Up at 6.5% for 2017 and 6.7% for 2018
Asian Development Bank (ADB) said it has revised upward its growth forecast for the Philippine economy to 6.5 percent for 2017 and 6.7 percent for 2018 on expectations of increased infrastructure spending and households’ purchasing power, as boosted by tax reforms.
The “growth forecasts are upgraded from 6.4 percent to 6.5 percent for 2017 and from 6.6 percent to 6.7 percent for 2018,” the multilateral lender said in a supplement to its Asian Development Outlook 2017 report released on Thursday.
“The government is making progress in ramping up infrastructure investment,” ADB said.
Still, the revised forecast for 2017 is lower than the rate of growth in 2016, which stood at 6.9 percent. The Philippine government has set a growth target of between 6.5 percent and 7.5 percent for gross domestic product (GDP) in 2017, and 7 percent to 8 percent for 2018.
Infrastructure and capital spending in May, the latest government data shows, rose 31.4 percent to P46.2 billion from P35.2 billion a year earlier.
In the first five months of the year, such expenditure grew 8.1 percent to P197.2 billion from P182.4 billion in the corresponding period last year, the Department of Budget and Management said.
The incumbent government aims to spend P847 billion this year on infrastructure development, covering projects in all regions, including small-, medium- and large-scale ventures to meet a target infrastructure spending-to-gross domestic product (GDP) ratio of 5.3 percent.
Under the “Build, Build, Build” component of the government economic reform program dubbed Dutertenomics, the administration intends to spend P8.4 trillion on infrastructure in the six years to 2022.
“In addition, the tax reform likely to be approved in the second half of 2017 will unleash purchasing power in 2018 through lower personal income tax,” the ADB said.
The government-proposed comprehensive tax reform program’s (CTRP) first package, which seeks to lower personal income tax rates, is now pending before the Senate.
The version passed by the House of Representatives on May 31 under House Bill 5636, or the proposed Tax Reform for Acceleration and Inclusion Act, consolidated the original version of the CTRP Package One endorsed by the Department of Finance with 54 other tax-related measures.
ADB’s move marks the first upward revision of a forecast for Philippine growth this year, despite the lower-than-expected 6.4 percent rate in the first quarter.
The World Bank had revised downward its forecast for the Philippine economy for 2017 to 6.8 percent from 6.9 percent on account of the slowdown in the first quarter.
Credit Suisse reduced its growth forecast for the economy to 6 percent from 6.4 percent, saying it expected private consumption to moderate on the back of a weak labor market.
ANZ Research kept its growth forecast at 6.9 percent, despite the lower-than-expected performance in the first quarter, saying overall growth is strong and balanced.
London-based research consultancy firm Capital Economics noted the economy is likely to continue growing at a solid pace of 6.5 percent, while DBS and IHS Markit maintained their respective forecasts at 6.4 percent.
Investment bank First Metro Investment Corp. and the University of Asia and the Pacific also maintained their GDP growth forecast, at 7 percent this year, despite the slower-than-expected 6.4 percent print in the first quarter.
Meanwhile, the ADB said growth projections for Southeast Asia are expected to remain at 4.8 percent in 2017 and 5.0 percent in 2018, with accelerating growth for Malaysia, the Philippines, and Singapore.
This trend, however, is slightly dampened by the slower-than-anticipated expansion in Brunei Darussalam, it added.
Robust domestic demand — particularly private consumption and investment — will continue to support growth in the sub-region, according to the report.