The International Monetary Fund said Monday it expects the Philippines to sustain its strong economic growth this year, on higher government spending and export recovery.
IMF resident representative to the Philippines Shanaka Jayanath Peiris said the country’s gross domestic product was expected to expand 6.8 percent in 2017, slightly faster than its previous estimate of 6.7 percent, following a strong fiscal stimulus with budget deficit widening towards 3 percent of GDP.
“The Philippines is expected to maintain its strong GDP growth momentum registered in 2016 into 2017 at a pace of about 6.8 percent, supported by a fiscal stimulus as the budget deficit widens towards the 3 percent of GDP target,” Peiris said.
He said exports were also anticipated to recover, reflecting the pick-up in global growth and commodity prices.
“The medium-term growth outlook would depend on the more uncertain global economic outlook and the passage of the administration’s tax reform proposals that would be important to continue to raise public infrastructure investment and social spending to benefit from the demographic dividend,” he said.
The inter-agency Development Budget Coordination Committee set the growth target at 6.5 percent to 7.5 percent in 2017 and 7 percent to 8 percent in 2018 and 2019.
Data showed the economy grew 7.1 percent in the third quarter, bringing the average growth for the three quarters at 7 percent. Official data for the full-year growth will be released by the Philippine Statistics Authority on Jan. 26.
Finance Secretary Carlos Dominguez III said sustaining the economic growth would be a challenge if the Comprehensive Tax Reform Program would not push through.
Dominguez said funding the Duterte administration’s ambitious infrastructure program by raising sufficient revenues for tax reform, rather than relying primarily on borrowings, was necessary to keep the budget deficit within the manageable level of 3 percent of GDP beginning 2017.
He said the incremental revenues estimated to be collected from the first package of the CTRP amounting to P163 billion in 2018 was consistent with the planned increase in the budget deficit from 2.7 percent of GDP in 2016 to 3 percent of GDP from 2017 till the remainder of the Duterte presidency.
He said that without tax reforms, the deficit of 3 percent of GDP would be breached, leaving the country susceptible to an unsustainable fiscal position, which could lead to a credit rating downgrade below investment grade.
“The non-passage of the tax reform package now pending in the Congress will have dire consequences not only on our hard-earned gains in improving our macroeconomic fundamentals but also on the lives of our poor and vulnerable fellow Filipinos,” Dominguez said.
He said accelerating spending on infrastructure would not only fill the massive backlog left behind by the previous administrations, but would also create more jobs, which would further spur economic growth and help free some six million Filipinos from extreme poverty over the next five years.
“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, inclusive growth,”he said.