BATALO, Sittie Faisa M.

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Philippine recognized as middle income economy

After decades of erratic growth as the tiger economies in the region roared, it seems the
Philippines has hit its stride and is growling on its own.

The Philippines is currently classified as a lower middle income country. The World
Bank however also said that for the Philippines to achieve its long-term goal of becoming a
prosperous country free of poverty by 2040, it will need to triple its per capita income in the next
two decades.

“The Philippines’ ability to sustain its current high growth rate will depend primarily on
two factors: how the country can accelerate investment in improving its physical infrastructure,
and how it can make better use of capital, labor, and technology to increase productivity,” said
Mara K. Warwick, World Bank Country Director for Brunei, Malaysia, Philippines and
Thailand.

However, in 2016, the year Duterte took over after winning the elections in May, the
economy grew 6.8%.

When President Duterte came into office, Philippine inflation can be found right in the
middle of the ASEAN pack.

The Philippine economy is far from being sick. As of the first quarter of 2018, the
country’s gross domestic product (GDP) stood at 6.8%. This is one of the fastest growth rates in
the Asia-Pacific. But UP economics professor Emmanuel de Dios said that economic managers
should not rejoice so quickly, as this is still short of the government’s target range of 7% to 8%.
2016 economic growth fastest in three years
By CNN Philippines Staff
Updated 22:16 PM PHT Thu,
January 26, 2017

Metro Manila (CNN Philippines) – The Philippine economy grew by 6.8 percent in 2016,
according to the Philippine Statistics Authority (PSA) – the fastest growth in the last three years.
The Philippines also posted among the fastest GDP growths in Asia last year, along with China
(6.7) and Vietnam (6.2 percent).
PSA reported the country’s GDP—which measures a country’s total economic production and
performance—grew 6.6 percent in the fourth quarter of 2016.
Although this was the slowest quarterly growth last year, it was higher than the 6.5 percent
growth in Q4 of 2015.
PSA said the main drivers of the economy in Q4 were manufacturing, trade, and real estate,
renting, and business activities.
Economy in ‘Good Shape’
Finance Secretary Carlos Dominguez said last year’s GDP growth indicates the economy is in
“pretty good shape” under the Duterte administration.
“This is clear proof that no amount of counterproductive political chatter from certain quarters
could undermine the upward trajectory of a domestic economy that is in pretty good shape under
a Duterte Presidency that is fully committed to sustaining its growth momentum,” Dominguez
said in a statement.
He said the recent GDP growth gives the Finance Department more reason to push for the
Comprehensive Tax Reform Program (CTRP), which woud adjust the annual income tax rates.
Studies have shown poor and middle-class Filipinos could stand to gain from the CTRP.
Projected growth
The finance Chief said he expects the economy to grow by 6.5 to 7 percent in 2017, as projected
by international and local financial institutions and experts.
Socioeconomic Planning Secretary Ernesto Pernia is also optimistic the government will sustain
economic growth this year.
“Given this growth in 2016, we believe that the target of 6.5 percent to 7.5 percent for 2017 is
highly likely. In the medium-term, we expect growth to strengthen further towards 7 percent to 8
percent,” Pernia said at a press conference on Wednesday.
He added “the economy will expand by 50 percent in real terms, and per capita income will rise
by over 40 percent” in the next six years.
Pernia attributed the economy’s good performance to domestic demand, particularly in terms of
investment and consumption.
He said the Philippines is now shifting towards an industry-based economy, from a services-
based one.
Both Dominguez and Pernia said the government hopes to turn the Philippines into an upper
middle-income country by 2022.
Pernia said this would mean lifting about six million Filipinos out of poverty.
Possible risks
“The government will remain steadfast in its work, making sure that economic growth is built on
people-centered and people-powered policies, stable macroeconomic fundamentals, and strong
partnerships with other countries,” Pernia said.
But Pernia also warned against possible risks to economic growth.
Chief among them are extreme weather disturbances, such as El Nino and typhoons. Hence, the
government needs to bolster the country’s agricultural sector.
Pernia said the economy may be vulnerable to “possible policy shifts in the U.S., greater
volatility in capital flows, and geopolitical risks.”