Finance Secretary Carlos Dominguez III is optimistic the economy will expand 6.8 percent this year despite the slower-than-expected expansion in the first half.
Dominguez said in an interview with Stephen Schwartz, head of the Asia-Pacific Sovereigns of global debt watcher Fitch Ratings, the ‘Build, Build, Build’ infrastructure program of the Duterte administration would provide the needed boost in the second half.
“The economy took a breather in the second quarter but we still grew by 6.3 percent in the first half. I think we will grow at a faster rate in the coming months,” Dominguez said.
“I still believe we will be close to 6.8 percent this year. The momentum of the ‘Build, Build, Build’ is strong and we are moving quite well in our infrastructure program,” Dominguez said.
The economy grew 6 percent in the second quarter, slower than the revised 6.6 percent in the first quarter. Economic managers cited faster inflation, trade imbalance, closure of Boracay island and some mining companies, and sluggish agricultural output as among the reasons for the anemic second-quarter expansion.
This brought the GDP growth in the first half to 6.3 percent, below the government’s target range of 7 percent to 8 percent for the year.
Dominguez said the economy was not overheating at the moment and local industries were not even running at 90 percent of their capacities, “so we are in safe borders.”
He said another reason the economy was not in a “great danger” was the passage into law of the administration’s first package of the Tax Reform for Acceleration and Inclusion law that reduced personal income taxes but raised excise taxes on tobacco, alcohol, fuel, and automobiles. Julito G. Rada
He said the Train law resulted in the collection of higher revenues for the government. He said total revenue collections grew 20 percent in the first half from a year ago.
Dominguez said the country’s current debt-to-GDP ratio of 42 percent was expected to decline further to 38 percent by 2022.
Dominguez expressed optimism the Philippine economy would overcome the threats posed by trade tensions between economic powerhouse US and China and the rising interest rates’ scenario in advanced economies.
“We have to adjust to what is happening around the world…. especially the rising interest rates in the US and the shrinking balance sheet of the Fed,” he said.
He said local monetary authorities already raised by 100 basis points the benchmark interest rates this year in a move to temper the second-round impact of faster inflation and to ensure economic growth would continue.
“I think we will cope with it,” Dominguez told Schwartz.
He expressed apprehension that the ongoing trade war between the US and China might affect the country in the long run if it was not resolved at once. “We are hopeful that in the medium term, there will be a settlement on the trade issues that are happening,” he said.
The Philippines currently enjoys investment grade ratings from Fitch Ratings, Moody’s Investors Service and S&P Global Ratings.