Infra, Social Programs, Tax Reform to Help Fuel Philippine Growth
MANILA, PHILIPPINES (26 September 2017) — The Asian Development Bank (ADB) projects economic growth to strengthen in the Philippines to 6.5% in 2017 as robust domestic demand, including higher public investments in infrastructure and social services—pillars of the government’s 0+10-Point Socioeconomic Agenda—push growth higher.
In its new Asian Development Outlook (ADO) 2017 Update, ADB projects Philippine gross domestic product (GDP) growth to rise modestly from the 6.4% April forecast. GDP growth in 2018 will accelerate to 6.7% through increased public investment and household consumption.
“The concerted effort by the Philippine government to improve public project implementation is bearing fruit, as public investment programs help drive continued economic expansion,” said Richard Bolt, ADB Country Director for the Philippines. “A strong focus on infrastructure investment and implementation of tax reform will see the country continue its growth momentum through 2018.”
The economy expanded by 6.4% in the first half of 2017, a moderation from the election-driven 7% pace a year earlier. Fixed investment grew by 12.1%, reaching its highest share as a percentage of GDP in over a decade at 25.8%. Public and private investment, and household consumption supported by remittances from overseas Filipinos, were the key drivers of growth.
Services, the largest sector of the economy, increased by 6.4% in the first half of 2017, with business process outsourcing, trade, tourism, and finance leading the way. Manufacturing growth quickened to 7.7% on strong domestic consumption and an improvement in exports.
Inflation rose to 3.1% in the first 8 months of the year from 1.5% a year before, but remains within the Bangko Sentral ng Pilipinas target range of 2%-4%. The forecast for inflation has been revised down to 3.2% from 3.5% for 2017 and to 3.5% from 3.7% for 2018.
Moving forward, further progress in the “Build, Build, Build” Program and advancing comprehensive tax reforms will be vital to sustain strong growth. The first package of tax reform measures, likely to be approved within the year, includes excise tax increases for automobiles and gasoline, broadening the value-added tax base by limiting exemptions, and lower personal income tax rate which would boost domestic demand.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB is celebrating 50 years of development partnership in the region. It is owned by 67 members—48 from the region. In 2016, ADB assistance totaled $31.7 billion, including $14 billion in cofinancing.