KUALA LUMPUR, Malaysia (Dow Jones) – The Philippines aims to limit its annual fiscal deficit to 2% of gross domestic product through 2016, but a wider tax base and higher growth will allow the government to continue spending to boost economic growth and reduce poverty, the secretary of finance said Thursday.
The fiscal deficit was 2.3% of GDP last year.
Manila is widening the tax base to drive up government revenue to help cut reliance on borrowing to fund expenditure. It has recently increased an excise tax on so-called sin products--cigarettes, liquor and alcoholic beverages--that is expected to add about $6 billion to the government’s revenue by 2016.
So far, to help fund its expenses, the Philippines has tapped global debt market, emerging as one of the most active foreign-currency sovereign debt issuers in Asia.
“We plan to borrow the bulk of debt locally this year as our banking system is awash with cash,” Cesar V. Purisima told Dow Jones Newswires on the sidelines of a health conference.
The domestic focus is also in line with the government’s aim to cut foreign debt to 20% of GDP by 2016 from the current level of 25.6%, he added.
The Philippine economy has expanded over nearly 60 consecutive quarters, but the benefits of brisk growth have failed to touch a significant part of its 95 million population.
The government expects the economy to grow between 6% and 7% this year after expanding 6.6% last year. “Obviously we want to grow higher and 7%-8% is our aspirational target,” Mr. Purisima said.
Manila is inviting foreign investment to boost infrastructure and healthcare, among other sectors, and also sharpening its focus on governance to create a better business environment.
Some “structural” changes, such as greater reliance on technology to boost the government’s efficiency and efforts to attract foreign tourists to the country’s scenic islands, will spawn greater economic benefits for the country, Mr. Purisima said.
Private consumption and public investment will continue to drive growth, while the government addresses infrastructure constraints and tries to revive mining in the southern island of Mindanao, he added. Last month, Manila gave a conditional environmental approval to a unit of Xstrata PLC to develop what would be the country’s largest gold and copper mine.