Economy...

From B3 Revenues from the first package of the tax reform agenda would be used to fund the administration’s ambitious infrastructure program as well as social services that would blunt the effects of higher tax on consumer goods.

Combined with the expected rise in world oil prices this year, FMIC said this is expected to drive up inflation to a range of 3.5 to four percent this year. Officials, however, expect this would be manageable as it is still within the central bank’s target of two to four percent.

University of Asia and the Pacific economist Victor Abola said TRAIN would generally cause a 0.6 percent rise in domestic inflation this year. As the law is fully implemented in the coming years, inflation is seen to rise to between seven to eight percent by 2022.

With the expected surge in the consumption of goods and services alongside higher takehome pay, FMIC sees the industry sector growing at a faster pace of 8.7 percent in 2018 and the services sector at 7.1 percent.

Infrastructure spending as a percentage of the GDP is seen growing 6.1 percent this year from 5.3 percent last year. FMIC sees government spending in infrastructure rising to 7.4 percent of GDP by 2022.

“Infrastructure spending is crucial for faster growth this year,” he said.

On the external front, exports are expected to continue to grow in line with improvements in the global economy led by upticks in the US, European Union and japan — all of which are major traditional markets for Philippine goods.

FMIC said the peso would remain under pressure as the US economy continues to recover, leading to the strengthening of the dollar. Because of this, the local currency is expected to trade weaker at 52.50 against the dollar.

Abola said that while this would hurt imports, this would not cause a major problem for the economy as most imports are capital goods for manufacturing. A weaker peso is also beneficial to exports and domestic consumption because of huge OFW remittance inflows.