ADB says gov’t on ‘right track,’ keeps Philippine GDP forecasts

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Workers are seen on scaffolding at a construction site for an expressway in Manila on March 8, 2017. -- AFP

By Elijah Joseph C. Tubayan

THE GOVERNMENT is on track as it pushes tax reform and infrastructure development, the Asian Development Bank (ADB) said in its latest report, prompting the regional lender to maintain its 2017 and 2018 gross domestic product (GDP) growth projections for the Philippines.

In its Asian Development Outlook 2017 Update, ADB retained its Philippine GDP growth outlook for this year and 2018 at 6.5% and 6.7%, respectively, from its Asian Development Outlook 2017 Supplement report in July.

The latest projections are up a tad from the earlier estimates of 6.4% and 6.5% for this year and next in ADB’s April Asian Development Outlook 2017 report.

The latest projection for this year lies at the lower end of the government’s 6.5-7.5% GDP growth target, but the outlook for 2018 falls short of a 7-8% official goal.

Actual GDP growth averaged 6.45% last semester, putting the lower end of 2017’s official full-year target within reach. Growth clocked 6.9% last year, just below the top end of the government’s 6-7% target for 2016.

ADB’s latest forecasts for the Philippines compare to 5.0% this year (from 4.8% in the July supplement report) and 5.1% (from 5.0%) in 2018 for Southeast Asia, as well as to 5.9% and 5.8% (both flat from July) in those respective years for “Developing Asia” — a category consisting of 45 of ADB’s 67 members (48 in the region and 19 outside) that are covered by the report.

“The country’s infrastructure and social program, and the tax reforms are being implemented on schedule. These policies will become fiscal pushes to growth. Consumer and business upbeat sentiments signify that robust consumption and investments will continue,” ADB Philippines country director Richard S. Bolt said in a press conference on the report’s launch yesterday at the regional lender’s headquarters in Mandaluyong City.

“Government is already on the right track.”

The report said that government efforts to improve budget execution will help ensure effective implementation of the planned programs.

“There is already some evidence that this is occurring.”

Public infrastructure spending and other capital outlays reached P1.778 trillion in the eight months to August, equivalent to 60% of a P2.96 trillion program for that period and about a 10th bigger from a year ago.

Under its P8.44-trillion 2017-2022 “Build, Build, Build” program, the government aims to ramp up its spending on infrastructure alone to P1.899 trillion, equivalent to 7.45% of GDP, by the time President Rodrigo R. Duterte ends his six-year term in 2022, from P847.22 billion or 5.32% programmed this year, and from a 2.9% annual average in 2010-2016 under former president Benigno S.C. Aquino III.

Mr. Bolt said ADB officials meet with representatives of line government departments and agencies every two weeks to help improve project implementation.

“I think that the seriousness by which the government is taking it is really commendable,” Mr. Bolt said of the government’s focus on infrastructure development.

“The fact they are looking for very sizable assistance to do this means that they are taking this issue seriously.”

ADB prepared a $100-million Infrastructure Preparation and Innovation Facility technical assistance loan in January to upgrade the capabilities of implementing agencies and a $5-million grant for Strengthening Infrastructure Capacity and Innovation for Inclusive Growth in June.

“GDP growth is projected to strengthen in the rest of the year and in 2018 as domestic demand is likely to continue to expand in the near term,” the report said of Philippine prospects.

“Growth can expect a push from higher public spending, particularly on infrastructure and social services,” it added.

At the same time, ADB cut its Philippine inflation estimates to 3.2% for 2017 from 3.5% previously, at 3.5% in 2018 from the earlier 3.7% forecast — against the central bank’s 3.2% forecast average for each of those years.

“Fuel price inflation is likely to be lower than earlier projected as international oil prices stay subdued. The rebound in agriculture and resulting augmentation of food supply will help contain food prices,” the report read.