THE GOVERNMENT has put key pieces of reforms in place for the country to build “strong momentum” to grow faster in the years ahead, economic managers said in a forum on Friday.
The secretaries of Finance and of Public Works and Highways as well as the socioeconomic planning chief kicked off the first of three planned pre-State of the Nation Address (SONA) fora on Friday to inform the public of the government’s achievements. Malacañang had announced that the briefings are designed to give President Rodrigo R. Duterte more leeway in saying what he wants to say in his third SONA on July 23.
“Our economic strategy is anchored on two major programs: the comprehensive tax reform program and the Build, Build, Build infrastructure modernization already in place,” Finance Secretary Carlos G. Dominguez III said in a speech at the first pre-SONA forum, themed “Tatak ng Pag-unlad”, at the Philippine International Convention Center (PICC) in Manila, attended largely by journalists, bloggers and government employees.
“Without the tax reform and the infrastructure program that it is funding, we will continue to suffer from high cost of production and transportation. With the tax reform and better infrastructure, the road to higher productivity, and thus lower and stable inflation is within reach,” Mr. Dominguez said.
“We are clearly building on a strong momentum.”
Mr. Dominguez said Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) law that took effect on Jan. 1, allowed the government to raise its tax effort to 14.3% of gross domestic product (GDP) in the first three months of the year, grow overall revenues by 19% annually in the five months to May and convinced S&P Global Ratings to raise its credit rating outlook for the Philippines from stable to positive in April.
He also said that the government was able to grow overall spending by 25% year-on-year as of May, boost infrastructure spending by 42% in the same five months, increase the share of infrastructure spending to 5.4% of GDP that is “more than twice” the share of GDP invested in infrastructure over the last three decades and expects this ratio to increase to 6.1% this year; approve 35 of its 75 large-scale infrastructure projects; increase foreign direct investments by 21.5% to a record $10 billion in 2017, among others.
The Finance chief also said that spending comes with prudent debt management, as debt-to-GDP ratio steadied at 42.1% in 2017, and is targeted to decline to 39% in 2022.
“… [O]ur numbers all point to a positive direction. We are doing the right things at the right time. There is reason to be confident in the Philippines’ growth story,” Mr. Dominguez said.
“At that rate of expansion, and with strong investment inflows contributing to more inclusive growth, we hope to bring down the poverty rate from 21.6% in 2015 to only 14% by 2022.This is the most important number we all hope to achieve. All development efforts will be meaningless if they do not translate into liberating our people from the curse of poverty.”
Socioeconomic Planning Secretary Ernesto M. Pernia said in the same briefing that the Philippines will “join the ranks of upper middle-income countries by end-2019.”
He said that the government was able to meet its 6.5-7.5% GDP growth target in 2017 after seeing an actual 6.7% clip; top its 4.5% gross national income per capita growth target after recording an actual 4.8% last year; expand the share of investments in the economy; sustain double-digit manufacturing growth in the first five months this year; generate 1.52 million additional jobs in the first half of the year; cut infant mortality per 1,000 live births from 23 in 2013 to 21 last year, lower under-five mortality per 1,000 live births from 31 in 2013 to 27 in 2017; reduce total fertility rate from three births per woman in 2013 to 2.7 in 2017; reduce school dropouts with 94.2% and 84.6% of elementary and high school students reaching their final year in school year 2016-2017, respectively, from 87.5% in the previous school year; and improved the country’s ranking in the Global Innovation Index report to 73rd out of 127 economies in 2017.
Mr. Pernia said that 2018 will be “an important transition period, as we expect full implementation of many of our planned programs and proposed socioeconomic policies next year.”
He said that the government aims to complete 32 of the 75 “flagship” infrastructure projects by 2022, when Mr. Duterte ends his six-year term, break ground for 4,909 smaller scale local projects by then and reduce unemployment rate to 4.7- 5.3% this year from 5.4% as of the first half.
“While many challenges and risks lie ahead, I am confident that we will reach our macroeconomic targets and further the national development agenda,” Mr. Pernia said in his speech.
Department of Public Works and Highways Secretary Mark A. Villar presented the “boldest and most ambitious” infrastructure projects currently in the works such as the Luzon Spine Expressway Network, Panguil Bay Bridge Project, first phase of the Mindanao Rail Project and New Bohol Airport, among others.
The economic managers also sought to allay concerns about rising inflation during a panel discussion, noting that current spikes are temporary and natural for a fast-growing economy.
This is a day after the government reported that inflation picked up to 5.2%, a fresh high in at least five years that is above the central bank’s 2-4% full-year target for 2018. Inflation has now picked up for the sixth straight month and pierced the 2018 target for the fourth straight month.
“This is really because demand outstripped supply so the most robust solution to addressing inflation is really to increase supply,” said National Economic and Development Authority Undersecretary Rosemarie G. Edillon said during the panel discussion, adding that a cash transfer program is in place for the poorest of the poor.
Mr. Dominguez said that TRAIN — which slashed personal income tax rates — stoked consumption by giving households more money to spend. “We are also injecting into the economy around P32 billion a month and that goes around and people buy… I am sure they are buying more gadgets, more restaurant foods,” he said.
Mr Dominguez added that he welcomed the increase in prices in cigarettes and sugar-sweetened drinks as a result of the first tax reform pacakage, saying these items are bad for health.
“While slightly elevated, the inflation rate during the first six months of the year is understandable. Economies expanding at a fast clip tend to put pressure on supply. This is particularly true of our economic performance,” Mr. Dominguez said.
“We can pull back the inflation rate to within target range,” he added, echoing Mr. Pernia’s estimate that price pressures could ease by October.
Economic managers separately issued a joint statement on inflation on Friday, saying that overall price hikes may peak it the third quarter, but would taper off by October.
“The additional revenues that we generated from the TRAIN Law will also allow us to provide free education in state colleges and universities, free irrigation for farmers, conditional cash transfers to poor families and senior citizens, and higher salaries to government employees including uniformed men. Without doubt, these should help in coping with the rising prices of goods,” they said, while while urging Congress to promptly approve a bill that will slash rice prices by shifting to a regular tariff scheme from the current import quota system. — Elijah Joseph C. Tubayan