CEBU, Philippines - While the Philippines is backed by strong economic macro fundamentals, the country is seen to achieve an impressive growth of five to six percent by 2012, however, it will depend on how the government will balance its debt management and expenses.
In an economic briefing hosted by the Canadian Chamber of Commerce-Cebu, economist Jonas Ravelas, who is the first vice-president and chief market strategist of Banco de Oro Universal Bank, said that the Philippines only needs a careful balancing of its revenues, at the same time cushion the strengthening economy, which is slowly affected by the problems faced by two giant economies, the United States and Europe.
There are only three simple steps that the PNoy economic managers should follow, to sustain the economic gains, and these are improving the infrastructure, lower the energy cost, and streamline business processes.
While the government is doing well in shrinking the deficit figures, it has on the other hand underspent on boosting the economy. Thus, there is an out-balanced in the country’s economy making it fragile to any external interventions.
Ravelas recommended that the government should put on more financial stimulus to be poured in infrastructure development to create jobs, attract investors, thereby promoting confidence for private sector to invest more.
He said the Philippines has over-supply of liquidity right now. In fact, one large bank had recently hit its one-trillion-peso mark. The problem is there are jitters in the market, wherein investors are afraid to borrow from banks, because of the uncertainty of the world economic state.
Despite the low interest rate, and banks’ active stance to encourage borrowing, investors are still on their “wait and see” attitude. Because of this, the government should initiate in providing more economic activities by spending on infrastructure, at the same time implement a considerable or lower cost of power rate, otherwise this will discourage both foreign and local investors to put in money.
According to Ravelas providing conducive environment for business, such as cutting bureaucracy, is one of the most serious problems that should be addressed by the government, in order to protect the Philippines from being affected by the contagious problems faced by two giant economies, (US and Europe) of which Ravelas described as, the world’s “twin towers of terror.”
Ravelas said the Philippines now is like a small boat travelling the wide ocean with two big ships passing by. If its economy is not handled carefully, it can easily be shaken.
The need for the government to spend more on infrastructure is highly recommended. The Philippines is already affected by the US and Europe crises in exports, remittances, and BPO.
“The government has to aid the economy by doing extra-ordinary expenditure to sustain the growth,” Ravelas said. (FREEMAN)