While the transition to the Duterte administration has been smooth, the Philippines is expected to grow at a tempered pace this year and next year, London-based information and analytics provider IHS Markit said.
Asia-Pacific chief economist Rajiv Biswas, in a commentary released on Thursday, said the Philippine economy will grow 6.4 percent this year and by 6.3 percent in 2018.
The projected GDP growth for this year is lower than the Duterte administration’s target of 6.5 percent to 7.5 percent.
Biswas said his assessment is based on a number of factors, including the “sound fiscal policy environment” built over the years by former Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr.
“The ability of the Duterte administration to deliver such large increases in infrastructure spending has been helped by the tremendous progress made by successive Philippine governments since 2004 in the task of implementing fiscal consolidation,” he said.
“The Philippine government’s debt-to-GDP ratio declined to a new record low of 34.6 percent in 2016, helped by the rapid pace of GDP growth and prudent fiscal management,” Biswas added.
The sound fiscal management, coupled with rapid economic growth for over two decades, has given the Duterte administration enough fiscal space to increase infrastructure spending, he said.
Biswas added that his evaluation is also anchored on the government’s drive to hike infrastructure spending to 7.4 percent of GDP by 2022, from the current 5.4 percent.
Plans to improve the tax system’s efficiency will also contribute to the Philippines’s growth story, he said.
Biswas, however, added the turbulent law and order situation and high crime rates in major cities and the ongoing insurgency in Mindanao will pose a challenge to the Duterte administration’s efforts to hit its economic goals. In the medium term, the economist said President Duterte may also be faced with the challenge of lowering poverty incidence despite adopting the inclusive growth mantra of the previous administration.