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AFTER
stock markets all over the world plunged on Tuesday and
the local bourse slightly recovered the day after, the
government has decided to maintain a “wait-and-see”
attitude before it considers the revision of its
economic targets for 2008 onward.
Acting
Director General Augusto Santos of the National Economic
and Development Authority (Neda) said revising targets
are not yet an option for the government.
“[The
situation is] being monitored by the government. The key
is to pump prime the economy to head off possible
adverse effect,” Santos told reporters.
The
central bank, for its part, said sound macroeconomic
foundations of the Philippines are going to serve it
well in the event of a full-blown recession in the
United States, the country’s main export market.
In a
statement, Bangko Sentral ng Pilipinas (BSP) Governor
Amando M. Tetangco said the growth momentum in the first
nine months last year was sustained “on the strength of
[its] solid macroeconomic fundamentals [which was] the
best in 30 years.”
Deputy
BSP Governor Diwa C. Guinigundo believes the effects on
the Philippines will be minimal, particularly if the US
Federal Open Market Committee reduces interest rates to
head off the feared recession.
“If the
US lowers interest rates, avoids recession and the
slowdown in growth is minimized, then its impact on the
Philippines will also be minimal,” he said.
The US
Fed has already cut by 75 basis points the interest
rates ahead of the January 29 and 30 rate-setting
meeting—from 4.25 percent to 3.5 percent.
A number
of analysts believe the US Fed will do another rate cut
of up to 75 basis points at the upcoming meeting in a
bid to build confidence and head off recession.
In
Manila BSP Governor Tetangco said a solid macroeconomic
foundation allowed the economy to keep inflation at bay
during the year at only 2.8 percent versus target of up
to 5 percent—also the lowest in 21 years.
“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.
“This
contributed to the firmness of the peso, which averaged
P46.15 per US dollar in 2007, and provided the BSP the
opportunity to build up its international reserves,
which reached a historic level of $33.7 billion as of
end-December 2007,” he said.
As the
economy achieved firmness, so did the banking system,
where key indicators reflect overall soundness.
“Bank
lending expanded, while asset quality improved
significantly with the banking system’s average
nonperforming loan [NPL] ratio declining to 5.3 percent
as of October 2007.
“Moreover, banks remained adequately capitalized with
average capital adequacy ratio of 19.3 percent as of
end-June 2007, which was above the statutory level set
by the BSP at 10 percent and the Bank for International
Settlements’ [BIS] standard of 8.0 percent,” Tetangco
said.
Meanwhile, Neda chief
Santos said the government is concentrating on priming the economy
through the passage of the 2008 budget by Congress,
improving tax collection and speeding up the approval of
major infrastructure projects to weather the global
economic downturn.
The
Development Budget Coordination Committee earlier
revised its projections for 2008 to 2010 from the
projections made when the 2004-2010 Medium Term
Philippine Development Plan was released.
Santos
said the government projects a gross domestic product
(GDP) growth within the range of 6.3 percent to 7.0
percent in 2008, 6.4 percent to 7.1 percent in 2009, and
6.7 percent to 7.5 percent in 2010.
Meanwhile, Santos said the government considered the
global sellout in stock markets short-lived, since this
was merely a product of readings and speculations on the
projected recession in the United States economy.
He said
the US has announced a tax package worth 1 percent of
its economy, or roughly $150 billion. He said this is
around the same amount of the country’s whole economy.
Santos
attributed the current problems in the
US
economy to the subprime-mortgage crisis and the increase
in oil prices. He said the US experienced one of the
highest increases in pump prices because of the weak
dollar. |
