By Elijah Joseph C. Tubayan Reporter
and Carmina Angelica V. Olano
ECONOMIC growth likely picked up this quarter to fall within the 7-8% official full-year 2018 target, the Budget chief said on Tuesday, as the Philippine Statistics Authority (PSA) reported that factory output began those three months with its biggest improvement in eight years.
“I’m very confident that we will hit seven percent in the second quarter because of the impact of the TRAIN personal income tax deduction,” Budget Secretary Benjamin E. Diokno said in a joint press briefing of state economic managers, referring to Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion Act.
That law slashed personal income tax rates in hopes of spurring household spending that contributes more than three-fifths of gross domestic product (GDP) when it came into force on Jan. 1, and sought to offset the expected foregone revenues by increasing or adding taxes on various items besides lifting the value added tax exemption of several sectors.
“We put more money in the pockets of consumers. It was not felt in the first quarter. In the second quarter, that will be felt,” Mr. Diokno said, estimating that the personal income tax cut alone freed about P12 billion per month for household consumption.
GDP grew by 6.8% in the first quarter and by 6.6% in April-June 2017. The government is scheduled to report second-quarter GDP data on Aug. 9.
Preliminary results of the PSA’s Monthly Integrated Survey of Selected Industries showed that factory output — as measured by the Volume of Production Index — grew 31.1% year on year in April.
This was higher than the revised 16.5% growth recorded in March and the minimal 0.1% increment in April 2017. The last time factory output grew at this pace was in April 2010 when it also recorded 31.1%.
Growth of factory output volume averaged 21.8% year-to-date, faster than the 9.3% recorded in 2017’s first four months.
Average capacity utilization, which is the extent by which industry resources are used in the production of goods, was estimated at 84.3% with 12 of the 20 sectors registering capacity utilization rates of at least 80%.
In a statement, the National Economic and Development Authority (NEDA) attributed April’s to various factors, including higher commodity prices, strong consumer demand and a weaker peso that “encouraged manufacturers to produce more.”
“Growth in production of food and export-oriented products (processed food, chemicals, fabricated metals, leather, petroleum, non-metallic minerals, electrical and non-electrical machinery, among others) contributed to the gains,” the NEDA statement read.
Also contributing to manufacturing’s growth, NEDA said, was bigger government spending on infrastructure that “helped sustain growth in construction-related manufactures… given higher demand for non-metallic mineral products, particularly cement.”
Leading growth among sectors was printing at 182.8%, followed by 14 others that posted double-digit growth during the period, including petroleum products (79.2%), miscellaneous manufactures (34.5%), machinery except electrical (34%), textiles (32.1%), beverages (31.7%) and food manufacturing (31.4%).
Peter Lee U, economist at the University of Asia and the Pacific, April’s said reading was “consistent with the economy growing very quickly, while the industry sector is doing well.” “If the government will continue to spend for its infrastructure projects, then we’ll see construction-related manufactured goods to continue to grow,” he said.
NEDA’s officer-in-charge, Undersecretary Jose Miguel R. de la Rosa, expects manufacturing to pick up further on increased business confidence. “A bullish business outlook is expected for the entire second quarter on the back of robust economic growth. An expansion of businesses will also be facilitated thanks to the new law on ease of doing business,” he said, referring to the newly enacted Republic Act No. 11032, or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, that further cut time for and streamlined procedures for securing permits and other transactions.