The year 2019 was a difficult but fruitful one for the economy.
It started dismally with the delayed passage of the national budget for 2019, but ended with the timely passage of the 2020 budget, plus other tax measures on the side.
The lag in the approval of the 2019 budget, which was signed by President Duterte only in April, led the government to underspend by P1 billion a day on essential public infrastructure and services, causing, in turn, the economy to slow down.
However, it was one positive development after another since then on the economic front—from declining inflation and low interest rates to a sustained but slightly lower economic growth, a tourism boom, the improved pace of the “Build, build, build” (BBB) infrastructure program and lower rice prices, to name some.
The rice tariffication law helped stabilize prices of the staple. Although it came at the expense of reduced income for farmers, government efforts to alleviate their plight will eventually result in reduced production costs and make the agriculture sector competitive.
A private sector initiative involving Leyte farmers has cut down production cost to P6 a kilo, a rate already at par with major rice exporters Vietnam and Thailand. In contrast, the current production cost of local rice farmers is estimated at P12 a kilo.
A midterm review of the Duterte administration’s massive infrastructure program has also led to the tapping of private sector investors in capital-intensive projects such as airports and tollways.
This was a deviation from the original plan of relying solely on cheap official development assistance (ODA) loans from foreign governments and multilateral lenders.
The recast BBB program is now more realistic, ensuring a faster pace of implementation beginning 2020.Aside from the prompt passage of the 2020 budget, Congress gave the Filipino people a bonus when it also approved higher taxes on “sin” products, notably e-cigarettes and vaping gadgets, hopefully starting 2020.
Also approved by Congress was the removal of the value-added tax (VAT) on the sale of some 600 medicines for diabetes, high cholesterol and hypertension starting Jan. 1, 2020.
The latest economic numbers for 2019 have been encouraging and stir optimism for the coming year. Inflation as of November was at a low 1.3 percent, with the average for the first 11 months at 2.5 percent.
The Bangko Sentral ng Pilipinas’ forecast range for December is 1.8 to 2.6 percent. Likewise, the BSP’s benchmark interest rate is at a low 4 percent.
The country’s gross international reserves (GIR) were at a very healthy $86.23 billion as of November. The preliminary estimate of the full-year 2019 unemployment rate is 5.1 percent, the lowest in 14 years.
The national poverty incidence for full-year 2018 is at 16.6 percent versus 23.3 percent in 2015.The only negative development, insofar as the business community is concerned, was the late-flaring dispute between the government and the water concessionaires.
While Manila Water Co. and Maynilad Inc. have agreed to renegotiate their contracts, which the government claims are disadvantageous to the public, a number of investors and business observers such as research firm Fitch Solutions have raised concerns that the development may weaken investor confidence in the country, as it puts at risk of renegotiation all previous government-private sector deals, along with the contracts entered into by this administration when a new regime takes over.
Still, the business sector anticipates a number of economic milestones in the coming year, including the projected passage of the Corporate Income Tax and Incentives Rationalization Act or Citira, which seeks to lower corporate income tax from 30 percent to 20 percent and at the same time rationalize investment incentives; the Duterte economic team’s drive to get a grade-A investment rating from international debt watchers such as Moody’s; and stepped-up efforts to help modernize farming and buttress the agriculture sector.
If the administration were to be graded on the subject of the economy at least, this year it deserves to get high marks.