MANILA, (PNA) — The Department of Finance (DOF) on Wednesday said the 2015 growth target of seven to eight percent is achievable.
A Standard Chartered Bank report considers as “slightly ambitious” the Philippine government’s decision to maintain its growth target for 2014-15 despite rising inflation rate and the slowdown in government spending.
Finance Undersecretary Gil Beltran, who is the Department’s concurrent economist, said the researcher of Standard Chartered Bank should have checked latest data that shows negative correlation between domestic output and the rate of price increases.
He explained that growth in 2012 and 2013 rose to 6.8 percent and 7.2 percent, respectively, but inflation averaged to 1.9 percent.
Citing the theory that when domestic growth increase so is the available supply of goods, which in turn lowers commodity prices as well as interest rates.
”This is the reason why the lowering of the inflation target should not be seen as negative factor for growth,’ Beltran said in a statement.
The DOF executive even pointed out that the central bank’s decision to move from a negative real interest rate regime to a positive real interest rate situation “is more sustainable in the long run.”
”It avoids bubbles and maintains the growth of savings,” he said.
In the first quarter of the year, domestic output, as measured by gross domestic product (GDP), slowed to 5.7 percent from quarter-ago’s 6.3 percent due to the impact of calamities that hit the country in the last quarter of 2013.
Beltran said this situation should not be considered as a trend because the manufacturing sector, for one, reversed to the positive territory and posted a double-digit growth to 13 percent from January to March this year and investment growth remains strong.
He also said that although government expenditures slowed in the first quarter of the year it recovered the following quarter by 44 percent, due in part to the rule that disqualifies government agencies from the implementation of the performance-based bonus (PBB) if they fail to meet eligibility requirements.
”The medium-term growth prospects of the economy are sound. The Philippine economy has the capacity to grow faster than the 7.2 percent attained last year with or without the boost from election spending,” he stressed.
Among the reasons for his statement is the rising savings of the government, the rise in fixed capital investment and the government’s bid to further increase investments in infrastructure.
”If these trends continue and plans are implemented as targeted, the country would attain the 6.5-7.5 percent growth target for 2014 and the seven to eight percent growth in 2015,” Beltran added.