Gov’t confident of 6-7% growth in ’16
Economic managers are confident about hitting the 6-7 growth target for this year on positive business sentiment and initiatives to ramp up infrastructure spending.
“Growth for the second half of the year remains consistent with market expectations, given the upbeat perception of the private sector and the upsurge in government spending. The normalization of economic activities during post-election years will put downward pressure on GDP [gross domestic product] growth in the second half, but nonetheless, the smooth transition of power and assurance of macroeconomic policy consistency by the new administration will likely keep business and consumer confidence strong to meet the full-year target,” the Cabinet-level, interagency Development Budget Coordination Committee (DBCC) said in its 2016 midyear report.
In July, the DBCC cut the 2016 GDP growth target to a “conservative” 6-7 percent from the earlier goal of 6.8-7.8 percent set by the Aquino administration, citing that the new administration still had to adjust.
To achieve at least the lower end of the target, the economy should expand by an average of 5.1 percent in the third and fourth quarters, following strong 6.9-percent growth in the first half on the back of election-related spending.
The DBCC said attaining the full-year goal would be possible by ensuring government spending on infrastructure projects, especially on logistics and transport.
Budget Secretary Benjamin E. Diokno had said that the problem of underspending on public goods and services would be a thing of the past, with the Duterte administration aiming to increase infrastructure spending as a share to the GDP to 5.4 percent next year before further rising to 7 percent by 2022.
The new administration wanted to invest more in public infrastructure, which, according to Diokno, had been “neglected” by the previous administration.
To ramp up infrastructure spending, Duterte’s economic managers also widened the budget deficit program for this year to 2.5 percent of GDP from 2 percent previously. In the next six years, deficit spending will be raised to 3 percent of GDP.
Besides the infrastructure boost, economic managers see robust domestic demand buoying the economy despite external shocks, such as sluggish global trade.
“The expenditure side of the economy will continue to be driven by domestic demand, led by household consumption and investment, and supported by government expenditures. Based on the latest Consumer Expectations Survey, consumer sentiment will likely normalize given the post-election season,” the DBCC said.
“For investments, the construction activity will be reinforced by the increase in spending on durable equipment, reflected by the continued rise in capital goods importation, particularly for telecommunications equipment and electrical machinery, power generating and specialized machines, land transport equipment, as well as office and electronic data processing machines,” it added.
Amid weak global demand for Philippine merchandise exports, the DBCC was optimistic that the services sector would compensate with higher dollar revenues this year.
“Exports of services are expected to make headway, supported by a full year target of 6.5 million inbound tourists in tandem with the strong performance of the country’s BPO [business process outsourcing] sector,” the DBCC said.
Also, “imports will still outpace exports, driven by a strong investment and consumption demand,” it said.
The National Economic and Development Authority had said that sustained imports growth augurs well for manufacturing, as imported equipment and raw materials are used as inputs to produce goods locally.
The manufacturing sector would also benefit from the implementation of the roadmap dubbed “Comprehensive National Industrial Strategy,” the DBCC said.
Prospects for the domestic construction, power, trade and tourism sectors likewise remain rosy, according to the DBCC.
