The Asean+3 Macroeconomic Research Office (Amro) has slightly cut to 6.7 percent its 2018 growth forecast for the Philippines even as the think tank still sees solid fundamentals buoying the economy in the near term.
In an e-mail to the Inquirer, the Amro said the change in the 2018 gross domestic product growth forecast from 6.8 percent in its report last October was “small, reflecting the softening of private sector demand from the third-quarter 2017 GDP release.”
“Overall, Amro’s assessment of the Philippine economy has not changed since October 2017,” it said.
The adjusted growth forecast for 2018 was reflected in the Monthly Update of the Asean+3 Regional Economic Outlook Special Edition report released last Thursday.
The Amro’s updated forecast for 2018 remained below the government’s target range of 7-8 percent.
In October, Amro lead economist Sumio Ishikawa said “the Philippine economy is expected to grow by 6.6 percent [in 2017] before quickening to 6.8 percent in 2018 as public sector infrastructure spending gains pace while domestic consumption and exports remain buoyant.”
“To support the infrastructure program and enhance growth potential, mobilizing sufficient revenue via tax reforms is essential,” Ishikawa had said.
According to the Amro, the Philippine economy “continues to have sound macro fundamentals, which should make it less vulnerable to shocks” even as it warned that delays in the Duterte administration’s “Build, Build, Build” infrastructure program pose risks.
“Failure to accelerate infrastructure investments through the ‘Build, Build, Build’ program owing to, among others, absorptive capacity constraints of the government and private sector participants could dampen investment activity and undermine growth prospects. A delay in infrastructure projects execution also risks having the additional revenues from the comprehensive tax reform program being diverted to other expenditure items with little growth potential,” the Amro had said.
“On the other hand, as the infrastructure program gains traction, it may lead to a widening of the current account deficit in the medium term, which could in turn put strong depreciation pressures on the peso. Likewise, brisk fiscal spending adding to an already buoyant domestic demand, rapid credit growth, and rising inflation could give rise to overheating pressures in the near term, although this risk may diminish over the medium term as the economy’s productive capacity improves,” according to the Amro.
For the Amro, “the ‘Build, Build, Build’ program should be implemented with a view to boosting growth while keeping the current account and fiscal deficits at moderate levels,” as well as “complemented with the timely implementation of the comprehensive tax reform program in order to mobilize the revenue for greater infrastructure spending.”
Under “Build, Build, Build,” the government plans to rollout 75 flagship, “game-changing” projects, with about half targeted to be finished within President Duterte’s term, alongside spending a total of up to P9 trillion on hard and modern infrastructure until 2022 to usher in “the golden age of infrastructure” after years of neglect. /kga