Infra push, education focus seen driving Phl growth

The Duterte administration’s focus on infrastructure and education would boost economic growth over the long term, BMI Research said.

In its latest economic analysis titled “Government’s focus on infrastructure upgrade positive for growth,” BMI Research said higher infrastructure spending would improve the business environment as well as the competitiveness of the Philippines.

“Given the severity of infrastructure constraints, we believe that government efforts to boost infrastructure spending, aided by a more transparent public tendering process, will help to significantly improve the business environment and competitiveness of the economy, which will in turn support growth in the coming years,” it said.

It pointed out the Philippines has long suffered from poor infrastructure attributable to the lack of public and private investment due to a poor business environment and corruption.

“More recently, prudent efforts by the previous Aquino administration to pare back public debt, improve government procurement, and strengthen macroeconomic stability had also acted as a drag on infrastructure investment,” BMI Research said.

The Philippine economy ranks a meager 57 out of 138 in terms of its overall competitiveness, dragged down by the infrastructure sub-component ranking of 95, according to the World Economic Forum Global Competitiveness Index report in for 2016/17.

Moreover, business executives tagged inadequate supply of infrastructure as the second most problematic factor in doing business in the country.

President Duterte certified the proposed 2018 budget as an urgent matter allowing Congress to expedite its enactment. The approved budget for next year is 12.4 percent higher than this year’s allocation of P3.35 trillion.

“Although we regard the fiscal plan as overly ambitious, with the government likely to miss both its revenue and expenditure targets, we expect the government’s focus on improving infrastructure and education to be supportive of growth over the short and long term,” it said.

The research arm of the Fitch Group sees the Philippines booking a budget shortfall of 2.7 percent this year and 2.9 percent next year as the share of revenue to gross domestic product is seen to reach 15.5 percent and expenditure to GDP to amount to 18.4 percent next year.

In line with the administration’s plan to tackle poverty, develop the Filipino workforce, and promote economic growth, the highest budget allocations next year would go to the Department of Education with P691.1 billion and the Department of Public Works and Highways with P643.3 billion.

The government intends to spend between P8 trillion to P9 trillion for its massive infrastructure program. This was in line with efforts to raise infrastructure spending as a share of GDP to 7.4 percent by 2022 from 5.4 percent this year.

Economic managers see the GDP expanding between seven and eight percent next year from 6.5 to 7.5 percent this year.