Finance Secretary Carlos Dominguez III sees the economy firing on all cylinders this year, driven by, among others, an even more vigorous government spending on infrastructure and social services, stronger domestic consumption resulting from benign inflation, and a revitalized agriculture sector.

Dominguez said this year’s fiscal expansion for greater economic activity will get its multiple boost from the swift congressional approval of the 2020 General Appropriations Act (GAA), extended validity of the 2019 national budget, and higher revenue take from the implementation of the Comprehensive Tax Reform Program (CTRP) plus tax administration reforms by the top two revenue collectors—the Bureaus of Internal Revenue (BIR) and of Customs (BOC).

The Finance secretary issued this statement following Thursday’s release of official data showing that the gross domestic product (GDP) grew by 6.4 percent in the last quarter of 2019 and by 5.9 percent for the full year to remain as among Asia’s fastest growing economies.

In a news briefing this morning, the Philippine Statistics Authority (PSA) said services had the highest contribution to growth in the 4th quarter with 4.4 percentage points, followed by industry with 1.9 percentage points, and agriculture with 0.1 percentage point.

For the whole year of 2019, services grew the fastest at 7.1 percent, industry by 4.9 percent and agriculture, 1.5 percent. In the 4th quarter, services recorded the fastest expansion of 7.9 percent, followed by industry at 5.4 percent and agriculture at 1.5 percent.

Dominguez said the hoped-for passage by the Congress this year of the remaining CTRP packages—notably the Corporate Income Tax and Incentive Rationalization Act (CITIRA)—will sharpen the country’s global competitiveness; attract more investments, including in micro, small and medium-scale enterprises (MSMEs); and further supercharge the domestic economy in the face of what could be a prolonged global economic slowdown.

“The pickup in growth in the fourth quarter of 2019 resulting in part from the government’s catch-up spending following anemic expansion in the year’s first semester will gain speed in 2020, with the domestic economy firing on all cylinders as a result of even more vigorous investments in infrastructure and human capital development for the entire year ahead,” Dominguez said.

He said the timely approval of this year’s budget plan of P4.1 trillion and the extended validity of certain portions of the 2019 GAA till the yearend will provide the economy with “a double-barreled boost enough to sustain—and even crank up—the level of catch-up spending that the economic team, upon President Duterte’s directive, carried out in the remaining half of last year to reverse anemic growth in the first two quarters brought about by the delay in the congressional approval of the national budget.”

Dominguez expects the concerned government agencies to do a better job of implementing more priority programs and projects—and efficiently disbursing their bigger outlays—this 2020, as he cited Bureau of the Treasury (BTr) data pointing to the better absorptive capacity of national government (NG) offices in the past year.

In November 2019, he said, the BTr reported that NG disbursements rose to P365.6 billion for that month, reflecting a P66.8 billion or 22.36 percent increase from the year-ago level that boosted the government’s catch-up performance to P3.303 trillion for the January-November period or a cumulative year-on-year (YOY) disbursement growth of P208.2 billion or 6.73 percent.

On the strength of the CTRP’s Package 1—the Tax Reform for Acceleration and Inclusion Act (TRAIN)—and tax administration reforms, Dominguez said the BIR and BOC managed to collect over P2.8 trillion combined in 2019, with the internal revenue agency posting a 10.67-percent YOY increase in collection to P2.33 trillion and the customs bureau collecting 6.32 percent higher YOY with P630.57 billion.

He expects both revenue agencies to perform better this year as the government implements the TRAIN for the third year, including higher taxes on alcohol products, cigarettes and smoking alternatives like electronic cigarettes, heat-not-burn tobacco (HTPs) and vapor (vaping) products.

Dominguez said the government’s unprecedented investments in infrastructure and social services like education, healthcare and skills training are “designed to sustain the country’s high-growth momentum—in support of President Duterte’s goal of pulling down the poverty level to 14 percent or lower and ensuring better lives for all law-abiding Filipinos by the time he leaves office in 2022.”

With more money in their pockets—equivalent to one-month’s take home pay—as a result of the TRAIN’s income tax cuts for 99 percent of Filipino taxpayers, he said the strong consumer spending that helped fuel growth in 2019’s fourth quarter is expected to continue this 2020.

Meanwhile, the improved performance of the agriculture sector in the latter half of last year is likely to continue, too, in 2020, as the government implements more intervention measures to boost palay productivity, with funding support from the annual P10-billion Rice Competitiveness Enhancement Fund (RCEF), said Dominguez, who was agriculture secretary during the former Corazon Aquino administration.

RCEF is sourced from grain import duties collected by the BOC from private rice traders, following the enactment of the Rice Trade Liberalization (RTL) in March 2019. Excess revenue on top of the P10-billion RCEF will also finance other intervention programs for local palay growers.

“Although it did not grow as fast as we had wanted it to in 2019,” he said, “the domestic economy grew faster than most other economies in the East Asia and the Pacific region last year, and it will remain among the world’s fastest-growing economies this year on the back of the Philippines’ strong macroeconomic fundamentals and the game-changing reforms implemented by President Duterte to sustain high—and inclusive—growth.”

He said a major speed bump last year was the four-months-and-a-half delay in the congressional approval of the 2019 GAA, which had forced the Duterte administration to run the government on a reenacted 2019 budget and hold off the implementation of new and ongoing programs and projects that would have accelerated the growth momentum in last year’s first semester.

Dominguez said the downside risks to growth this year include the possibly lingering impact of last year’s trade spat between the United States and China; any possible re-escalation of the US-Iran conflict that could induce global oil price volatility; and, depending on its intensity, an explosive eruption of Taal Volcano that could impact Metro Manila and neighboring regions.

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