ECONOMISTS said the government likely missed its growth target for 2018, but the Department of Finance (DOF) said Philippine economy will bounce back this year on the back of higher infrastructure spending and tax reforms.
The DOF said it will fight to expand GDP by 7 percent this year and is confident that the “Build, Build, Build” (BBB) infrastructure program and collections from the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law will boost growth.
“We are still maintaining a 7-percent GDP growth rate as a fighting target, even as the major multilateral institutions have adjusted global growth projections,” Finance Secretary Carlos G. Dominguez III told reporters on the sidelines of the 2019 Inaugural Meeting and Induction Ceremony of the Financial Executives Institute of the Philippines (Finex) on Wednesday at the Shangri-La the Fort in Taguig City.
“We are building on our own momentum and on the massive economic investments we have programmed for this year. We fully expect to be a growth leader in this dynamic region,” Dominguez added.
The International Monetary Fund slashed its world growth forecast for 2019 to 3.5 percent, from the 3.7 percent it projected last year, due to heightened trade tensions and rising interest rates. The World Bank and the Organisation for Economic Co-operation and Development have also downgraded their global growth estimates for this year.
“Of course, we are affected by the headwinds but because we have this BBB program, we are sort of… quite insulated. And we have good credit, we have good tax collections, we are quite insulated,” Dominguez said.
In January to November of 2018, the government’s infrastructure spending reached P728 billion, 50 percent higher than the P486.5 billion recorded in the same period last year.
He also said collections from the Train likely reached the government’s target of P63.3 billion for 2018. Collections in January to September amounted to P41.9 billion.
The Duterte administration’s BBB consists of 75 flagship infrastructure projects that are envisioned to usher in the “golden age of infrastructure” in the country.
“We are moving faster than expected. The old problem of absorptive capacity has been overcome,” Dominguez said.
ECCP bullish
The European Chamber of Commerce of the Philippines (ECCP) shares the sentiment of Dominguez as it remains bullish about the Philippine economy in 2019.
While it was true that 2019 started off with a lot of uncertainties that were out of the Philippines’s control, the ECCP said there are many growth drivers that would come into play this year.
ECCP President Nabil Francis told reporters on Wednesday that the Philippine economy may be affected by the trade tensions between China and the United States, as well as the slowdown in China’s growth.
However, Francis said the Philippines continues to enjoy strong private consumption and a young population, which ensures that families are able to earn a stable income enough to pay for their needs and wants. Consumption accounts for 70 percent of the Philippine economy. This is expected to continue to be a major growth driver, especially now that inflation is easing.
“This country has a huge potential. In our opinion, one of the main potentials is the demography. To have a population of 110 million, depending on the statistics with 10 million Filipinos living abroad. This is a big strength for the Philippines,” Francis said.
Downward revision
On Wednesday, the Philippine Statistics Authority (PSA) revised its growth estimates downward to 6 percent in the third quarter, from the initial estimate of 6.1 percent.
This will make the third-quarter growth the lowest since the second quarter of 2015 when GDP growth was also at 6 percent. January to September 2018 growth will now be pegged at 6.3 percent, slower than the 6.8 percent posted in the same period in 2017.
“[This indicates that] we may miss the full-year growth target,” former Socioeconomic Planning Secretary Romulo L. Neri told the BusinessMirror. He also said that, for 2019, “risks come from trade wars, anemic agriculture and current account deficits.”
The PSA said the reduction in growth estimates was due to slower growth in Manufacturing; Trade and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods; and Financial Intermediation.
The PSA also said the Net Primary Income from the Rest of the World was also revised downward to 4.8 percent from 5.6 percent resulting in the revision of Gross National Income to 5.8 percent from the initial estimate of 6 percent.
Ateneo Center for Economic Research and Development Director Alvin P. Ang told the BusinessMirror that he estimates full-year GDP for 2018 to hit 6.2 percent.
Ang also said attaining the 7-8 percent GDP growth target for 2019 may also not be possible as the economy can only grow by around 6.5 percent at the most this year.
University of Asia and the Pacific School of Economics Dean Cid Terosa agreed and said GDP likely expanded by 6.3-6.4 percent last year, while 2019 growth would be around 6.5 percent to about 6.7 percent at best.
“[GDP growth in 2019] will be driven by consumption spending and capital formation,” Terosa told the BusinessMirror on Wednesday.
Secretary Benjamin E. Diokno said, however, that the economy likely expanded by 7 percent in the fourth quarter of 2018 and enabled the government to hit the low end of its revised GDP forecast of 6.5 to 6.9 percent.
Diokno said the country’s potential growth drivers will be the continued increase in government spending, consumer spending and the expansion of the services sector.
“Some are saying [the expansion reached] 6.8 percent, but you know the Philippines will still be one of the fastest-growing countries in the fastest-growing region,” he said.
With a report by Bernadette D. Nicolas, Rea Cu