Philippines needs to grow more than 6% to reduce debt, says finance chief

(Bloomberg) – The Philippines needs to grow more than 6% a year for at least the next five years to emerge from debt bloated by the Covid-19 crisis, Finance Secretary Carlos Dominguez has said.

“The biggest challenge for the next administration is really getting out of the debt that we’ve taken on during the pandemic,” Dominguez said in an interview Thursday with Bloomberg Television’s Kathleen Hays. “The next administration should design policies and stick to very strict fiscal discipline to get out of these debt problems,” he said.

The pandemic has disrupted consumption and business activity, which in turn has reduced tax revenues and pushed the Southeast Asian nation to rely more on debt to fund its spending plans. While Dominguez recently said he was preparing a fiscal consolidation plan for the new government, Barclays Plc analysts at Fitch Solutions see May’s presidential election leading to political continuity.

The Philippines is targeting a growth rate of 7-9% this year as consumption begins to return to pre-pandemic levels. The government has extended the least stringent movement restrictions until the end of April in metro Manila, which accounts for a third of the country’s economic output.

Strong points:

  • The Philippines is watching the United States and other countries raising interest rates to make sure they don’t fall behind as they balance growth, inflation and capital preservation, said the chief financial officer.
  • Peso depreciation is within ‘manageable limits’, he said
  • The government is exploring what more can be done to collect the inheritance tax owed by the family of late dictator Ferdinand Marcos, whose son, Bongbong, is a presidential candidate, Dominguez said.

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