By Diego Gabriel C. Robles
THE NEW growth targets set by President Ferdinand R. Marcos, Jr.’s economic team are achievable if the government will continue to reopen the economy, address its debt burden, and pursue aggressive infrastructure spending.
The Development Budget Coordination Committee (DBCC) on Friday approved the medium-term macroeconomic assumptions and fiscal program for 2022 to 2028. The DBCC set the gross domestic product (GDP) growth target at 6.5-7.5% this year, lower than the 7-8% given by the previous administration. However, it expects the economy to grow by 6.5-8% annually from 2023 to 2028, higher than the previous administration’s assumption of 6-7% from 2023 to 2025.
“Yes, these targets are achievable. In fact, if President Marcos Jr. is able to significantly root out corruption and cronyism, the GDP can grow at 8 to 10% annually during the second half of his term,” Bernardo M. Villegas, economist at the University of Asia and the Pacific, said.
Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, said in an e-mail these adjusted targets can be achieved if the government ensures that there will be no new coronavirus disease 2019 (COVID-19) surges and that economic reopening will continue.
“Protecting economic recovery gains is also a matter of keeping inflation in check and not [letting] monetary policy tweaks get in the way of growing the economy in the short- to medium-term,” Mr. Asuncion said.
The DBCC also raised the average inflation rate assumption to 4.5-5.5 % for 2022, from 3.7-4.7% previously, reflecting the impact of soaring transport, fuel, and food expenses. Inflation is expected to ease to 2.5- 4.5 % in 2023 and return to the 2-4% target range from 2024 to 2028.
Also, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the increased foreign and domestic tourism, as well as face-to-face schooling will help support the economy’s continued recovery.
“Other growth drivers include increased infrastructure spending; fiscal/tax reform measures that would pay for the debts incurred during the pandemic… increased local and foreign investments; further boosting the productivity and output of agriculture and manufacturing sectors,” Mr. Ricafort said in a Viber message.
The Marcos administration is targeting an infrastructure spending-to-GDP ratio of 5-6% annually.
Mr. Villegas said the Philippines is expected to attract at least $10 billion of foreign direct investments (FDIs) annually, after the amended Public Service Act opened up airports, seaports, subways, railways and other sectors to full foreign ownership.
“I foresee leading transport, telecom, and energy companies from South Korea, Taiwan, Japan, China, Spain and Germany, among others, investing heavily in our infrastructures, helping us to continue the ‘Build, Build, Build’ program despite the handicap of our debt burden. This is the only way we can continue to invest 6 % of our GDP in infrastructure,” he said.
Infrastructure development must also extend to the agriculture sector, Mr. Villegas said citing farm-to-market roads, irrigation systems, post-harvest facilities, and mechanisms for economies of scale such as cooperatives and nucleus estate farming.
Economists also underscored the need to implement fiscal reform and tax measures to pay for debt incurred during the pandemic.
“To achieve these goals, the government must address the debt burden by increasing tax collections,” Mr. Villegas said.
As of end-May, the government’s outstanding debt stood at P12.5 trillion.
Finance Secretary Benjamin E. Diokno last week said they will support the passage of a bill that would regulate or tax the consumption of single-use plastics, as well as a bill that would tax digital services.
The DBCC is targeting to bring down the debt-to-GDP ratio to 61.8% this year and all the way to 52.5% by 2028.
The country’s debt-to-GDP ratio stood at 63.5% as of the end of the first quarter, which surpasses the 60% threshold considered as manageable by multilateral lenders for developing economies.
UPPER MIDDLE-INCOME STATUSMeanwhile, economists said the Philippines’ goal to achieve upper middle-income status may be achieved as early as 2025.
“By 2025, we shall be an upper middle-income economy with a per capita income of more than $4,000. With such an income, our 112 million population would be a predominantly middle-income society that will be the main engine of growth as the domestic market will provide enough economies of scale to all type of industrial products and services,” Mr. Villegas said.
Mr. Diokno last week said the Philippines will achieve upper middle-income status by the end of Mr. Marcos’ term in 2028.
The Philippines had originally targeted to graduate to the upper middle-income status by 2022, but this was derailed by the coronavirus pandemic.
Latest World Bank data showed the Philippines remains a lower middle-income country, as its gross national income (GNI) per capita stood at $3,640 in 2021. This is slightly higher than its $3,430 GNI per capita in 2020.
This fell within the lender’s income bracket for lower middle-income economies of $1,086-$4,255 GNI per capita, which was raised from $1,046-$4,095 GNI per capita last year to account for inflation.
The World Bank set the income range for the upper middle-income bracket of GNI per capita at $4,256-13,205, higher than the $4,096-$12,695 threshold last year.
“With the right policy mix and government’s capability to temper inflation, manage the pandemic, and mitigate unemployment rate, continue infrastructure projects, [and] enhance education, among others, all of these would help reduce poverty towards a middle-income status in the foreseeable future,” John Paolo R. Rivera, economist at the Asian Institute of Management, said.