THE Department of Finance (DOF) on Tuesday, June 26, 2018, shot down a columnist's observations that the Philippine economy is "beginning to display vulnerabilities" two years into the Duterte administration.
"Inflation has breached the government's target, the peso is in free fall, and the country is suffering its largest current-account deficit in 18 years," Richard Heydarian wrote in his column for the Nikkei Asian Review on June 21, 2018.
Read Richard Heydarian's column here: More Duterte fallout on the Philippine economy
In a statement, the DOF said "Heydarian’s opinions went overboard" when he described the Philippine economy as suffering from a “fallout” and “economic managers as grappling with erratic and populist policies.”
"His generalizations are erroneous and not backed up by accurate statistics," the DOF said.
"The 'fallout' that Heydarian is imagining is debunked by the rapid growth of the economy — 6.7 percent in 2017 and 6.8 percent in the first quarter of 2018," the department added.
DOF also denied that the government has “erratic and populist policies.”
"The Philippine tax reform is certainly not 'populist' and not 'erratic' but it is necessary to fund that ambitious infrastructure program which is necessary to enhance the competitiveness of the economy," the DOF said.
The tax reform package may have raised prices, but DOF said the increase was only 0.4 percentage point which is below the 0.7 percentage point discussed in Congress during the tax reform hearings.
DOF argued that the same tax reform package increased the disposable income of salaried workers by, an average of 15 percent.
"Thus, the 4.1-percent average rise in prices from January to May was more than fully offset by this tax cut," the DOF added.
The same DOF statement denied Heydarian's claim that there was a 90-percent drop in new investment pledges in the first half of 2017.
"Actual gross domestic investment in the economy based on the National Income Accounts (and these are not just pledges) rose in real terms, by 9.5 percent in the whole of 2017 and 12.5 percent in the first quarter of 2018," the DOF said.
"The investment pledges being referred to by Heydarian are those that are applying for fiscal incentives which are a small proportion of total investments," it added.
The DOF also cited foreign direct investment (FDI) inflows recorded by the Bangko Sentral ng Pilipinas which reached $10.05 billion in 2017, up by 21.4 percent over the previous year.
In the first quarter of 2018, FDI inflows reached $2.2 billion, an increase of 43.4 percent over the same period in 2017.
"These investment data are also backed by bank-disbursed loans, almost 90 percent of which go to production, which rose by 17.9 percent in 2017 and 17.3 percent in the first quarter of 2018," the DOF added.
DOF, meanwhile, defended the Bangko Sentral from alleged criticisms over the "delayed adjustment of interest rates" to curb an elevated inflation.
DOF said monetary authorities "acted swiftly" in tightening monetary policy.
"As of May 2018, the month-on-month inflation has dropped to zero, implying that prices were nailed to their average levels in April," the department said.
On Heydarian's claim about the weak peso, DOF said the peso was even weaker in end-2003, at P55.57/US$1, and in end-2004, at P56.27/US$1.
"Since inflation has risen since that period, the recent exchange rate adjustment is giving exporters and OFWs what is due them given that their foreign exchange earnings are now being efficiently used through importation of equipment to beef up the country’s productive capacity," the DOF statement said.
The peso closed at P53.6 to US$1 as of Tuesday, June 26. (MVI/SunStar Philippines)