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The Arroyo administration must not
ignore calls for more diligence in improving tax collection, job
creation and combating inflation.
Its
political-machine operators must do everything it can—without
fraud and open vote-buying, both of which will lead to a national
disaster—to try and get the “12-0” goal in the senatorial
contest against the Genuine Opposition. But the administration’s
team of technocrats must not be distracted from continuing the very
satisfactory fiscal and economic work they and the President have
done.
The
forecasts made earlier this week by ACERD—the Ateneo Center for
Economic Research and Development—that the economy will not grow
as much as the government economic managers say it will must be
taken very seriously.
ACERD
forecasts growth of only 5 to 5.6 percent while government
economists project 6.1 to 6.7 percent growth in the Gross Domestic
Product. (To the many OP-ED section readers whose passion for
politics is not matched by basic knowledge of economic matters: the
GDP is the money value of the total flow of goods and services
produced by the economy over a period of time.)
The
economy’s growth in 2006 was 5.4 percent. (By comparison, China
and India have experienced double-digit GDP growth. This does not
mean, though, that there are less dirt-poor people in those
countries than here.)
ACERD bases
its lower forecasts on (1) weak manufacturing output, (2) slow
growth in and low levels of both local and foreign direct
investment, (3) persistent political fighting.
The former
NEDA head, who once wrote a column for The Manila Times, Dr.
Cielitio Habito, says, “Investments in 2007 will have an
insignificant growth because of the elections.” There is always
less private sector investment in election years.
And he sees
that our electronic industry—which is our export leader —will
only perform moderately this year because of the continuing strength
of the peso.
That’s
something always to bear in mind about the peso-dollar exchange
rate. Whenever the peso gains against the dollar or the yen or the
euro, Filipino exporters tend to suffer because our overseas
customers have to pay more for our products. Our export customers
then end up buying from other countries.
That’s why
our exporters and export-product manufacturers should make sure our
products are much better in quality. They thereby make our products
irresistibly better buys abroad even if they cost more.
It’s the
government and such firms as PLDT and Meralco—who have foreign
debts—that always benefit from the strong peso. The cost of
foreign borrowings become less for them. One of the reasons foreign
banks and ratings agencies are praising the Arroyo administration is
its ability to pay back government debts ahead of scheduled loan
maturities, an ability that comes largely from the strength of the
peso and our large foreign-exchange reserves (both thanks to our
OFWs.)
The
government’s deficit position is also markedly better now than in
years prior to the Arroyo administration, which is a result of
better fiscal management as well as the forced stagnancy of the
national budget (a result of Congress’ inability to pass the
appropriations bill three years in a row).
ACERD’s
prediction may prove wrong. The administration could still meet its
6 to 7 percent growth target—by spending a lot on new
infrastructure projects: more roads, bridges, airports and piers,
tourist destinations and more schoolhouses, etc.
Even if the
massive spending on these projects is attended by the usual
40-percent corruption rip-off (as estimated by the World Bank) the
stolen money will still add to consumer spending and boost GDP
growth.
This would be
true, however, only if the corrupt officials don’t buy US dollars
with their loot. If they spend their stolen wealth here or deposit
it in their local banks, which should lend it to local merchants for
expansion or investment, then even corrupt income will benefit the
local economy.
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