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By Darwin G. Amojelar and Chino
S. Leyco Reporters
THE National Economic and
Development Authority (NEDA) said the government plans to pump prime
the economy by speeding up infrastructure projects to mitigate the
impact of a US recession on the Philippines.
“The government really needs to
pump prime the economy to head off the possible adverse effect of
the US economic slump,” Acting Socioeconomic Planning Secretary
and NEDA Director General Augusto B. Santos told reporters on
Wednesday.
Santos said the Arroyo
administration is pressing Congress to pass the 2008 General
Appropriations Act for that purpose.
Under the proposed spending bill
for this year, the government has set aside capital outlays of
P147.7 billion to boost infrastructure. This incorporates about
P116-billion worth of infrastructure projects of the Departments of
Public Works and Highways, of Transportation and Communications and
of Agriculture, among others.
The Palace had proposed to
Congress a P1.227-trillion national budget, which is P101 billion
higher than last year. The government is targeting a 6.3 percent to
7 percent economic expansion this year.
The Bangko Sentral ng Pilipinas (BSP)
said the US Federal Reserve’s surprise move to reduce its Federal
funds rate by 75 basis points would help financial markets calm
down. The BSP however stopped short of saying whether it would take
its cue from its US counterpart and slash its overnight rates.
“We will be monitoring how
markets digest the Fed’s surprise move. Overnight we saw some
correction in the equities market in the US. This should benefit our
own domestic markets as volatility would be reduced,” BSP Governor
Amando M. Tetangco Jr. said.
BSP Deputy Governor Diwa C.
Guinigund said the Fed move will give the Philippines more leeway in
terms of conducting its monetary policy.
“We can expect lower demand for
us. This might affect exports both goods and services. The effect on
the demand side is lower consumption,” he told reporters.
If the US turbulence intensifies,
Guinigundo said there could be more risk aversion, causing investors
to avoid emerging markets like the Philippines, which “will reduce
capital inflows.”
Tetangco said the country’s
macroeconomic fundamentals are at their best in 30 years and were
realized through prudent policies and continued structural reform
efforts.
“Broad-based economic expansion
was achieved in a low inflation environment,” he said, adding
inflation averaged 2.8 percent last year, or below the 4-percent to
5-percent target range, and the lowest annual average in 21 years.
The BSP said the country
generated a robust external surplus position of $8.6 billion in 2007
on the back of sustained inflows of remittances from overseas
Filipinos and higher capital inflows, adding this contributed to the
firmness of the peso.
“The peso provided the BSP the
opportunity to build up its international reserves, which reached a
historic level of $33.7 billion as of end-December,” Tetangco
said.
He said bank lending also
expanded, while asset quality improved with the banking system’s
average non-performing loan ratio declining to 5.3 percent in
October. Banks remained adequately capitalized with average capital
adequacy ratio of 19.3 percent in the first six months of last year.
In the first nine months, the
Philippine economy as measured by its gross domestic product grew by
seven percent. Full-year data will be released next week.
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