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ANOTHER
voice joined the growing chorus of economists with the
unsolicited advice to President Arroyo that balancing
the budget this year is not the end-all and be-all of a
stable economy, with the new voice saying a commitment
to do so is enough, amid the current unhealthy economic
world situation.
The
President has time and again expressed her firm resolve
to balance the budget this year, two years ahead of the
target in 2010, apparently to show the country and
foreign investors the state of the domestic economy is
excellent in the face of brickbats all around owing to
increasing poverty.
Adding
to the pressure on the President is that balancing the
budget is considered by many investors and analysts as
the “litmus test” for the Philippines and puts at stake
the credibility of the economic team.
But
Asian Development Bank (ADB) deputy director general for
Southeast Asia Thomas Crouch said Wednesday that as long
as the Philippines has the capability to balance its
budget and the economic team is firm on meeting this
commitment, that is enough for now.
“It is
important for the government to achieve this. However,
there is no absolute reason why 2008 must be the year
when there is a fiscal balance. If there are very sound
reasons for increasing the expenditure in public
infrastructure and the social sector, as long as debt
occurred in parallel with continuous upward trend in tax
revenues, for example, then there is no reason to
balance the budget and maybe encourage a larger deficit
than planned in 2008,” said Crouch in the open forum
after the launch of the bank’s flagship publication, the
Asian Development Outlook for 2008, in Pasig City.
There
was a small development on the balanced budget issue
when President Arroyo told a pooled media interview in
her suite at the Grand Hyatt Hotel in Hong Kong late
Tuesday that government may incur a “small” budget
deficit this year.
“As of
now, our goal is still a balanced budget on the
assumption that the US slowdown will be short....But we
have to watch the situation. If the slowdown is more
prolonged, and we discussed this with the creditors and
the international financial community, they can
understand, they will understand a small deficit as long
as they see an increase in our tax effort,” she said.
Mrs.
Arroyo added the deficit, if incurred, “will be very
targeted” and spent on the shelved fiscal-stimulus
package earlier proposed by Albay Gov. Joey Salceda, her
economic adviser.
In
January, Salceda had proposed a P75-billion
economic-stimulus package to cushion the country against
the ill effects of a US slowdown which includes P16
billion in tax rebates for middle class working families
and P8 billion in power-rate discounts for those
consuming a maximum of 200 kilowatt-hours per month; and
increased spending for agriculture (P15 billion),
food-for-school projects (P6), education (P6 billion),
health (P4 billion), housing (P4 billion) and
infrastructure (P16 billion).
Her
economic managers are expected to meet after the first
quarter to assess the impact of the
US
slowdown and determine whether it is time to consider
Salceda’s proposal.
At the
ADB forum in Pasig, Crouch said, “Our key concerns would
be that any act is focused, sharp and doesn’t undermine
the gains of fiscal consolidation,” but he acknowledged
that managing the economy is essentially a balancing act
and this task is especially difficult given an expected
rise in inflation due to the increase in commodity
prices.
Crouch
said the government must provide a response to this
problem, a focused approach to ensure the poor are
somehow shielded from high commodity prices. Crouch
attributed the increase in poverty, as shown by a survey
of the National Statistical Coordination Board, to high
commodity prices.
The NSCB
data showed that 33 out of 100 Filipinos were considered
poor in 2006. This translated to 4.7 million families or
around 27.6 million individuals living below the poverty
line, an increase of 16 percent from 2003 levels. |
