By Rhosedel Grace Gabac
The Philippine economy, according to a report from the International Monetary Fund (IMF), currently performs sufficiently well due to robust public investments, but is held back by a surging inflation and rigidifying global financial conditions. Another factor that must be recognized is the inequality brought upon by enduring poverty.
“The Philippines has been one of the region’s strong economic performers over the past years, reaping the fruits of prudent policies and critical reforms. The team welcomes the authorities’ strategy of maintaining policy continuity while adapting to emerging challenges and taking advantage of the strong economy to implement reforms to improve inclusive growth and job creation. This strategy has served the Philippines well,” said IMF mission chief Luis Breuer.
The IMF suggested that there needs to be a balanced strategy from the government in maintaining a strong and stable economy in an ever-changing global environment. At the same time, it needs to prioritize reforms such as targeted social spending and infrastructure investments that raise living standards.
Build, Build, Build program
The Department of Finance (DoF) said “strong macroeconomic fundamentals backed by tax reforms and the ambitious P8.4-trillion ‘Build, Build, Build’ infrastructure projects would continue to boost economic growth as the competitiveness of the economy rises and more jobs are created.”
According to Finance Secretary Carlos Dominguez III, economic managers slightly adjusted the deficit forecast from 3 percent to 3.2 percent through 2019 to maintain the momentum of the ‘Build, Build, Build’ program.
“We assure our people that the government remains steadfast in its commitment to fiscal discipline. The improved revenue collections are channelled to productive spending that will clear the way towards economic growth,” said Dominguez.
Meanwhile, the Duterte administration’s Tax Reform for Acceleration and Inclusion (TRAIN) law this year ushered in higher taxes for oil, tobacco and sugary drinks, while promising unconditional cash transfers and fuel cards to alleviate the poorest Filipino families from the effects of inflation. Unfortunately, the Department of Social Welfare and Development (DSWD) said they were only able to release the funds in September, which was already at the height of inflation, while The Department of Transportation (DOTr) also faced hitches in distributing over 179,000 fuel cards worth over P5,000 each.
“The TRAIN law removed those zero excise taxes, on top of the 12-percent VAT (Value Added Tax). The TRAIN law is, thus, called by many as anti-poor. The point is that they took the gamble that the excise tax in petroleum will not impact on cost of goods and services. But as figures show, it did. It also impacted on consumption. Now, where, and how do we pick up the slack?” asked consumer advocacy group Laban Konsyumer Inc. president and former Trade undersecretary Victorio Dimagiba.
GDP and Inflation
Based on the inflation averages from Bangko Sentral ng Pilipinas (BSP), the rapid but steady growth of our country’s Gross Domestic Product (GDP) is accompanied by a slow descent of inflation, a subtle decrease in unemployment and a subsiding public debt.
“The Monetary Board (the policy-making body of the BSP) believed that the series of policy rate adjustments thus far in 2018 will help reduce further the risks to inflation, including those emanating from the ongoing normalization of monetary policy in advanced economies and its impact on the foreign exchange market, and bring inflation toward a target-consistent path over the medium term. Favorable conditions arising from sustained domestic growth also suggest that the economy can accommodate a further tightening of monetary policy settings,” the BSP said in a statement.
According to Trading Economics, an online platform that provides historical data, economic forecasts, news, and trading recommendations, the country’s GDP expanded to 1.5% in the first quarter this 2018, followed by 1.3% and 1.4% for the second and third quarters, respectively, and concluded with a 1.5% for the last quarter which was considered as the weakest quarterly expansion since quarter one, an underlying effect of the downturn in the services sector.
2019 economic prognosis
The country’s economic momentum is expected to abate slightly in 2019 with solid fixed investment and government spending towards the midterm elections in May bolstering the economy, while private consumption is seen to be an impetus for growth, according to the Barcelona-based economic analysis provider FocusEconomics, whose panelists see the Philippine GDP expanding by 6.4% in 2019 and 6.2% in 2020.
Prospective investors are also on the lookout for next year’s TRABAHO BILL, which imposes stricter incentives for exporters in a weak exportation environment which might just force them to look for a greener pasture in business-friendly terrain.
The IMF also projected a 6.6 percent economic growth outlook by next year, while a weaker peso will be trimmed up to 4% in the current inflation rate of 6.7%, with higher excise taxes and rising global oil prices as primary mainsprings for inflation.