By Elijah Joseph C. Tubayan
Reporter
THE ASIAN Development Bank (ADB) has retained economic growth estimates for the Philippines that made the country one of Asia’s best performers, but at the same time upped its projected inflation rate this year to one of the region’s fastest.
In the Asian Development Outlook Supplement which ADB released on Wednesday, the regional lender kept its 2018 and 2019 Philippine gross domestic product (GDP) growth forecasts at 6.4% and 6.7%, respectively, from its September report.
“GDP growth is seen accelerating through 2019, supported by robust public and private investment. Growth forecasts are maintained at 6.4% for 2018 and 6.7% for 2019,” ADB said.
If realized, the Philippines’ 2018 growth would be slower than the actual 6.7% recorded in 2017, while 2019’s pace would match that of last year.
The nine months to September saw GDP growth average 6.3%, which the ADB said “remained strong” even as it was slower than the 6.8% clocked in the same period last year.
“Investment was the biggest contributor to growth, followed by household consumption. Investment growth accelerated to 16.7% in the first three quarters from 9.8%. Public and private construction growth quickened, as did investment in durable equipment. Growth in government spending also picked up on higher social service expenditure and on salary hikes for government workers,” the development bank said.
“Drag on GDP growth from net exports deepened, however, as strong domestic demand fueled a surge in imports, especially of capital goods, and as a weaker external environment slowed export growth.”
ADB’s forecasts compare with the World Bank and International Monetary Fund’s 6.5% and 6.7% for 2018 and 2019, respectively, and the 6.7% estimate of the Organization for Economic Cooperation and Development for both years.
ADB’s economic growth prospects for the Philippines are higher than the Southeast Asia average estimates of 5.1% for 2018 and 2019, as well as the six percent and 5.8% in 2018 and 2019, respectively, of “developing Asia”, consisting of 45 of the regional lender’s 67 members.
The Philippines will be the third-fastest this year after Vietnam (6.9%) and China (6.6%), and will be the second-best in 2019, again after Vietnam (6.8%) and ahead of China (6.3%).
ADB stated that infrastructure spending was also strong in Brunei, Indonesia, and Thailand, but noted that Malaysia saw a decline.
INFLATION RISK
At the same time, ADB increased the Philippines’ inflation projection this year to 5.3% — matching the forecast of the Bangko Sentral ng Pilipinas — from five percent initially, and retained the four percent outlook for 2019.
“… the Philippines saw inflation moderate to 6.0% in November from a high of 6.7% in October, for an average of 5.2% in the first 11 months, well up from 2.9% a year earlier. Food prices rose significantly owing to weak agricultural output, and high global oil prices early in the year and new excise taxes contributed to inflation,” ADB said.
“While inflation is expected to ease, the full-year average is still likely to exceed the projection in the Update. The inflation forecast for 2018 is therefore revised up from 5.0% to 5.3%,” it explained.
“The recent buildup in inflationary pressure should moderate next year, with inflation still projected at 4.0%, as in the Update,” it noted, adding: “Tight monetary policy will kick in following a cumulative rate hike of 175 basis points implemented from May to November 2018.”
The ADB cited that: “Oil prices continue to drop as supply outpaces expectations, which reduces pressure on external balances in the region, particularly in India and the Philippines.”
Its inflation forecast for the Philippines is above Southeast Asia’s forecast average of 2.7% in 2018 and 2.8% in 2019, and on the list except for Kazakhstan, whose overall price increases will clock in at 6.3% this year and 6.5% in 2019.

THE BUREAU of Internal Revenue (BIR) has extended anew the deadline for processing value-added tax (VAT) refund claims affected by a 2014 rule that had initially denied many of them.
In Revenue Memorandum Circular 102-2018 published yesterday, the BIR extended the deadline by a little over three months to March 29, 2019, from Dec. 14 previously. This is the second time it extended the deadline. In mid-June, the BIR extended the deadline by about six months from June 30 initially, to Dec. 14. The initial June 30 deadline was set in February last year.
The timetable for processing VAT refund claims is applicable to those affected by RMC No. 54-2014 The BIR under previous leadership implemented a 2014 circular that gave the Commissioner 120 days to decide on VAT refund applications, with inaction after the period “deemed a denial.” Claimants were also given 30 days from denial to elevate the claim to the Court of Tax Appeals.
The BIR implemented this rule retroactively, affecting many taxpayers’ pending claims and the chance to elevate them to the tax court upon expiration of the “120+30”-day period.
The BIR under the Duterte administration then issued Revenue Regulation 1-2017 in January last year to give “fair and adequate relief to taxpayer-claimants,” following a Supreme Court ruling that taxpayers “have every right to pursue their claims in the manner provided by existing regulations at the time it was filed,” and that RMC No. 54-2014 “cannot be applied retroactively as this would prejudice taxpayers whose VAT claims for tax credit or tax refund were filed and pending before June 11, 2014 the date RMC No. 54-2014 took effect.”
Deputy Commissioner Arnel SD. Guballa said the backlog of the applicable VAT refund claims are not that big, noting that the bureau will be able to act on pending claims within the adjusted timetable. “Kakayanin (We will manage),” he said by phone.
Under the tax code, VAT-registered taxpayers can claim a refund of their creditable input tax due or apply for a tax credit certificate for their zero-rated sales within two years from the end of the taxable year when sales were made.
Under Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Act that took effect in January, the maximum processing time for VAT refund claims is 90 days, shorter than the previous 120 days.
PERA TAX TREATMENT
The BIR on Wednesday has also issued clarifications on the tax treatment of the Personal Equity and Retirement Account (PERA).
The BIR published Revenue Memorandum Circular No. 99-2018 on Wednesday, providing frequently asked questions on administrative guidelines for PERA tax treatment.
It said that employers’ contributions to employees’ PERA are not subject to 35% fringe benefits tax and that contributing employers are not entitled to a five percent tax credit.
Employers are not affected by penalties for early withdrawal by employees from their PERA and neither will early withdrawals result in penalties on the transfer of funds from a PERA administrator to another.
Opening PERA accounts do not require the submission of a tax identification number, according to the circular.
It said that overseas Filipinos are also entitled to tax credit certificates in relation to a PERA.
Among others, the BIR also said that PERA transactions are subject to the 20% stock transactions tax.
The PERA was launched in 2016, seeking to encourage Filipinos to save up for their retirement through voluntary contributions, complementing mandatory contributions in state-run pension funds of the Government Service Insurance System for state employees and the Social Security System for those in the private sector. — E. J. C. Tubayan