President Benigno Aquino III has finally conceded that government underspending did the economy in this year and vowed to do the opposite to lift it from its lethargy.
He and his Cabinet have little choice. The Asian Development Bank has warned that in the event both the eurozone and the US economies contract sharply, the impact on emerging East Asia will be serious, although manageable.
“The turmoil emanating from Europe poses a growing danger to trade and finance within emerging East Asia; so the region’s policymakers must be prepared to act promptly, decisively, and collectively to counter what could be an extended global economic slowdown,” an ADB official said.
The multilateral financing institution is forthright on its assessment of the global economic situation next year. It lowered its growth outlook for the Philippines in 2012 to 4.8 percent from 5.1 percent. But this could even drop to 4.2 percent should the eurozone and US fall into a deep recession next year.
A mere one-percentage-point drop in the economic growth rate means thousands of jobs will be lost, and the economy will be nowhere near to reducing the country’s poverty level. Things could get awry if the government fails to respond to the specter of a deep global economic downturn.
President Aquino has talked of “front-loading” expenses in the early part of 2012 as a way of pump-priming the economy—the way his predecessor did when the sub-prime crisis in the US exploded in 2008. Boosting spending in the early part of the year, especially on infrastructure like roads and bridges, will create the right amount of multiplier effect that will accelerate economic growth.
Government spending in the past had produced the economic results it intended to create. Government spending generates jobs and adds to the consumers’ purchasing power. More importantly, it leads to the construction of more roads, air and sea ports and bridges, which have a long-term effect on the economy.