Finance Secretary Carlos Dominguez III said that bucking the perceived global headwinds, the Philippines will surge ahead this year as a growth leader in one of the world’s fastest-growing regions, owing in part to the decisive measures taken by the Duterte administration to control inflation, attract more investments and speed up the rollout of its big-ticket infrastructure projects under the President’s centerpiece “Build, Build, Build” program.
“The Philippines is poised to buck the trend of a global growth slowdown in 2019,” Dominguez said, “with its economy keeping its ascending trajectory onwards on the strength of the massive public investments programmed this year for infrastructure and human capital development along with prospects for higher consumer and business spending resulting from the government’s headway in taming inflation and improving the ease of doing business.”
Given the growth-friendly and inflation-busting measures that have been put in place in 2018 plus those that are due for execution in 2019, Dominguez said “President Duterte’s economic team is still maintaining 7 percent as a fighting target for GDP (gross domestic product) growth this year and thereafter, despite independent forecasts of sluggish global economic expansion arising from downside risks such as the trade spat between the United States and China and rising US interest rates.”
The Philippine Statistics Authority (PSA) reported last week that the economy expanded by 6.1 percent in 2018’s October-December period and 6.2 percent for the full year.
The industry sector recorded the fastest growth rate of 6.9 percent in the fourth quarter of 2018, followed by services, which expanded 6.3 percent, the PSA said. Agriculture grew 1.7 percent in the October-December period, the PSA said.
For the full year of 2018, industry also expanded the fastest at 6.8 percent and services grew by 6.6 percent, while agriculture posted a 0.8 percent growth rate.
Secretary Ernesto Pernia of the National Economic and Development Authority (NEDA) said the Philippines’ 2018 GDP growth rate was a “firm finish” and the fourth fastest in the region after India, Vietnam and China.
Following 2018’s growth figures, Dominguez said the domestic economy will grow at a quicker pace this year as the government—under the President’s directive—is committed to roll out more of the 75 projects under ‘Build, Build, Build,” along with countless other public works and logistics improvements projects across the country. These are designed to close the country’s infrastructure backlog that has for long been a deal-breaker for foreign and local investors.
He said more strategic projects are underway to stimulate growth as the Department of Finance (DOF) has managed to seal concessional funding support for “Build, Build, Build” ventures.
Aside from Official Development Assistance (ODA) support from our major development partners like Japan, China, World Bank and the Asian Development Bank (ADB), Dominguez said that higher tax collections by the Bureaus of Internal Revenue (BIR) and of Customs (BOC) from the Tax Reform for Acceleration and Inclusion (TRAIN) Law and additional funds from the government’s successful bond floats would let the government maintain an expansionary fiscal policy required by the capital-intensive infrastructure modernization.
He said that President Duterte’s initiatives to ease 2018’s price pressures by removing administrative constraints on food imports and reducing the gap between farmgate and retail prices have since then started to improve consumer and business confidence in the economy, leading to higher growth in the coming quarters.
Price pressures will continue to subside this year, he said, with such additional measures as the imminent enactment of the rice tariffication law, which is projected to lower by P2 to P7 the per-kilo price of this staple, whose 2018 cost contributed 0.57 percentage point to last year’s inflation rate.
Lower inflation and the hefty personal income tax (PIT) cuts under the TRAIN will further spur domestic spending and thus fuel higher growth this year, he said.
Also, Dominguez remains optimistic that the next packages of the comprehensive tax reform program (CTRP) will pass the legislative mill this year, including the Tax Reform for Attracting Better and High Quality Opportunities (TRABAHO) bill, which, in cutting corporate income taxes (CIT) and rationalizing tax incentives, is seen to encourage the country’s small and medium-sized enterprises (SMEs) to invest in expanding their businesses and hiring more workers.