High, Inclusive Growth Plan Starts Picking Up Steam

Finance Secretary Carlos Dominguez III said the Gross Domestic Product (GDP) expansion of 6.5 percent in the second quarter is “solid proof” that the government’s “unparalleled” investment strategy anchored on the “Build, Build, Build” program has started to “pick up steam,” and is on course to steering the Philippine economy towards a growth path of 6.5 to 7.5 percent for 2017.

Dominguez expressed the hope that the Senate would help the government meet this high growth target by passing soon enough—and in full—its own version of the comprehensive tax reform package, which would help spell the financial sustainability of its accelerated spending on infrastructure as well as on human capital formation and social protection for the poor and other vulnerable sectors.

“This is solid proof that the year-old Administration has been making the right moves at the right time in pursuit of President Duterte’s socioeconomic agenda on high—and inclusive—growth,” said Dominguez in response to the Philippines Statistics Authority (PSA)’s announcement today (Aug. 17) that the GDP grew by 6.5 percent over the April-June 2017 period.

According to the PSA, the second quarter growth is slightly up from the 6.4 percent expansion in the first quarter of this year, and is faster than Vietnam’s 6.2 percent and Indonesia’s 5.0 % percent during the same three-month period.

“With the upturn in state spending beginning in the year’s second quarter, President Duterte’s unparalleled investment strategy anchored on the ‘Build, Build, Build’ program has started to pick up steam,” said Dominguez, thereby raising hopes that the government could well meet its growth targets of 6.5 to 7.5 percent this 2017 and a higher 7 to 8 percent in 2018.

“We are optimistic that the accelerated state spending and project implementation would keep the Philippines in the club of Asia’s fastest-growing economies as it sustains the momentum for the government-set expansion rate of 6.5 to 7.5 percent this year and a higher 7 to 8 percent in 2018 and onwards,” he said. “‘Build, Build, Build’ is seen to induce the multiplier effects on the domestic economy of more jobs, greater investments and improved connectivity across the regions.”

Under its expansionary fiscal policy, the Duterte administration aims to raise infrastructure spending from an equivalent of 5.4 percent of GDP this year to 7.3 percent of GDP by 2022.

It has set aside P1.097 trillion in 2018 to support the “Build, Build, Build” program

alone, from the adjusted level of P.858.1 billion this year.

Said Dominguez: “Now is the right time for the government to spend big on infrastructure, human capital and social protection as we take full advantage of both our demographic strengths and the opportunities for inclusive, investment-driven growth presented by soft global oil prices and a low-interest rate regime, our investment-grade credit ratings and benign debt conditions, and marked improvements in the ease of doing business in the country.”

“Hence, we are hoping that our senators share our confidence in the robust growth prospects of our economy and would pass soon enough—and in full—its version of Package 1 of the TRAIN (Tax Reform for Acceleration and Inclusion Act), which the House of Representatives already passed in May this year,” he said.

Senate President Aquilino Pimentel III has filed Senate Bill No. 1408 as his version of the TRAIN, which the House overwhelmingly approved last May 31 as House Bill No. 5636. The Senate ways and means committee chaired by Sen. Juan Edgardo Angara has been holding public hearings on this tax reform package.

Dominguez noted that the Department of Finance’s endorsement of the TRAIN bill to both chambers of the Congress has boosted investor confidence in the economy, as shown by the positive forecasts on the country’s growth prospects by foreign and local business groups as well as by prominent financial institutions here and overseas.

He pointed out that apart from making the tax system simpler and fairer, especially for wage earners plus low- and middle-income families, the TRAIN would help raise enough revenues for the Duterte administration to sustain its aggressive spending on infrastructure and on social services such as education and healthcare. (DOF)