Marcos Economics Team Goals Are Achievable — Experts

Jeepneys wait for passengers at the corner of EDSA-Aurora Boulevard in Quezon City on July 1. — PHILIPPINE STAR/ MIGUEL DE GUZMAN

By Diego Gabriel C.Robles

NEW growth targets set by President Ferdinand R. Marcos, Jr.’s economic team are achievable if the government continues to reopen the economy, reduce its debt burden and continue aggressive infrastructure spending.

The Development Budget Coordinating Committee (DBCC) on Friday approved medium-term macroeconomic assumptions and Ifscal program for 2022 to 2028. The DBCC has 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, he expects the economy to grow 6.5 to 8 percent a year from 2023 to 2028, which is higher than the previous administration’s assumption of 6 to 7 percent from 2023 to 2025.

“Yes, these goals are achievable. In fact, if President Marcos Jr. is able to significantly eradicate corruption and cronyism, GDP can grow 8-10% per year during the second half of his term,” Bernardo M. Villegas, economist at the University of Asia and the PaciIfc, said.

Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, said in an email that these adjusted targets can be met if the government guarantees there will be no further outbreaks of the coronavirus disease. 2019 (COVID-19) and economic reopening will continue.

“Protecting the achievements of the economic recovery also means controlling inflation and not [letting] monetary policy adjustments hamper the growth of 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 spending on transportation, fuel and food. Inflation is expected to decrease to 2.5-4.5% in 2023 and return to the target range of 2-4% from 2024 to 2028.

Additionally, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said 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/fiscal reform measures that would pay off debts incurred during the pandemic…an increase in local and foreign investment; further boost productivity and production in the agricultural and manufacturing sectors,” Ricafort said in a Viber message.

The Marcos administration is aiming for an infrastructure spending to GDP ratio of 5-6% per year.

Villegas said the Philippines should attract at least $10 billion in foreign direct investment (FDI) a year, after the amended Civil Service Act opened up airports, seaports, subways, roads iron and other sectors to full foreign ownership.

“I anticipate that major transport, telecommunications and energy companies in South Korea, Taiwan, Japan, China, Spain and Germany, among others, will invest heavily in our infrastructure, helping us to to pursue the ‘Build, Build, Build’ program despite the handicap of our debt burden. This is the only way to continue to invest 6% of our GDP in infrastructure,” he said.

Infrastructure development must also extend to the agricultural sector, Villegas said, citing farm-to-market roads, irrigation systems, post-harvest facilities and economies of scale mechanisms such as than cooperatives and core agriculture.

Economists have also pointed to the need to implement tax reform and tax measures to pay off debt incurred during the pandemic.

“To achieve these goals, the government must tackle the debt burden by increasing tax revenues,” Villegas said.

At the end of May, outstanding government debt stood at 12.5 trillion pesos.

Finance Secretary Benjamin E. Diokno said last week he would 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 aims to reduce the debt-to-GDP ratio to 61.8% this year and to 52.5% by 2028.

The country’s debt-to-GDP ratio stood at 63.5% at the end of Iffirst quarter, which exceeds the 60% threshold considered manageable by multilateral lenders for developing economies.

UPPER MIDDLE INCOME STATUS
Meanwhile, economists have said the Philippines’ goal of reaching upper-middle-income country status could be achieved as early as 2025.

“By 2025, we will be an upper-middle-income economy with a per capita income of over $4,000. With that income, our population of 112 million would be a predominantly middle-income society that would be the main engine of growth because the internal market will provide enough economies of scale to all types of industrial products and services,” said Villegas.

Mr. Diokno said last week that the Philippines would achieve upper-middle-income country status by the end of Mr. Marcos’ term in 2028.

The Philippines originally planned to transition to upper-middle-income country status by 2022, but that was derailed by the coronavirus pandemic.

The latest data from the World Bank showed that the Philippines remains a lower-middle-income country, as its gross national income (GNI) per capita stood at $3,640 in 2021. This figure is slightly higher than its GNI per capita. $3,430 in 2020.

This was in the lender’s income bracket for lower-middle-income economies of $1,086 to $4,255 GNI per capita, which fell from $1,046 to $4,095 GNI per capita the last year to take inflation into account.

The World Bank has set the income range for the upper middle income bracket of GNI per capita at $4,256 to $13,205, higher than the $4,096 to $12,695 threshold last year.

“With the right policy mix and the government’s ability to temper inflation, manage the pandemic and mitigate the unemployment rate, continue with infrastructure projects, [and] improving education, among other things, would all help reduce poverty towards middle-income status for the foreseeable future,” said John Paolo R. Rivera, an economist at the Asian Institute of Management.

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