ING sees 6.7% GDP growth in Q4

MANILA, Philippines - Dutch financial giant ING Bank said the Philippines’ economic expansion likely eased in the fourth quarter of 2017 but is still enough to meet the 6.5 to 7.5 percent target set by economic managers.

Joey Cuyegkeng, senior economist at ING Bank Manila, said the economy likely registered a gross domestic product (GDP) growth of 6.7 percent in the fourth quarter of 2017, bringing the full-year performance at 6.7 percent.

He said the performance was fuelled by the recovery in agriculture from the effects of drought in 2016.

He also cited the government’s stimulus through higher spending and more intense infrastructure push, business spending growth at reasonable pace, and resilient household spending.

Cuyegkeng said the strong recovery of exports in line with faster global growth also contributed to the sustained strong economic activity.

The economists explained the enactment of the first package of the comprehensive tax reform package (CTRP) also boosted private consumption in the last quarter of 2017.

“The expected impact of excise taxes likely contributed to a faster Q4 economic activity as households anticipated higher costs in 2018,” he said.

President Duterte signed Republic Act 10963, otherwise known as the Tax Reform for Acceleration and Inclusion (TRAIN) Law, on Dec. 19, 2017, reducing personal income tax but imposes higher tax on fuel, cars, tobacco, and sugary beverages to fund infrastructure and development projects of the government’s Build Build Build program.

The initial package is seen to generate P90 billion in additional revenue to help partially finance the ramp up of infrastructure projects wherein the Duterte administration has committed to spend at least P8.4 trillion until 2022.

Cuyegkeng said the risk to the forecast is on the upside with the implied robust November and December government spending and improved manufacturing and industrial sector activity.

“There is good chance that the fast pace of economic activity since 2012 can be sustained with proper execution of government programs to stimulate the economy, a stable political environment, continued appropriate monetary policy stance (to tackle inflation and balance this with growth),” he said.

According to Cuyegkeng, the economic environment engendered by policies of the previous administrations has made it easy for the current administration to bring the country to a faster pace of growth.

“A favorable external backdrop with sustained global economic growth would also help despite tightening of monetary policy in major economies. Domestic policies to benefit a greater number of Filipinos would also allow for a faster pace of growth,” he said.