Finance Secretary Carlos Dominguez III has said the clear growth momentum plus the increased spending power of Filipinos will ensure that the economy will emerge stronger in 2019 despite both international and domestic headwinds, followed by a “very good year” for economic expansion in 2020.
The government’s aggressive “Build, Build, Build” program will continue to be among the major drivers of growth, said Dominguez as he pointed out that in the first 10 quarters—or first two-and-a-half years under President Duterte—actual disbursements for infrastructure and capital outlays totaling P1.64 trillion had already outpaced similar investments of P1.57 trillion made by the previous administration in all of its six years.
He said that in the same first 10 quarters on the Duterte watch, economic expansion averaged 6.5 percent, establishing a momentum that has emboldened the present administration to maintain its “fighting target” of 7 percent growth this year.
The hefty reduction in personal income tax (PIT) rates as a result of the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Law has strengthened the purchasing power of consumers, as shown by the double-digit growth in sales and the high-profit margins of publicly-listed retail giants and real estate companies in 2018, Dominguez said.
Public spending, in turn, will continue at a robust pace, complemented by the implementation of sound fiscal policies, tax reform and measures that will improve the ease of doing business in the country to help sustain the country’s status as among the region’s growth leaders, he said.
“While we rank as among the best-performing economies in this dynamic part of the world, growth is not the final goal of all our efforts. We seek a more dynamic and competitive economy to bring down poverty rates and create more opportunities for our people,” Dominguez said during the UP Women Lawyers Circle Business Conference held last week at the University of the Philippines-Bonifacio Global City Auditorium in Taguig City.
This year’s conference of the UP organization has for it’s the theme “Eye on 20/20: What businesses need to focus on for 2020.”
Dominguez said the brisk growth in sales and net income of corporate giants such as Jollibee, McDonalds Philippines, San Miguel Food and Beverage Inc. and real estate leaders such as Ayala Land and SM Prime Holdings attest to the increased spending power of Filipinos under the TRAIN Law.
Top commercial banks such as BDO and Metrobank also published figures indicating strong growth in interest income and net income, he added.
Dominguez noted that the aggressive expansion of real estate and fastfood industries in areas outside Metro Manila accounted for a large part of their earnings last year, demonstrating “how a fast-growing economy complemented by business-friendly reforms can become a potent tool in creating wealth across the country,” on top of creating more jobs for Filipinos.
As for the concern over the growing number of foreign workers in the country, especially those involved in Philippine off-shore gaming operations (POGOs), Dominguez assured the lawyers’ group that the government “will make sure that Filipinos are not disadvantaged.”
He said the Department of Finance (DOF) is working closely with the Bureau of Internal Revenue (BIR), Department of Labor and Employment (DOLE), Bureau of Immigration (BI) and Philippine Amusement and Gaming Corporation (Pagcor) to come up with a comprehensive list of foreign workers in the country to ensure that they comply with Philippine laws, especially on the payment of personal income taxes.
“We want fair treatment for our countrymen who are dutifully paying their income taxes,” Dominguez said.
In presenting a bullish outlook on the Philippine economy this year and onwards, Dominguez cited the following positive factors:
· As a share of gross domestic product (GDP), capital formation, which is the most comprehensive measure of investment, rose to 27 percent last year compared to 25 percent in 2017, which is remarkably higher than the 21-percent average share of investments to GDP for the past 16 semesters;
· In the first 11 months of last year, foreign direct investments (FDIs) reached $9.1 billion, which is almost as high as the $10 billion FDI inflows recorded for the whole 2017.
“We are confident the full year FDI level can reach or even exceed the previous record high,” Dominguez said;
· In 2018, national government revenues rose by 15 percent to P2.85 trillion while tax revenues grew by 14 percent to P2.57 trillion.
This translates into a tax effort of 14.7 percent last year, which is now significantly better than the regional benchmark and the highest tax effort the government has ever achieved in the past 20 years;
· Expenditures posted its fastest rate of expansion since the beginning of the Duterte Administration. With its continued growth, spending in 2018 reached P3.41 trillion, 21 percent higher than the 2017 level.
The expenditure effort in 2018 reached 19.6 percent, the highest ever achieved in the past 28 years;
· The P1.64 trillion spent on infrastructure and capital outlays in the first 10 quarters of the Duterte administration already exceeded the programmed infrastructure and other capital outlay spending of P1.63 trillion for the said period and was equivalent to 4 percent of GDP.
In the previous administration, infrastructure and capital outlay spending reached only P1.57 trillion for all its six years, or just 78 percent of its programmed spending of P2.01 trillion for its entire term and equivalent to only 2.3 percent of GDP;
· The government has the fiscal space to pursue an ambitious infrastructure program as shown by the manageable debt level and the country’s sound credit ratings. Debt-to-GDP ratio continued its downward trend at 41.9 percent in 2018 from 68.5 percent in 2005, and is expected to further decrease to 38.6 percent by 2022.
“International confidence is seen in the willingness of our development partners and foreign governments to help finance the large infrastructure projects,” Dominguez said;
· The passage and implementation of reform measures that include: The Ease of Doing Business Act, National ID System, Personal Property Security Act, the law upgrading the Corporation Code, an act strengthening the Bangko Sentral ng Pilipinas (BSP), Universal Health Care (UHC) Act, and a law shifting rice trading to a tariff regime; and
· Optimism over the passage and implementation over the remaining tax reform packages.
“The tax reform packages will bring us a more modern tax system conducive to investments. It will raise revenues to fund our infrastructure and social development programs. It will bring our tax effort to levels compatible with the most dynamic economies of the region,” Dominguez said.