Economic team crosses fingers for 6-6.5 percent GDP growth in 2019

Predictions estimate Philippine economy to grow between 6 and 6.5 percent this year largely because of easing inflation though tugged in part by slow growth in external trade.

In a report on Wednesday (Dec. 11), the Asian Development Bank (ADB) kept its gross domestic product growth forecast for the Philippines at 6 percent in 2019 and 6.2 percent in 2020.

Accelerated growth, ADB said, would be “supported by investment as more infrastructure projects” flow out of the pipeline.

“Fiscal and monetary policies will support domestic demand,” said the Manila-based multilateral lender.

In the first three quarters of 2019, GDP growth slowed to an average of 5.8 percent because of government underspending on public goods and services brought by a delay in passage by Congress of the year’s P3.7-trillion budget.

The ADB also stuck with its inflation projections for 2019 (2.6 percent) and 2020 (3 percent).

The Development Budget Coordination Committee (DBCC), a Cabinet-level body, also shook clear its crystal ball and predicted 2019 GDP growth to 6 to 6.5 percent, a little narrower than 6-7 percent it had seen earlier.

“We already have the first quarter to third quarter numbers,” said Socioeconomic Planning Undersecretary Rosemarie G. Edillon.

“If we say it’s 6-7 percent, then it’s no longer credible,” Edillon said.

While the DBCC kept 2020 growth goal at 6.5 to 7.5 percent, it scaled down targets for 2021 and 2022 to the same range from 7 to 8 percent previously.

“We want to stick to prudent fiscal management,” Edillon said.

She said tax reform packages that are already being enforced and are coming out soon measured against spending were likely to place fiscal deficit to GDP ratio at 3.2 percent.

She said “we want to make sure” that projections do not “balloon” growth projection numbers “consistent with fiscal prudence.”

To keep the budget-deficit ceiling until 2022, the government should collect revenues worth P3.15 trillion this year, P3.49 trillion in 2020, P3.85 trillion in 2021, and P4.31 trillion in 2022.

Finance Secretary Carlos G. Dominguez III said the lower revenue projection for next year—down from P3.54 trillion previously—took into account the impact of slower economic growth at the start of the year.

Additional collections from the Tax Reform for Acceleration and Inclusion (Train) Act were “quite good” so far, however.

“The comprehensive tax reform program can help ensure a reliable revenue base,” said Dominguez.

It would also modernize the Philippine economy, he added.

Quick passage by Congress of the rest of the tax reform package, he added, “will ensure a steady revenue flow.”

The reforms, he said, would also lead to “equitable sharing for the government’s social and infrastructure programs while securing fiscal stability long into the future.”

Swift passage of the proposed Corporate Income Tax and Incentives Rationalization Act (Citira) by Congress would attract more investments, according to acting Budget Secretary Wendel Avisado, chair of the DBCC.

Additional taxes on alcohol and e-cigarettes, Avisado added, would fill financing gap for the Universal Health Care Program.

Disbursements were projected to amount to P3.76 trillion in 2019, P4.16 trillion in 2020, P4.59 trillion in 2021, and P5.12 trillion in 2022.

Given “relatively stable prices,” Avisado said inflation would average 2.4 percent this year, lower than the DBCC’s previous forecast of 2.7-3.5 percent.

The peso was expected by the DBCC to end the year within the range of 51-52:$1, a narrower range from 51-53 against the greenback previously.

“Due to continuing unresolved trade tensions” amid the US-China trade war, the DBCC lowered its 2019 goods exports and imports growth targets to 1 percent and 2 percent from 2 percent and 7 percent previously.

Services exports and imports, meanwhile, were seen growing by 9 percent and 2 percent this year.

The DBCC expected exports and imports growth to pick up pace starting 2021 “as global economic activity is expected to recover in the medium-term,” Avisado said.

Edited by TSB