DOF sees faster GDP growth in H2

MANILA, Philippines — The Department of Finance (DOF) remains confident the economy would grow faster in the second half of the year on the back of larger investment inflows and exports, higher infrastructure expenditures, and improved revenue efforts.

Finance Secretary Carlos Dominguez III said during the Kapihan sa Manila Bay forum the economic numbers for the second semester of 2018 remain “very promising” and the slowdown in the second quarter was a mere “exception that does not indicate a medium-term trend.”

The country’s gross domestic product (GDP) growth in the second quarter eased to its slowest pace in three years at six percent from the revised 6.6 percent in the first quarter, bringing the average to 6.3 percent in the first half of the year.

Economic managers through the Development Budget Coordination Committee (DBCC) had penciled a GDP growth of between seven and eight percent this year from 6.7 percent last year.

“Domestic demand remains robust. Investment flows grew in the first half of this year. Our exports of goods and services recovered to a double-digit growth of 13 percent in the second quarter from 6.5 percent in the previous quarter,” Dominguez said.

In terms of expenditure, he said the government’s effort improved to 19.47 percent, which is the highest first semester expenditure effort since 2003.

Dominguez said the government’s revenue effort also improved by 1.47 percentage points to 17.12 percent in the first semester, the highest since 1946.

The tax effort of 15.23 percent is also the country’s highest first semester tax effort, said Dominguez in pointing out that this accomplishment is the result of the implementation of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion Law and tax administration improvements in the Bureau of Internal Revenue and Bureau of Customs (BOC).

“Our tax effort is now at par with the best-managed economies in the region. It is a tax effort we can very well sustain, especially with the subsequent packages of the comprehensive tax reform program now being deliberated (by the Congress),” Dominguez said.

These tax reform packages include Package 1B, which covers tax amnesty and adjustments in the motor vehicle user charge; Package 2, which seeks to reduce corporate income tax rates closer to the regional averages and modernize the fiscal incentives regime to attract the industries of the future and benefit micro, small and medium enterprises; and Package 2 plus, which contains additional excise taxes on tobacco and alcohol products as well as an increase in the government’s share from mining.

Others include Package 3, which covers reforms in property valuation to make the system more equitable, efficient and transparent; and Package 4, which aims to rationalize capital income taxation to address the multiple rates and different tax treatments and exemptions on capital income and other financial instruments.

“The President has stressed the urgency of passing the rest of his tax reform program in his State-of-the-Nation Address and we hope that Congress would heed his call for the swift approval of the remaining packages,” the DOF chief said.

  In seeking public support for the rest of the CTRP packages, Dominguez said that “once completed,” they “will ensure a healthy revenue flow, a more efficient investments-led economy, and a more inclusive growth process.”

  “We will finally have a modern revenue system fit to support a strong emergent economy,” he added.

Dominguez, who is also a member of the Monetary Board of the Bangko Sentral ng Pilipinas (BSP), said inflation would ease to the original forecast of four to 4.5 percent set by the DBCC by the end of the year after leaping to a five-year high of 5.7 percent in July from 5.6 percent in June.

“The central bank has a very good capacity to analyze economic trends and figures. All the decisions made by the MB are data driven so we look at the data and the MB together with the chairman decide on the data so as the BSP Governor said we will look at the data,” he said.

Further stimulating the economy in the second half is the Duterte administration’s Build Build Build program that accounted for government spending of P352 billion in the first six months of 2018, representing an increase of 41.6 percent over the same period last year and 4.3 percent above the disbursement target.

“The massive infrastructure program will drastically alter the Philippine economic landscape. It will create over a million jobs per year. It will bring our logistics backbone up to par with a region celebrated for dynamic growth,” Dominguez said.