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By Chino S. Leyco and Darwin G. Amojelar, Reporters
DESPITE its vigilance over the Philippines’
budget deficit-reduction program, the international financial
community may be warming up to government plans to crank up
infrastructure and social spending to weather the US economic
slowdown.
The World Bank’s country director said
infrastructure and social service spending shouldn’t be sacrificed
at the altar of fiscal prudence.
Bert Hofman said the multilateral lender
observed that last year’s record-low P9.4-billion budget deficit
was made at the expense of key expenditures.
“Maybe not enough were spent on a couple of
things that we like, such as infrastructure, health care and
education because the budget deficit had to be reduced,” Hofman
said.
“Expenditure management is terribly important
as well so improving that side by side would be really good. That
would be a sign of a healthy government increasing the better
programs or expenditure management and then higher revenues,” he
said.
After the Bureaus of Internal Revenue and of
Customs missed their collection targets last year, the
Washington-based lender wants to see taxes as a share of the
economy, as measured by the country’s gross domestic product (GDP)
to go up “so the government can do more,” he added.
The World Bank has line up a $1.7-billion worth
country assistance strategy until end-June next year for the
Philippines to help it spur infrastructure spending and boost the
government’s poverty reduction efforts.
In its latest outlook on the country, Nomura
Securities said the Philippines should be supported by a fiscal and
monetary stimulus package, especially in the second half of the
year.
Balancing the budget may have to wait
The Japanese securities firm said the Arroyo
administration’s objective of balancing its budget may have to
wait until next year, citing the relevance of a P75-billion stimulus
package that Philippine economic managers eventually dropped
after it raised concerns over the impact on the country’s fiscal
reform program.
“We expect capital and construction investment
to be firm in 2008, led by government spending on public
infrastructure and increased capital expenditure in the expanding
business process outsourcing industry,” it said.
The company drew attention to a higher risk of a
slowdown for the Philippine economy owing to higher crude prices and
the US downturn.
Nomura said the Philippines’ GDP growth may
slow to 5.3 percent this year from 7.3 percent last year, with
exports and private consumption likely to cool.
The securities firm also said the Bangko Sentral
ng Pilipinas (BSP) has more leeway to further reduce its overnight
rates despite inflationary pressures stoked by rising oil prices,
adding the strong peso will partly counter the impact of costlier
crude.
“We would expect inflation to ease in 2009 as
the boost to prices from higher crude oil prices drops off,” the
securities firm said.
It said the Philippines should mitigate
the US slowdown’s impact on exports by shipping more minerals,
especially to China, and taking advantage of their high prices
worldwide. Having said that, Nomura admitted that a weak US would
first cause Philippine exports to soften.
Gov’t spending to avert slowdown
A source at the National Economic and
Development Authority (NEDA) said GDP growth may slow down this year
if government spending on infrastructure were crimped.
The source said expansion may slow to between
5.4 percent and 6.1 percent without the boost to state spending.
The NEDA used a 6.1 percent to 6.8-percent
baseline GDP growth on the assumption that oil prices will range
from $80 to $90 a barrel and the exchange rate would be between P42
and P45 for every dollar.
The government plans to spend about P79.36
billion this year to boost the economy. Of this amount, P36.5
billion will be allotted for the transport sector; P20.3 billion,
power; P14.4 billion, water; P5.6 billion, social infrastructure;
P2.2 billion information and technology; and P214.2 million,
property development.
These investments would contribute about 0.6
percent and 0.4 percent to industry and services, respectively.
Budget Secretary Rolando G. Andaya Jr. had said
that the government plans to front-load its infrastructure and
social spending in the first quarter to offset the likely impact of
a possible US recession and sustain domestic economic growth at the
high end of the government’s target.
For this year, the government had proposed a
P1.23-trillion budget. It targets GDP growth of 6.3 percent to 7
percent.
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