October 20, 2017, 9:17 am
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Gov’t spending crucial to sustained growth

The outlook for the country’s economic growth remains strong  despite the slowdown in the first quarter this year, officials said yesterday.

But they noted the importance of government spending in infrastructure as key in sustaining growth.

“Our first quarter performance bodes well for the economy as it is broadly in line with our target of 6.5 to 7.5 percent for this year. It is, however, lower than desiredly expected, and for this we were somewhat downcast because we were expecting something like around the midpoint of growth range 6.5-7.5 percent. But this can be explained by the base effects: that is, growth last year was high due to election spending, as you would already know by now, the impact of which has already dissipated,” said Planning Secretary Ernesto Pernia.

Pernia said it is important to ensure  government spending for both consumption and investment remains within the fiscal program, which is critical to sustain the growth momentum. 

“With the steady unfolding of the Build Build Build program in the coming months, we expect construction activities and public spending to pick up sharply, consistent with the government’s aim to spend 5.3 percent of GDP this year for infrastructure and up to 7.4 percent by 2022,” Pernia said.

Pernia said the administration’s first major infrastructure project, the Clark International Airport upgrade, is expected to start implementation by the latter part of the year. 

 “But we remain on the lookout for external downside risks that may include market volatility from continuing US interest rate normalization, geopolitical tensions in various regions, and the possible rise of protectionist sentiments in Western countries,” said Pernia.

He said government remains  cautious and stands ready to take measures to counter the effects of El Nino phenomenon, which may include continuous production support, timely importation, and the distribution of seeds. 

“We also need to ensure that inflation will remain modest for the next three quarters to keep demand strong. Our inflation in the first quarter at 3.2 percent was pretty high compared with first quarter of last year,” Pernia added.

Amando Tetangco, Bangko Sentral ng Pilipinas (BSP) governor, said d  BSP will continue to provide an operating  environment that would support non-inflationary domestic demand,  adding that monetary officials “will continue to calibrate our policy levers so these provide the appropriate incentive structure for businesses to plan with risk-adjusted returns in mind.”

Diwa Guinigundo, BSP deputy governor, said the challenge is to further strengthen infrastructure spending to help boost jobs and increase income as well as extend urbanization and economic activities in key areas from Luzon to Visayas and Mindanao.  

“Legislative action on the tax reform package is critical so that infra and econ activities are sustained with actual public revenues. Productivity and efficiency enhancements are critical today to ensure our competitiveness and sustain the growth momentum,” Guinigundo said.

Carlos Dominguez III, secretary of the Department of Finance, expressed optimism  the Philippines remains on track to meet its full-year growth target of 6.5 percent to 7.5 percent.

“…growth remains steady and could gain momentum for the rest of the year,” said Dominguez, “partly as a result of this Administration’s ‘Dutertenomics’ strategy to stimulate economic activity and achieve financial inclusion for all Filipinos in the long haul via an aggressive expenditure program on infrastructure, human capital formation and social protection.” 

Dominguez said he hopes legislators could help Malacañang sustain the growth momentum this year and onwards “by acting soon enough on the first package of the CTRP (Comprehensive Tax Reform Program) that is now pending in the Congress, as it will help guarantee a steady revenue stream for the Duterte administration’s high—and inclusive—growth agenda.”

“Solid macroeconomic fundamentals plus strong domestic consumption and investment sentiment have enabled, and will continue to enable, our country to sustain its pace as one of the world’s fastest-growing economies on the Duterte watch despite the ever-changing global market conditions,” Dominguez said.

Jomari Lacson, head of equities research at ATR Trust Corp., said an “acceleration” in the growth should be expected more by next year once the government finally pushes through with its infrastructure spending plan. 

Joey Cuyegkeng, ING Bank senior economist, said economic activity for the full year 2017 could easily achieve the lower end of government’s target.

“We are reviewing our full year forecast of 6.3 percent for a possible upward revision. We expect second quarter growth to also show slower year-on-year growth but would likely accelerate as government spending and infrastructure projects gather momentum,” Cuyegkeng said.

Cuyegkeng noted GDP is likely to be moderately slower in the second quarter “but an acceleration is expected in the second half.”

Presidential spokesman Ernesto Abella shared the observation that the country is on the right track towatds growth.

“There are cycles of development... We are not not growing, we are growing,” Abella said.

Malacanang also welcomed the 11.8 percent hike in personal remittance and 5.28 percent hike in agricultural production in the first quarter ofthe year.

Abella said the remittance hike “underscores the strong demand for the skills and the competence of the great Filipino workers.”

The BSP said the personal remittances from overseas Filipinos grew by 8.1 percent year on year after the total personal remittances for the first quarter of 2017 amounted to $7.7 billion.

Abella, meanwhile, attributed the agricultural production growth to favorable weather conditions, the proper application of fertilizer, the availability of water in irrigated farms and adequate amount of rainfall in the first quart of the year. (R. Castro and J. Calapati) 
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