By Melissa Luz T. Lopez
THE GOVERNMENT will hold on to its 7-8% growth target this year, according to Finance Secretary Carlos G. Dominguez III who noted the Philippines has room to stand resilient despite a slowing global economy.
This after the Philippine Statistics Authority (PSA) revised the third-quarter growth figure to 6%, a tad slower than the previously reported 6.1% due to lower growth in some sectors such as manufacturing, trade of motor vehicles, and financial intermediation.
The nine-month gross domestic product (GDP) average stands at 6.3%. The fourth quarter and full-year data is scheduled to be released today.
Mr. Dominguez said on Wednesday that the government will keep seven percent as the “fighting target” for 2019, at a time when multilateral lenders are scaling down global growth forecasts.
“Despite the headwinds presented by global factors last year, we continued to grow our economy at an impressive rate. We expect 2019 to be an even better year,” Mr. Dominguez said in a speech before the Financial Executives Institute of the Philippines at the Shangri-la at the Fort, Taguig.
Pressed further, the Cabinet official said the economic team is keeping its 7-8% growth target this year, even as latest estimates by market watchers like banks and multilateral agencies are betting on a slower pace.
The International Monetary Fund said global growth will decelerate to 3.5% this year from the 3.7% pace expected for 2018, at a time of weaker activity among advanced economies and trade tensions between the United States and China.
The United Nations also sees “increasing downside risks and vulnerabilities” for global economic activity. In its World Economic Situation and Prospects 2019, the UN expects the Philippines to log a faster climb of 6.5% this year from 6.3% in 2018.
“Fighting target — it means to say we want to meet it, we’ll fight to meet it (for 2019),” Mr. Dominguez told reporters, noting that there will be ample domestic drivers to stimulate economic activity despite paling global prospects.
“First of all, we’re not really a big international trader. Of course we are affected by the headwinds but because we have this ‘Build, Build, Build’ program, we are sort of insulated. And we have good credit, we have good tax collections, [so] we are quite insulated.”
More market analysts are bullish about economic prospects for 2019, with inflation seen to finally tame. In turn, this could stoke consumer spending.
Slower inflation is seen to persist as food supply normalizes and as world crude prices drop, Mr. Dominguez said, making it almost certain that price increases will return to the 2-4% pace this 2019.
In a separate report, bank analysts at UBS said lower inflation would be the “critical macroeconomic trend” this year, but said the economic growth will still ease to 6.1% from 6.4% in 2018 due to tighter monetary conditions and weak exports.
Some lift is also expected this year as the central bank is unlikely to raise interest rates further as prices cool, UBS said in a report published yesterday.
Inflation averaged 5.2% last year, well above the 2-4% target band.
Substantial investments in infrastructure would likewise propel growth, Mr. Dominguez added, as seen in the 50% increase in state spending from January-November last year.
“We are moving faster than expected. The old problem of absorptive capacity has been overcome,” he added.
Meanwhile, Mr. Dominguez pointed out that additional revenues drawn from the Tax Reform for Acceleration and Inclusion (TRAIN) law that took effect last year will continue supporting the more upbeat government spending, with collections reaching P41.9 billion as of end-September albeit short of the P44.3 billion target for the first nine months.
Collections from tobacco excise and documentary stamp taxes were the biggest revenue sources under TRAIN so far. Mr. Dominguez also signalled confidence that package two of the tax reform program can still be passed “within this year,” despite lukewarm reception among lawmakers and strong lobbying against the revamp of tax perks granted to new businesses.
The measure remains pending before Congress, with just a few weeks of sessions left before the midterm polls that would create a new House of Representatives and leave half the 24 Senate seats up for grabs.
Q3 GDP REVISION
Meanwhile, the statistics agency on Wednesday reported the country’s GDP — which indicates the value of final goods and services produced within a country — expanded by 6% in the third quarter of 2018, slightly lower than the previously reported 6.1%.
Four subsectors saw lower revised estimates in the third quarter, namely: manufacturing (revised to 3.3% from 4%); electricity, gas and water supply (4.7% from 5%); financial intermediation (6.9% from 7.6%); trade and repair of motor vehicles, motorcycles, personal and household goods (5.2% from 5.6%); and transport, storage and communication (5.37% from 5.41%).
At the same time, upward revisions were made for construction (18.2% from 16.1%); mining and quarrying (-0.2% from -1.1%); real estate, renting and business activities (5.5% from 5.3%); and “other services” (7.9% from 7.5%). — with Carmina Angelica V. Olano