Mon, 12 Jun 1995

The economy is picking up

With a GNP growth rate of 5.1 percent in 1994, the Philippine economy is expected to register stronger expansion of 7.0 percent in 1995 and 7.3 percent in 1996. This growth is expected to be supported by GDP growth of 6.3 percent and 6.5 percent in 1995 and 1996 respectively.

Indeed, government efforts to liberalize the different sectors of the economy are paying off. The country's vision of development, Philippines 2000, launched in 1993 by President Fidel V. Ramos to turn the country into a newly industrializing country by the turn of the century, looks more and more within reach.

Consumer confidence continues to provide a stable source of strength for the economy. From the 3.7 percent expansion in 1994, private consumption is expected to perform more favorably in 1995 mainly as a result of the third phase of wage increases for government employees coupled with prevailing low interest rates on deposits that may encourage people to spend more and save less. Similarly, efforts to maintain a single-digit inflation level, as well as tariff reductions on imported consumer goods, are seen to provide the push for consumption. Finally, last May's elections may also contribute to a higher consumption level.

The urge to spend more will also be evident in government in 1995. Three key factors will definitely be a source of higher disbursements for the year. Namely, the third phase of salary adjustments for government workers, the increase in budget allocation to cushion the impact of GATT, and lastly, the May elections.

On the revenues side, although not a lot of new tax measures are forthcoming because of the elections, the government expects to source out funds from other means, such as the implementation of the expanded value-added tax law,, the privatization program (particularly the Fort Bonifacio deal), and the planned reduction in tax incentives.

Overall, government consumption is expected to grow by 2.2 percent and 2.5 percent in 1995 and 1996 respectively.

Good record

One of the best indicators of the good performance of the Philippine economy is the robust growth in investments. The Board of Investments reported a 400 percent increase in project approvals in 1994. Similarly, the Securities and Exchange Commission reported a dramatic rise of paid-up investments for the period.

The manufacturing and finance sectors continues to dominate the investment areas, receiving almost 75 percent of total investments for 1994.

Considering this trend and the incentives offered by the government, real investments are projected to increase by 19 percent and 20 percent in 1995 and 1996 respectively. This is based on the assumption that most project plans made in 1994 will become actual investments by 1995 and 1996.

Likewise, low bank ending rates expected to prevail in the short-term will provide a good incentive to borrow money for productive purposes. Moreover, the entry of additional foreign banks into the country could provide a bigger source of funds for loans to the business community.

Freer trade

With the country joining the World Trade Organization, real exports of goods and services are expected to grow by 20 percent and 22 percent in 1995 and 1996 respectively. Tariff reductions offered by the country's major markets are seen to increase the volume of exports, with manufactured goods (semi-conductors and electronic micro-circuits) comprising the bulk of export products.

Government efforts to arrest the appreciation of the peso by imposing a 1.5 percent volatility band in foreign exchange transactions have so far been successful, and have been a source of relief to exporters. The exchange rate is expected to average at P25.50 per US dollar in 1995 and P26.50 per US dollar in 1996. On the other hand, real imports of goods and services are predicted to grow by 22 percent in 1995 and 24 percent in 1996. This is expected as increased investments call for the importation of capital equipments as well as raw materials and supplies. Nevertheless, to ensure that only necessary imports will enter the country, an anti-dumping law was signed to further strengthen existing anti-dumping measures.

Regarded by foreign observers as proof of the determination of President Ramos to bring the country back on its feet, Philippines 2000 is built upon a program of moral and cultural regeneration and a comprehensive plan for social and economic development. The Medium-Term Philippine Development Plan (MTPDP) for 1993-1998 spotlights the country's vision of development. It lays down the goals, targets, strategies and programs that the government, with the support of the Filipino people and the international community, has set out to implement and accomplish over the six-year plan period.

To ensure the MTPDP's success, the President said in his State of the Nation Address before the joint session of Congress on July 26, 1993 that the country must put its house in order. This, he said, can be achieved through political stability and national unity, a commitment of the economic and political elite to the common good and a deeply ingrained work ethic among all workers in the government and private sectors.

Thus, the attainment of the vision of Philippines 2000 and the success of the MTPDP will be fueled by the hard work, ingenuity and dedication of all who have a stake in the country's development -- both within and outside the Philippines. For it will not only lean heavily on the Filipino people's innate strength, but will likewise thrive in a healthy partnership with the international community.

Philippines 2000 foresees an era of rapid economic growth. And as the key to the country's economic success remains in the hands of the private sector, the government is creating the best conditions possible for business to flourish.

More and more business groups are taking an interest in Philippines 2000 and the opportunities it presents. A number of them are envisioning the Philippines as the next investment center in the Asia-Pacific region. There are also parties showing increasing interest in Philippine exports.

Indeed, after only the first half of the MTPDP, the Philippine economy has succeeded in warming up its engine and it has now picked up speed on the way to faster growth.