The new administration’s economic team expects the economy to expand by 6.5 to 7.5 percent this year, with the country seen to have the highest growth rate in the Asean+3 region this year and next.
Finance Secretary Benjamin Diokno said in a briefing with reporters at the Malacanang Palace yesterday the economy may post an even faster double-digit growth in the second quarter vis-a-vis the first quarter expansion of 8.3 percent.
“We expect the economy to grow by 6.5 to 7.5 this year. The consensus is this will be the highest growth rate among all Asean+3 countries this year and next year…. then it will be followed by a growth rate of 6.5 to 8 percent from year 2023 to year 2028,” Diokno said.
“Q2 2022 will hit double-digit growth. That’s my bet,” he added.
The new estimate for this year, however, is slower than the Development Budget Coordination Committee’s (DBCC) projection of 7 to 8 percent during its meeting last May.
The DBCC then revised the full-year forecast from the previous 7 to 9 percent even as the economy expanded by a strong 8.3 percent in the first quarter of the year.
“…(our full year estimate) is still a little conservative. Remember the first quarter is (8.3 percent). The second quarter I think will be even higher, remember we had a surge (in COVID-19 cases) in January 2022,” Diokno said.
The finance chief said the government aims to reduce the poverty rate to 9 percent by 2028.
“On the debt, it be down to 60 percent by 2025. Right now, it’s around 63 percent. So it will be slowly tapering off to 60 percent by 2025. And then on the Build, Build, Build program, we are committed to spend some 5 to 6 percent of GDP (gross domestic product) for infrastructure annually between 2023 to 2028,” Diokno said.
He said under the administration’s medium term fiscal framework, the government also aims to achieve the upper middle-income status, or a $4,046 per capita income for Filipinos, by the end of the President’s term.
“This framework will set the tone or will be our game plan for the next six years. The desire is to reduce the deficit, which ballooned during the pandemic to around 9 percent deficit-to-GDP ratio to around 3 percent by 2025 or 2026,” Diokno said.
Inflation explained
Meanwhile, Diokno said the President’s disbelief at the 6.1 percent June 2022 inflation rate figure was “misunderstood.”
“He was referring to it as a full year figure, when in fact, the year-to-date average inflation rate is actually 4.4 percent. So that’s what he has in mind. In practice, the BSP (Bangko Sentral ng Pilipinas) projects the monthly inflation rate a few days before the official announcement. The inflation rate of 6.1 percent for June 2022 is within the BSP’s forecast range of 5.7 to 6.5 percent for the month,” Diokno said.
“Inflation is driven mainly by the elevated world price of oil and it affected the whole world.
We will continue the grant of the fuel subsidy to the affected parties. The other measure is that we will continue the importation of products which are in short supply, such has been done before and of course, we will try to improve the transportation and logistics sectors,” he added.
Diokno said the annual average inflation for this year will be in the neighborhood of 5 percent, and it will be down to 4.2 percent next year and 3.3 percent by 2024.
Subsidies to continue
Diokno said the distribution of the first tranche of fuel subsidies worth P6,500 for public utility vehicle operators and drivers is expected to be completed in the first week of July.
“Considering that oil prices are expected to remain elevated in the near term, the government will expedite the release of the second tranche of subsidies for the transport sector,” Diokno said.
“President Marcos will continue the fuel subsidy that was put in place by the former President Duterte. This will be funded from the windfall tax from fuel oil. Rest assured the recent acceleration (in) inflation will be arrested by the government through addressing constraints in the food, energy, and transportation and logistics sectors,” he added.
Diokno said the current administration will also push for the passage of the two remaining tax packages under the Duterte administration’s comprehensive tax reform program.
“… it’s supposed to be revenue neutral, but it will simplify a lot the tax system, so we will push for that. We expect that to be approved before the end of the year, and it will be implemented next year,” he said.
He added he is also supportive of tax on digital services.
“If you were going to buy it from the regular stores, it is taxed, why not in digital. I think in the sense of fairness there should really be tax,” Diokno said.
No more hard lockdowns
Amid the continued reopening of the economy, Diokno also said the government will now do away with hard lockdowns.
“I think no country now, except maybe China, will go into general lockdowns. I think we have now graduated from being pandemic to endemic. We have to live with the virus and most of us are vaccinated anyway,” Diokno said.
“In fact, that is also key to the 100 percent opening of the face-to-face classes. The plan is it will start opening up by August, and then 100 percent by November,” he added.
