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| RP feels effects of US crisis |
But Arroyo says gov't ready for economic slowdown
MANILA (PMN)—The Philippines has started to get hit by the fallout of the US financial market crisis precipitated mainly by the bankruptcy of the investment bank Lehman Brothers in mid September this year.
Amidst talks on the $700-billion financial bailout package for the US financial market, Philippine economic managers have scaled down the country's economic growth target forecast to a range of 4.4 percent to 4.9 percent, almost one third off last year's historic growth of 7.2 percent.
Before the collapse of Lehman Brothers, the government had projected GDP to grow between the range of 5.5 percent to 6.4 percent. Finance Secretary Margarito Teves had even said that economic growth at best would be at 4.7 percent.
On the other hand, 2009 growth would be between 4.1 percent and 5.1 percent, according to Economic Planning secretary Ralph Recto. This is way below a previous government forecast of 6.1 percent to 7.1 percent.
Budget deficit is seen to balloon to P100 billion ($2.12 billion) under a worst case scenario, from the current estimate of P75 billion.
The Philippine peso had closed weaker at P47.050 against the US dollar, against a government previous forecast of P42 to P45.
Despite all these, however, President Gloria Arroyo said that the Philippines is ready for a looming US economic recession.
In her speech at the opening of the 29th Masskara Festival in Bacolod City, she stressed the government is doing all it can for the Philippines to ward off the effects of the US financial crisis.
"This time the government is averting the effects of a global economic slowdown brought about by the volatile global economic situation," the president said.
She said that the government is ready to "manage inflationary pressures, provide a safety net to those hit hardest by these global developments and deliver the growth that will continue to generate jobs, and the tax revenues we need to invest in our nation's future."
Likewise she has insulated the poor by delivering targeted subsidies. She also said that the government has reached out to neighbors like Vietnam in Asia and elsewhere to secure a steady supply of rice and keep its price down from the height it has reached last summer.
"While the situation has been stable, we have not been complacent. We have continued to monitor the global situation," she said.
"On the same token, we are working hard to strengthen the banking system, improve our fiscal health, encourage investments to sustain our economic growth momentum and to insulate our economy from volatility in world markets," she pointed out.
Despite the gloomy global economic landscape, Socioeconomic Planning Secretary Ralph Recto said in a report in the Philippine Star that economic managers are still expecting the country to post "respectable" growth until next year, even with Gross Domestic Product (GDP) targets scaled down for this year and 2009 to five percent and 5.5 percent, respectively.
He expects market volatility and peso depreciation. But with macroeconomic fundamentals "even better than the US," he said that the market will eventually stabilize.
Recto further stressed the need to jack up infrastructure spending and to investments in agriculture in these times of economic crunch.
"The mantra of NEDA (National Economic and Development Authority) is infra, infra, infra to improve the growth rate of the economy and make the economy more efficient; and to attract more investments into the Philippines is all the more important now," Recto said.
He also said that the challenge the economic managers face now is how to reduce inflation and to spend for sustainable growth in the future through increased government spending on infrastructure and agriculture productivity.
"Medium term, we are in a better position to cope with the crisis and if we continue improving our revenue collections and GDP efforts," he added.
Budget Secretary Rolando Andaya Jr., on his part, said the proposed 2009 national capital layout "focuses on infrastructure" as he stressed that the proposed 2009 national government budget has the "embedded solution to the problem," with infrastructure allocation proposed to be increased by 20 percent, and agriculture, by 50 percent.
Andaya stressed that there is no need to revise the proposed 2009 budget as this was "crafted in anticipation of this particular problem."
"The challenge now is to be able to have these agencies spend the money we have for 2008. For the first few months, there have been flat growth in terms of infrastructure spending but through reforms instituted, June, July and August, there have been significant increases," Andaya noted.
For his part, Bangko Sentral Deputy Governor Nestor Espenilla said there is a need to "work on tax administration measures" to generate more revenues as he stressed that there will be no new taxes.
The economic managers said the Philippines is an emerging economy that can be adversely affected by the fate of the new 700-billion dollar bailout package deal for the US financial services sector.
Thus, the President's economic team had scaled down their growth targets for this year and next year to be "realistic, credible and transparent" given the present scenario in the global economy.
From the revised 2008 growth target of between 5.5 and 6.4 percent, the economic team now sees the economy growing by 4.4 to 4.9 percent this year.
For next year, a growth of 4.1 to 5.1 percent is expected.
Meanwhile Trade Secretary Peter Favila said that the country's economic managers mapped out an action plan during a meeting with some private sector representatives on Sep. 30.
He said the plan, which was made through a teleconference of the group and undisclosed foreign economic and financial experts was submitted to the president, which would come up with her decision in the coming days.
He refused to give details of the economic plan, which he calls as "the best shield for the Philippine economy from external shocks," to avoid preemption of the government's actions by finance market players.
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