The April 2022 IMF World Economic Outlook (WEO) report revealed a faster growth projection for the Philippines of 6.5 per cent for this year, up from the previous forecast of 6.3 per cent made in January. Meanwhile, the same report showed that global growth is to slow from an estimated 6.1 per cent in 2021 to 3.6 per cent in 2022 and 2023 due to the Russia-Ukraine crisis.
Focusing on recovering and sustainable inclusive growth
Amidst managing its emergency response to the pandemic, government reform work geared toward recovery and sustainable inclusive growth saw through.
From being an inward-looking economy, the Philippines has pushed for new laws and programmes to make the country an ideal destination for more foreign investments that promote sustainability, resilience, and digital innovation.
For instance, on top of the accelerated 5 per cent to 10 per cent Corporate Income Tax (CIT) cut, the incentives under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) enacted in March 2021 include an additional 100 per cent deduction on Research and Development (R&D) expenses for businesses to incentivise the creation of new knowledge and products. This aims to nurture a culture of R&D and innovation among Filipino enterprises and lead to the rise of more competitive companies in the years ahead.
The rationalised tax incentives system is also complemented by the amendments to the Retail Trade Liberalization Act (RTLA), which were successfully enacted in December 2021 together with the amendments to the Foreign Investments Act (FIA) and the Public Service Act (PSA), which were both signed into law in March 2022.
Furthermore, the Philippines has participated in the Asian Development Bank’s (ADB) Energy Transition Mechanism (ETM) facility. As a public-private finance vehicle, it aims to retire coal-fired power plants in favor of renewable energy (RE) sources. This in turn will attract investments in RE, create jobs locally, and promote sustainable growth.
The Philippines has also historically underinvested in infrastructure. This led to problems of congestion and inefficiency in the country’s ports, airports, bridges, and roads. In recent years, infrastructure spending has dramatically risen to an average of 5 per cent of GDP – double the level recorded by the four previous administrations. This was maintained amid the pandemic through fiscal discipline and financing via tax reforms, which encouraged the country’s development partners to support its Build, Build, Build (BBB) Program through concessional loans and grants, which has also provided 6.5 million jobs since 2016.
Compared with the 2.6 per cent of GDP expenditure seen during the previous administration, the BBB Program is projected to continue to accelerate public infrastructure expenditure to above 5 per cent. This will sustain a nationwide infrastructure modernisation programme to spur economic development.