ADB upgrades PH GDP outlook due to infrastructure investment, tax reform measures

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(CNN Philippines, July 20) — An increase in infrastructure investment and tax reform measures to be approved soon will see the Philippine economy grow by 6.5 percent in 2017 and 6.7 percent in 2018, the Asian Development Bank (ADB) said Thursday.

"Growth forecasts are upgraded from 6.4 percent to 6.5 percent for 2017 and from 6.6 percent to 6.7 percent for 2018," the ADB said in Asian Development Outlook 2017 Supplement.

"The government is making progress in ramping up infrastructure investment," the ADB said, citing a reason for the upward revision in gross domestic product (GDP). 

The Duterte administration is on the 2nd year of launching a series of big-ticket infrastructure project under its P9-trillion ($180-billion) "Build Build Build" program. Socioeconomic planning manager Ernesto Pernia on Thursday told CNN Philippines that 18 out of the 75 planned projects have already been approved and are being constructed.

The Manila-based ADB said that tax reform measures to be approved in the later part of the year "will unleash purchasing power in 2018 through lower personal income tax," thus triggering the economic growth in 2018.

It noted that the country's GDP grew by 6.4 percent in the first quarter of 2017, down five percentage points from 6.9 percent in the same period a year ago, attributing this to "a base effect" from spending in the runup to the presidential elections of May 2016.

Growth in first quarter GDP was driven by investment and consumption, it said. However, even as the volume of exports improved in the period, it was not enough to offset imports, the ADB said.  The Bangko Sentral ng Pilipinas noted that the country's balance of payments deficit ballooned to 994 million dollars in the first quarter of 2017, from 210 million dollars in the same period a year ago.

The Asian Development Outlook report said the services sector contributed significantly to nearly two-thirds of GDP growth in the first quarter of 2017, on the back of trade, business process outsourcing, and finance industries.

"Manufacturing growth has remained robust. Agriculture output has recovered after being hit by a dry spell last year caused by El Niño," the report cited as other engines of growth. 

In Southeast Asia, the region's overall economic growth is pegged  at 4.8 percent for 2017 and 5.0 percent for 2018. "High growth in Malaysia, the Philippines, and Singapore is dampened somewhat by disappointing growth in Brunei Darussalam," the ADB report said.