Gov’t unfazed by Europe, US woes

Investments, pump priming to blunt impact

THE LINGERING economic uncertainties in the United States and Europe will not affect Philippine economic growth too much this year, as higher fiscal pump-priming and private sector investments will likely counter the adverse effects of the global downturn.

This is according to Socioeconomic Planning Secretary Cayetano Paderanga Jr., who said in an interview published by New York-based think tank Global Source that the effects of the global slowdown could trim the country’s real gross domestic product for the full year 2011 and 2012 by only 0.8 percentage point.

This is lower than the 1.5-2 percentage point decline in GDP caused by the government’s underspending last year, as estimated by some analysts.

Paderanga also said that this year would be better for the domestic economy compared to last year. The government sees growth this year at 5-6 percent while the “fighting” target of the Aquino administration is 7-8 percent.

The adverse effects of slower global economic activities this year will be mostly felt by the country’s industry sector, followed by the agriculture and the services sectors, Paderanga said. It is also seen taking a toll on the expenditure side, particularly through the exports, imports and investments channels.

“Overall, our estimates show the adverse effects of the world economic slowdown could cause the unemployment rate to go up by 0.25 ppt (representing 100,000 persons) in 2011 and 0.30 ppt (representing 123,000 persons) in 2012. Please note that that the estimates assume all other things being equal. But already, we have countervailing actions,” he said.

Looking back on 2011, Paderanga said growth was affected mainly by external circumstances, such as the debt woes in Europe and the sluggish economic growth in the United States.

On the part of the government, Paderanga said fiscal spending was needed.

“Fiscal spending also has a medium-term impact, because you increase your capacity to produce,” he said.

Apart from the government’s infrastructure spending in the next few years, Paderanga said the domestic economy would benefit from investments from the private sector particularly in tourism, business process outsourcing and consumption-oriented industries.

“We’re also working on the agro-industrial post-harvest process, which will be helped by investments in transportation and communication. And beyond that, once the cloud of bad governance starts to dissipate, we should be able to find out where in manufacturing we feel we have a chance. That could become clearer in the next two or three years. I am not sure about that, but that cloud will be dissolved. I actually have quite optimistic look over the medium term. We just need to get through the next one or two years in a way that is encouraging for the rest of the economy,” he said.