BSP chief wants to end RP dependence on exports
abs-cbnNEWS.com | 07/01/2009 8:09 PM
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As the economic crisis continues to take its toll on global trade, Bangko Sentral ng Pilipinas (BSP) governor Amando Tetangco said the Philippines should focus more on domestic demand rather than relying too much on exports.
According to Tetangco, there is an emerging sentiment among Asian economic planners that the region's dependence on exports has made it more vulnerable to the economic slump.
"There are views that Asia must boost domestic consumption and end its dependence on exports. In the longer term, the view is that Asian economies may need to look more at their own domestic economies as the engine of growth," he said.
The country's exports, which account for 40 percent of the economy and a major employer, have been plunging at a rate of 30 to 40 percent for the past seven months.
On the other hand, money sent home by the country's labor exports have grown less than 5 percent for the past months compared to double-digit increases in the previous years.
Tetangco said the Philippine population is strong enough to support domestic economic growth in the region. However, he said this may prove to be difficult since Asia is currently geared towards the European and North American markets.
In the meantime, Tetangco said improvements in consumer and business confidence can drive economic recovery in the country.
"There is also a need for more investment and education and social safety nets to give consumers the confidence to spend," he said, adding that higher government spending on public and social infrastructure can contribute to faster recovery.
The government has been frontloading spending to overcome the slowdown in the economy, which it also blames for poor revenue collection. For the first three months of the year, the country's tax effort slowed to 11.5 percent of gross domestic product (GDP) from 12.9 percent in 2008.
The tax effort is the ratio of tax collections to GDP. The indicator mirrors the government's ability to raise revenues for infrastructure and social services.
Tax collections fell by 7.9 percent to P200.74 billion, P18.34 billion short of the government's target of P219.08 billion for the three-month period.
The country's GDP, on the other hand, barely expanded in the first quarter, slowing to 0.4 percent from 2.9 percent in the same period last year. The figure was much lower than the government's 1.8 to 2.8 percent projection, and was the lowest since the final quarter of 1998, during the Asian financial crisis.
Economic managers downscaled their growth forecast for 2009 between 0.8 and 1.8 percent from its previous growth range of 3.1 to 4.1 percent.
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