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By Lailany P. Gomez, Reporter
THE Asian Development Bank (ADB) warned that it would take at least
five years before Western demand for the region’s exports can
recover to their pre-crisis levels, thus the need for countries like
the Philippines to prop up their domestic sectors and complete trade
integration with neighbors.
“Over the next five to 10 years, Western
demand for Asian exports, including the Philippines, is no longer
there,” Neeraj Jain, ADB country director, said in a roundtable
with editors and reporters of The Manila Times.
“It will take time for Western consumer
spending to recover. Asians should generate greater demand from
their domestic or regional markets,” he added.
Given poor prospects for traditional markets in
the West, the Philippines has to diversify its product line and
market base to reduce vulnerability to external shocks, Jain said.
According to the ADB official, “sources of
growth must be rebalanced, from extreme dependence on external
demand to domestic demand” for the Philippines to lead the way in
charting a globally beneficial development course.
To encourage investments, the Philippines must
heed the “amber lights” cast upon its legal structure, political
system and public finance system.
Atractive environment
“From an investment perspective, this economy
needs more investment whether that investment should come from
foreign savings or domestic savings. When we see this economy
consume 77 percent of GDP it’s not a bad thing, if we can expect a
lot of foreign savings, a lot of foreign investments. But that would
need a certain type of investment climate. The foreigners must find
your country, the business environment, attractive enough to bring
their savings into the country,” Jain said.
An indicator of economic performance, GDP or
gross domestic product is the amount of final goods and services
produced in a country.
The ADB official said that the Philippines’
near-term economic prospects hinge on the global outlook and the
government’s revenue performance.
“If [the global] contraction deepens, then the
Philippines will take a hit,” Jain added.
Furthermore, “revenues should grow by 9
percent to 10 percent for the rest of the year” so that the
government avoids a fiscal blowout, he said.
The government earlier announced that revenue
collections declined 2.5 percent to P104.2 billion for May and by
5.4 percent to P456.2 billion in the first five months.
‘Downside risks’
“There are significant downside risks if taxes
don’t pick up. Interest rates will rise in the domestic market,”
Jain said, even as he acknowledged that a recent global bond
issuance eased the pressure on rates.
The government a few days ago successfully
raised $750 million from the sale of Republic of the Philippine
papers (ROPs) in the international market. This jacked up its
foreign commercial borrowing to $2.250 billion after last
January’s issuance of $1.5 billion in sovereign bonds.
Proceeds from these fund-raising exercises are
meant to plug a budget deficit that is forecast to widen to P250
billion this year on account of government moves to cushion the
country from the impact of the worst global economic crisis in
decades.
Jain, however, said that the results of any
fiscal stimulus that the government will undertake would take a
while to materialize.
“It will take two to three quarters for the
impact of the fiscal stimulus [to take effect]. With better global
prospects, consumers must start spending,” he added.
The ADB will grant Manila an additional $500
million in loans to help finance its expenditure program. The amount
is scheduled to be released in the fourth quarter this year.
Philippine GDP growth fell sharply to 0.4
percent in the first quarter this year, from 3.9 percent last year.
This forced authorities to cut their growth target for a third time
to between 0.8 percent and 1.8 percent this year, from an earlier
estimate of 3.1 percent to 4.1 percent.
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