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October 01, 2022

Policy reforms persisted after each new government based on history but MB member Medalla acknowledged he’d predicted wrong before

Monetary policymakers are confident on the persistence of reforms in both the fiscal and monetary space even after the upcoming May elections this year regardless of who wins at the electoral exercises.

This was the considered opinion of Felipe Medalla as member of the policymaking Monetary Board of the Bangko Sentral ng Pilipinas that he bared at Tuesday’s resumption of the BSP’s Regional Macroeconomic Conference Series of online discussions.

According to Medalla, history teaches that reforms adopted by one administration as these are ceded to the next have been embraced by generations of politicians.

“Incremental reforms persist after each subsequently elected president,” he said of concerns on monetary and fiscal policy measures adopted for instance under President Duterte and their continued implementation under a new dispensation.

The evidence thus far, he continued, is that subsequent administrations down the generations pushed for reforms from one government to the other, he said with certainty.

“But of course, I have been wrong before,” he quickly added.

Medalla, one of the more candid monetary policy crafters at the BSP, is an economist and educator by training but has helped steer the $361 billion Philippine economy past some of the more challenging economic backdrops since the political chaos of the 1980s.

He expressed the view that pandemic-induced borrowings by the public sector may be inevitable but nevertheless urged that central government planners keep the primary deficit well under control.

The primary deficit pertains to the shortfall in government finance net of interest payments – a subtle reminder to President Duterte’s successor, whoever he or she might be, to beware runaway deficit on pain of another central government crisis down the line.

Budget deficits of the past necessitated the imposition of new taxes that burden Filipinos or by borrowing from local or foreign lenders to bridge shortfalls, both of which entail more hardship for the taxpaying public.

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