Amro dimly skips 2018 GDP growth forecast due to TRAIN

Jhazzie Basit & Franz Lewin Embudo | January 16, 2018

Photo from Philstar.com

The Asean+3 Macroeconomic Research Office (Amro) has vaguely trimmed the 2018 growth prediction for the Philippines to a percentage of 6.7 even as they think tank still catches sight of solid fundamentals marking the economy in the near term.

According to a report in Inquirer, Amro said the change in the 2018 gross domestic product growth forecast from 6.8 percent in its report last October was “small, reflecting the softening of private sector demand from the third-quarter 2017 GDP release.”

It was said that the Amro’s assessment of the Philippine economy has not changed since October 2017.

Last Thursday, the monthly update of the Asean+3 Regional Economic Outlook Special Edition report sent back the adjusted progress forecast for 2018.

Amro’s updated forethought for 2018 stood around below the government’s target range of 7-8 percent.

Lead Economist Sumio Ishikawa of Amro asserted “the Philippine economy is expected to grow by 6.6 percent [in 2017] before quickening to 6.8 percent in 2018 as public sector infrastructure spending gains pace while domestic consumption and exports remain buoyant.”

“To support the infrastructure program and enhance growth potential, mobilizing sufficient revenue via tax reforms is essential,” Ishikawa added.

In line with the Amro, the Philippine economy “continues to have sound macro fundamentals, which should make it less vulnerable to shocks” all the more as it warned that holds up in the Duterte administration’s “Build, Build, Build” infrastructure program pose risks.

As claimed by Ishikawa, “Failure to accelerate infrastructure investments through the ‘Build, Build, Build’ program owing to, among others, absorptive capacity constraints of the government and private sector participants could dampen investment activity and undermine growth prospects. A delay in infrastructure projects execution also risks having the additional revenues from the comprehensive tax reform program being diverted to other expenditure items with little growth potential,”

According to Amro’s statement on Inquirer, “On the other hand, as the infrastructure program gains traction, it may lead to a widening of the current account deficit in the medium term, which could in turn put strong depreciation pressures on the peso. Likewise, brisk fiscal spending adding to an already buoyant domestic demand, rapid credit growth, and rising inflation could give rise to overheating pressures in the near term, although this risk may diminish over the medium term as the economy’s productive capacity improves,”

“The ‘Build, Build, Build’ program should be implemented with a view to boosting growth while keeping the current account and fiscal deficits at moderate levels,” as well as “complemented with the timely implementation of the comprehensive tax reform program in order to mobilize the revenue for greater infrastructure spending.” the Amro pointed out.

Under the “Build, Build, Build,” the government concocts to rollout 75 flagship, “game-changing” projects, with about half of its targets to be completed within the bounds of President Duterte’s term, together and in cooperation with dishing out P9 trillion on hard and modern infrastructure to escort in “the golden age of infrastructure” after ages of paying no heed to it until 2022.