The economy is clearly on the right track, and the government is performing creditably, with no less than the International Monetary Fund (IMF) coming forward to stress that it has a “very optimistic” growth outlook on the Philippines because of the economy’s continued “impressive” performance.
Luis Breuer, chief of the IMF mission to the Philippines, has cited “the clear vision” of the administration’s economic team and commended the government’s plan to initiate a comprehensive tax reform program (CTRP), which the IMF sees as a vital component to sustain the economy’s growth momentum.
This underscores the high importance of Congress passing the CTRP soonest.
Debate on this issue should narrow down to the essentials. Delaying tactics being employed by certain groups—such as calling certain reforms as not being pro-poor—are deleterious and populist. The tax reform policy should be weighed on the balance of what will best improve or sustain national economic performance, from which all citizens and families will benefit. Stalling the reform because of the interests of certain groups should be forcefully rejected.
“The Philippine economy is quite impressive. It is one of the most dynamic economies in the world,” Breuer said in his meeting with Finance Secretary Carlos Dominguez and the other members of President Duterte’s economic team earlier this month.
Although the IMF has trimmed its growth forecast for the Philippines to 6.6 percent this year from a previous 2017 forecast of 6.8 percent on account of a slower-than-anticipated first quarter expansion, the lender said the country remains an economic “standout” amid global uncertainties.
“Overall, we are very optimistic on growth in the Philippines. It is true that for now, [the]growth projection was revised a little bit. The reason for that was basically math. Growth in the first quarter of the year was lower than anticipated… so the numerical average reduces the growth,” he explained. For 2018, IMF also trimmed its growth projection—to 6.8 percent from the previous 6.9 percent. Nevertheless, Breuer said the Philippines remains in a good place amid uncertainties brought about by US policies, China’s expected slowdown, Brexit concerns and geopolitical tensions. “In that ecosystem, the Philippines really stands out as a place that continues to do very well economically. Growth is very strong, At the same time, inflation is very low,” he said.
The IMF mission had sought the meeting with the economic managers to discuss the Philippine government’s priorities and the challenges that the country expects to meet in the face of global uncertainties.
The IMF mission also reiterated the IMF’s support for the Duterte administration’s CTRP. In the IMF’s view, tax reform and the government’s massive investments in infrastructure will yield even more positive results for the Philippine economy.
Dominguez explained why the government is taking advantage of the beneficial developments propping up the national economy in order to achieve the government’s vision of high and inclusive growth.
These beneficial factors include the current low-interest rate regime, a benign inflation rate, low oil prices, and the country’s “robust, young workforce.”
The government’s ambitious infrastructure strategy, which is codenamed ‘Build, Build, Build,’ is umbilically linked to the tax reform program.
The CTRP will raise additional revenues and at the same time correct the flaws, inequities and inefficiencies in the current system.
The government, through the proposed 2018 budget, will maintain fiscal stability through reforms in tax policy and administration, a manageable budget deficit and a prudent borrowing policy.
“Between now and 2022, the government looks toward improving the ratio of revenues to GDP from the current 15 percent to 17.7 percent in 2022. Tax revenues-to-GDP will increase from 13.7 percent in 2016 to 17 percent by 2022,” Dominguez said.
Dominguez assured lawmakers that despite the Duterte administration’s aggressive spending plan to close the infrastructure gap, the budget deficit will remain at an average of 3 percent of GDP between now and 2022.
This is doable, Dominguez said, because the national government aims to raise total revenues of P2.8 trillion, or 16.3 percent of GDP in 2018, which will include revenue measures of P133.8 billion.
With the yields from the revenue measures and the continued implementation of administrative reforms by revenue collecting agencies, the government expects revenues to grow by 17 percent in 2018, he said.
Above all, the economy will keep growing at a high and rapid pace.