Philippines Economy

Philippine GDP grew 7.3% in 2010, spurred by consumer demand, a rebound in exports and investments, and election-related spending. The economy weathered the 2008-09 global recession better than its regional peers due to minimal exposure to troubled international securities, lower dependence on exports, relatively resilient domestic consumption, large remittances from four- to five-million overseas Filipino workers, and a growing business process outsourcing industry. Economic growth in the Philippines averaged 4.5% during the MACAPAGAL-ARROYO administration. Despite this growth, poverty worsened, because of a high population growth rate and inequitable distribution of income. The AQUINO administration is working to reduce the government deficit from 3.9% of GDP, when it took office, to 2% of GDP by 2013. The government has had little difficulty issuing debt both locally and internationally to finance the deficits. AQUINO's first budget emphasizes education, health, conditional cash transfers for the poor, and other social spending programs, relying on the private sector to finance important infrastructure projects. Weak tax collection, exacerbated by new tax breaks and incentives, has limited the government's ability to address major challenges. The AQUINO administration has vowed to focus on improving tax collection efficiency - rather than imposing new taxes - as a part of its good governance platform. Economic growth in the Philippines has averaged 4.5% per year since 2001, when former President MACAPAGAL-ARROYO took office. Despite this growth, poverty worsened during the term of MACAPAGAL-ARROYO, because of a high population growth rate and inequitable distribution of income. MACAPAGAL-ARROYO averted a fiscal crisis by pushing for new revenue measures and, until recently, tightening expenditures to address the government's yawning budget deficit and to reduce high debt and debt service ratios. But the government abandoned its 2008 balanced-budget goal in order to help the economy weather the global financial and economic storm. The economy under AQUINO faces budget shortfalls in the near term, but has had little difficulty issuing debt both locally and internationally to finance the deficits. AQUINO's first budget emphasizes education and other social spending programs, relying on the private sector to finance important infrastructure projects. Weak tax collection in recent years limits the government's ability to address major challenges. Aquinomics has four pillars. One is fiscal sustainability and macroeconomic stability. In this Purisima says the country is on track, with reserves at historic highs and borrowing costs down, a balance of payments surplus, moderate inflation, and deficit targets within range. The second pillar is the private-public partnership or PPP program. This has stalled a bit, with seven instead of 10 projects scheduled for bidding within

the year. But Purisima said were resisting the temptation to rush into halfbaked projects. A third pillar is ease in doing business, for both local and foreign investors. Last week, for example, the Securities and Exchange Commission signed an agreement with the Land Bank of the Philippines, allowing the banks branches nationwide to accept incorporation papers. The SEC and Department of Trade and Industry will soon be combining their data. The fourth pillar is investment in people giving Filipinos health care, education and the skills necessary to become productive participants in the economy, Purisima said. All the pillars are anchored on good governance. Corruption led to wastage in the past, Purisima said. Now, even if were deploying less, were accomplishing more. What is saved can be spent on improving infrastructure and basis services such as education and health care. In the next five years, the President wants to nurture industries where the country has a competitive advantage. These are tourism, business process outsourcing and electronics. The administration wants to position the country as a northern and Pacific gateway to the Association of Southeast Asian Nations. The President also wants to grow agro industries and improve access to micro finance and markets. He is set to formally appoint an adviser for micro financing for the rural poor: Aris Alip, founder and managing director of CARD or the Center for Agriculture and Rural Development Mutually Reinforcing Institutions. The President also wants to create an entrepreneurial environment with a middle chain that adds value. For example, Tony Meloto of Gawad Kalinga, in tandem with the Philippine Chamber of Commerce and Industry, launched a project three weeks ago in Angat, Bulacan. Meloto wants to create an army of middle entrepreneurs who can go to farmers, create a brand for their products and market the items.