Finance Secretary Carlos Dominguez III said Friday that Filipinos have reason to remain confident in the Philippines’ growth story, given that economic indicators point to a positive direction as the Duterte administration continues to “do the right things at the right time.”


Dominguez said the government is well on its way to providing the inclusive development that the people have long aspired for now that the economy is on course to be among the region’s growth leaders.

Global developments such as increased protectionism and oil price swings could pose numerous challenges ahead to the country’s economic resurgence, he said, but the long-elusive inclusive growth and higher incomes that Filipinos deserve are “still within reach as the government will relentlessly push reforms to modernize all sectors of the economy with the same vigor that the Duterte presidency has demonstrated over the past two years.”

While inflation was slightly elevated during the year’s first half, averaging around 4.3 percent, Dominguez said this is understandable for a fast-growing economy, and is expected to return within the target range set by the Development Budget Coordination Committee (DBCC) of 4.0 to 4.5 percent within the year with the likely consolidation of the peso’s exchange rate, easing of oil prices in the world market and stabilization of rice supply.

Dominguez said economies like the Philippines that are expanding at a fast pace tend to put pressure on supply, especially with a tax reform law–Tax Reform for Acceleration and Inclusion (TRAIN)–that has now increased the purchasing power of Filipino consumers.

Along with an inflation uptick brought about by rising demand, Dominguez said the massive importation of capital goods needed for the “Build, Build, Build” program has also increased the trade deficit and weakened the peso, while the rice situation pushed prices of the grain to abnormal levels.

“None of these factors are permanent infirmities,” Dominguez said at the “Tatak ng Pag-Unlad” Pre-State-of-the- Nation Address (SONA) Forum of the Cabinet’s Economic Development Cluster that was held at the Philippine International Convention Center (PICC) this morning.

“But without the tax reform and the infrastructure program that it is funding, we will continue to suffer from high cost of production and transportation,” he added. “With the tax reform and better infrastructure, the road to higher productivity, and thus lower and stable inflation is within reach.”

He said the bill that will liberalize rice imports by shifting trading from quantitative restrictions to tariffs is now in the final stages of legislation and when implemented into law would ensure adequate supplies of the grain, and thus normalize retail prices.

Moreover, the speedier implementation of the unconditional cash transfer (UCT) program for the poorest Filipino families will help ease inflation’s impact, which will be further improved with the implementation of a national ID system, Dominguez said.

Two years into the Duterte administration, Dominguez said among its achievements on the economic front are the following:

· Sustaining a gross domestic product (GDP) growth rate of 6.5 percent or better, with first quarter expansion this year of 6.8 percent. The biggest contributors to this GDP expansion, which is tied with China, are manufacturing which grew by 8 percent, industry by 7.9 percent, and services by 7 percent.

At this growth rate, and with strong investment inflows contributing to more inclusive growth, the government hopes to bring down the poverty rate from 21.6 percent in 2015 to only 14 percent by 2022, Dominguez said.

“This is the most important number we all hope to achieve. All development efforts will be meaningless if they do not translate into liberating our people from the curse of poverty,” he said.

· The enactment of the first package of the comprehensive tax reform program (CTRP) known as the TRAIN, which, for the first quarter of 2018, pushed the tax effort from 13.4 percent of GDP to 14.3 percent. This is the highest first-quarter tax effort the Philippines has ever achieved in the past 25 years.

From January to May, revenue collections grew by 19 percent over the same period last year, with the Bureau of Internal Revenue (BIR) improving its collection by 15.5 percent and the Bureau of Customs (BOC) increasing its collection by 31.2 percent over the same period in 2017.

Up to 30 percent of incremental revenues from TRAIN will go to social services to improve public health, upgrade the educational system and provide cash assistance to the poorest households, while the remaining 70 percent will help fund infrastructure investments.

Dominguez said the succeeding tax reform packages which will modernize investment incentives and lower corporate income tax rates, will empower consumers; produce conditions more conducive to job-creating investments, especially in the provinces; and ensure sufficient revenues to fund infrastructure modernization and expanded social services.

· Expenditures posted their fastest rate of expansion since the beginning of the Duterte administration. With continued growth, spending from January to May was 25 percent higher than the same period last year.

· Public spending for infrastructure rose to 5.4 percent of GDP in 2017 — slightly above the regional average. This is more than twice the share of GDP invested in our infrastructure over the last three decades.

In the first five months of 2018, national government spending on infrastructure reached P281 billion, representing an increase of 42 percent over the same period last year. These numbers are on top of private sector construction and public sector projects financed through Public-Private Partnerships (PPPs). The government expects infrastructure spending to reach 6.1 percent of GDP this year. By 2022, the share of GDP going to infrastructure investments will rise to 7.3 percent.

Thirty-five of the 75 strategic infrastructure projects under the “Build, Build, Build” program have passed all the required approvals and are ready to commence construction anytime soon.

Dominguez said this aggressive spending will close the infrastructure gap with the Philippines’ neighboring economies, attract industrial investments, stimulate domestic economic activity, ensure that every community and every island participates in the mainstream of national wealth creation, and enable the country to take full advantage of regional economic integration within the framework of the Association of Southeast Asian Nations (ASEAN).

· The agriculture and fisheries sector registered a remarkable 4 percent gross value added growth in 2017, reversing the 1.2 percent decline in 2016. In the first quarter of 2018, agriculture grew by 1.47 percent, with rice production rising by 9.4 percent to about 1.65 million metric tons (MT) last year.

For the first time ever, the Philippines is poised to export corn to neighboring countries as the government improves both hectarage and yield for the crop.

· Debt-to-GDP ratio held steady at 42.1 percent in 2017, which was the same rate as in 2016.

Dominguez said the government will continue to prudently manage its obligations as he expressed confidence that the rapid expansion of the domestic economy will enable a further decrease in government debt to 39 percent in 2022.

“Given the rapid expansion of our GDP, we will certainly outgrow our debt,” Dominguez said. “Those who raise the specter of a debt crisis arising from our use of official development assistance (ODA) to finance our infrastructure program are not reading the numbers well enough.”

· Foreign direct investment (FDI) inflows reached a record $10 billion, up by 21.5 percent from the previous year and almost double the rate in 2015. For the first quarter of 2018, FDIs totaled $2.2 billion in net inflows, an increase of 43.5 percent compared to the same period last year.

· The Department of Trade and Industry (DTI) has sustained its efforts in achieving the ambitious goal of putting the country in the top 20 percent in the ease of doing business rankings.

“With all our efforts at simplifying processing, speeding up approvals for startups, and reducing red tape, this should be an achievable goal,” Dominguez said.

· As of April this year, the Philippines’ unemployment rate has dropped to 5.5 percent, down by 0.2 percent from the same period last year with 625,000 jobs created. Of this number, 605,000 Filipinos were employed in manufacturing and construction.

· Total merchandise exports reached $62.87 billion in 2017, which represents a strong 9.53 percent growth over the 2016 performance

· Standard & Poor’s raised the country’s credit rating outlook from BBB stable to BBB positive, an upgrade which recognizes that the Duterte administration’s policy making settings support a track record of more sustainable public finances and balanced growth over the next 24 months.

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