It was provided the other night by Reza Baqir, resident representative of the International Monetary Fund, which has had the most bullish economic outlook on the Philippines.
And it’s not just because Reza’s wife, his fellow Pakistani and the daughter of an official of the Asian Development Bank, was born at the Makati Medical Center and spent the first 17 years of her life in Manila.
The IMF is impressed by fiscal reforms in the Philippines amid sustained economic growth and declining inflation in the past year, and expects the economy to grow by 5.5 percent this year, further expanding to 5.8 percent in 2007. The fiscal deficit is at manageable levels and the peso has performed well throughout the year.
Reza told me that a review of the Philippines’ economic performance since 1998, a year after the Asian financial crisis, would show that much of the country’s financial woes stemmed from revenue shortfall rather than wrong spending priorities.
After the government approved new or higher taxes and other fiscal reforms, international credit rating agencies held back on their assessments of the Philippines, waiting to see if the revenue targets would be met.
So far the IMF has been pleased with the revenue performance, and so have the credit rating agencies, all of which have upgraded their outlooks on the Philippines.
It’s not just the IMF that is bullish on the Philippines.
I was told that more and more Indian investors are coming to the Philippines to set up call centers because they find labor costs here cheaper. And I thought India was the center of the global call center business.
The Canadians, meanwhile, are interested in the opening up of the mining industry. I was told that previous mining disasters and pressure from environment advocates in Canada have made Canadian mining companies more socially and environmentally responsible.
What the Canadians are unsure of is whether new, liberalized mining policies in the Philippines will be sustained.
Sustaining fiscal reforms is also the IMF’s principal concern, although Reza the optimist thinks the reforms and economic gains can be sustained through 2007.
He remembers a recent meeting of the Philippine Economic Society that he attended, where industrialist Jaime Augusto Zobel de Ayala stressed that the country has experienced periods of economic growth and sound macroeconomic fundamentals in the past. But such periods were never sustained, Zobel said.
Can the Arroyo administration sustain the year’s economic gains?
Already the Senate is raising a howl over the P129 billion in discretionary funds proposed for the Office of the President in 2007.
Members of the House of Representatives have increased their pork barrel allocations together with those of senators, and there’s a big possibility that much of that money will go to non-priority projects.
The senators are making the usual noises about their readiness to give up their pork barrel – but only if the House and the Office of the President also give up theirs, which of course will never happen.
Outgoing Defense Secretary Avelino Cruz, worried that all the reforms he has instituted in his department will be overturned as soon as he steps down, is trying to make sure about P32 billion earmarked for the capability upgrade of the Armed Forces of the Philippines will be used for its intended purpose: the purchase of new and modern military equipment.
There’s a ban on non-essential public works projects during campaign periods. But you can be sure the congressional pork will be used for election purposes long before the start of the 2007 campaign.
If the House plan pushes through and the midterm elections are moved to November, there will be a longer period for spending the 2007 pork barrel for election purposes, without being limited by spending rules during a campaign period.
Then we will see more piecemeal road improvement projects – anything where a billboard can be displayed declaring that taxpayers should thank their congressman for a particular project. They should ban such billboards. The only thing that should be displayed on any project, if at all, is: "This is where your taxes go."
Also, as the IMF resident representative pointed out, what they are watching closely is revenue collection and sustained fiscal reforms.
The administration has been blessed with external factors, particularly the softening of world crude oil prices. Millions of Filipinos working overseas continue to remit billions of dollars, strengthening the peso.
Despite general optimism on the economy, there is much that can go wrong in this country. We have a history of shooting ourselves in the foot, overturning hard-won gains.
The government is working on additional tax incentives – a tricky undertaking, and there is concern about slow privatization efforts as well as the bidding for Transco.
As several quarters have also pointed out, the country’s infrastructure is in serious need of upgrading. This effort is being hampered by the fact that almost all our big-ticket infrastructure projects are bogged down in corruption scandals and litigation.
Finally, all the rosy economy figures aren’t being felt by the poor. As survey after survey has shown, economic growth isn’t trickling down to the grassroots.
This may still be possible, if reforms are sustained long enough.