IMF sees 2017 PHL growth on target

THE INTERNATIONAL Monetary Fund (IMF) expects the Philippines to remain among Asia’s growth leaders in 2017 on the back of increased public spending and a recovery in exports, its country official said, even as he stressed the need to legislate tax reforms to support the government’s aggressive fiscal plans.

IMF country representative Shanaka Jayanath Peiris said the multilateral lender hiked its Philippine gross domestic product (GDP) growth forecast for this year to 6.8% from the 6.7% it had expected as of September 2016.

If realized, the IMF’s projection for this year would fall within the government’s 6.57.5% target for GDP growth.

The government in November last year reported a three-year-high 7.1% third-quarter expansion on the back of a continued improvement in state spending and investments that added to the mainstay of strong household consumption.

The third quarter, in turn, fueled GDP growth to average seven percent in 2016’s first nine months — partly on a boost from spending related to the May national elections — already at the top end of the government’s 6-7% full-year goal.

The Philippine Statistics Authority is scheduled to report full-year 2016 growth data on Jan. 26, and economic managers have said that GDP likely grew at a pace closer to 7%.

“The Philippines is expected to maintain its strong GDP growth momentum registered in 2016 into 2017 at a pace of about 6.8%, supported by a fiscal stimulus as the budget deficit widens towards the 3% of GDP target. Exports are also anticipated to recover reflecting the pickup in global growth and commodity prices,” Mr. Peiris said in an e-mail.

Placed together with neighboring Malaysia, Singapore, Thailand, and Indonesia, the IMF projects the so-called ASEAN-5 countries to clock an average 4.9% expansion this year, coming from an earlier 4.7% estimate, the IMF said in the January edition of its World Economic Outlook Update.

World output growth is projected to pick up to 3.4% this year from 3.1% in 2016.

The Philippines is also expected to benefit from an expected recovery in global demand, particularly through trade, with the IMF seeing merchandise exports to recover from a slump the previous year.

Overseas sales of Philippine goods dropped 5.2% year on year to $51.361 billion in the 11 months to November, against the government’s 3% growth target for the entire 2016.

Looking ahead, the IMF said proposed tax reforms would play a key role in supporting the government’s plan to pour more funds on infrastructure.

“The medium- term growth outlook would depend on the more uncertain global economic outlook and the passage of the administration’s tax reform proposals that would be important to continue to raise public infrastructure investment and social spending to benefit from the demographic dividend,” Mr. Peiris added.

He was referring to the comprehensive tax reform package drafted by the Finance department for Congress’ consideration and approval, which seeks to bring down personal and corporate tax rates while also introducing several revenue- raising measures such as higher excise taxes on fuel and luxury goods, among others.

If passed, the reforms will raise an additional P163 billion by 2018, according to Finance Secretary Carlos G. Dominguez III.

Economists have said that timely enactment of these measures will be critical for the delivery of public infrastructure projects and social services.

The Duterte government is looking to allot as much as P9 trillion over the next six years for state-funded infrastructure programs, which when delivered is expected to sustain GDP growth at 7- 8% annually from 2018 to 2022.