Stakeholders from the government and the private sector agree that recent economic advancements are sustainable and that the targeted gross domestic product growth this year of 7 percent to 8 percent is attainable, if inflationary and labor issues are resolved.
In a statement Thursday, Department of Finance Secretary Carlos Dominguez III said the country has managed to be one of the fastest growing economies in Asia and is making its growth more inclusive as the government has enough fiscal space to accelerate expenditure on infrastructure and human capital development.
Dominguez’s statement came after the announcement of the country’s 6.8-percent GDP growth for the first quarter of 2018. He noted that the Build Build Build Program and other poverty-reduction initiatives of the administration will also help the country achieve its high growth targets.
“President Duterte’s commitment to attaining an investment-led and inclusive economy via a massive public spending strategy would usher in what the Asian Development Bank has forecast to be the ‘golden age’ of the Philippines’ economic growth,” the finance chief said.
Likewise, Trade Secretary Ramon Lopez has welcomed the 6.8-percent GDP growth in Q1 2018. “We really expect this growth momentum, and I believe it would even be stronger in the next quarters as we see the full benefits of reforms, infrastructure build up, investment influx, and manufacturing resurgence program,” Lopez told the Philippine News Agency (PNA) in a text message.
It was noted that the industry sector surpassed the growth of services at 7.9 percent in Q1 2018. Services expanded by 7 percent, while agriculture increased by 1.5 percent.
Moreover, IHS Markit Chief Economist for Asia Pacific Rajiv Biswas said in an e-mail that the government’s ambitious plan to build new ports, airports, roads and railways, and power stations will further boost the country’s economic growth by 2018.
But the rapid infrastructure spending would also drive up imports of capital goods, which is likely to widen trade deficit due to sluggish exports growth and increasing oil import costs because of rising world oil prices. “Rising inflation pressures in Q1 have not yet impacted significantly on the near term growth outlook.
However, a key risk to the positive outlook for the Philippine economy is if world oil price rise significantly above USD80 (per barrel) for Brent crude. Higher oil prices would also result in a widening trade deficit, which could increase the drag on GDP growth in second half of 2018 from net exports and also put downwards pressure on the peso,” Biswas added.
For Philippine Exporters Confederation President Sergio Ortiz-Luis, the Q1 2018 GDP growth “should have been better and expected to be better.”
Ortiz-Luis said in a phone interview that the slow expansion of the agriculture sector has not been able to supply the exports demand that could have pushed GDP growth to a higher level. “Some companies have orders but they don’t have supply. Others have slowed down because of the uncertainty on contractualization issue,” the Philexport executive noted.
He added that small and medium enterprises, as well as multinational companies, have been holding their expansion plans due to uncertainties on labor issues. “Because they are waiting, some of them are actually moving out. They are expanding elsewhere. They will expand here until they are sure of the outcome of the issue,” said Ortiz-Luis.
Meanwhile, International Chamber of Commerce Philippines Founder Francis Chua said the improving relations of countries in the region is expected to bring growth prospects in the coming months that will also benefit the Philippine economy.
“The balance diplomatic policy of our President contributes to the strong economic growth of our country. With the relief of tension in Korean Peninsula, we can expect greater growth in this region in general, and the Philippines in particular,” Chua said.