Press Release
July 8, 2009

Economic performance of RP revealed worse than expected
EXTEND PROGRAMS THAT DIRECTLY ENCOURAGE THE PUBLIC TO SPEND AS WELL - ANGARA

With recent forecasts of the Philippines' economic performance reveals worse than expected Senator Edgardo J. Angara said that public spending should now go beyond infrastructure and long-term investments, but extends to programs that directly encourage the public to spend as well.

Recent forecasts for the Philippines reveal worse than expected economic performance, with various credit rating agencies, international lending agencies, and even our own government downgrading the economic outlook for this year. Most ominous is the World Bank's, which singles out the Philippines as among the Asian countries to experience outright recession in 2009.

"Our government, through the Development Budget Coordination Committee (DBCC), halved its growth target - to between 0.8 to 1.8%, from 3.1 to 4.1% earlier his year," said Angara who chairs the Senate Committee on Finance.

The crux of the problem is consumption, which comprises 70 to 80% of our economy. Consumption data have been bleak. Seasonally adjusted personal consumption expenditure has decreased by 3.1% after five decades of growth, while consumption as a whole has increased by a mere 0.8%.

He added, "I think public spending should now go beyond infrastructure and long-term investments, but extends to programs that directly encourage the public to spend as well."

Based on recent spending data released by government, it has been frontloading public spending, which amounted to Php579.1 billion for the first five months of 2009, up by 16% compared to last year which means that despite government's efforts at pump-priming the economy, the efforts still fall short of inducing the consumers to spend.

To boost consumption various countries have included direct and indirect cash transfers such as Australia's US$6.8 billion-worth of cash handouts and family benefits, the European Union's 1 percentage point cut in value-added tax, Germany's lending program worth 15 billion euros, Spain's six billion euro tax cuts, and the US's tax rebates.

"Conditional cash transfers will not only tide the poor over the economic slowdown, it will contribute to increasing consumption as well. With the recently signed Salary Standardization Law, salaries of government employees will substantially increase, making it comparable to salaries of their counterparts in a medium-sized firm and more responsive to the pressing economic needs of our public servants," said Angara.

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