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SONA 2018

The economy under Duterte: The second year


In the second year of President Rodrigo Duterte in office, the country's economy went on a rollercoaster ride— while the economy kept its growth momentum boosted by public sector spending on infrastructure, commodity prices also jacked up affecting poor households.

As the President is about to delivery his third State of the Nation Address (SONA) on Monday, let us take a look at some of the achievements as well as targets missed by the administration so far.

GDP

The economy as measured by the gross domestic product (GDP) grew by 6.7 percent for the whole 2017, making the Philippines the third fastest growing economy in Asia next to China (6.9 percent) and Vietnam (6.8 percent.)

The GDP measures the value of goods and services produced by a nation in a given period.

For this year, the government is targeting to achieve a 7 to 8 percent growth.

In the first quarter, however, the GDP grew 6.8 percent, which is below the 7 to 8 percent target set by the economic team.

Socioeconomic Planning Secretary Ernesto Pernia said economic growth should have reached the upper range of the government’s target of 7 to 8 percent if not for the spikes in inflation during the quarter.

Inflation

The government is also targeting to keep inflation at a "manageable" 2 to 4 percent.
But this target was missed as inflation accelerated to breach the 5 percent level as it clocked in at 5.2 percent due to faster increments in prices of alcoholic beverages and tobacco (20.8 percent); and housing, water, electricity, gas, and other fuels (4.6 percent).

Critics blame the Tax Reform for Acceleration and Inclusion (TRAIN) law for the faster inflation rate due to reformed excise taxes on petroleum, but economic managers were quick to disagree and attributed the rising commodity prices to the price movements of petroleum products in the world market.

Tax Reform

The Duterte administration also vowed to institute a progressive tax reform.

This was achieved through the enactment of  Republic Act No. 10963 or TRAIN law, which took effect on January 1, 2018.

Those earning P250,000 a year or P21,000 a month are now exempted from paying personal income tax, while income tax rates were reduced for those earning above P250,000.

Before TRAIN's implementation, personal income earners were taxed at 30 to 32 percent—among the highest in the region.

To offset the foregone revenue from reduced personal income tax, the law has increased excise taxes on petroleum products and automobiles and imposed a levy on sugar sweetened beverages.

In the first five months of the year, the government's revenue grew 19 percent to P1.186 trillion from P996.5 billion. The 19-percent growth in national government revenue was attributed to the TRAIN law and improvements in tax administration.

Infrastructure spending

The Duterte administration also promised to ramp up spending on the "long neglected" infrastructure.

Infrastructure spending in the five months to May reached P280.8 billion, up 42.4 percent from P197.2 billion in the same comparable period.

The surge in infrastructure spending was a result of various infrastructure completed by the Department of Public Works and Highways, including roads, bridges and flood control projects.

Repair and rehabilitation of school buildings by the Department of Education, and the acquisition of medical equipment and facilities under the Health Facilities and Enhancement Program of the Department of Health also contributed to infrastructure spending.

Of the 75 big-ticket flagship infrastructure projects under the "Build, Build, Build" program, 35 have been approved by the National Economic and Development Authority (NEDA) Board which is chaired by the President.

The Duterte administration is targeting to complete almost half or 32 of the 75 big-ticket infrastructure projects by year 2022.

—KG, GMA News/Infographics by Jannielyn Ann Bigtas

Sources for data used in infographics: Philippine Statistics Authority, Bangko Sentral ng Pilipinas, Bankers Association of the Philippines, Philippine Dealing System, Philippine Stock Exchange

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