THE Philippine economy will grow faster in the second half of this year, on the back of larger investment inflows and exports, higher infrastructure expenditures and improved revenue efforts, the Department of Finance (DOF) said on Wednesday.
For one thing, the economic numbers thus far for the second semester of 2018 remain “very promising” and the year’s anemic second-quarter gross domestic product (GDP) growth of 6.0 percent was a mere “exception that does not indicate a medium-term trend,” Finance Secretary Carlos G. Dominguez III said at the Kapihan sa Manila Bay news conference in Manila.
“Domestic demand remains robust. Investment flows grew in the first half of this year. Our exports of goods and services recovered to a double-digit growth of 13 percent in the second quarter, from 6.5 percent in the previous quarter,” Dominguez said.
He said the inflation rate, which reached 5.7 percent in July but eased to 0.5 percent on a month-on-month basis, is expected to go down to the original forecast range
of 4.0 percent to 4.5 percent by the end of 2019, as reported earlier by the Development Budget Coordination Committee.
The inflation level for July is higher than the previous month’s level of 5.2 percent and the 2.8 percent recorded in July 2017.
“The Central Bank has a very good capacity to analyze economic trends and figures, and all the decisions made by the Monetary Board are data-driven, so we look at the data and the Monetary Board together with the chairman to decide on the data. So, as the Central Bank Governor said, we will look at the data and, according to him, they will take the appropriate action…,” Dominguez added.
In terms of expenditure, the government’s effort improved to 19.47 percent, the highest first-semester expenditure effort since 2003, Dominguez noted.
In the first half of the year, the government’s revenue effort also improved by 1.47 percentage points to 17.12 percent, which is the highest first-semester revenue effort ever achieved since 1946.
The finance chief said the tax effort of 15.23 percent in the first half of the year was the result of the implementation of the Tax Reform for Acceleration and Inclusion Law and tax administration improvements in the Bureaus of Internal Revenue and of Customs.
“Our tax effort is now on a par with the best-managed economies in the region. It is a tax effort we can very well sustain, especially with the subsequent packages of the Comprehensive Tax Reform Program [CTRP] now being deliberated [by the Congress],” he said.
He said the government will need to collect at least P10 billion in revenues a day to meet its revenue target of around P3.5 trillion annually. The DOF earlier said that it has set a revenue target of P3.2 trillion for 2019.
“Our goal is to collect P10 billion a day. Our total revenue should be around P3.5 trillion, so that’s about P10 billion a day, so we need everybody’s support, and everyone has to pay their taxes…,” he added.
In July DOF Undersecretary Karl Kendrick T. Chua said that all packages under the Duterte administration’s CTRP would have been submitted to Congress by the end of the July for assessment and review.
He said the DOF is hoping for three measures to be approved by Congress within the year, with two measures under the CTRP, namely Package 1B and Package 2, and the other being the Rice Tariffication Act.
Measures under Package 1B include increasing the motor vehicle users charge, an estate tax amnesty program, as well as a measure on general tax amnesty, amendments to the bank secrecy law and automatic exchange of information.
Package 2 of the CTRP, which aims to reduce corporate income-tax rates from 30 percent to 25 percent while rationalizing the country’s fiscal incentives regime, was submitted by the DOF to Congress in January this year. The measure is embodied in HB 7458 at the House of Representatives.
Further stimulating the economy in the second half is the Duterte administration’s “Build, Build, Build” infrastructure program, which accounted for government spending of P352 billion in the first six months of 2018, representing an increase of 41.6 percent over the same period last year and 4.3 percent above the disbursement target.
Image credits: Nonie Reyes