Fiscal plan for Marcos’ 3rd year missed in SONA

President Ferdinand R. Marcos, Jr. failed to discuss plans to address the country’s fiscal situation in his third State of the Nation Address (SONA), despite his vows to pursue “aggressive” infrastructure projects and push for a wage hike for government workers and teachers, economists said.

“There were no concrete sources of funds from the President’s SONA,” Emy Ruth Gianan, who teaches economics at the Polytechnic University of the Philippines, said in a Facebook Messenger chat.

“There was also no reminder for the Bureau of Internal Revenue to beef up tax collections or other levying units to improve revenue generation,” she added.

In his third SONA on Monday, Mr. Marcos said his government is pursuing an “aggressive” infrastructure development in line with the country’s goal to become an upper middle-income economy by next year.

“Our power and internet services are continuously being upgraded in both capacity and connectivity,” Mr. Marcos said, adding that the government is building “essential infrastructure and linkages” to support artificial intelligence systems “for high-impact practical applications.”

He said the government will boost scholarships and research grants in line with the “agenda to foster startups” and “commercialize and mass produce research and development outputs.”

Mr. Marcos also vowed to pursue a wage hike for government employees and implement an expanded career progression system for public school teachers.

Even though these programs will require massive funding, the President did not call for new taxes or discuss other sources of revenues.

“The President’s declarations on infrastructure and other key initiatives cost money. If we adhere to the policy of simply improving our tax administration without new forms or higher rates of appropriate taxes, the only option is to increase our borrowings,” Diwa C. Guinigundo, a former central bank deputy governor, said in a Viber message.

The National Government (NG) borrows from both foreign and domestic lenders to fund its budget deficit as it spends more than its revenues to support infrastructure projects and boost economic growth. The budget deficit in the January-May period widened by 24.06% to PHP 404.8 billion.

“In time, if borrowings are not translated into growth, debt servicing could even divert public money away from supporting more infrastructure and productive activities in the future,” Mr. Guinigundo said.

Economic managers are targeting 6-7% gross domestic product (GDP) growth this year.

Government debt hit a record high of PHP 15.35 trillion at the end of May, according to the Bureau of the Treasury (BTr), which largely pointed to the weakening of the local currency against the greenback.

“Any form of public goods will require substantial amounts of funds. Hence, a good measure of how SONA should consider not just the type of public goods that will be delivered but also how the public will have to pay in order to acquire them,” said Leonardo A. Lanzona, Jr., who teaches economics at the Ateneo de Manila University.

“In the face of substantial debts and huge budget deficits, this dream that the government will supply for all of this infrastructure and higher wages for government officials will be impossible,” he said in an e-mail.

At a post-SONA briefing on Tuesday, Budget Secretary Amenah F. Pangandaman said the department had set aside some PHP 9.5 billion for the new medical allowance for government employees announced by Mr. Marcos.

The appropriation was allocated under the Miscellaneous Personnel Benefits Fund for 2025, she noted, adding that government workers will each receive a medical allowance as a subsidy to avail themselves of Health Maintenance Organization (HMO) benefits.

The allowance covers employees under National Government agencies, state universities and colleges, and government-owned and -controlled corporations (GOCCs).

Ms. Pangandaman also said Mr. Marcos will issue an executive order detailing the four-tranche salary hike for government workers.

About P70 billion has been set aside under the 2025 National Expenditure Program to ensure the implementation of the first and second tranches, she said.

The last time government workers’ salaries were increased was in 2023, she said, referring to the fourth and last tranches of the Salary Standardization Law of 2019.

At the post-SONA briefing, Finance Secretary Ralph G. Recto said the government is targeting to double its revenue from nontax collections this year.

“Last year it was about P200 billion. This year, we will get about P400 billion… We are on track to hit our fiscal target for the entire year and that’s roughly about PHP 4.25 trillion,” Mr. Recto said.

At its June meeting, the Development Budget Coordination Committee retained the PHP 4.27-trillion revenue target, as well as the PHP 5.75-trillion expenditure program for this year. The fiscal deficit ceiling is set at PHP 1.48 trillion or -5.6% of GDP this year.

A large portion of the nontax revenues collected by the government in the first six months of the year came from remittances from GOCCs, the privatization of government assets, as well as income from the National Treasury, he noted.

In his speech, Mr. Marcos said the Philippine financial system remains robust and resilient, adding that tax and nontax revenue collection was “also efficient.”

“Notably, for the past two years, our GOCCs remitted dividends to the National Government with a combined tally exceeding their contributions in 2022,” he said.

BUDGET

Mr. Marcos also called on Congress to ensure that the proposed budget for 2025 — pegged at PHP 6.352 trillion, which is higher than this year’s PHP 5.768 trillion — is not just approved in a timely manner but also “be adhered to as closely as possible.”

“We expect all agencies to ensure that every centavo allocated will be judiciously spent for our urgent priorities and socially impactful programs,” he said.

The Budget department is scheduled to submit its proposed 2025 National Expenditure Plan to Congress on July 29.

Mr. Lanzona said the government should have a strategy also in terms of financing its programs and plans.

“This means priorities need to be instituted first and then as the time progresses as resources become available, then other promised goods can be obtained until towards the end of the President’s term,” he added.

“Without such a strategy, none of these become feasible unless greater debts and more budget deficits are incurred.” – Kyle Aristophere T. Atienza, Reporter