DOF sees faster economic growth in coming years

MANILA, Philippines — The Department of Finance (DOF) expects the economy to grow at a faster pace this year and the subsequent years due to higher investments, government spending on infrastructure and human capital, as well as the implementation of legislative measures to boost enterprises.

In his speech during the Philippine Economic Briefing (PEB) held in Osaka last Friday, Finance Secretary Carlos Dominguez said the country’s gross domestic product (GDP) in the first 10 quarters of the Duterte administration grew at an average of 6.5 percent.

He said the growth is expected to further accelerate this year and the years ahead due to several factors.

For one, Dominguez said economic growth has shifted from being consumption-led to investments-led, as shown by robust inflows of foreign direct investments, which reached a record high of $10 billion in 2017 and $9.1 billion in the first 11 months of 2018.

He said growth would also be driven by the government’s investments on infrastructure and human capital development.

This is complemented by prudent fiscal management, with the country’s debt-to-GDP ratio settling at 41.9 percent in 2018, down from the previous year’s level and the 2018 program of 42.1 percent. Dominguez said this is expected to decrease further to 38.6 percent in 2022.

The finance chief also pointed out that government disbursements posted its fastest rate of expansion since the beginning of the Duterte administration last year, growing by 21 percent year-on-year to reach P3.408 trillion. As a result, Dominguez said the government’s expenditure effort in 2018 reached 19.6 percent, the highest ever achieved in the past 28 years.

Dominguez also cited the Duterte administration’s Comprehensive Tax Reform Program (CTRP) as a contributor to GDP growth. The first package of this program, he said, helped fund the government’s infrastructure program and increased the spending power of Filipinos, as indicated by the robust growth in sales and high profit margins of publicly listed retail giants and real estate companies in 2018.

He said the government is also pushing for the second CTRP package, which focuses on reforms in corporate taxation and rationalization of fiscal incentives, and is aimed at further improving the Philippines’ status as an investment destination.

Lastly, Dominguez said the passage of the law improving the ease of doing business in the country, and the easing of some restrictions under the Foreign Investment Negative List would also encourage more investors to come into the market.

“In a word, the Philippines aspires to become the most hospitable economy for business. We encourage both market transparency and respect for the sanctity of contracts. We aim, through prudent economic and monetary management, to provide improved certainty for enterprises,” Dominguez said.

The Philippine economy’s growth slowed down to 6.2 percent in 2018, missing the government’s revised target of 6.5 percent to 6.9 percent.

Earlier, Dominguez said the government is maintaining its GDP growth target for 2019, ranging from seven to eight percent, despite headwinds in the global economic landscape.