DESPITE high inflation, the national government can hit its economic growth target for the year on the back of strong consumption spending, according to a local think tank.
In its latest Market Call report, First Metro Investment Corp. (FMIC) and University of Asia and the Pacific (UA&P) Capital Markets Research said the strong first-quarter growth of 6.8 percent and the recovery in consumption spending in the second quarter will provide the economy with a much-needed boost to counter rising commodity prices.
The think tank estimates the country’s GDP growth to reach 7 percent to 7.5 percent by year-end. Inflation, meanwhile, is expected to average 4 percent to 4.3 percent, slightly above the Central Bank’s target of 2 percent to 4 percent.
“We think that the NG’s [national government’s] 7 percent-to-8 percent economic expansion target in FY 2018 will be hit, anchored on the strong domestic demand, various infrastructures projects and the rebound in some industries (i.e., Mining and Quarrying, Construction), as well as in exports,” FMIC and UA&P Capital Markets Research said.
The think tank also said the government’s “Build, Build, Build” centerpiece program is expected to accelerate on the back of efforts by the Department of Public Works and Highways (DPWH) to scale up civil works.
FMIC and UA&P Capital Markets Research said that, in the past 12 quarters, the DPWH was able to increase the expansion of civil works to 25.1 percent in the first quarter of 2018, from 12 percent in the second quarter of 2017.
Based on the latest status report of DPWH, the think tank said, projects were, on average, 67 percent complete, which suggests being on track to finish as scheduled. It added that even public-private partnership projects were moving faster in this administration.
Apart from this, the think tank said the new Right-of-Way Act (Republic Act 10752) and implementing regulations appear to convince landowners that the Rowa system is more fair and, thus, less resort to expropriation would be needed.
The law provides that the government agency only needs to put 50 percent of the expropriation money in escrow, which is a last resort, and the project can proceed, the think tank pointed out.
“While Metro Manila commuters and car owners suffer daily from the worsening traffic
congestion, relief may be in sight as the government’s infrastructure program appears to go ‘full steam ahead,’” the think tank said.
“We think that the NG is moving fast enough to enable it to accomplish a substantial part of its Build, Build, Build program,” it added. Earlier, Socioeconomic Planning Secretary Ernesto M. Pernia said inflation was the “spoiler” of the country’s economic performance in the first quarter of the year.
He said, if it weren’t for high inflation, which averaged 3.83 percent using the 2012 rebased data, the country would have registered a growth of above 7 percent.
Despite this, Pernia said the Philippines remains one of the best-performing economies in the region, next only to Vietnam’s 7.4-percent growth, same as China’s and higher than Indonesia’s 5.1 percent.
He added the country’s GDP targets remain within reach. In order to attain the government’s growth targets, Pernia said the economy must post a growth of around
7 percent or higher in the next three quarters.
The country’s economic growth is expected to increase on the back of strong domestic demand due to the reduction of personal-income tax under the Tax Reform for Acceleration and Inclusion law.
Pernia said the government’s cash transfers, such as the conditional-cash transfers and unconditional-cash transfers, and even the Pantawid-Pasada subsidy for jeepney drivers will help ease the burden of higher commodity prices by poor households.