THE government’s economic managers are optimistic the Philippines will sustain high economic growth in 2017 despite “political noise,” banking on higher infrastructure spending, tax and other reforms, and improved peace and order.
“This means there will be no letup in the Duterte administration’s commitment to spending big on urban and rural infrastructure as a growth driver, to guarantee sustained high—and inclusive—growth,” Finance Secretary Carlos Dominguez 3rd said in a statement.
Budget Secretary Benjamin Diokno told reporters five things were needed to sustain growth at 7 percent: maintaining peace and order, improving infrastructure spending, investing in human resources, cutting the cost of doing business, and a competitive tax system.
“So if we manage to grow by 7 percent, we become the fastest-growing country in the fastest-growing region in the world and that’s an honor, right? And that would be an accomplishment,” Diokno said.
The government is expecting the economy, as measured by gross domestic product (GDP) or the value of goods and services produced, to grow between 6.5 percent and 7.5 percent in 2017.
Private and multilateral institutions are less bullish, forecasting the economy to accelerate by a moderate 5.6 percent to up to 6.9 percent.
GDP grew by 7 percent in January to September 2016, faster than the 5.7-percent pace recorded in the same period the previous year.
Dominguez said the economy’s strong showing in the third quarter of 2016, when GDP grew by 7.1 percent—its best in three years—was driven in part by the Duterte presidency’s spending on infrastructure and the recovery of the agriculture sector from a prolonged El Niño-induced drought.
The Philippines has the worst infrastructure among its peers in the region, which is why the Duterte administration has allotted a larger outlay for infrastructure in the 2017 budget, Diokno said.
“So the 2017 budget is a downpayment for that desire. If you look at the 2017 budget, 5.4 percent of GDP will go to public infrastructure. That has never been done before in the history of the country,” he said.
Diokno said the Duterte government would eventually ramp up the budget for public infrastructure to 7.4 percent of GDP.
“So I reckon that we should be spending something like 8 to 9 trillion pesos for public infrastructure,” he said.
To improve the country’s human resource pool, the government should invest in young people, Diokno said.
“If we don’t convert the youth into a productive, agile, healthy work force then we fail, right?” he added.
He also underscored the need to cut the cost of doing business in the country.
“We are ranked very low in that regard and if we want to attract foreign investors we need to do that,” said Diokno, a long-time UP economics professor.
RH Law needed
Diokno also said the Philippines’ tax collection system fares poorly in comparison with neighboring countries.
The Duterte administration, Dominguez said, was committed to pursuing congressional approval of its proposed comprehensive tax reform program to ensure the financial sustainability of government spending on infrastructure, human capital and social protection for the “most vulnerable sectors.”
The government plans to fully implement the Reproductive Health Law, modernize agriculture to pull down food prices while increasing farmers’ incomes, and level the playing field for micro, small and medium scale enterprises, the Finance chief said.
Dominguez said the government’s vision was to lift six million Filipinos from poverty and transform the Philippines into a high middle-income country five years from now, with a per capita gross national income of $4,100, the current level for Thailand and China.