PH Asia’s next success story: Diokno

Graph courtesy of Department of Budget and Management (PNA Photo)

MANILA — Budget and Management Secretary Benjamin Diokno told the foreign business community that they are in the right place at the right time because the country is poised to keep its position as one of the region’s economic growth leaders.

“In the medium term, the Philippines will remain to be one of the fastest growing economies in the fastest growing region, that is the ASEAN region, in the world. In the next four years, we expect the economy to grow at 7-8 percent. We are confident that the growth target is attainable in the medium term, especially with the key structural reforms and expansionary fiscal program that the Duterte administration has adopted,” Diokno said in a forum sponsored by the European Chamber of Commerce of the Philippines (ECCP) held at the Makati Shangri-La hotel on Wednesday.

With an audience composed mostly of business leaders, entrepreneurs and potential investors from overseas, Diokno sought to allay their apprehensions over recent political and economic developments.

He reiterated that, the real bottom line is the country is still on track with its growth targets, given the large inflow of foreign direct investments and the country’s sound macroeconomic fundamentals.

GDP growth is expected to reach 7.0 percent in 2019, with the transitory inflationary impact of the tax reform already stabilizing, the Department of Budget and Management chief added.

The Philippines has also made headway in the capital markets, he said. With an offering of USD1.5 billion of 10-year Global Bonds, the country has successfully returned to international capital markets.

“Last year, we have also returned to the public Samurai market, issuing Samurai bonds on a stand-alone basis amounting to JPY154.2 billion (approximately USD 1.4 Billion) in a multi-tranche transaction after an eight-year break,” Diokno added.

“The Philippines is also the first ASEAN sovereign to issue Panda bonds. The government’s inaugural issue of renminbi-denominated bonds, or Panda bonds, amounting to RMB1.46 B (or USD216.4 million) was warmly received by the Chinese and other offshore markets,” he also noted.

These bond offerings show the Duterte administration’s commitment to fund public investments in infrastructure development, which is crucial in maintaining the country’s economic growth momentum.

Notably, infrastructure appropriations will reach as high as P1.8 Trillion or 7.0% of GDP by 2022, in line with the Duterte administration’s ambitious Build, Build, Build program.

The budget chief highlighted the Duterte administration’s impressive spending performance in its first two years in office.

“Compared to previous administrations, Duterte hit the ground running in his first two years in office. Delivering on his promise to accelerate infrastructure development, infrastructure outlays as percent of GDP recorded a staggering 6.3 percent from 2017 to 2018,” he said.

He, however, explained that the administration’s spending has not been limited to infrastructure development saying its investment to enhance the delivery of social services has been unprecedented.

“Government spending for social services peaked at 8.5 percent of GDP in 2017 and 8.2 percent in 2018, as compared with the past 32 years. This is proof of our commitment to accelerate human capital development,” he added.

Also, Diokno emphasized how the various budget reforms introduced on his watch particularly the shift to an annual cash-based budget has not only diminished, but totally eliminated underspending.

“As of the third quarter of 2018, actual government expenditures have exceeded programmed expenditures by 2.6 percent. We are even slightly overspending. This is because we frontloaded our projects during the dry months (January to June) because these are the best months to undertake projects,” he said.

“President Duterte, compared to past presidents in recent Philippine history, hit the ground running. Infrastructure spending during his first two full years, both in terms of its share of the budget and as percent of GDP, hit record high. Spending for social services — education, health care, and social protection — has reached new heights too,” Diokno said.

“So, take my word for it: the Philippines will be Asia’s next success story,” he concluded.