Central bank Governor Benjamin E. Diokno talks during an economic briefing in Pasay City, April 5. — PHILIPPINE STAR/ GEREMY PINTOLO
PRESIDENT-ELECT Ferdinand “Bongbong” R. Marcos, Jr. on Thursday announced he is tapping Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno to be his Finance secretary when he assumes office on July 1.
In a televised briefing, Mr. Marcos said Mr. Diokno will be replaced by Monetary Board member Felipe M. Medalla as governor of the BSP. Mr. Medalla will serve the rest of Mr. Diokno’s unexpired term that is scheduled to end in July 2023.
“The first priority is always going to be the economy. That’s why we have been very careful in choosing the economic team. It’s still down to jobs, the increasing prices of commodities, some relief for the business community. We have to streamline the operations of government,” Mr. Marcos said.
Mr. Diokno, who served as Budget secretary from 2016 to 2019, on Thursday said he will continue the macro and fiscal policies that have helped the Philippine economy recover from the pandemic.
“As Finance Secretary, I will strive to continue prudently and carefully balancing the need to support economic growth, on one hand, and to maintain fiscal discipline, on the other,” he said.
Mr. Diokno and Mr. Medalla were both part of President Joseph E. Estrada’s Cabinet. Mr. Diokno was also Budget secretary, while Mr. Medalla was the Socioeconomic Planning secretary and National Economic and Development Authority director-general.
They join incoming Socioeconomic Planning chief Arsenio M. Balisacan in the Marcos administration’s economic team.
Mr. Marcos also named former University of the Philippines President Alfredo E. Pascual as the head of the Department of Trade and Industry (DTI), and SMC Tollways President and Chief Executive Officer Manuel M. Bonoan as the head of the Department of Public Works and Highways (DPWH).
“He has spent almost his entire professional life in the DPWH,” the president-elect said. “I know him very well so I think he will do a good job.”
Mr. Bonoan served as DPWH undersecretary for operations in the Visayas and Mindanao in 1998.
Mr. Marcos has vowed to continue President Rodrigo R. Duterte’s aggressive infrastructure program to drive economic growth.
VOTE OF CONFIDENCEMr. Marcos’ move to appoint familiar names to his Cabinet was largely welcomed by the markets, business groups and economists. The Philippine Stock Exchange index (PSEi) closed 0.72% up.
Philippine Chamber of Commerce and Industry President George T. Barcelon said the appointment of these “seasoned and competent economic leaders” would boost the confidence of local and foreign businesses.
“We believe they would do good in managing our fiscal affairs. As you know, we are faced with critical issues such as the huge debt deficit, and the need for post pandemic reforms and programs to sustain recovery, among others,” Mr. Barcelon said in a statement.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message said the appointees’ “wealth of experience” would be an advantage for the incoming administration’s economic team.
“The appointments will help ensure greater stability, order, and predictability on the local economy and financial markets. These appointments also help provide a more conducive environment for business and investment activities,” he said.
In an e-mail, Pantheon Chief Emerging Asia Economist Miguel Chanco said it may be “a bit of gamble” to move Mr. Diokno from the BSP at a time of rising inflation and policy normalization.
“(Mr. Diokno will) definitely bring some welcome credibility in the post of Finance Secretary, which is much-needed given the Philippines’ huge budget blowout over the past two years and the urgency to consolidate the country’s finances as soon as possible,” he said.
The BSP earlier this month raised interest rates for the first time since 2018, as it sought to curb intensifying inflationary pressure. Inflation surged to a three-year high of 4.9% in April due to the spike in oil and food prices.
The appointments signal a continuity in economic policy, Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila University said in a Messenger chat.
“What we need to do is to address the structural weaknesses that were exposed by the pandemic. What we will see may mostly be a combination of monetary and fiscal policies intended to pay debts and minimize inflation. This will not be enough to produce growth,” he said.
ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said Messrs. Diokno and Medalla are “well aware of the challenges that the country faces, including high debt levels, accelerating inflation and rising borrowing costs.”
“Next question is who will replace Medalla next year as BSP governor for a full six-year term,” he said via e-mail.
TAX RELIEFMeanwhile, Mr. Marcos said an economic recovery plan should be put in place before considering the fiscal consolidation plan of the outgoing Finance Secretary Carlos G. Dominguez III.
“We have to have an economic recovery plan (first) and fiscal policy will follow,” he said.
The Finance department on Wednesday presented a fiscal consolidation plan for the next administration, which includes imposing new taxes and deferring personal income tax reductions in order to generate more revenues to pay off the country’s ballooning debt. As of end-March, National Government debt stood at a record P12.68 trillion.
Mr. Marcos said they are considering tax relief for sectors most affected by the pandemic such as micro, small and medium enterprises (MSME) and the agriculture sector.
“For MSMEs, we can reduce (tax), give tax holiday, tax amnesty, we’re studying it right now, microfinancing. We want them to come back… We want to reduce as much of the tax collections from those who are suffering from the pandemic, MSMEs, agri sector, transport,” he said.
Mr. Marcos was also cool to the proposal to immediately suspend the excise tax on fuel products, as the government would need funds for its projects. Instead, he said he is considering subsidy programs for the transport sector.
“In terms of oil excise tax, I think we still have to look at that very well. We can support those areas hit by rising oil prices — number one there was transport,” he said.
President Rodrigo R. Duterte’s administration rejected calls to suspend the excise tax on fuel, saying it could reduce government revenues by billions. Instead, cash subsidies were given to the transport and agriculture sector. — Kyle Aristophere T. Atienza with inputs from Tobias Jared Tomas