Assessment of Marcos-Backed Tax Bills and the Philippines’ Economic Outlook

The tax measures proposed by the administration of Philippine President Ferdinand “Bongbong” Marcos Jr. are unlikely to significantly boost government revenues or accelerate fiscal consolidation, according to S&P Global Ratings. These tax measures, while considered helpful, are not expected to substantially enhance the government’s revenue base. YeeFarn Phua, a director at S&P, expressed this view in response to questions about the potential impact of these measures. Finance Secretary Benjamin Diokno identified four tax measures for presidential certification to expedite their passage, including package four of the Comprehensive Tax Reform Program (CTRP), Value Added Tax on Digital Service Providers, and Excise Taxes on Single-Use Plastic Bags and Sweetened Beverages and Junk Food​​​​​​.

In contrast, S&P Global Ratings recently affirmed the Philippines’ investment-grade credit rating, indicating a vote of confidence in the country’s economic stability. The Marcos administration aims to achieve an “A” rating from major credit rating agencies like S&P Global before the end of its term in 2028. Achieving such a rating would grant the Philippines access to loans at better interest rates and enhance its attractiveness to foreign investors. S&P Global affirmed the country’s ‘BBB+’ long-term and ‘A-2’ short-term sovereign credit ratings, maintaining a stable outlook based on the country’s continued economic recovery and strong external position. This affirmation reflects the confidence of international rating agencies in the Philippine economy’s macroeconomic fundamentals​​.

S&P projects that the Philippines will experience moderate real GDP growth of 5.4 percent in 2023, taking into account external macroeconomic developments and a high base effect. The growth forecast for the subsequent years is more optimistic, with predictions of 5.9 percent in 2024, 6.2 percent in 2025, and 6.4 percent in 2026. These projections are based on the government’s commitment to sound macroeconomic policies and fiscal consolidation strategies, aimed at maintaining or improving the country’s favorable credit rating and economic position​​.