Yearender: High growth
sustainable in 2017-- Department of Finance
MANILA, Jan. 2 - The Department of Finance (DOF) remains bullish on
prospects for continued high growth in 2017 and onwards, and is committed to
helping Malacanang pursue its accelerated spending program not only to
sustain the economic momentum but, more importantly, to also spread its
benefits to all sectors across all regions by way of more jobs and better
Finance Secretary Carlos Dominguez III said that despite the political noise
in the first six months of the Duterte presidency, growth has remained on
the upswing on the back of the country's rock-solid macroeconomic
He said the government remains on track in realizing its vision of lifting
six million Filipinos from poverty and transforming the Philippines into a
high middle-income country five years from now, with a per-capita gross
national income (GNI) of $4,100, or where Thailand and China are today.
The highly optimistic outlook on the Philippines as one of Asia’s
fastest-growing economies in the year ahead is apparently shared by credit
raters and other international institutions such as S&P Global, the Asian
Development Bank and the International Monetary Fund (IMF), he said.
Dominguez said the Duterte administration is likewise committed to pursuing
the congressional approval of its proposed comprehensive tax reform program,
the first in 30 years, to ensure the financial sustainability of the
government’s unparalleled spending on infrastructure, human capital and
social protection for the country’s most vulnerable sectors.
He said the economy’s strong showing in the third quarter with GDP growth at
7.1 percent, its best in three years, was apparently driven in part by the
onset of the Duterte presidency’s strong spending on infrastructure and the
recovery of the agriculture sector from the prolonged El Nino-induced
“This means there will be no letup in the Duterte administration's
commitment to spending big on urban and rural infrastructure as a growth
driver, to guarantee sustained high—and inclusive—growth,” Dominguez said.
He said the government needs to invest heavily in programs that will
transform the economy from a consumption- to an investment-driven one, and
at a much higher level from the current investment rate of 20 percent of
GDP, so the Philippines could be on the par with its more vibrant neighbors
that invest between 30 percent and 40 percent of their respective GDPs.
Alongside spending more on infrastructure, human capital and social
protection to sustain the economy’s growth momentum and attack poverty,
Dominguez said the Duterte administration will also remain focused on other
urgent measures such as fully implementing the Reproductive Health (RH) Law,
modernizing agriculture to pull down food prices while increasing farmers’
incomes, and leveling the playing field for micro, small and medium scale
Dominguez recalled that at the start of the new government, it put in place
at once a 10-point socioeconomic agenda to let President Duterte deliver on
his electoral mandate to sustain the growth momentum and make it a truly
inclusive one over the next six years by spreading its benefits to all
sectors across all regions.
Over the last six months, several institutions have painted a rosy outlook
for the economy.
The Economic and Social Commission for Asia and the Pacific, the UN’s
regional development arm, upgraded its 2016 growth forecast for the
Philippines to 7 percent from 6 percent.
BMI Research, a unit of Fitch Ratings, expects an average growth rate of 6
percent over the next five years.
“We believe that President Duterte’s fiscal stimulus measures will be
positive for economic growth as most of the increases in spending have been
earmarked for infrastructure development and social services like
healthcare, education and security, which will boost long-term
productivity,” it said.
Debt watcher S&P Global Ratings said it expects the Philippine economy to
grow 6.7 percent in 2016, faster than its previous forecast of 6.3 percent,
and even has the potential to expand at a higher rate in 2017, despite the
expected negative impact of would-be US President Trump’s protectionist
policies, should he proceed to implement them next year.
Banking giant Hong Kong and Shanghai Banking Corp. also raised its growth
forecast for the Philippines from 6.5 to 6.8 percent, on the strength of the
high 7.1 percent expansion of the economy.
HSBC, in a report, said the better-than-expected GDP growth "points to the
resilience of the Philippine economy in a soft global growth environment.”
Meanwhile, the Asian Development Bank (ADB) also upgraded the Philippines’
2016 GDP growth forecast to 6.8 percent from 6.4 percent, which, according
to its country economist Aekapol Chongvilaivan, was the result of the strong
7.1 percent third-quarter GDP growth.
IMF resident representative Shanaka Jayanath Peiris said the 7.1 percent
growth rate was faster than the institution’s full-year growth forecast of
6.4 percent, which it had earlier projected in September. The 6.4 percent
full-year forecast was already an upgrade from the IMF’s original projection
of 6 percent.
“Therefore, we will mostly likely be revising up our growth forecast for
2016 in the next round of world economic outlook revisions, while the
adjustments for 2017 and medium term will also depend on global developments
and financial conditions that have become more uncertain lately,” Peiris
The country’s growth was faster than China’s 6.7 percent, Vietnam’s 6.4
percent, Indonesia’s 5 percent and Malaysia’s 4.3 percent.
Economists polled by Bloomberg project that the domestic economy is set to
expand more than 6 percent until 2018 to rank among the fastest not only in
Asia but in the world.
Barclays Plc in Singapore said the Philippines will remain an “outperformer
in the region” and foreseen global risks “won’t fundamentally alter its
First Grade Holdings Securities said the Philippines’ high growth rate for
the July-September period was “a surprise for the financial markets,” but
“it affirms our view that fundamentals remain intact despite the political
As for the decline of the value of the peso vis-à-vis the US dollar and the
US interest rate hike, Dominguez said the country’s strong macroeconomic
fundamentals would enable the economy to survive external shocks such as
higher US interest rates, which is the primary reason for the recent
weakening of the peso along with other currencies in the region.
Finance Undersecretary Gil Beltran, the DOF’s chief economist, has said that
the overall weakening of the peso and other Asian currencies was an
overreaction by fund managers to the earlier market speculations on the US
Federal Reserve rates, which were later raised in mid-December.
Now that the Fed is on the way to “normalize” interest rates, Beltran said,
"the days of cheap financing and large capital inflows are coming to an
He has noted that "of 12 Asian countries, the Philippine peso has been one
of the less volatile currencies, with standard deviation-mean ratio relative
to the US$ of 5.0 percent from 2000 to November 24, 2016 compared with the
Asian average of 7 percent."
Beltran has said emerging economies with excess savings like the Philippines
are not dependent on the regime of cheap financing resulting from the
post-2008 financial crisis move by the US Federal Reserve to cut rates as a
monetary stimulus to ignite the United States' economic recovery.
He said the strengthening of the greenback against the peso “is expected as
an impact of the Fed normalization.”
“The peso is just normalizing. It was P57 per the US dollar in 2004. All
other currencies are moving in the same direction,” Beltran said.
Foreign analysts share Beltran’s assessment, with Citigroup saying that a
P50:$1 rate in the next six to 12 months should be no cause for alarm
because this adjustment is needed for the currency to stay regionally
“This is not a Philippine peso signal of an imminent crisis of fundamentals
but merely a repricing of macro risks,” Citi Philippines economist Jun
Trinidad said “recent global developments triggered by the US election
outcome and prospective Fed hiking cycle prompting rising US treasuries
resulted in a stronger US dollar outlook that compelled the rest of the
world to re-adjust.”
Bloomberg, meanwhile, reported that countries like the Philippines and
Thailand are expected to perform better as US interest rates keep climbing
because they have significantly increased their foreign exchange reserves
over the years, creating buffers to help them sail through the currency
The IMF has forecast Thailand’s reserves at $163.3 billion by yearend,
compared with the $64.9 billion needed, according to the IMF's Assessing
Reserve Adequacy (ADA) gauge, while the Philippines was projected to
accumulate $84 billion against a $31 billion ADA requirement, said a
The ADA is supposed to incorporate a country’s short-term debt with money
supply, imports and investment flows.
Tsutomu Soma, general manager of the fixed income department of SBI
Securities Co. has told Bloomberg that currencies most vulnerable to attack
are those from countries with less reserves.
Khoon Goh, head of Asia research at Australia & New Zealand Banking Group
Ltd. in Singapore had also told Bloomberg that “both Thailand and the
Philippines increased their reserves in the last couple of years and have
adequate buffers to intervene to smooth currency volatility." (DOF)