Finance Secretary Benjamin Diokno is confident that the economy will continue to expand this year, consistent with analyst consensus that projects the Philippines to post the highest growth rate in the ASEAN+3 region (the Association of Southeast Asian Nations plus Japan, China, and South Korea) despite challenging global economic conditions.
The ASEAN+3 Macroeconomic Research Office (AMRO) revised upwards its 2022 gross domestic product (GDP) growth projection for the Philippines from 6.5 percent to 6.9 percent, citing the reopening of the economy, domestic consumption, and infrastructure investment as key drivers of economic growth in the country, based on its July quarterly update of the ASEAN+3 Regional Economic Outlook (AREO) Report.
“We’re very optimistic about the Philippines… 6.9 percent is among the highest growth rates in the [ASEAN+3] region,” AMRO Chief Economist Hoe Ee Khor said during a virtual press briefing.
For 2023, AMRO kept its growth forecast for the Philippines at 6.5 percent, similar to Vietnam’s growth rate and the highest in the region.
At the 182nd Development Budget Coordination Committee (DBCC) Meeting on July 8, 2022, the country’s economic managers adjusted the Philippines’ GDP growth rate assumption for this year from 7-8 percent to 6.5-7.5 percent, following recent domestic trends and reflecting challenges from external developments.
Secretary Diokno explained that the slight narrowing of the target for 2022 was due to the rising oil and commodity prices brought about by the ongoing Russia-Ukraine conflict. Despite this, there is much to be hopeful about, he said.
“We should be happy. Be optimistic. That’s still the best among ASEAN+3, not only this year but also next year. That’s the consensus of forecasters,” Secretary Diokno said in the press briefing.
As economic activity is expected to continuously pick up over the medium-term, the DBCC projects revenues to increase from 15.2 percent of GDP in 2022 to 17.6 percent of GDP in 2028, and tax effort to improve from 14.5 percent of GDP in 2022 to 17.1 percent of GDP in 2028.
Meanwhile, disbursements from 2022 to 2028 will be maintained above 20 percent of GDP.
“There’s really nothing to worry about. The way out of this is by growing at a faster rate. We simply outgrow our debt,” Secretary Diokno reassured, noting that the same trend of ballooning deficits can be observed in both developed and emerging economies.
Accordingly, the DBCC targets to bring the deficit down to 3.0 percent of GDP by 2028, as the government pursues a Medium-Term Fiscal Framework (MTFF) that aims to reduce the fiscal deficit, promote fiscal sustainability, and enable robust economic growth.
The broad-based growth strategy on which the Framework is anchored also contains “fair and efficient” tax measures where all Filipinos contribute their fair share and will cover areas where tax laws and administrative policies need to catch up, such as on digital services.
Aside from improved tax administration, Secretary Diokno said the government is looking into pursuing the previous administration’s remaining tax reform packages on improving real property valuation and simplifying financial taxation, as well as further enhancing public-private partnership (PPP) arrangements in the national and local levels to ease the pressure on the country’s fiscal space.
The MTFF will help achieve the commitment of President Ferdinand “Bongbong” Marcos, Jr. to bring down poverty incidence to single-digit level by the end of his term in 2028.
Read the full Review of the Medium-Term Macroeconomic Assumptions and Fiscal Program for FY 2022 to 2028 here.