Gov’t confident to achieve 2016 growth target

The Department of Finance (DOF) is confident that the Philippines can achieve its economic growth target this year and sustain that robust pace in the coming years.

Given its strong economic performance in the first semester, Finance Secretary Carlo. G. Dominguez III said the country only needs to sustain an above five percent expansion in the second half to hit the six percent to seven percent goal 2016.

While acknowledging that the new government’s tax reform plan could lead to a temporary erosion in revenues, Dominguez assured that countermeasures would be put in place for the remainder of the year.

In the long run, Dominguez said the government could pump more funds into the state coffers to offset such projected revenue loss.

The Duterte administration plans to cut personal and corporate income tax rates, which is among the highest in the region, to increase tax compliance and grow a robust middle class.

“This is the 70th straight quarter growth since the Asian financial crisis, the 18th straight quarter above five percent, and we’re very happy that this growth has been strong and we foresee that it will continue to be strong through the coming years,” Dominguez said.

“Most likely we will hit our targets for the year. We need only to grow 5.1 percent for the next two quarters to achieve between six percent and seven percent for the whole of 2016,” he added.

Besides implementing countermeasures, Dominguez said lowering corporate income tax rates would help attract foreign investments and build capital, along with government initiatives to relax foreign ownership limits by amending the Constitution.

“We are preparing our tax reform program that will actually lower tax rates for individuals as well as corporations,” he said. “However, we have countermeasures to cover those erosions in revenue, and they will certainly, we’ll end up with more revenues in the long run.”

Dominguez earlier said the government is “eyeing higher oil excise duties plus fewer value added tax (VAT) exemptions, rationalizing other fiscal incentives, enhancing collection by revenue-earning agencies, and improving the ease of doing business in the country.”

With the President supporting moves to amend the Constitution, “among the items that he has put on the table are liberalizing the foreign investment laws in our country,” Dominguez said.

“We are looking towards increasing the amount of allowed foreign investments in nationalized industries, and we believe that will be a boost to our foreign direct investments,” he added.

The finance chief said he was “very happy with the strong numbers” reported by the National Economic and Development Authority (NEDA).

“These are the highest secondquarter and first-half numbers since 2014. We hit 7 percent for the second quarter and 6.9 percent for the first half of 2016,” Dominguez noted.

Earlier, Dominguez said last quarter’s seven percent gross domestic product (GDP) growth would enable the new government to keep its growth targets on track for the rest of the year and in 2017.

Dominguez said that with the growth momentum of the Philippine economy remaining strong, the Duterte administration would build on previous efforts to effectively implement its 10-point socioeconomic agenda.

The finance secretary acknowledged the “good policies of both the Aquino and Arroyo administrations to sustain the country’s strong macroeconomic fundamentals that made this growth possible.”

“But we still have a big task ahead of us to lower the poverty rate that has been stuck at 26 percent of our population,” he added.

Besides investments in infrastructure and education, Dominguez said the government will also fully implement the Reproductive Health Law to realize its goal of reducing the poverty rate from the current 26 percent to 17 percent by the time President Duterte steps down in 2022.