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LEGAZPI
CITY—Albay Gov. Joey Salceda, one of President Arroyo’s
top economic advisers, said on Thursday the government
should put up a P120-billion deficit spending package to
counter the impact of the US financial crisis that is
seen to slow down investments and growth.
He said
this economic stimulus would soften the impact of the
crisis that had already toppled the foundations of two
of Wall Street’s titans, Merrill Lynch & Co., which was
sold to Bank of America, and Lehman Brothers Holdings
Inc., which filed for bankruptcy on Monday.
The
insurance giant American International Group (AIG) was
bailed out with an $85-billion bridging facility from
the Fed.
Also on
Thursday, US Ambassador to the Philippines Kristie
Kenney said the US meltdown may have immense global
impact, but maintained that Manila’s economy “stands on
solid footing” as it continues to attract foreign
investments.
Kenney
said the US financial situation is intertwined with the
global market, but assured Filipinos her government is
facing the challenges head on.
“We
certainly hope that the rescue [bailout] of the AIG will
help stabilize the situation,” said Kenney in Manila.
“The US Congress is also looking at further improvement
in the regulation of the banking [industry].”
Merrill
Lynch had been taken over by Bank of America through a
$50-billion all-stock buyout while Lehman Brothers had
collapsed and was offered to immediate buyouts.
Barclays
Plc. had reportedly agreed to buy Lehman’s US
investment-banking unit for $1.75 billion, after
abandoning plans to acquire the entire securities firm.
AIG, meanwhile, is most likely to repay its loans by
liquidating or selling assets.
“The
Philippine economy can run but can’t hide from the
impact of an imminent global recession, which is being
conveyed by the crash in global markets,” Salceda said.
A credit
crunch and a consequent plunge in consumer confidence
will shrink export demand and investment flows, even
tourist flows and OFW deployment, he added.
The top
presidential economic adviser said one immediate impact
of the global crisis was felt in the second quarter of
this year by 4.6 percent against last year’s 8.3
percent.
To
offset the economic breakdown, he said, deficit spending
is a proportional response to shield the poor from its
adverse effects.
“Clearly
we must execute an economic stimulus. It is not only
correct and good but also the smart thing to do. That
could mean a higher deficit of P120 billion or 1.5
percent of GDP,” he said.
He said
part of the economic stimulus is the tax exemption for
minimum-wage earners, meant to give the ordinary workers
relief—reaching P36 billion if retroactive to January.
“What is
missing is a more massive income transfer to the poor of
at least P30 billion,” Salceda said.
The US
ambassador, meanwhile, said that the Philippines along
with other countries will similarly face the impact of
the US crisis, but it remains resilient due to the sound
economic situation.
“The
Philippine economy stands on solid footing and [is]
playing to its good advantage,” said Kenney at the
groundbreaking on Thursday of the new $20-million US
department of Veterans facility at the US Embassy
seafront compound on Roxas Boulevard.
She is
confident there will be no pullout by US companies in
the Philippines. She said there are still some
multimillion-dollar US investments in the pipeline.
But
Kenney stressed that the Philippines should maintain its
sound economic policy “to keep this country attractive
to foreign investors.”
There
are more than 2 million Filipinos in the US, mostly
immigrants, information-technology and health-care
professionals. They are seen to face possible
displacement amid the global meltdown.
These
professionals may get affected in the retrenchment of
major investment companies, “[but] hopefully, that won’t
happen as we need to save these people [from the
negative effects of the meltdown].”
Next to
Japan, the United States is the second-biggest trading
partner of the Philippines, with a total of $665 billion
in foreign direct investments (FDIs) in fiscal year
2007. Japan poured a total of $827 billion in FDIs last
year. (With E. Torres) |
