Strong Q2 showing maintains pace for more inclusive growth – DOF
MANILA, Philippines – The economy's strong showing of 7% GDP growth for the second quarter of the year gives the government room to push for inclusive growth as well as guard against economic events beyond its borders.
"The numbers are good for the Duterte government to hit its growth targets of at least 7% [for] this year's second semester and 6.5 to 7.5% in 2017," Finance Secretary Carlos Dominguez III said in a statement following the release of the latest economic results on Thursday, August 18.
The Department of Finance (DOF) head also noted that the second quarter growth rate is the highest for quarterly and semestral growth since 2014.
With the new administration taking the economic reins at the tail-end of the quarter, Dominguez acknowledged that "the good policies of both the Aquino and Arroyo administrations to sustain the country's strong macroeconomic fundamentals" made the high growth possible.
He pointed out, however, that the government must aim to lower the poverty rate that has been "stuck at 26% of our population."
"We expect to continue this growth trajectory but with a difference from the previous administration because we will be reducing poverty rates," Dominguez added.
Social stimulus spending
While the Duterte administration's plan to boost infrastructure spending is well-known, the DOF highlighted the fact that funds should also be poured into social services to reach the poorest sectors.
Dominguez said the Duterte administration would invest heavily in developing the country's human resources to empower poor families to be active contributors in developing the economy.
To facilitate this, he said, the government will also fully implement the Reproductive Health Law to realize the government's goal of reducing the poverty rate from the current 26% to 17% by the time President Rodrigo Duterte's term ends in 2022.
"But for government to do that, it must first sustain the growth momentum by way of a stimulus program anchored on accelerated spending on infrastructure, human capital, and social protection," Dominguez said.
The proposed national budget for 2017, pegged at P3.35 trillion, will be scrutinized at the House of Representatives committee level starting Monday, August 22. (READ: 2017 budget will be responsive to Filipinos' needs – Nograles)
The government is also preparing sweeping tax reforms, which it plans to submit to Congress for approval next month. These reforms include lowering both corporate tax and income tax.
The DOF is also looking at higher oil excise duties plus fewer value-added tax (VAT) exemptions, rationalizing other fiscal incentives, enhancing collection by revenue-earning agencies, and improving the ease of doing business in order to maintain government revenue to fund the stimulus.
Meanwhile, Dominguez said "strong macroeconomic fundamentals will buffer the Philippine economy from external shocks," already being felt through declining exports.
This year has been particularly turbulent for the global economy with the Brexit causing a brief panic across markets. China's continuing slowdown and the oil price slide has also hit many developing nations.
Despite these, the World Bank, Asian Development Bank, and International Monetary Fund all expect Philippine economic growth to go above 6% this year, higher than the average growth forecast for the ASEAN-5.
The revised 6.8% growth for the first quarter of 2016 also raised no alarms for the Bangko Sentral ng Pilipinas (BSP).
"The performance supports the maintenance of monetary policy settings. The economy continues to expand and does not need additional monetary support," said BSP Deputy Governor Diwa Guinigundo.
The BSP's Monetary Board has kept its policy stance unchanged for 15 straight rate-setting meetings since October 2014 due to sustained demand coupled with manageable inflation.
"With more confidence in the Philippines' growth prospects and commitment to policy reforms, we are confident the growth targets for the next few years are very doable [but] infrastructure and social spending remain critical," Guinigundo said. – Rappler.com