen Corp. partnered to develop two LNG plants with capacities of 1,200 MW and 1,760 MW, along with an LNG import and regasification terminal in Batangas. The Philippine Competition Commission approved the $3.3 billion deal on December 23.

 

10. Ongoing yellow-red alerts expose regulatory challenges.

 

Power supply issues, such as delays in approving Power Supply Agreements (PSAs) and Ancillary Services Procurement Agreements (ASPAs) by the ERC, have contributed to recurring yellow and red alerts. Concerns include the ERC’s decade-old secondary price cap of P6.25 per kWh at the Wholesale Electricity Spot Market and limitations on retail electricity supply.

 

Related to item number five above, coal plants here have been winning CSPs and offering cheap electricity. For instance, in the 600 MW baseload capacity CSP by Meralco last August, winners were SMC’s Masinloc Power and Aboitiz Power’s GNPower Dinginin with all-in rates of P5.60 per kWh and P5.74 per kWh, respectively, way below Meralco’s reserved price for levelized cost of electricity set at P7.26 per kWh. 

BWorld 766, Top 10 fiscal economic stories of 2024

Top 10 fiscal economic stories of 2024

December 27, 2024 | 12:01 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2024/12/27/643568/top-10-fiscal-economic-stories-of-2024/

 

I have listed what I consider the major fiscal/economics trends of this year. The first five are global, the next five are local or Philippine issues.

 

1. The government or public debt to GDP ratio continues to deteriorate in many countries. Among the ASEAN-6, Indonesia, the Philippines, Singapore, and Thailand are projected to have had higher ratios in 2024 than in 2023.

 

2. Among developed Asian nations, only Singapore and Japan have debt/GDP ratios of above 100%. But these are largely domestic debt or borrowing from their own citizens and companies and, hence, have no or little threat of debt default. Meanwhile, major European and American countries continue to have ratios of above 100% or rising ratios, except for Germany, Russia, and Argentina (see Table 1).

 

3. Argentina gets a fiscal shock with the abolition of 10 government ministries. Argentina’s free marketer and libertarian president, Javier Milei, took office in December 2023 and made deep cuts in expenditures, produced a fiscal surplus within the first two months, and, in 2024, the country’s first fiscal surplus in 123 years. First, he merged six ministries — Public Works, Housing, Transportation, Energy, Mining, and Telecommunications — into a single Ministry of Infrastructure, abolishing five. Then he abolished five other ministries — Culture, Education, Health, Labor, and Social Development — and instead created the Ministry of Human Capital. Argentina’s Debt/GDP ratio is projected to decline from 155% in 2023 to 92% this year.

 

4. US outstanding public debt has breached $36 trillion. By the end of 2016, or last year of the Obama administration, US public debt was $19.98 trillion. It rose to $23.2 trillion by the end of 2019 or the third year of Donald Trump’s first presidency. But then the COVID-19 lockdowns happened in 2020 and borrowings expanded, and debt reached $27.75 trillion that year. Under Joe Biden it rose to $29.62 trillion in 2021, $34 trillion in 2023, and $36.19 trillion as of Dec. 23 this year. Or an average increase of $2.11 trillion/year under Biden.

 

5. All G7 members are in the list of the top 10 debtor countries in the world. Their combined outstanding debt is $61.29 trillion — huge! — and this number does not yet include their guaranteed debt and unfunded liabilities like elaborate pensions. In contrast, the combined outstanding debt of the BRICS nations (Brazil, Russia, China, India, and South Africa with $302 billion) is $22.35 trillion (see Table 2).

 

6. The Philippine budget deficit went from P1.54 trillion/year from 2020-2023, to around P1.16 trillion in 2024. This from only P660 billion in 2019. The actual deficit from January-October in 2024 was P964 billion. Financing or borrowings increased from P876 in 2019 to P2.2 trillion/year from 2020-2023 and is projected to hit P1.45 trillion in 2024. Interest payments from high levels of public debt increased from P360 billion in 2019 to P503 billion in 2022 and are projected to reach P767 billion in 2024.

 

7. The Philippines’ public debt has reached P16 trillion. Outstanding debt as of October was P16.02 trillion actual, plus a debt guarantee of P412 billion, for a total outstanding debt of P16.43 trillion (see Table 3).

 

 

8. The idle funds of the Philippine Health Insurance Corp. or PhilHealth were used to finance the government’s unprogrammed appropriations. Finance Secretary Ralph G. Recto was bombarded by criticism by the health activism community this year because the good Secretary wanted to fund many health and infrastructure projects — worth P90 billion— without new borrowings nor seeking new or higher taxes. This money comes not from contributions by PhilHealth members but from drinkers, smokers, vapers, and gamblers via excise taxes on tobacco, vapes, and alcohol, and the remittances from the Philippine Amusement and Gaming Corp., better known as Pagcor, which are directed to PhilHealth. The P90 billion is the accumulated net flow from 2021-2023 of government premium from sin taxes minus benefit claims by non-contributing members. In my opinion, Mr. Recto is correct and the detractors are wrong.

 

9. The funds of the Department of Health (DoH) and PhilHealth have declined mainly due to a decline in tobacco taxes. The health activist community also attacked the Department of Budget and Management (DBM) for submitting a lower budget for DoH and PhilHealth for 2025. But this group is perfectly aware that 50% of the tobacco-alcohol tax is allotted to DoH-PhilHealth and that the tax has been declining due to rampant smuggling and illicit trade as the tobacco tax rates are rising yearly. Tobacco tax revenue peaked at P176 billion in 2021 when the tax rate was P50/pack. This declined to P160 billion in 2022 at the tax rate increased to P55/pack, then P135 billion in 2023 at P60/pack, and it is projected to be around P120 billion in 2024 at a tax rate of P63/pack. In my view, the DBM is correct and its detractors are wrong.

 

10. The enactment of the CREATE MORE law and an income tax cut. RA 12066 or the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy law (CREATE MORE) was signed into law on Nov. 11. Among its key provisions is further reduction in the corporate income tax (CIT) rate from 25% to 20% for Registered Business Enterprises (RBEs) under the Enhanced Deductions Regime (EDR) on their taxable income derived from registered projects or activities during the taxable year.

BWorld 765, Necessary cuts in the 2025 budget; Argentina’s fiscal reforms

Necessary cuts in the 2025 budget; Argentina’s fiscal reforms

December 24, 2024 | 12:02 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2024/12/24/643174/necessary-cuts-in-the-2025-budget-argentinas-fiscal-reforms/

 

The big public backlash against the proposed budget for 2025 was triggered by the big reductions made this month by the Bicameral Conference Committee from the proposed budget submitted last August: that of the Department of Social Welfare and Development (DSWD) was reduced by nearly P100 billion (its Ayuda sa Kapos Ang Kita Program or AKAP was cut by P12.8 billion, 4Ps by P50 billion, others by P33 billion), the Philippine Health Insurance Corp. or PhilHealth’s budget was cut by P74.4 billion, the Pension and gratuity fund by P36 billion, the Commission on Higher Education’s (CHED) was cut by P26.9 billion, the Department of Health (DoH) by P25.8 billion, the Department of Agriculture (DA) by P20 billion, and the Department of Labor and Employment (DoLE) by P18 billion, among others.

 

Then the Bicameral Committee significantly increased the budgets for the following: unprogrammed appropriations were increased by P373 billion, the Department of Public Works and Highways (DPWH) by P288.7 billion, Congress’ own budget was increased by P18.8 billion, and the allocation to local government units (ALGUs) went up by P10.6 billion, among others.

 

My quick reaction to the cuts in the budgets of the social agencies (DSWD, the Department of Education or DepEd, DoH, State Universities and Colleges, among others) is that this should have been done in 2022 or 2023, not 2025. There were big increases in their budgets in 2020 to 2021 because of lockdown, the virus crisis leading to an economic crisis, so the big increases were understandable.

 

But there was no more virus crisis and economic crisis in 2022 and beyond, but heavy welfare spending funded by heavy borrowing continued which should not have been done.

 

The DoH experienced a big jump in its budget, from P98 billion in 2019 to P177 billion in 2020, and P236 billion in 2021. The DSWD also experienced a big jump, from P139 billion in 2019 to P347 billion in 2020, and P230 billion in 2022. DepEd has had consistent increases in its budget. PhilHealth’s went up from P68 billion in 2019 to P80 billion in 2022 and P100 billion in 2023 (see Table 1).

 

Meanwhile, government revenues suffered heavy declines in 2020 due to the lockdown and the mandatory shutdown of taxpaying businesses and people. Revenues fell from P3.13 trillion in 2019 to only P2.86 trillion in 2020 and P3 trillion in 2021.

 

The budget deficit increased, from P660 billion in 2019 to P1.37 trillion in 2020, P1.67 trillion in 2021, and P1.61 trillion in 2022. Financing or borrowings increased from P876 billion to an average of P2.2 trillion yearly from 2020 to 2023. Interest payments from higher public borrowings jumped from P360 billion in 2019 to P503 billion in 2022 and are projected to reach P767 billion in 2024 (see Table 2).

 

I support the reduction in the budgets of many social agencies, but I do not support the increase in those of other sectors, particularly the DPWH and the unprogrammed appropriations.

 

There should be forced savings via the consistent reduction in the budget of many welfare agencies because high public debt, high interest rates, and high interest payments have big “diswelfare” effects on the poor themselves.

 

Last week I went to Buenos Aires, Argentina, to attend the Tholos Forum 2024. I was with fellow leaders of free market think tanks, institutes and taxpayers’ associations from many countries in South America, North America, and Europe. I was the only participant from Asia. The local sponsor of the Tholos Foundation was the Argentina Taxpayers Association.

 

Many of the speakers were high officials and legislators from La Libertad Avanza, the political party of Argentina’s new president, Javier Milei. Argentinians suffered from horrible high inflation for decades under previous administrations. There were huge, wasteful, and corrupt bureaucracies, the irresponsible printing of money, and a great deal of cronyism in business.

 

Milei cut the number of Ministries or Departments in government from 19 to nine. He abolished 10 Ministries, not just reduced the budgets of these agencies. He attained a fiscal surplus for Argentina within two months of his administration. This year is the first time in 123 years that Argentina will experience a budget surplus and economic recovery has been visible: inflation has been declining, there has been GDP growth and an escape from recession, business confidence is improving. He is now on another path to reduce the number of taxes and reduce tax rates.

 

The Philippines need not follow Argentina’s hard U-turn in public spending, but big reforms in social spending are possible because we are not in any crisis, viral or economic. We should do this before a real fiscal crisis occurs if the consistent increase in our public debt stock is not controlled.

Macroeconomic 32, GDP growth in Q1 2025, Germany degrowth, Japan inflation

Three related topics here.

(1) GDP growth in Q1 2025

India reported their Q1 2025 GDP and it's a whooping 7.4% growth. Here are the top 6 largest economies in the world in GDP size at PPP values, 3 are with BRICS, 3 with G7. Also the ASEAN-5. GDP growth in %, Q4 2024 and Q1 2025, respectively.

India, 6.4, 7.4

China, 5.4, 5.4

Russia, 3.3, 1.4.

US, 2.5, 2.1

Japan, 1.3, 1.7

Germany, -0.2, 0.

Indonesia, 5.0, 4.9

Thailand, 3.3, 3.1

Vietnam, 7.6, 6.9

Malaysia, 4.9, 4.4

Philippines, 5.3, 5.4.

Taiwan, 3.8, 5.5

HK, 2.5, 3.1

S. Korea, 1.2, -0.1.

VN, IN and PH still the top 3 fastest growing medium-large economies in the world, those in the top 50 largest GDP size.

(2) Germany degrowth

Germany has eight consecutive quarters of either 0, flat growth, or contraction of -0.1 to -0.3% GDP performance. From Q2 2023 to Q1 2025, two years straight. 

Any responsible leader/s should be ashamed of that, especially they are an industrialized economy, the largest economy of W.Europe. But shame is secondary to pursuing leftist and war mongering agenda.

Save Ukraine and Zelensky. Save Taiwan, save the planet, save illegal immigrants, save DEI. Save their economy from degrowth and deindustrialization is a secondary or tertiary priority. Bright Germany leaders. Really bright.

(3) Japan food inflation.

Japan inflation rate year on year (yoy) in %, Jan-April 2025: 4.0, 3.7, 3.6, 3.6, average 3.7.

PH inflation rate same period: 2.9, 2.1, 1.8, 1.4, average 2.05 or 2.0.

Some people still think our inflation rate is bad, it contributed kuno to defeat of half of admin candidates, ewww. 

JP inflation in 2023 and 2025 are among the highest in JP economic history, and it has little or nothing to do with Ukraine war, Mideast war, Trump tariff, other fall guys. And the killer inflation is high rice prices, 90% higher than year ago level.

https://asiatimes.com/2025/05/soaring-rice-prices-are-stirring-political-trouble-in-japan/.

They should have imported fast enough from TH or VN, just few days away of boat trip as short-term measure and not waited for this to happen. Or perhaps they also have rice trade cartels, the usual punching bag here?

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See also:

Macroecon 29, Vietnam's high growth, non-war mongering stance, June 29, 2024

Macroecon 30, PH low unemployment, high GDP growth, August 08, 2024

Macroecon 31, Low oil prices, low inflation, September 05, 2024