Tuesday, 3 March 2009

Philippine c. bank head urges rapid stimulus implementation

Paolo Luis G. Montecillo
BusinessWorld Online

THE BANGKO Sentral ng Pilipinas (BSP) wants the government to quickly implement a P330-billion fiscal stimulus package or risk diluting the scheme’s effectiveness.

Central bank Governor Amando M. Tetangco, Jr. told a forum yesterday that while the country’s economic fundamentals remained sound, an immediate stimulus would shore up market confidence and drive economic growth.

"Delayed responses could prove very costly," he said.

Mr. Tetangco said the Arroyo administration should take note of the lessons learned from the United States’ Great Depression in the 1930s, where the government was only able to hike public spending as the four-year downturn was about to end.

"In hindsight, the deep and painful dislocations of the Great Depression could have been mitigated if the government had responded more quickly," he said.

"Losing time was one of the greatest lessons in public finance of the Great Depression."

The P330-billion rescue package focuses heavily on infrastructure spending and job creation and preservation. As a consequence, the government expects this year’s budget deficit to grow to about 2.2% of the gross domestic product, equivalent to over P177 billion, up from an earlier goal of P102 billion.

The National Economic Development Authority (NEDA) agreed, saying that prompt action is key to preventing the country from falling into recession. Socioeconomic Planning Secretary Ralph G. Recto said part of the plan was to spend 60-80% of the stimulus in the first half.

Presidential economic adviser and Albay Governor Jose "Joey" C. Salceda said the stimulus would have a positive effect on public sentiment, which should also boost demand.

He said that instead of funding lengthy infrastructure projects, whose effects may not be felt immediately, the government should consider increasing its allocations for conditional cash transfers, education and healthcare.

"Throwing cash out of a helicopter flying over the Tondo or Quiapo areas would be more effective than handing over the money to government agencies," he declared. —

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