THE National Economic and Development Authority (Neda) remained confident that the country’s macroeconomic fundamentals will hold despite the lower growth forecasts released by international agencies for the Philippines, while the International Monetary Fund (IMF) predicted a quick recovery for the country despite the still lingering risks owing to internal and external factors.
In a statement on Sunday, Socioeconomic Planning Secretary Ernesto M. Pernia noted the decision of the Asian Development Bank (ADB) and Fitch Solutions to cut their GDP growth forecasts in 2018 and 2019.
The ADB downgraded its growth forecast to 6.4 percent, from 6.8 percent for 2018, and to 6.7 percent, from 6.9 percent in 2019. Fitch Solutions, a member of the Fitch Group, also cut its 2018 growth outlook for the country to 6.3 percent from 6.5 percent.
We understand the concerns of ADB and Fitch, but we remain confident about the strength and stability of the country’s macroeconomic fundamentals,” Pernia said.
The International Monetary Fund (IMF) on Friday forecast faster growth for the Philippine economy in the second half of 2018, saying that the slowdown in the second quarter was only temporary.
It forecast 6.5-percent growth for the whole of 2018, lower than the lender’s earlier projection of 6.7 percent. For 2019 it projected GDP to grow by 6.7 percent.
In a briefing, IMF Resident Representative to the Philippines Yongzheng Yang said they expect a 6.6-percent growth in the third quarter and 6.9 percent in the last quarter, which would translate to a 6.6-percent average output for the second half.
Aside from higher government spending, particularly on infrastructure projects, Yang said private investment, which he said remains “robust,” and household spending, are seen to drive domestic output in the second half.
The IMF executive said contribution of external factors on domestic output “will probably be more modest because global demand will be slowing. “How that affects the Philippines will be watched but might expect some headwinds,” he said.
Nonetheless, Yang said the Philippine economy remains among the top performers and that growth outlook remains favorable. But risks remain, he said, citing the rising inflation, the strong growth of credit to GDP ratio, and global trade tension.
IMF forecasts the rate of price increases to average at 4.9 percent this year and 3.9 percent next year, with this year’s forecasts above the government’s 2-4 percent target band. These factors are seen to be countered by the passage of the bill rationalizing fiscal incentives and the shortening of the negative investment list.
The IMF’s outlook faces downside risks particularly high inflation, oil prices, credit growth, the trade war between US and China, the impact of higher US interest rates and more expensive borrowing costs in the short term.
‘Fastest since ’70s’
On Sunday, however, the Neda chief sounded unfazed. “Our economy has been strong, growing by an average of 6.4 percent in the last eight years. This is the fastest since the mid-1970s,” according to Pernia.
However, Pernia gave assurances the government is already undertaking reforms to address inflation and other concerns raised by ADB and Fitch.
Pernia said the President has already signed Administrative Order No. 13 which removes nontariff barriers in the trade of various commodities. The AO was released on September 25, 2018.
He said the government is keen on streamlining administrative procedures on the importation of agricultural products among its measures to counter high inflation.
Inflation busters
“Besides short-term measures, we also need to look at long-term solutions like giving farmers access to farming technology and developing high yielding varieties of rice and other vegetables. Thus, we are calling for the urgent passage of the rice tariffication bill,” he added.
Further, Pernia said the Duterte adminis-tration continues to ramp up investments in infrastructure to improve connectivity and lower the cost of doing business in the country.
Easing restrictions
Efforts to liberalize sectors of the economy to allow more investments is being done through the removal of foreign restrictions included in the Regular Foreign Investment Negative List (RFINL).
Pernia said the Economic Development Cluster has already approved the draft of the 11th RFINL, which will be the least restrictive among previous amendments made on the country’s negative list. This is now with the President for his signature.
The reduction of the negative list is also one of the main points discussed by Pernia at the recent Philippine Economic Briefing
in London.
The draft executive order on the 11th RFINL eases foreign restriction on private recruitment for local and overseas employment; practice of select professions; and construction and repair of public works projects.
The EDC also removed foreign restrictions on the culture, production, milling, processing and trading of rice and corn; teaching at higher education levels; and retail trade.
Pernia, however, said not all areas can be adjusted by an executive order. Some need legislation, while others, constitutional amendment.
“Compared with our neighbors, the Philippines seems to be the most restrictive in terms of foreign direct investments. We have many negative-listed investment areas and activities, meaning that there is a high restrictive wall on the participation of foreign investors,” Pernia said “We hope to boost foreign investments in the country by means of lifting or easing
such restrictions.”
The Neda is tasked to review and revise the country’s RFINL, which contains restrictions on foreign investments and the practice of professions based on the constitution and Philippine laws.
With a report by PNA