Economic Analysis - Tax Reforms To Reinforce Positive Growth Outlook - MAY 2017

BMI View: We believe that the first out of four proposed tax reform package s - introduced by the DOF in February - will be posit ive for revenue growth, and will allow the government to push through higher infrastructure and developmental spending (in line with the PDP 2017-2022) without risking macroeconomic instability. This should help drive real GDP growth in excess of 6.0% over the coming years. That said, heightened political instability pose downside risks to our view.

We believe that the proposed Comprehensive Tax Reform Package (CTRP) introduced by the Philippine Department of Finance (DOF) in February will be positive for revenue growth and should enable the government to push through its expansionary fiscal plans without putting too much downside pressure on macroeconomic stability. It will also help the administration progress towards its fiscal objectives set in the Philippine development Plan (PDP) 2017-2022. Accordingly, we maintain our forecast for the Philippines' fiscal deficit as a share of GDP to come in at 2.7% in 2017, versus 2.4% in 2016, and for the shortfall to be capped below the statutory limit of 3.0% over the coming years. We also expect the higher targeted developmental spending outlined in the PDP 2017-2022 to support real GDP growth over the next five years, which we forecast to average 6.1%.

Tax Reforms To Lower Compliance Cost And Promote Social Equity

Deficit Widening Again But Will Stay Under Statutory Limit Of 3%
Philippines - Fiscal Balance, % of GDP
BMI/Bureau of the Treasury

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