The growth outlook for the Philippines in the near term remained strong on the back of stable economic, fiscal and monetary policies, favorable demographics, its ambitious infrastructure program, as well as the comprehensive tax reform, debt watcher S&P Global Ratings said yesterday.
“Growth-wise, the Philippines in the past two years has actually been stellar. In terms of the outlook for the next two years, we think that 6.5 percent and above as a pace of growth is actually very easily achievable,” S&P Asia-Pacific economist Vincent Conti said in a webcast.
The government is targeting a 7- to 8-percent growth yearly in the medium term after the economy expanded by 6.7 percent last year, among the highest gross domestic product growth rates in the region.
Conti attributed S&P’s rosy forecast to “the very favorable demographic trends that continue to benefit the Philippines, particularly through providing a very mobile and effective labor force that has generated a lot of investments and consumption onshore.”
“From the economic side of policy, it seems to be very stable and tends to have a lot of continuity across administrations,” he said.
“We’re talking about the fiscal side and the monetary policy side … A lot of positives from the economic policy as well,” he added.
Conti also noted the gains to be made under the Duterte administration’s massive “Build, Build, Build” program.
He said the ramping up of the infrastructure program was one of the relatively newer additions to the policy toolkit.
“That’s a positive, in that it can generate even further potential growth farther into the future,” he said.
Under “Build, Build, Build,” the government plans to rollout 75 “game-changing” flagship projects alongside spending a total of over P8 trillion on hard and modern infrastructure until 2022 to usher in the “golden age of infrastructure.”
Overall, the Philippine growth outlook, he said, “is pretty strong.”
“We are quite upbeat about the policy environment in the Philippines … This is because of the confidence direct investors have in the policy framework,” said Kim Eng Tan, S&P senior director for sovereign and international finance ratings for Asia-Pacific.
Tan noted that for the first time in quite a number of years, some degree of tax reforms are being carried out in the Philippines. This, he said, was expected to go on over the remaining years of the administration.
The first package on personal income taxation or the Tax Reform for Acceleration and Inclusion (TRAIN) Act was signed into law by President Duterte last December.
Tax reform “would, to some extent, stabilize government revenue and hopefully provide more funds for infrastructure,” Tan said.
“The key things we are looking at in tax reforms is that the government actually has the ability to carry this out. I think … this shows greater proactiveness on the part of the policymakers and improvements in the government’s support for sovereign ratings,” Tan added.
“This is one of the reasons why we have a ‘positive’ outlook on the Philippines’ credit rating,” he said.
In April, S&P raised its credit rating outlook for the Philippines to from “stable” to “positive,” citing improved fiscal management following the passage of the first tax reform package.
This means the country’s long-term sovereign credit ratings, affirmed at ‘BBB’, may be raised over the next six months to two years.