By Elijah Joseph C. Tubayan, September 30 2018; Business World
Image Credit to The Philippine Star
THE GOVERNMENT is still bullish on economic growth prospects despite downgrades to the economic outlook issued by multilateral institutions and ratings agencies.
Socioeconomic Planning Secretary Ernesto M. Pernia said macroeconomic fundamentals remain sound.
“We understand the concerns of ADB (Asian Development Bank) and Fitch, but we remain confident about the strength and stability of the country’s macroeconomic fundamentals,” Mr. Pernia, who also heads the National Economic and Development Authority (NEDA), said in a statement over the weekend.
The ADB last week revised its gross domestic product (GDP) forecast for the Philippines to 6.4% and 6.7% for 2018 and 2019, respectively, from its previous 6.8% and 6.9% estimates.
In August, Fitch Solutions, a unit of the Fitch Group, also downgraded the outlook to 6.3% from 6.5% earlier.
The International Monetary Fund on Friday also cut its forecast to 6.5% for this year from 6.7% initially, although it maintained its 2019 estimate of 6.7%.
“Our economy has been strong, growing by an average of 6.4% in the last eight years. This is the fastest since the mid-1970s,” said Mr. Pernia, attributing the growth performance to robust domestic demand, the rising contribution of investment and the industry sector, and high growth in total factor productivity.
Growth was weaker than expected in the second quarter at 6%, from 6.6% in the first quarter and a year earlier, due to the weak performance of the agriculture sector, and slower growth in exports and services.
“While this is slower compared to that of last year, we have strong enough macroeconomic fundamentals to weather external risks. Our fiscal policy remains prudent, our external position is supportive of economic growth, we have a stable banking system, and measures to address high inflation are currently being prioritized,” Mr. Pernia said.
As of the first half, the government’s overall revenue and expenditure both grew 20% year-on-year, and were 8% and 2% above target, respectively, keeping the deficit 27% below program.
The balance of payments position however is at a $3.3 billion deficit, more than double the $1.5 billion target.
Aside from the twin deficits, the economy is also saddled with high inflation, which at 6.4% in August was the highest in nine years.
“Besides short-term measures, we also need to look at long-term solutions like giving farmers access to farming technology and developing high-yielding varieties of rice and other vegetables. Thus, we are calling for the urgent passage of the Rice Tariffication bill,” Mr. Pernia said.
The bill hurdled the House of Representatives in August, and is currently pending in the Senate.
The government “continues to ramp up investments in infrastructure to improve connectivity and lower the cost of doing business in the country,” according to the statement.
President Rodrigo R. Duterte on Monday issued administrative orders to boost the food supply and ease its distribution, including lifting non-tariff trade barriers, cutting red tape in importation, setting up of public outlets and cold storage facilities.
Mr. Pernia also noted that the government is easing restrictions on foreign investment, as the Economic Development Cluster has approved the draft of the 11th Regular Foreign Investment Negative List (RFINL), “which will be the least restrictive among all FINLs,” according to NEDA. The list is awaiting Mr. Duterte’s signature. — Elijah Joseph C. Tubayan