With the third-quarter results out, it is safe to say that the economy under the Duterte administration will not suffer the same fate as it did in 2011, the first full year of the Aquino administration, when growth plunged by more than 50 percent compared to the previous year.
In terms of Gross Domestic Product (GDP), the economy grew by 7.6 percent in 2010, when the country held national elections, which was won by then Senator Benigno Aquino III. Outgoing President Gloria Macapagal Arroyo left a robust economy, one of Asia’s top performers, in the hands of her successor.
I have always believed that a new administration must hit the ground running to sustain, and not stall, growth of the economy. That was not what happened after Aquino became president.
In 2011, when the economy could no longer rely on the one-time gain from election spending, GDP growth dropped to 3.7 percent.
Romulo Virola, then secretary general of the National Statistical Coordination Board (NSCB), said the “feeble” performance was not unexpected – except for the first quarter, growth had been below the government’s target of 4.5 percent to 5.5 percent. From 4.9 percent in the first quarter, GDP grew by just 3.4 percent in the second and 3.6 percent in the third and 3.7 percent in the fourth quarter.
The Aquino administration was criticized for underspending on infrastructure, which the country direly needs, and which was cited as a major factor behind the disappointing growth. Infrastructure projects were studied and implemented based on good governance and the Aquino administration’s anti-corruption efforts.
In 2016, election-related spending helped the economy grow by 6.9 percent, close to the high end of the government growth target of 6-7 percent.
Unlike the economy’s performance after the 2010 elections, results for 2017 show growth staying within or very close to the government’s target of 6.5 percent to 7.5 percent. GDP grew by a revised 6.4 percent in the first quarter of 2017, 6.7 percent in the second quarter, and a higher-than-expected 6.9 percent in the third quarter.
This brought the GDP expansion in the first nine months of the year to 6.7 percent, higher than the low end of the target and just 0.2 percentage point from the full-year performance in 2016.
The performance in the first nine months, even without the one-time gain from election spending, affirms the government’s position that the economy’s robust growth is sustainable.
President Duterte’s economic team presented this position before investors during their road shows in Japan, China, Singapore and the United States.
Socio-economic Planning Secretary Ernesto M. Pernia, director general of the National Economic and Development Authority (Neda), says the Philippines is expected to remain a top performer in Asia this year and next, with the International Monetary Fund (IMF) projecting the country’s GDP to grow 6.6 percent and 6.7 percent in 2017 and 2018, respectively.
Nevertheless, the government is pursuing a number of policy reforms to ramp up spending and investments in order to accelerate growth further to meet our target of 7-8 percent growth from 2018 onwards.
Pernia lists three points that suggest that economic growth under the Duterte presidency is sustainable, thereby capable of generating more stable and gainful jobs. These are:
- GDP growth has been on a sharp monotonic uptrend over the last three decades.
- The economy is undergoing structural transformation. Sources of economic growth have broadened. Growth is increasingly being driven by investments vis-à-vis consumption. On the supply side, the industry sector is increasing contribution to growth
- Total factor productivity (TFP) growth of the economy in recent years has been the fastest among Asean-6 countries, at 3.3 percent for the period 2010-2014, based on computations by the Asian Productivity Organization. This means that capital efficiency (incremental capital output ratio or ICOR) has been improving.
The third-quarter results, according to Pernia, show a sustained improvement in government spending in a run-up to the massive infrastructure program – the “Build, Build, Build.” This is expected to ramp up public spending even further.
Construction activities and public spending are expected to make headway in line with the government’s aim to spend 5.3 percent of GDP this year for infrastructure and up to 7.4 percent by 2022.
The government is pushing for the enactment of a tax reform package, Tax Reform for Acceleration and Inclusion Act or TRAIN, which will fund about half of the government’s infrastructure program while providing relief to lower- and middle-income earners.
The Neda chief notes that the government’s infrastructure program will open more opportunities for the private sector to expand business activities in construction and operation and maintenance and increase their capital spending.
With less than two months before the end of the year, Pernia is optimistic that GDP growth in the fourth quarter will be higher, or at least match the third quarter performance.
The economy usually takes a nosedive after elections, but its performance, so far, indicates that the Philippine economy will buck the trend this year, thanks to Duterte’s economic team, whose members continue to dedicate their efforts toward achieving the President’s goal: Improving the lives of Filipinos.
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