Abstract

The Rodrigo Roa Duterte administration seeks a safer, fairer, richer, greener and more beautiful Philippines. Specifically, it aims first, that the economy grows strongly and sustainably at 7 to 8 per cent in the medium term and second, that poverty incidence be cut from 25 per cent in 2015 to 14 per cent in 2022, its steepest decline in Philippine history. In order to achieve these lofty goals, the new administration has adopted an expansionary fiscal policy, reformed its weak and unresponsive tax system and redesigned its dysfunctional budget system. Most of these fiscal reforms need to be institutionalized, enacted into law, so the next president(s) will be constrained from undoing them. With the imminent Congressional approval of the Budget Reform Bill, which embodies most of the structural fiscal reforms planned by the Duterte administration, the Philippine budget system has the promise of becoming one of the best budget institutions in the world in terms of openness, allocative efficiency and accountability.

The Philippine Growth Narrative

For many decades, the Philippines had seen wild swings of booms and busts brought forth by various crises, whether political or economic in nature. Since 2010, however, the Philippine economy has grown at a rapid and sustained pace above 6 per cent. This growth momentum was sustained last year as full-year growth reached 6.7 per cent, despite it being a post-election year.

Remarkable dips were recorded in previous post-election years. Growth decelerated from 6.7 per cent in 2004 to 4.7 per cent in 2005. Likewise, growth skyrocketed to 7.6 per cent in 2010, another election year, before falling back to 3.7 per cent in 2011.

For the Duterte administration, this is not quite applicable. GDP (Gross Domestic Product) growth was a robust 6.9 per cent in 2016, an election year, but was sustained the year after with 6.7 per cent GDP growth—the difference being a mere 0.2 percentage points.

More importantly, we can say that Philippine growth is now more diversified and sustainable. Economic expansion is increasingly being driven by investments on the demand side and industry on the supply side.

Multilateral organizations like the International Monetary Fund, the World Bank and the Asian Development Bank all project the Philippines to grow steadily in the near term. All three organizations peg our growth to reach almost 7 per cent (about 6.7 per cent to 6.9 per cent) from 2017 to 2019. In their forecasts, this is the highest among the ASEAN-5 countries.