PH growth ‘will still be close to 6.8’
Economic growth could fall below target this year but the government’s infrastructure push will drive the expansion past the 2017 mark, a Cabinet official said.
“I think we will still be close to 6.8 percent this year. I think the momentum on our ‘Build Build Build’ is strong and we are really moving quite well in our infrastructure program,” Finance Secretary Carlos Dominguez 3rd said in a recent interview with Stephen Schwartz, head of APAC sovereigns at Fitch Ratings.
The government is targeting 7.0-8.0 percent gross domestic product (GDP) growth for this year. As of the first half, growth remained below target at 6.3 percent, also lower than the full-year 6.7-percent result for 2017.
“We have actually managed to bring up our infrastructure investments as a percentage of GDP to over 5 percent already,” Dominguez pointed out during the interview.
Government infrastructure spending rose by 38.6 percent to P71.9 billion in June, based on latest data, bringing the first-half result to P352.7 billion, 4.3 percent higher from a year earlier.
The Duterte administration is banking on the “Build Build Build” program to backstop the 7.0-8.0 percent GDP growth goal for 2018 until 2022. The ambitious infrastructure program will be bankrolled by tax reforms and concessional loans, with the overall budget expected to hit up to P9 trillion by 2022.
Dominguez, however, admitted that successive interest rate hikes implemented by the Bangko Sentral ng Pilipinas (BSP) to address above-target inflation would put a slight dent on economic growth.
“It will a bit. But as I said we’re still only at 4 percent or around that area so it’s not like … it’s not yet growth threatening,” he said.
The BSP’s policymaking Monetary Board has raised key interest rates by a total of 100 basis points (bps) since May after continued consumer price growth since the start of the year.
Inflation hit a nine-year high of 5.7 percent in June, prompting monetary authorities to order a 50-bps increase last month following two 25-bps hikes in May and June.
The adjustments have taken the BSP’s overnight borrowing, lending and deposit rates to 4 percent, 4.50 percent and 3.50 percent, respectively.
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