Infra Spending Increased to 5.5 Percent of GDP in 2018, Says DOF

The national government’s infrastructure spending breached the 5 percent mark of the gross domestic product (GDP) last year fueled by the revenue from the tax reform program, says the Department of Finance.

According to the Finance agency, this reversed “the government’s chronic underspending on infrastructure, which averaged only 2.8 percent of the country’s GDP in the past half-century.”

“With additional proceeds from the comprehensive tax reform program, the government intends to increase infrastructure spending further to 7 percent of the GDP by 2022, completing one of two sources—capital accumulation—that the World Bank has cited to sustain the economy’s long-term high growth,” Finance Undersecretary and DOF chief economist Gil Beltran said.

The Philippines’ public infrastructure spending was minimal at 2.8 percent of GDP in the past 50 years, as compared with the 5 percent of the rest of the ASEAN countries Indonesia, Thailand, Malaysia, and Singapore.

Furthermore, the government is putting in place several measures to ensure total factor productivity, which, World Bank identified as a long-term source of growth.

Among these are:

• provisions of the Tax Reform for Acceleration and Inclusion (TRAIN) Act that simplified tax administration
• the shift to an electronic invoicing system by 2022
• the full implementation and connection to the ASEAN Single Window (ASW) of TradeNet, the government’s online trade facilitation portal

“Fiscal policy has been the Achilles’ heel of the Philippine economy, at least as regards macroeconomic stability. Our past tax measures were largely passed to stave off brewing fiscal imbalances. Now that our fiscal position is in a much better footing, it is time to turn our gaze towards growth and equity,” Beltran said during the membership meeting of the European Chamber of Commerce in the Philippines (ECCP) held recently in Taguig City.

This “is precisely the reason why we have embarked on a comprehensive tax reform program to sustain the economy’s higher growth rate and translate this growth rate into inclusive development,” Beltran noted.

“Accordingly, where other economies have either one or the other, the Philippines is among the very few economies that have both of the two sources of long-term growth for easy picking: total factor productivity and capital accumulation,” he added.

Source: GMA News