Philippine deficits and debts

MANILA, Philippines - Each Filipino now owes P47,039 to local and foreign creditors, based on the national government's total debt stock as of September.

A month before that, each of the 92.2 million Filipinos owed P45,889.

The culprit: the widening budget deficit that prompts the government to borrow some more. Additional debts, which address current funding needs but could be paid in the future, translate to more debt burden for future generations.

The fact that the Philippines has been spending more than it earns is not earthshaking. Even the richest of countries have budget gaps. But prudence dictates that this deficit, which is a fiscal policy issue, has to be manageable.

Already, there are concerns about how the Philippines is faring as far as fiscal discipline is concerned.

The Philippines blew past its P250-billion fiscal gap target for 2009, recording a deficit of P272.5 billion with one more month to go before the year ends.

If this year's experience is any guide, analysts believe the country's 2010 budget deficit will also breach the government's official target.

Forecast

Weak revenues—due to slower economic growth, several revenue-eroding laws, the negative impact of typhoons on tax collection, and lackluster privatization of assets—have been blamed for the wider-than-targeted deficit this year.

Except for privatization, which is expected to pick up steam, the same factors are seen to push the budget deficit above goal in 2010.

Despite the continued deterioration in the government's fiscal position, analysts at some of the biggest banking institutions say it's not as bad as it seems.

The government had set next year's budget deficit ceiling at P233.4 billion, but the country's economic managers are looking to increase this "to incorporate realistic assumptions."

They said more revenue-eroding measures that will take effect next year as well as the lingering economic downturn will take toll on the collections of the government's main tax agencies, the Bureau of Internal Revenue and Bureau of Customs.

The government is also expected to spend more for reconstruction efforts following back-to-back typhoons.

Taking these into account, Finance Secretary Margarito Teves said the actual 2010 deficit figure may hit close to P300 billion, the same as their "worst-case scenario" for the 2009 budget gap.

Teves' forecast is in line with analysts' consensus.

Not alone

Viewed in the context of the current economic crisis, financial experts say the country's swelling budget shortfall is not worrisome at all.

Unlike in 2004, when the poor fiscal state of the country was a product of the government's own hubris, the recent global crisis has made a large deficit more acceptable.

According to Metrobank head of research Marc Bautista, the country needs to incur a deficit to be able to sustain economic growth by curing sluggish demand through increased spending.

He noted that other countries are doing the same thing.

"There is room for deficit spending in 2010, the markets all but expect it already, and the Philippines is not alone in this predicament," Bautista said.

DBS strategist Philip Wee, for his part, said the widening budget gap has not really affected the strength of the Philippines , given the country's steadily rising external liquidity, and the peso's stability.

Fiscal consolidation

Nonetheless, the Philippines is eyeing to wipe out its budget deficit by 2013.

The country first targeted to balance the budget in 2008, but pushed this goal back to 2010 due to adverse external developments, including the rise in commodity prices and the onset of the global financial crisis. The 2010 goal was pushed further to 2013 to accommodate deficit spending for the economy.

As the country consolidates its fiscal position, Teves said that the government’s debt as a percentage of gross domestic product will also drop to 46.1% by 2013 from the programmed 57.6% by end-2009.

Similarly, he said the consolidated public sector fiscal position—the combined fiscal positions of the government, state-owned agencies and government financial institutions—will post a surplus during that year.

In the end, the economic managers will be assessed on how they managed the country’s finances. After all, it is the future generations of Filipinos who will bear the burden of today’s folly. - Text and graphics by Judith Balea, abs-cbnNEWS.com; with reports from Business Mirror, The Philippine Star

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The True State of the Nation

Photo: Arkibong Bayan

Gloria’s First World in 20 years pure fantasy

By Chito Lozada Business Editor

Daily Tribune 07/24/2007

The most striking part of President Arroyo’s policy speech in the State of the Nation Address yesterday was her target of putting the Philippines in the ranks of First World nations in 20 years, which an economist described as an obvious publicity spin.

University of the Philippines (UP) economics Prof. Benjamin Diokno, who was Budget secretary during the term of deposed President Joseph Estrada, said the economy is far from going the path of an industrialized nation.

“Forget the First World status in 20 years. For the next three years, she’ll be lucky if she can make up for her neglect of educa-tion, health and infrastructure,” Diokno said.

He noted that for every P1-tax that the Arroyo administration has collected,

93 centavos went to debt service.

He noted that based on a recent UP research, the historical growth of the Philippine economy from the Nineties to the present, averages only slightly more than four percent even if only non-crisis years are included.

Diokno said except for 2004, the Arroyo administration has consistently failed to meet its own gross domestic product (GDP) growth rate targets, which is used as basis in tracking economic growth.

“The gap between the promise and actual performance has been widening and it would be much wider if no further reforms are adopted. Given how weak the government is, however, further reforms are highly unlikely,” Diokno asserted.

He noted that the economy has not performed well enough to improve the lives of the poor.

According to the Asian Development Bank’s (ADB) Asian Development Outlook 2007, which was released last March 27, the Philippine economy has been growing only moderately which was not enough to address the country’s worsening problems of unemployment, underemployment, and poverty, Diokno said.

The economy is being hobbled by fiscal mismanagement in government which resulted in the collection of higher taxes, thus reducing the disposable income of Filipinos.

“Every Filipino is now paying more taxes, effectively reducing the money in his pocket, and as a result, reducing his overall welfare,” Diokno said.

He said wrong priorities had made the plight of Filipinos worse. The Arroyo administration is spending less for education, basic health care and public infrastructure, and more for debt service, he said.

The fiscal mismanagement was reflected in the Arroyo administration’s failure to get congressional support for its budget plans.

“It operated on a reenacted budget for three of the six years it has been in power. The national budget is an important tool of public policy, it is supposed to provide the flesh and blood to the skeletal medium-term plan or vision of any government,” according to Diokno.

By agreeing to run the government without an approved budget, the critical role of the budget is lost, he added.

Mrs. Arroyo incurred the highest budget deficits, measured in terms of national government deficit, public sector borrowing requirements and consolidated public sector deficit, in recent Philippine history, Diokno said.

Her priorities were misplaced. The President neglected education, health and public infrastructure, thereby propelling the Philippine economy on a lower growth trajectory. Debt servicing became the government’s top priority, he said.

The Arroyo administration incurred the highest budget deficits — which peaked in 2002— in recent Philippine history. In 2002, the budget yawned to a P214 billion deficit, the biggest ever for a Philippine administration.

“After creating such a monumental fiscal mess, Mrs. Arroyo now wants credit for cleaning it up,” according to Diokno.

To cover the fiscal disaster, Mrs. Arroyo has to rely heavily on borrowings.

“When Mrs. Arroyo assumed power in 2001, the national government’s outstanding debt was P1.9 trillion; it now stands at P3.9 trillion, which means the national government’s debt rose by P2 trillion during Arroyo’s watch.

Interest payments as percent of GDP peaked at 5.5 percent in 2005, up from 3.6 percent in 1999 4.2 percent in 2000, Diokno added.

The result is the current debt servicing level quadrupling since Mrs. Arroyo took power in 2001.

The P854.4 billion spent to service the national government’s debt, covering interest and principal, in 2006 is almost equal to what it collected in taxes of P860 billion during the year.

Put differently, for every 100 pesos collected in taxes, P99.35 went to debt servicing, he said.

Government spending per student was P5,830 per student during the administration of former President Joseph Estrada compared to P5,467 during the present administration.

The combined per capita health spending, adjusted for inflation, in 2000 prices, was the highest during the term of Estrada; it dropped during Mrs. Arroyo’s watch. It was P201 during the term of Estrada against P184 for each Filipino in the Arroyo administration.

Poor priorities helped push the economy to uncompetitiveness in the world stage.

According to the World Economic Forum, the Philippines’ ranking in global competitiveness, has been falling, from a ranking of 48 in 2000 to 71 in 2006.

By contrast, the country’s neighbors in the Association of Southeast Asian Nations (Asean) garnered the following rankings in 2006: Singapore 5, Malaysia 26, Thailand 35, and Indonesia 50.

Poor governance and the dismal state of public infrastructure have deterred foreign direct investment, Diokno said.

The country’s investment rate is “extraordinarily low at about 15 percent,” as pointed out by the Joachim Von Amsberg, World Bank’s country representative, at the Philippine Development Forum held in Cebu last March 8 to 9.

The domestic investment rate of the Philippines has dropped from 19 percent in 2001 to a record low of 14.8 percent in 2006 while those of its neighbors have continued to rank from 20 percent to 40 percent based on ADB’s Asian Development Outlook 2007.

During the last six years, the economy has not performed well enough to make a difference in the lives of most Filipinos, especially the poor, Diokno said.

Not enough jobs were created, inflation remained high, and consequently the 2006 misery index is higher than the 2000 level.

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World Bank: RP lagging in economic ‘renaissance'

What economic take-off? Mrs. Gloria Arroyo is spreading lies around the about economic gains under her watch.


RP lagging in economic ‘renaissance,’ says WB

Daily Tribune 06/05/2007

While the World Bank (WB) proclaimed yesterday that an economic renaissance has started in Asia, it noted that the Philippines is among the underperformers with 41.9 percent of its 83 million population living in poverty.

The WB defined the poverty level as an income of less than $2 (less than P100) a day for an individual.

WB country director for the Philippines Joachim von Amsberg, in a briefing during yesterday’s launch of the WB study — An East Asian Renaissance: Ideas for Economic Growth — said the country “has for a long time had the potential for dynamic growth and sustained poverty reduction but development outcomes have lagged behind this potential.”

The study noted that in 2005, the level of poverty in the Philippines was exceeded in the region only by Cambodia, Laos, Vietnam and Indonesia.

In WB’s poverty headcount on the percentage of population living below $2 per day, East had a median of 31.3 percent in 2005, with Korea having less than five percent of its population as poor under the definition, Malaysia, 5.5 percent; Thailand, 22.8 percent; China, 28.6 percent; the Philippines, 41.9 percent; Indonesia, 44.4 percent; Vietnam, 49.1 percent; Cambodia, 62.1 percent and Laos, 68.6 percent.

The WB said low investments are what keeps the development in the country at snail’s pace.

“Deepening of reforms to improve tax revenue collection, to improve the quality of public spending and reduce corruption, and to improve the investment climate through infrastructure and effective competition in key sectors would help raise the investment rate from its current extraordinarily low level,” Von Amsberg said.

“A higher investment rate would make higher growth sustainable, generate more jobs and income and reduce poverty more rapidly,” he said.

Thus, he raised the importance of increased economy of scale, more regional trade with the other Asian countries and higher quality of education.

Von Amsberg said while macroeconomic fundamentals were strengthened particularly in the fiscal position, more focus should be given to investments since it remains below 15 percent of gross domestic product (GDP) against the 20-percent to 30-percent share in other East Asian countries.

“The Philippines has already seen and is reaping the benefits of the right policies in the telecommunications industry. We hope other key sectors, particularly maritime and aviation, will soon follow suit,” he stressed.

On the country’s 6.9 percent GDP growth, Von Amsberg said the WB will have to see how the growth will be sustained.

“The challenge right now is that the good news could create complacency. The good news could lead to a situation where the gains from this very good situation might be lost,” he added.

Homi Kharas, one of the two authors of the latest WB study on East Asia, said the improvement in East Asia right now is “something quite new.”

“The old Asia relied on the famous flying geese analogy that saw mature industries move to low-wage countries. The new Asia is more innovative and networked —it’s characterized by a very competitive business environment that encourages new products and processes and a labor force able to absorb new ideas,” he said.

He added compared to countries in the East Asia, the Philippines is “doing well on trade side, okay on the finance side but quite poorly on innovation in research and development, management of cities and absorption of people in the cities, rural/urban divide and on corruption.”

Indermit Gill, co-author of the East Asia study, said “(East Asia) cities are at the core of development strategy based on international integration, investment and innovation.”

He said, “East Asia is witnessing the largest rural-to-urban shift of population in history.”

“Two million new urban dwellers are expected in East Asia cities every month for the next 20 years. This will mean planning for and building dynamic, connected cities that are linked both domestically and to the outside world so that economic growth continues and social cohesion is strengthened,” he added.

Int’l Tribunal Verdict: Political Killings Stem From Opposition To Arroyo’s Economic Policies

I doubt that Gloria Arroyo is in control of the Armed Forces of the Philippines. She has no political will to fire-out General Eduardo Ermita and his military clique, National Security Adviser Norberto Gonzales, Interim Justice Secretary Raul Gonzales, Defense chief Hermogenes Ebdane and AFP chief General Hermogenes Esperon. The Cabinet Oversight Committee on Internal Security (COC-IS) is responsible for the discredited counterinsurgency Oplan Bantay Laya II. The militarization of Metro Manila’s slum areas is part of Oplan Bantay Laya II to neutralize left wing elements and its supporters. It appears the Philippines bogus President Gloria Arroyo is dragging the US military to fight her all-out war against the communist. Oplan Bantay Laya II is patterned after Vietnam War, CIA inspired-Operation Phoenix.



Int’l Tribunal Verdict: Political Killings Stem From Opposition To Arroyo’s Economic Policies

Written by Antonio Tujan Jr.

Thursday, 29 March 2007

Political killings persist precisely because the government attempts to stop people’s opposition to policies and systems that violate their economic rights. By Antonio Tujan Jr. IBON Features Vol XIII No 7 IBON Features-- The recent verdict of the Permanent Peoples’ Tribunal (PPT) found Pres. Gloria Macapagal Arroyo guilty of violating Filipinos’ political and civil rights, as well as their economic rights and right to self-determination. It is important to emphasize the relationship of these violations because it will explain why political killings persist in the country. Under the Arroyo government, domestic production and agriculture remained in depression while joblessness and poverty worsened as it aggressively implements neoliberal reforms. What the verdict of the 7-member jury indicates is this: the current rash of political killings stems from the regime’s attempts to silence opposition to her policies and the resulting economic crisis. For instance, according to the PPT proceedings, in its struggle against extreme poverty, Filipino farmers have organized themselves to claim their rights through the democratic process. But their resistance is met with state repression by increasing military presence in the countryside. Statistics show that almost 60% of the victims of extrajudicial killings and forced disappearances are farmer leaders and that these killings are not isolated but planned and systematic. Not surprisingly, the main target of extrajudicial killings (and disappearances, massacres, tortures, etc.) is the legal left. For years, it has steadily represented the people's voice in the national and international arenas in calling for an end to policies and systems that violate economic, social, and cultural rights of Filipinos. Rights groups have recorded more than 800 victims of political killings under the Arroyo administration since 2001. The legal left has been the target in the regime’s campaign to suppress opposition, using the communist bogey and the US-led war on terror as context. Targeting progressive party-lists, people’s organizations, and civil society groups also sends a signal to anti-Arroyo forces without providing the push that would strengthen and incite the opposition further. But as history has shown, amid intense poverty, hunger, unemployment, and landlessness, the efforts of the administration to suppress people’s movements do not decisively weaken opposition ranks but only fuel further social unrest. IBON Features

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