Critique on the Philippine Development Plan 2017-2022

as regards Monetary and Fiscal Policies

Baroro, Karl
Biolena, Jaya Trisha

November 2020
 Abstract

This paper presents an analysis and evaluation of the Philippine Development

Plan 2017-2022 in relation to Monetary and Fiscal Policies of the country. The
specific objectives of this paper are to identify the three main agenda of the
Philippine Development Plan 2017-2022, determine the strategies outlined in the
PDP that would address the Enabling and Supportive Economic Environment
and define the status of the outlined strategies concerning Macroeconomic
Policy. The method being employed to analyze the gathered data is Descriptive
Research Method. The results of the analysis showed significant progress
towards achieving the pre-determined outcomes and impact of the plan as
reflected on the Results Matrices published by the National Economic
Development Authority. Recommendations were made by the authors to address
the slowdown in the attainment of PDP targets brought about by the pandemic
currently experienced worldwide.
Introduction

According to the briefer of the Philippine Development Plan developed by the current
administration, one of the key aspects that the plan is aiming is for a sound, stable and
supportive macroeconomic environment that would be essential for expanding opportunities and
will foster sustainable growth. The PDP aims to establish a fiscal sector that is responsible,
strategic, and supportive of an inclusive growth that would boost the economy and provide a
stable environment that would be fitting for investments. Also, it aims to enforce a monetary
policy that would ensure that the prices in the market is stable and the financial sector can
support growth and improve access to economic opportunities (National Economic
Development Authority, 2017).

The Philippine Development Plan is the backbone of every political government and the
National Economic Development Authority (NEDA) in collaboration with other government
agencies and bureaus, whose mandate are similar to the priorities, crafts the said plan. (Martin,
2014). However, Martin (2014) cautioned that this should not be a political party attribution
rather should reflect the development strategies of the current administration. The planning an
budgeting systems of the country are well placed to support the Sustainable Development
Goals whch can be mapped into the priorities of the PDP (Manasan, 2020). The Department of
Finance has created a four-pillar socio-economic strategy aimed at: (a) supporting the more
vulnerable sectors of society; (b) increasing medical resources to contain the virus and offer
safety to front-liners; (c) keeping the economy afloat through financial emergency initiatives; and
(d) creating jobs and sustaining the economy (Beja Jr, et al., 2020) and it is crucial to have
these programs and institutions in place in cities, regions, and provinces (Beja Jr, et al., 2020).

Assessment and Challenges

Given the current experience of the slowdown in the international trade, given the subdued
economic outlook, the slowdown is predicted to persist and due to the pandemic, the existing
problems in the economy such as poverty and unemployment have been seriously highlighted
(Roeleveld, 2020).It has been seen that the economy is seen to remain weak, citing the average
growth rising slightly at 3.2% in 2008-2015 and 3.6% in 2017-2021. Currently, the global export
volume growth is expected to improve from 3.0% (2008-2015) to an average of 3.9 % (2017-
2021) (National Economic Development Authority, 2017). The Asian Development Bank, on the
other hand, projects the GDP of the Philippines to trend upward by 6.8 % in 2018 having results
from the strong domestic demand, expansionary public spending, and a more active export
industry (Katigbak, 2018).

In 2017, the Philippine economy continues to perform well as it expands to 6.7%, making it third
in the ranking in the Southeast Asia trailing China (6.9 %), and Vietnam (6.8%), amid the
slowdown in the global economy, subdued world trade, and increased uncertainty due to the
intensifying call for protectionist and inward-looking policies (Katigbak, 2018). Similarly, all the
changes in the policies and strategies that will be implemented are considered to include all
sectors of the economy and its need even beyond the current situation of the pandemic
(Roeleveld, 2020).

Given the promising outlook of the Philippine economy, rising number of foreign firms and
investors, and domestic economic developments (Katigbak, 2018), there has become a growing
trend in inward looking policies and protectionism, thus the following aspects are taken into
consideration: (1) Intensification of competition in the global market heightens the difficulties
faced by the sector; (2)Rising global uncertainties will have an implication on the borrowing
costs of the country; (3)Higher investments in infrastructure, social services, and innovation will
require more fiscal space; (3) The tax system is inequitable, complex, and inefficient; (4) The
absorptive capacities of national government agencies need improvement; (5) Overall, local
government units (LGUs) remain dependent on the internal revenue allotment (IRA); (6) Other
sources of fiscal risks remain; (7) Despite widening networks, there are persistent geographical,
human, institutional, and infrastructure-related barriers on access to financial services; (8)
Growing complexity across financial transactions is a risk to financial stability. (National
Economic Development Authority, 2017).

Currently, the Philippines has a total of 77 projects and 30 (39%) of these projects are currently
in the operation or construction stage, 9 (12%) are already in the operation stage only, and 21
(27%) are already in the construction stage especially the Build, Build, Build program.
(Economic Research Institute for ASEAN and East Asia, 2019). Clearly, the government has
already started doing their best efforts to turn this paper int o reality until the term of the current
President ends.
Statement of the problem

1. What are the three main agenda of the Philippine Development Plan?
2. What are the strategies outlined in the PDP that would address the Enabling and
Supportive Economic Environment (Ensuring Sound Macroeconomic Policy)?
3. What is the status of the outlined strategies concerning Macroeconomic Policies?

Method of research

The Action Research utilized a Descriptive Research. A descriptive research describes

a certain phenomenon and its characteristics. It is primarily concerned on the how it
happened rather than why something has happened (Nassaji, 2015). Therefore, it is
very useful in this action research because the quantitative research is the design of
choice because we would like to know, regarding events, who were involved, what was
involved, and where did things take place (Lambert & Lambert, 2012) regarding the
Philippine Development Plan.
Analysis

Three Main Agenda of the Philippine Development Plan

The Philippine Development Plan has outlined three areas of concern namely: The
Matatag, The Maginhawa, and The Panatag na Buhay.

Figure 1. Three Main Agenda of the Philippine Development Plan

Anchored in the Ambisyon 2040, as seen in the figure above, the Government aims to
achieve a Matatag, Maginhawa, and Panatag na Buhay through its 2022 goal of laying
down a good foundation that would yield a high trust, inclusive growth, a high trust and
resilient society and a globally-competitive knowledge economy.

The Malasakit focuses on the enhancement of the social fabric in which the aim is to
regain peoples‟ trust in public institutions and cultivate trust in fellow Filipinos. The
Maginhawa aims to make ordinary Filipinos feel the “Pagbabago” through economic and
financial efforts and programs. While the Panatag na Buhay is imperative that economic
growth is accelerated and sustained for “Patuloy na Pag-unlad.” A major strategy to
sustain and further accelerate growth in the future is by graduating to a knowledge
economy.

Strategies outlined in PDP addressing the Enabling and Supportive Economic

Environment (Ensuring Sound Macroeconomic Policy)

For 2017-2022, as shown in Figure 2 below, indicators have been identified and targets
have been set to monitor the attainment of the sub-sector outcomes of 1.) responsible,
strategic, and supportive fiscal sector, 2.)resilient and inclusive monetary and
financial sectors, and 3.)strategic external trade policy. To attain a responsible,
strategic, and supportive fiscal sector; a resilient and inclusive monetary and financial
sector; and a strategic external trade policy regime, the strategies as outlined will be
implemented. (National Economic Development Authority, 2017)

Sector Outcome 1: To achieve responsible, strategic, and supportive fiscal sector, the
government must: (a) improve revenues through reforms in tax policy and
administration; (b) increase local sources of LGU revenue, institute legislated and non-
legislated measures; (c) encourage the private sector to engage in public-private
partnership schemes; (d) increase budget share of social and infrastructure sectors. (e)
formulate and implement expenditure management reforms; and (f) enhance debt
management through the Medium-Term Debt Strategy. (National Economic
Development Authority, 2017)

Sector Outcome 2: To realize resilient and inclusive monetary and financial sectors,
monetary policy must be geared towards: (a) maintaining a flexible inflation targeting
framework through the interest rate corridor (IRC) system; (b) maintaining a market-
determined exchange rate and sufficient international reserves to better insulate the
economy from external shocks that could disrupt the pace of economic growth; and (c)
pursuing regional and international cooperation to prevent and manage future financial
crisis. Financial policies, on the other hand, must focus on: (a) promoting financial
stability through micro-macro prudential measures; (b) fostering capital market
development through the promotion of efficiency in trading, settlement and delivery of
securities; (c) strengthening the effectiveness of financial inclusion initiatives by
focusing on the efficient delivery of microfinance and micro-insurance products and
services for Filipinos including those who live abroad; (d) encouraging efficiency and
innovation in microfinance and micro-insurance for the domestic market; and (e)
developing the legal infrastructure for Islamic finance. (National Economic Development
Authority, 2017)
Sector Outcome 3: To accomplish a strategic external trade policy regime, the
government must concentrate on: (a) expanding market access and diversify export
products and markets; (b) increasing the competitiveness of Philippine exports; (c)
enhancing trade facilitation and strengthen linkages and connectivity; (d) fostering
forward and backward linkages across sectors through the value chain approach; and
(e) providing adequate infrastructure and logistical support to achieve connectivity,
ensure efficient flow of goods and services domestically and internationally, and lower
the cost of production and delivery. (National Economic Development Authority, 2017)
 Figure 2. Strategic Framework to Sustain a Sound, Stable and Supportive
Macroeconomic Environment, 2017-2022

Status of Outlined Strategies Concerning Macroeconomic Policies

The figures below show us the recent progress of the outlined strategies of the
Philippine Development plan that concerns Macroeconomic policy. In table 1, we can
see that the Goal on laying down the foundation for an inclusive growth, a high trust and
resilient society and a globally competitive knowledge economy, the responsible,
strategic, and supportive fiscal sector has been reported to be achieved. The DOF,
DBM has reported that the following indicators have been achieved over the years. The
Government to GDP ratio improved and the tax reform has been passed,
Macroeconomic fundamentals (e.g. inflation, GDP growth, fiscal balance, external
position, interest rates) remained sound, Political stability is maintained, and
Governance improvement efforts are strengthened.
 Table 1. Status of the Outlined Strategies in the PDP Concerning Macroeconomic
Policy

In table 1.2, we can clearly see that the Bureau of Local Government Fund reported that
the ratio of local source of LGU income to total current operating income increased,
legislated measures passed, shares from LGUs IRA and other Shares from National
Tax Collections at minimal growth rate, political will of LGUs to adopt locally legislated
measures, all newly-appointed municipal/city/provincial treasurers and assessors
trained (% of newly- appointed treasurers and assessors), and all LGUs are
capacitated/informed on local finance policies (% of LGUs).

It has also been noted that the number of Public Financial Management (PFM)
practitioners who attended at least one PFM Competency Program (PFMCP) course
increased. According to DBM, outturns are contingent on the registration rate of target
participants, and arrangement with select universities for the conduct of training
programs in 2018. According to DOF, the number of training activities conducted on
Government Procurement Reform Act (RA 9184) and its revised implementing rules and
regulations (IRR) increased and the number of training activities conducted may
increase or decrease depending upon GAA funding, implementation of programs in
partnership with other agencies, roll- out training of recognized trainers, and training
demand/requests, among others.
 Table 1.2. Status of the Outlined Strategies in the PDP Concerning Macroeconomic
Policy

It is explicitly explained in Table 1.3 that Resilient and inclusive monetary and financial
sector were achieved according to BSP and PSA. However, there were pending
petitions for adjustments in electricity rates as well as proposed tax policy reform
program pose as upside risks to inflation. Also, the BSP reported that the annual value
of microfinance services delivery maintained above PHP10 billion (PHP billion) and
there were increasing programs and project conduits on microfinance delivery of public
and private agencies. Also, the SEC reported that Total number of applications for
registration, licensure, or accreditation of stock corporations, non-stock corporations,
partnerships, foreign corporations, multinational companies, capital market institutions,
and professionals, and securities processed and approved increased explaining that
The number of registration, licensure and accreditation processed and approved
depends on the number of applications received and the conduciveness of the
economic environment. The IC has also reported that Microinsurance penetration or
density expanded (as % of total population, cumulative) and there were Increasing
programs and project conduits on microfinance delivery of public and private agencies.
The table clearly shows that there is improvement in the economic sector due to great
economic activities.

Table 1.3. Status of the Outlined Strategies in the PDP Concerning Macroeconomic
Policy
In Table 1.4, it was reported by the SEC that the value securities registered already
increased in Php Billions and notes that Registration is demand-driven: SEC cannot
compel applicants to register their securities. Several economic and regulatory factors
and risks are considered by the applicants before they decide to register.

Market risk pertaining to the movement in the financial market which may affect the
value of its underlying assets. This is particularly relevant to investment companies
where the Net Asset Value (NAV) of its portfolio is based on the underlying securities
that are mainly coming from the securities in the market. The other factors that may
affect the fluctuation of the market are the state of the economy, current events,
corporate earnings, and interest rate movements.

On the other hand, we can still see that there is progress on the part of DTI to monitor
and implement the Strategic External trade policy regime, it was achieved. The number
of DTI-assisted technology- enabled and technology-based exporters increased and
Exporters are open to the use of technology. High cost of production and insufficient
investment are possible risks.
Table 1.4. Status of the Outlined Strategies in the PDP Concerning Macroeconomic
Policy
Conclusion

PDP 2017-2022 was expected to produce “higher trust in government and society, more
resilient individuals and communities, and a greater drive for innovation,” with the
Philippine values of “Malasakit, Pagbabago and Patuloy na Pag-Unlad” as the three
founding principles of the development plan.

Underneath these three development fundamentals are four strategic objectives,

namely: attaining just and lasting peace, ensuring security, public order and safety,
accelerating strategic infrastructure development, and ensuring ecological integrity and
a clean and healthy environment.

In summary, PDP 2017-2022 is the government‟s ambitious high growth and inclusive
economic program with an unprecedented or record spending agenda on infrastructure,
human capital and social protection for the poor and other vulnerable sectors.

Strategies concerning Fiscal and Monetary Policies were found at the Part V of the PDP
2017-2022 entitled Enabling and Supportive Economic Environment (Ensuring Sound
Macroeconomic Policy). Strategies focused on attaining a sound, stable, and supportive
macroeconomic environment which is essential for expanding economic opportunities
and fostering sustained growth, a fiscal sector that is responsible, strategic, and
supportive of inclusive growth which can boost the economy and provide a stable
environment that is conducive to investments, and a monetary policy that ensures price
stability with a stable and inclusive financial sector which can support growth and
improve access to economic opportunities, and a strategic external trade policy regime
which enables Philippine enterprises to successfully compete in global markets and
provide employment opportunities for Filipinos.

To ensure clarity of goals and systematically track progress, indicators and targets were
developed. These were listed in the Results Matrices accompanying the plan. The PDP
expanded economic opportunities for everyone. Growth was boosted in all sectors
including Industries, and Services. To successfully employ the strategies, development
of technologies and physical infrastructure such as better public transportation,
communications, water and energy, were accelerated. Altogether, the efforts of the
government, through effective implementation of the outlined strategies, resulted to a
continuous progress and attainment of majority of the specified targets or indicators of
ensuring a sound macroeconomic policy through achieving responsible, strategic, and
supportive fiscal sector, resilient and inclusive monetary and financial sectors, and
strategic external trade policy.

Although pandemic has slowed down the achievement of the targets in 2020, several
international financial and investments houses have given favorable remarks about the
government‟s plan and Congress‟ efforts in supporting it. Fitch Ratings found the plan
“feasible”, Moody‟s Investors Service described it as “credit-positive.”

Recommendations

To address the slowdown in the attainment of PDP goals, the government must craft a
Recovery Plan with PDP as its framework, alongside with rapid adoption of digital
technologies which can help our country overcome the impact of the Covid-19
pandemic, recover from the crisis, and achieve its PDP goals and its vision of becoming
a middle-class society free of poverty. The use of digital technologies such as digital
payments, e-commerce, and online education, is rising in the Philippines and has
helped individuals, businesses, and the government cope with social distancing
measures, ensure business continuity, and deliver public services during the pandemic.
The government must allocate appropriate fund to expedite development in its
technologies and to regain boost in economic activities for faster recovery.

As the nation strives to deal with the challenges posed by the pandemic, we must
ultimately seek to translate the crisis into an opportunity and ramp up actions necessary
to achieve the PDP targets. Quick and robust action to defeat the virus and the spirit of
solidarity that we are witnessing must be brought to bear on the implementation of the
strategies. Enhanced political will and commitment is what is acutely needed. Strategies
have already been employed and have developed significant progress, and if we are
ambitious enough, we can muster the full complement of resources needed to
implement the goals successfully. Attachment of high level of importance and urgency
to the fight against poverty, hunger, and towards all the other goals must be made and
we will be well poised for success in this ambitious high growth and inclusive economic
program. We should not, and cannot give up the efforts already made, even amid this
painful pandemic. We must extend and boost our efforts to „recover better‟, and build a
safer, healthier, fairer and a more prosperous nation, so essential in avoiding future
pandemics and its brutal effects to the economy.
References

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