Bright prospects for the new year

Prospects remain bright for the Philippine economy in 2018, thanks to the continuity in fiscal and monetary policies and the enactment of the crucial first phase of the tax reform program of the Duterte administration.

Add to this the intentional focus on ramping up infrastructure spending, dubbed the “Build, Build, Build” program.

The year 2017 ended as another year of high economic growth, among the fastest in the region, with private and government economists expecting a gross domestic product (GDP) expansion of 6.5 percent to 7 percent.

Foreign agencies are already taking note of the positive outlook for the Philippine economy. Given the faster-than-expected GDP expansion in the third quarter, the Washington-based multilateral lender World Bank has raised its growth forecast for the Philippines to 6.7 percent in 2017, from the previous projection of 6.6 percent.

The revised growth forecast is still within the government’s target range of 6.5-7.5 percent. For 2018, the World Bank expects Philippine economic growth of 6.7 percent, still respectable but below the government’s target of 7-8 percent annual growth until 2022.

The World Bank noted that the continued global economic recovery has led to higher-than-expected export growth. The simultaneous recovery in major advanced economies and in developing economies is boosting global trade that, for the Philippines, means stronger import demand from the country’s main trading partners, such as the United States, Japan and Europe.

The World Bank also noted that economic growth in 2018 could be higher than 6.7 percent if investments would accelerate alongside the increased government spending on infra-structure.

Last month, the Asian Development Bank also raised its growth forecasts for the Philippines for 2017 and 2018 on the back of expectations that the Duterte administration’s massive infrastructure program would pick up steam.

The Manila-based multilateral lender jacked up its GDP growth projection to 6.7 percent for 2017 and 6.8 percent for 2018 from 6.5 percent and 6.7 percent previously.

It explained that this outlook assumed that growth in the government’s infrastructure program would accelerate as planned, supported by improvements in budget execution, with more large investment projects under way.

Japanese financial giant Nomura has likewise raised its 2018 growth forecast for the Philippines.

In a Dec. 7 report titled “Asia in 2018: Stretching the Sweet Spot,” Nomura said it was most upbeat on economic prospects for the Philippines, India and Indonesia in 2018.

In the case of the Philippines, Nomura said it still viewed the growth outlook as solid and raised its 2018 GDP growth forecast to 6.9 percent from 6.8 percent earlier, and from 6.7 percent in 2017, projecting a further rise to 7.1 percent in 2019.

Nomura expects the Duterte administration’s ambitious “Build, Build, Build” infrastructure program and comprehensive tax reform to sustain robust economic growth in 2018.

The key to sustaining economic growth starting in 2018 will indeed be the “Build, Build, Build” program, which is aimed at ushering in “a golden age of infrastructure” after decades of neglect.

Launched early in 2017, it will see the government rolling out 75 flagship infrastructure projects, with about half targeted to be finished within President Duterte’s term, alongside plans to spend up to P9 trillion on modern infrastructure.

The board of the National Economic and Development Authority chaired by the President approved in 2017 P1 trillion worth of infrastructure projects, and these will most likely go on stream in 2018.

With the expected jobs to be generated by these projects and the increased purchasing power to be triggered by the income tax cuts starting this month, the economy is truly looking forward to a prosperous new year.