RP ECONOMIC MANAGERS ALLAY FEARS OF RECESSION
MANILA, NOVEMBER 13, 2008 (STAR) President Arroyo's economic managers allayed fears yesterday that the country would go into recession next year.
They said the country's economy would only slow down and the growth forecasts of 6.1 to 7.1 percent in gross domestic product (GNP) might go down to 3.7 to 4.6 percent.
Malacaņang meanwhile pressed Congress to pass the proposed budget for 2009 before the end of the year.
During the Development Budget Coordination Committee's (DBCC) presentation at the Senate, Finance Secretary Margarito Teves, National Economic and Development Authority director Ralph Recto and Budget Secretary Rolando Andaya Jr. said the concerns expressed by the Makati Business Club were valid, but gave assurances that the country's economic fundamentals were strong enough for it to withstand the global financial crisis.
"Technically, we are not going to have a recession because it means two successive quarters of negative growth. We at the DBCC and the economic managers are ready for an economic slowdown."
"There will still be growth, but not as much as we expected," Teves said.
With the change in the growth target, Teves said the government revised the 2009 programmed budget deficit to P102 billion from P75 billion this year.
He said much of this deficit was due to the need for additional government capital outlay to take up the expected slack in private investments.
Recto said there were positive signs in the economy such as the growth in business process outsourcing, tourism, and mining.
"There are so many things that can be done. SMEs (small and medium enterprises) will continue to do business. We still need food, clothing, shelter, basic services, education, healthcare - that will all continue," he said.
He added that private companies would be in a better position not to lay off workers because corporate income tax would go down next year from 35 to 30 percent under the Value Added Tax Law.
"So that's a 20-percent reduction in corporate income tax. That would be helpful for the business community, for the business sector as well. It's not our business to tell them what to do but that provides some leeway for them not to fire people," Recto said.
He said businesses must also consider that oil prices and inflation were going down, although these factors were volatile.
Recto and Andaya said they were pressing Congress to immediately pass the budget for 2009 before the recess in December so that this could be used as economic stimulus.
They maintained there was no need to revise the budget as suggested by Sen. Manuel Roxas II because all factors had been considered when the executive branch drafted the proposed General Appropriations Act.
"On our part, we recognize that there will be a slowdown, that's why we are preparing the national government to (provide) the stimulus package for next year - in terms of infrastructure, agriculture, and social services," Andaya said.
He said this strategy was similar to what China and the United States had unveiled to address the global financial meltdown.
He said the budget for the Department of Education and the Department of Social Welfare and Development had been increased by 12.5 percent and 114.7 percent, respectively, to address hunger and other immediate concerns of the people.
"That's a very, very big increase (for DSWD), (it's) the first time in history that this happened," Andaya said.
Other agencies whose budgets were increased were the Department of Public Works and Highways, 17.1 percent; Department of Agriculture, 55.9 percent; Department of Agrarian Reform, 23.2 percent; Department of Environment and Natural Resources, 47 percent; and Department of Health, 37.2 percent.
Recto and Andaya said the economy would benefit from the increase in spending, especially in infrastructure and agriculture.
Aside from the BPO industry, Recto said "halal" exports, telecommunications, real estate and utilities are expected to grow next year.
Sen. Juan Ponce Enrile, chairman of the Senate finance committee, agreed there was no need to revise the budget and that it must be passed as soon as possible.
But Roxas said the Arroyo administration was unprepared to deal with the negative impact of the global financial meltdown following economic managers' testimony before the Senate.
Roxas said he asked Mrs. Arroyo's economic managers to quickly provide the Senate with an updated list of programs so the chamber could consider the proper changes that would allow the national government to use the 2009 national budget as a tool to deal with the global financial crisis.
"The President's economic team has admitted the situation is so different today, and various sectors will be affected. So what are we going to do for these sectors? It's still not clear," Roxas said.
Roxas had proposed that Congress realign P100 billion from the proposed P1.415-trillion national budget next year to fund safety nets that would soften the impact of the financial crisis on ordinary Filipinos, many of whom were expected to lose jobs or face income reduction as companies worldwide scale down work forces and consumer demand decreases.
He said an initial list of budget items provided by the DBM should provide the amounts for specific programs, and not just lump sums that could lead to corruption.
President Arroyo also assured Filipinos that the country would not bear the full brunt of the global financial crisis due to its strong economic fundamentals.
In her speech before the Filipino community in Chicago, Mrs. Arroyo said while no one can predict the full impact of the current financial crisis on the Philippines, "our economy is stronger than it has been in generations because tough choices were made."
Mrs. Arroyo is in the US to attend an interfaith forum in the United Nations headquarters in New York organized by Saudi Arabia.
She said while her administration's fiscal reforms a few years back made her unpopular, it "saved the day for our country now that there is a global economic crisis."
Meanwhile, Albay Gov. Joey Salceda, Mrs. Arroyo's economic adviser, warned against "domestic complacency" as the incoming Obama administration "is showing early a bias for domestic interests - natural of course yet inordinately disturbing."
Salceda pointed out the proposed bailout of the US automotive industry was very worrisome as it goes beyond "systemically significant institutions" or banks and other financial institutions.
"Thus, we should put in place our offensive measures," he said, referring to increasing deposit insurance and the capitalization of the Philippine Deposit Insurance Corp.; injecting P40 billion into the Bangko Sentral ng Pilipinas; and securing foreign exchange from multilateral institutions like the World Bank and the Asian Development Bank.
Executive Secretary Eduardo Ermita, in a briefing at Malacaņang, said that the President's economic team and her entire Cabinet have been tasked to prepare for the impact of what has been described as a slowdown of the economy.
While the possibility of the economy going into recession next year has not been discounted, Ermita said that the President has lined up various programs and projects aimed at safeguarding the nation from the adverse impacts of the global crisis.
The President has also directed all Cabinet members to personally oversee the implementation of various livelihood and emergency employment programs for the poor families and individuals in each of the country's regions.
Ermita said that the President has been following this up with her Cabinet officials to ensure that the poorest sectors would be protected from the impacts of the global crisis. - Aureal Calica, Paolo Romero, Marvin Sy
Chief News Editor: Sol Jose Vanzi
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