MANILA – The Philippine economy likely grew by 6 percent in the first quarter of the year, mainly driven by consumer spending, according to an economist.
In a report, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said lower individual tax rates starting January this year as part of the Tax Reform for Acceleration and Inclusion (TRAIN) law may have led to increased consumer spending, which accounts for at least 75 percent of the economy.
Under the TRAIN law, taxpayers earning more than PHP250,000 a year but not more than PHP8 million will have 15 percent to 30 percent income tax rates, down from the previous 20 percent to 32 percent.
Ricafort said the further reopening of the economy also led to increased sales.
“Measures to reopen the economy towards greater normalcy that led to increased sales overshadowed the risks of higher prices, higher interest rates amid aggressive Fed (Federal Reserve) rate hikes as well as local policy rate hikes in recent months, relatively weaker peso exchange rate especially compared to early 2022, and risk of recession in the US, which is the world’s largest economy, that could slow down global economic recovery in terms of some slowdown in global trade, investments, remittances, employment, and other economic activities worldwide,” he said.
Ricafort’s forecast, however, was slower than the 8.2 percent gross domestic product (GDP) expansion recorded in the first quarter of 2022.
He said that while the Philippine economy has already been back to pre-pandemic levels, offsetting challenges remain.
These include the higher inflation which settled at 6.6 percent as of April this year, higher global and local interest rates that led to higher borrowing costs, and risk of recession in the US.
Ricafort said other possible drivers of economic growth include overseas Filipino workers remittances, good employment and unemployment rate, manufacturing, and further increase in government spending, especially infrastructure spending.
“The delivery of more reform measures, especially fiscal reform measures and other economic reform measures that would help further ease limits on foreign ownership, would help attract the entry of more foreign investment, such as the amendments to the Public Services Act, Retail Trade Liberalization Act, Foreign Investment Act, among others, would lead help boost investor confidence and lead to the creation of more jobs and other business opportunities that would also help the economy recover further from the pandemic,” he said.
The Philippine Statistics Authority will release the official first quarter GDP growth data on May 11. (PNA)