Bright outlook for 2010

THE Philippines will survive 2010 with flying colors, according to the country’s economic managers.

They projected a higher growth rate for the country this year amid reports of an economic rebound already being felt by various industry sectors despite the prolonged dry spell faced by the country.

Finance Undersecretary Gil Beltran yesterday told reporters that the country’s growth rate of 0.9 percent last year was not bad. “It’s still positive,” Beltran said, citing the global economic crunch that has hit major industry sectors and the natural calamities that hit the agriculture sector.

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Beltran was among the speakers at the Yearend Philippine Economic Briefing and Press Conference at Cebu City Marriott Hotel hosted by the Investor Relations Office.

Budget deficit

Amid the global economic crisis said to be the worst since the Great Depression, Beltran said fiscal spending was still contained, and the country’s budget deficit was equivalent to just 3.9 percent of its gross domestic product (GDP).

He said this ratio was not bad and is lower compared to that of neighboring countries, whose deficits are equivalent to an average 4.5 percent of their GDP.

However, per capita income dropped because of the increase in the population growth rate to 2.1 percent.

GDP refers to the amount of goods and services produced by a country.

The Great Depression refers to the severe worldwide economic downturn that started in 1929 and lasted until the late 1930s or early 1940s.

As for savings, Beltran said the country posted a good savings growth rate of almost 30 percent of the country’s GDP.

“This means our banks have a lot of money to invest, and the government can spur spending without much problem because it can issue Treasury bonds to the market,” he said.

While major countries already feel the rebound in the economy, Beltran warned that once big countries with big populations like India and China start returning to their usual growth rates, these countries might push up oil prices, which can impact on the prices of basic commodities.

As the economy recovers, he said, the government aims to bring down the budget deficit to 3.6 percent of GDP this year.

The Finance Department will implement more effective tax administration measures, intensify collections of non-tax revenues, and tighten implementation of the rules and regulations of recently enacted revenue-eroding measures.

However, key challenges that may affect the growth of the financial sector this year include the El Niño dry spell, imminent power shortages and volatile commodity price movements.

Bangko Sentral ng Pilipinas (BSP) Acting Director Zeno Ronald Abenoja said the inflation forecast for 2010 is within the target of 3.5 to 5.5 percent.

He said the country was able to survive the global crisis due to its “sound macroeconomic fundamentals—as evident in the favorable inflation environment and strong external payments dynamics—and a sound and healthy banking system.”

Abenoja said the country is positioned for self-sustaining growth with its strong gross international reserves, balance of payments and overseas Filipino remittances.

The average inflation rate of 3.2 percent last year, he said, was well within the target and lower than the 9.3 percent posted in 2008.

Exit strategy

Key challenges identified by the BSP include commodity price pressures and a surge in capital flows, which could lead to problems in liquidity management and the timing of exit strategies.

Abenoja said exiting too soon could hurt recovery and exiting too late could lead to inflation and asset bubbles.

Although total government spending skyrocketed from P174.5 billion in 2001 to P1.4 trillion in 2009 and grew at an annual average rate of nine percent, Budget Undersecretary Laura Pascua said this was mainly due to finance infrastructure investments and social services.

This, she said, reflects the government’s thrust of placing infrastructure high in its development agenda.

She added that a huge budget was set aside for infrastructure and rehabilitation rather than settling debt obligations.

Agriculture Assistant Secretary Preceles Manzo said the department will continue investing in infrastructure and equipment to address the dry spell faced by the agriculture sector.

He said the department will also make more loans available to the farmers.

With the P48-billion budget allotted last year, Manzo said the government constructed farm-to-market roads, mariculture parks, post-harvest and irrigation facilities; and provided organic fertilizers to farmers.

Manzo said the department will also take advantage of trade liberalization to boost the exposure of Philippine products to other markets.