Philippines no longer Asia’s ‘Sick Man’

INCREASED government spending, propelled by the Duterte administration’s “Build, Build, Build” program, and strong household consumption drove the Philippine economy to grow by 6.8% in the first quarter of the Fiscal Year of 2018 — surpassing World Bank’s forecast of 6.7% and close to the lower end of the government’s target of 7% to 8%. According to Department of Budget and Management (DBM) Secretary Ben Diokno, this growth rate makes the Philippines one of the fastest-growing economies in the fastest-growing region in the world.

According to the Department of Finance (DOF), National Government revenue rose by 16.4% in the first quarter of 2018 as the first phase of TRAIN took effect, almost doubling nominal GDP growth which registered 9.7% during the quarter.

Due to improved tax administration, tax revenues grew by 18.2% with Bureau of Internal Revenue collections rising by 14.2% and Bureau of Customs collections rising by 24.7%.

In the first quarter, revenue effort rose by 0.91 percentage point and tax effort also increased by 1.03 percentage point — the highest first quarter tax effort ever achieved.

Expenditures grew by 27.1%, also outstripping the 9.7% nominal GDP growth due to the estimated 40.0% increase in capital outlays. Expenditure effort rose by 2.73 percentage point to 20%, the highest first quarter expenditure effort since 2003.

According to the Philippine Statistics Authority, Government Final Consumption Expenditure (GFCE) grew by 13.6% in Q1 2018, a marked improvement from the 0.1% growth in the same period of 2017.

The higher government spending is directly correlated with the Duterte Administration’s Build, Build, Build program. Data on National Government Disbursements show a surge in Infrastructure and Other Capital Outlays by 33.7% year on year, reaching 1157.1 billion. In fact, according to DBM, actual infrastructure disbursements exceeded the program by 113.7 billion, or 9.6%, in the first quarter of 2018.

The Gross Value-Added in Public Construction also showed optimistic results as it grew by 25.1% in the first quarter of the year — higher than the 2.1% growth recorded in the same period of 2017.

This is a result of the reforms, strategic policies imposed in agencies like the Department of Public Works and Highways, Department of Transportation and Bases Conversion and Development Authority to further improve infrastructure spending.

In DPWH, Secretary Mark Villar integrated physical and financial accomplishment to the existing monitoring system to ensure real-time reporting and revisited level of authorities provided based on performance and absorptive capacity. It also strictly imposed calibrated sanctions and penalties on contractors with negative slippages and strictly enforced uniform guidelines on suspension and blacklisting of contractors or suppliers or consulting firms.

Interestingly, the First Quarter 2018 Social Weather Survey, done March 23 -27, found that 30% of Filipino families, or one out of three, escaped poverty (18% usually non-poor, 12% newly nonpoor) and that hunger has decreased by 6%, from 15.9% or an estimated 3.6 million families to 9.9% or an estimated 2.3 million families.

Clearly the Philippine economy remains strong and will continue to grow with strong macroeconomic fundamentals backed by tax reform and the Build, Build, Build program.