The sustained economic growth will enable the Philippines to join the ranks of upper-middle-income economies by 2019, the government’s economic managers said Tuesday.
The economic team said strong macroeconomic fundamentals coupled with massive infrastructure spending by the Duterte administration would keep the economy robust in the face of domestic and external headwinds that threaten to stifle growth.
“The Philippine economy is strong and the growth momentum can be sustained by policy and fiscal reforms implemented by the government,” Finance Secretary Carlos Dominguez III said during the Philippine Economic Briefing held at the Bangko Sentral ng Pilipinas.
“We expect the infrastructure program to hit a stride in the coming months,” Dominguez said.
National Economic and Development Authority director-general Ernesto Pernia said an upward growth trajectory remained possible because the economy was more broad-based now, driven not just by consumption but also investments.
Pernia said the country could become an upper middle-income economy by 2019, adding the government was “more than on track” to meet this target.
“Government spending continues to boost economic activity,” Budget Secretary Benjamin Diokno said.
“Our expansionary fiscal policy is prudent, sustainable, and supportive of development objectives,” he said.
Diokno said with a robust growth target of 7 percent to 8 percent in the next five years, the Philippine economy would be the fastest growing among the top five Asean economies. He said this would be supported by strong fiscal performance.
“The revenue effort is projected to increase from 15.7 percent in 2017 to as high as 17.6 percent in 2022,” he said.
“In nominal terms, revenue collection will rise from close to P2.5 trillion in 2017 to as much as P4.6 trillion in 2022,” Diokno said.
Government spending is expected to surge from just over P2.8 trillion in 2017 to as high as P5.4 trillion in 2022. Diokno said with a strategy to keep the deficit at 3 percent of GDP in 2018 and eventually to 3.2 percent in 2019, the strong momentum in infrastructure spending was poised to be sustained.
Dominguez said the implementation of the first package of the Comprehensive Tax Reform Program would ensure good revenue flows for the government. The Tax Reform for Acceleration and Inclusion law took effect in January, which cut personal income taxes but raised the excise tax on tobacco, fuel, alcohol, automobile and sweetened beverages.
“The government also is not suffering from deficits and we have a very good credit rating,” Dominguez said. The Philippines currently enjoys investment grade ratings from global debt watchers Moody’s Investors Service, Fitch Ratings and S&P Global Ratings.
Dominguez also cited the country’s low indebtedness, high gross international reserves, and high domestic liquidity.
Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said the economy experienced 78 quarters of uninterrupted growth, although the challenge was how to sustain this momentum.
The economy grew by 6.3 percent in the first half, lower than the expected 7 percent to 8 percent targeted by the country’s economic managers at the start of the year.