Philippines Posts Budget Deficit as Spending Rises

This is from Bloomberg.

The Philippines is facing the same sort of problems as the US and Canada but on a smaller scale and it still is not in recession. However growth is approaching zero. Interesting that the government will be issuing bonds in Japanese yen. I wonder why that is?


Philippines Posts Budget Deficit as Spending Rises (Update1)
Karl Lester M. Yap [] and [bn:PRSN=1] Max Estayo []
June 23 (Bloomberg) -- The Philippines posted a budget deficit in May as the government increased spending and revenue faltered amid slowing economic growth.
The shortfall of 11.4 billion pesos ($234 million) widened the five-month deficit to 123.2 billion pesos, Finance Secretary Gary Teves told reporters in Manila today. Spending increased 15.8 percent in May from a year earlier and revenue fell 2.5 percent, Teves said.
Economic growth slowed to a decade low of 0.4 percent last quarter, hurting businesses and consumers and crimping tax collection at a time when the government is trying to spend its way out of the slump. The Philippines on June 10 widened its 2009 budget-deficit forecast a third time this year to 250 billion pesos from 199.2 billion pesos.
“The government needs to maintain its spending to boost the economy but there is a cost to it,” said Arlene Agustin, treasurer at GE Money Bank Inc. in Manila. “We are prepared for a risk of yields on government bonds going up” as the nation raises more debt.
The Philippines may sell as much as $1.5 billion of yen- denominated bonds to fund the government’s widening deficit, Teves said on June 17.
The government plans to spend 1.489 trillion pesos in 2009, less than the 1.495 trillion pesos it estimated earlier, according to a summary of the government’s fiscal program provided by Finance Undersecretary Gil Beltran on June 11.
To contact the reporters on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net; Max Estayo in Manila at mestayo@bloomberg.net Last Updated: June 22, 2009 23:23 EDT

IMF lowers Philippines growth target to 5.8%

This is from the Manila Times. Even though the Philippines is the second worst performer in Southeast Asia the U.S. would be ecstatic to reach that growth rate! Of course part of the growth is from overseas remittances. For expatriates paid in U.S. dollars they are buying less Philippine pesos because of the weak dollar. The growth may not help many of the poorest filipinos at all since inflated food prices are making their situation much worse.

IMF LOWERS GDP GROWTH TARGET
FOR PHILIPPINES TO 5.8%

By Maricel E. Burgonio, Reporter

The International Monetary Fund (IMF) has lowered its economic-growth forecast for the Philippines, which is poised to be the second-worst performer in Southeast Asia this year.

In its latest World Economic Outlook, the Philippines’ economic growth, as measured by gross domestic product (GDP), is expected to reach 5.8 percent this year, lower than the original projection of 6 percent and last year’s actual growth of 7.3 percent. GDP refers to the total market value of final goods and services produced within a country in a year.

Strong domestic consumption is expected to drive the country’s growth this year, fueled by expected strong remittance inflows from the millions of overseas Filipino workers. But growth is expected to be affected by a global economic slowdown, resulting from the US subprime mortgage crisis, the IMF said.

“IMF cited that robust domestic demand, led by consumption, supports the growth of Indonesia, Malaysia, Hong Kong SAR [Special Administrative Region], Philippines and Singapore, while export growth began to show some signs of moderation,” according to the report.

Philippine export growth declined by 5.2 percent to $4.241 billion as of January, compared with $3.9987 billion in the same period last year. Exports in the previous month reached $4.472 billion.

In the IMF’s Philippines Staff report, experts earlier suggested that the government should improve its revenue effort to post faster economic growth this year, which would likely be 6.3 percent. This will help government meet its priority targets, such as infrastructure development, as current reforms will only allow the economy to grow modestly, they added.

The Association of Southeast Asian Nations (Asean) member countries—including Indonesia, Thailand, Philippines, Malaysia and Vietnam—is projected to post a GDP growth of 5.8 percent this year, lower than last year’s 6.3 percent.

Vietnam is expected to post the highest growth this year with 7.3 percent, followed by Indonesia at 6.1 percent, Thailand at 5.3 percent, and Malaysia at 5 percent.

But the strength of domestic demand in the region, combined with rising food and energy prices, has contributed to a buildup of inflation pressures in a number of countries.

“Inflation pressures have also begun to emerge in Indonesia, Thailand, and the Philippines,” according to the IMF.

In the Philippines, inflation or increase of prices in March increased to 6.4 percent from the previous year, and in February, the increase was 5.4 percent compared with the same period in 2007. That reflects the impact of negative global developments, particularly the unprecedented surge in both oil and non-oil commodity prices, the IMF said. But the relative firmness of the peso against the US dollar continues to cushion the impact of higher imported oil and food prices on domestic inflation.

In terms of GDP growth in emerging Asia, IMF said it is expected to decelerate this year but remain robust at about 7.5 percent in 2008 and 7.8 percent in 2009, compared with 9.1 percent last year, as growth in the newly industrialized countries and other Southeast Asian nations are expected to weaken.

In light of the greater uncertainties associated with the outlook, policymakers face a difficult task in balancing the trade-offs between growth and inflation.

“The challenge remains to avoid overheating, which may require tighter monetary policy, supported by greater exchange rate flexibility in some countries,” the IMF said.

“Policymakers will need to respond flexibly, however, to evolving developments, with some scope for monetary policy easing in the event of a sharper than anticipated slowdown in countries where inflation expectations continue to remain well above anchored,” it added.

Moreover, the IMF said capital inflows in emerging economies are projected to slow this year as a consequence of the tightening of global financial conditions.

But the lender expects the direct impact of the US subprime mortgage crisis on regional financial systems has been limited.

World Bank: Philippines, East Asia to weather U.S. recession.

This is from the Inquirer. Economic growth will slow in the area however as evidenced by the Philippines decline to 5.9 from 7.3. The slowdown will certainly not help many poorer Philippinos when inflation in food prices such as rice is taken into consideration.



WB: Philippines, East Asia to weather US recession

Region seen growing 8.6% this year

By Michelle Remo
Philippine Daily Inquirer
First Posted 00:41:00 04/02/2008


The Philippines and other developing East Asian countries will manage to post decent growths this year and weather a global slowdown to be caused by a US recession, the World Bank said.

In a paper titled “East Asia: Testing Times Ahead,” which it released Tuesday, the multilateral lending agency said the development of intraregional trade has made member-countries less vulnerable to sharp declines in exports to the United States, one of the world’s biggest markets.

“Although East Asia will undoubtedly be affected, it is reasonably well positioned to navigate this crisis without incurring significant damage to its prospects,” it pointed out.

The World Bank projects developing East Asia to grow by 8.6 percent this year, slower than the 10.2 percent recorded last year. The figures showed a slowdown, but the foreign lender said the growth forecast for the year was still the strongest among other regions in the world.

For the Philippines, the World Bank’s growth forecast was 5.9 percent, marking a slowdown from the 7.3-percent expansion last year.

Vikram Nehru, World Bank chief economist for East Asia and the Pacific, said in a live video conference Tuesday from Tokyo that structural reforms implemented by East Asian governments over the last decade have made member-countries more able to deal with external shocks.

What should require much attention from policymakers in the region is how to deal with an accelerated rise in consumer prices.

“In virtually every East Asian country, inflation is climbing to uncomfortable levels due to these cost-push pressures, while monetary and credit growth is difficult to contain owing to substantial capital inflows,” the World Bank paper said.

The Philippines’ problem about rising prices is much less than its neighbors’ because it is coming from a very low inflation environment last year. But still, increases in consumer prices have shown possible breaching of the full-year target.

The central bank, Bangko Sentral ng Pilipinas (BSP), said Monday that it expected year-on-year inflation to reach 5.3-5.9 percent in March.

Analysts said average inflation for the full year was likely to hit the high end of the BSP’s 3.0-5.0 percent target.

Vera Songwe, senior economist at the World Bank’s Philippine office, said rising commodity and oil prices in the world market would adversely affect domestic prices of goods.

Songwe said the efforts of policymakers in the Philippines should be focused more on implementing programs to temper inflation. The World Bank recommended projects promoting fuel efficiency, boosting agriculture production, and further opening up to world trade.

Songwe said the World Bank was supporting plans by the Philippine government to provide subsidies to poor Filipino families, but cautioned that subsidies should come only as a temporary measure and should not encourage heavy reliance on state support. The government should also be careful that the subsidies are directly granted to the needy sectors.

“Growth in the Philippines had been phenomenal, but there were still [members] of the population that were not benefiting from this,” Songwe said.

Songwe said the government should implement programs such as food subsidies that will directly benefit the sectors of society that do not feel the benefits of a growing economy.



Copyright 2008 Philippine Daily Inquirer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Arroyo: Philippine Economy has turned corner

This is from the AFP. With the slowdown in the U.S. and the higher peso value, exports will probably decline. Also, the value of overseas remittances will shrink in value at least those in U.S. dollars. The corner turned will probably be in terms of lower growth and inflationary problems caused by the increased price of oil.


Philippines economy has turned corner: Arroyo

MANILA (AFP) — Philippine President Gloria Arroyo told business leaders Monday that the country had made a permanent economic turnaround but conceded the ailing US economy was a concern.
"We are confident the turnaround is permanent," she told an international conference, citing economic growth of 7.3 percent in 2007, which was the highest rate in more than three decades.
She also cited growth over the past seven years, local currency strength, stock market resilience and the lower budget deficit, saying "the Philippines is on a path of permanent economic growth and stability."
But Arroyo conceded that the risk of a recession in the United States, the country's main trading partner, was a concern.
"The more connected we become ... the more we need to minimise the ups and downs of other nation's economic bubbles," she said.
She made no mention of the current political scandal surrounding her administration.
It has been alleged that her allies, including possibly her husband, tried to get millions of dollars in bribes out of a government broadband deal with a Chinese company.
Her husband Jose Miguel Arroyo has denied the claims.

Philippines needs to tackle constraints to growth, poverty reduction.

This is from forextv.com. It is not clear how the Philippines will be able to reduce poverty. There is no mention of high population growth at least versus job growth. When I was in the Philippines I noticed that there just seemed to be many more people than jobs. The social safety net as mentioned is very much lacking. Families send members overseas because of lack of jobs in the Philippines and to help support families at home. Ageism is rampant in employment. A notice for a clerk in a mall in Legazpi stipulated that the applicant should not be above the age of thirty!
Most Filipinos seem to think that they can succeed as entrepreneurs either that or are forced to be so because there are no jobs. As a result there are little convenience stores (sari-sari stores) in every block. Also, the bus system in many areas consists of privately owned jeepneys. Most of these businesses are marginal or even losing propositions.
Surplus labor power makes the Philippines a place where labor costs will be cheap. The education system produces many students who have the skills for work in the Global economy. If poverty is much reduced then labor might be more expensive and the powers that be might not be too happy about that.
The powers that be will crow about growth and the problem of poverty can be left to the Church.


Philippines needs to tackle constraints to growth, poverty reduction - ADB

02/05/08 10:27 am (EST)
MUMBAI (Thomson Financial) - The Asian Development Bank (ADB) said Philippines needs to identify the most critical factors that constrain growth and poverty reduction in order to sustain the current pace of growth or even accelerate it.The bank said critical constraints to growth include tight fiscal situation, inadequate infrastructure, weak investor confidence due to governance concerns, in particular, corruption and political instability, and the inability to address market failures leading to a small and narrow industrial base.Critical constraints to poverty reduction include lack and slow growth of productive employment opportunities, inequitable access to development opportunities, especially education, health, infrastructure, and productive assets and inadequate social protection and social safety nets.Removing these three constraints will result in increased private investments from domestic and foreign sources, the agency said. The government will also need to address the market failures in order to encourage investments in diversifying and expanding the manufacturing sector and exports, and in upgrading the level of technology, the ADB added.TFN.newsdesk@thomson.com