The Manila Times (April 12, 2018)
Philippine economic growth has hit a “golden age”, the Asian Development Bank (ADB) said on Wednesday, driven by domestic demand that will be bolstered by government spending on infrastructure.
“The Philippine economic growth in 2017 was very strong.” ADB Country Director Kelly Bird said at the launch of the multilateral lender’s 2018 Asian Development Outlook.
“It was driven by robust domestic demand,” she noted, adding: “We see this period as a golden age. It is the highest economic expansion in over 40 to 50 years.”
“This growth will be sustained in 2018 and 2019.”
While 2017’s 6.7 percent gross domestic product (GDP) growth was slower than 2016’s 6.9 percent, the ADB said the result still exhibited robust domestic demand that was upheld by higher export growth.
The Manila-based lender maintained its growth forecast for this year at 6.8 percent and said it expected an expansion to 6.9 percent in 2019.
Both estimates, however, fall below the government’s 7.0-8.0 percent targets for both years.
“Along with domestic demand, the government’s infrastructure investments will fuel the country’s growth in the next few years, supported by a sound economic policy setting,” Bird said.
“We expect this growth to further lift wage employment numbers, add to household incomes, and benefit more poor families across the archipelago.”
The ADB said investments would be supported by large public infrastructure projects that include the Philippines’ first mass transit subway.
It noted that the 2018 budget would raise expenditures by 12.4 percent from last year, with two-thirds allocated to regions outside of Metro Manila. Allocations for the provinces are also 25 percent higher and are earmarked for rural development and job creation.
The budget for infrastructure, meanwhile, is a quarter higher and equal to 6.1 percent of GDP, up from 5.4 percent in 2017.
Remittances and employment, in addition to infrastructure spending, will also help drive growth.
“Household consumption grew by 5.8 percent in 2017, from 7 percent in 2016, on the back of higher remittances and employment, with the unemployment rate falling by 1.3 percentage points to 5.3 percent in January 2018 as 2.4 million jobs were added,” the ADB said.
By sector, services are expected to continue driving GDP growth along with manufacturing and construction.
The approval of the Tax Reform for Acceleration and Inclusion law in December 2017, meanwhile, is expected to augment tax revenues and provide additional fiscal space for more progressive public spending.
External risks to the Philippines’ growth outlook come from heightened volatility in international financial markets and uncertainty about global trade openness, although the country’s strong external payments position are expected to provide a cushion.
A major policy challenge is managing the rollout of the government’s “Build Build Build” infrastructure program, which has a target of raising spending to 7.3 percent of GDP by 2022 from 4.5 percent in 2016.
Government capacity, the ADB said, can by boosted by strengthening coordination between government agencies and improving the technical capacity of staff within these agencies, plus fostering stronger partnerships between government agencies, the private sector and development partners.
Source: The Manila Times