Duterte Says Economy in Doldrums

Philippine economic activity is stagnating in the provinces and no less than President Rodrigo Roa Duterte himself is worried that the rising prices of goods could prolong the period of gloom.

“Now, the economy is in the doldrums, actually it is now,” Duterte said, less than a week after the Bangko Sentral ng Pilipinas raised interest rates for the second time since September last year to counter inflation, PNA reported.

The president admitted that the situation in the provinces had become a problem for his administration because projects were barely progressing.

“Interest rates are picking up, are getting high so it destroys the existing economic gains … You raise your interest rate, our peso value goes down, theoretically,” Duterte said in a speech at the National Information and Communications 2018 Summit at SMX Convention Center in Davao City.

“I said in Manila, they’re starting the megaprojects well. I supposed that they would be doing it on time. But in the provinces, it’s a doldrums thing,” he added.

The BSP raised interest rates anew last Wednesday to 3.5% from May’s 3.25% due to inflation concerns. Until the central bank moved to counter rising prices a month ago, the interest rate had stood at 2.75 since September last year.

The BSP said it decided to raise interest rates anew as inflation surged to a five-year high of 4.6%.

The Philippine economy actually grew by 6.8% in the first quarter of 2018—among the fastest in the region and faster than the rate recorded in the same period last year—with manufacturing, trade and other services as the main drivers of growth, according to the Philippine Statistics Authority.

Thanks to additional revenues from the Tax Reform for Acceleration and Inclusion Act, the share of taxes collected by the government also increased to a record high of P567.1 billion ($10.66 billion) in the first quarter.

In an economic bulletin, Finance Undersecretary Gil Beltran said the first-quarter expenditure effort, or share of government spending in the gross domestic product, reached a 15-year high of 20%.

Meanwhile, the country’s external debt service burden was lower at the end of the first quarter, down 9.58% to $2.246 billion versus the previous year’s $2.484 billion.

Data from BSP show that principal debt servicing fell 12.75% to $1.539 billion from $1.764 billion. Interest payments also decreased 1.80% year-on-year to $707 million from $720 million.