Election spending to spur economic activity

Next year’s election spending is expected to generate economic activity in order to offset the decrease in exports, a Singapore based economist said yesterday.

Jose Mario Cuyegkeng, senior economist of ING Bank said the growth in exports this year will not be duplicated in 2007 as the world economy slows down.

"Global environment is not growing as fast this year," Cuyegkeng told members of the Financial Executives Association of the Philippines (Finex) at a conference in New World Hotel.

Although the election is expected to improve market liquidity through an increase in spending, Cuyegkeng warned that the May polls may also spell loss in investments.

"The elections is very important," he noted. Should the opposition succeed in getting 81 congressional seats, the impeachment against President Arroyo may finally push through.

The impeachment, he said may spell uncertainty and discourage investments.

Aside from election spending, Cuyegkeng said infrastructure spending will also push economic activity.

According to Cuyegkeng, government spending will boost the economy for this and the coming year.

"Hopefully private sector borrowing will follow," the economist said.

In the same conference, United Kingdom based Standard Chartered Bank lauded the country for having solid economic fundamentals and robust domestic consumption.

Frances Cheung, the bank’s Hong Kong based economist forecasted a positive yearend as overseas remittance continue to support domestic spending.

Cheung said the strong economic performance will continue until the first three months of next year as the number of overseas workers are expected to rise.

"This would strengthen the external position, support growth and allow further fiscal consolidation," Cheung said.

She added that the strong external position will push the local currency to 48.50 against the greenback for the first quarter next year.

The bank foresees that as growth momentum continues while inflation decelerates, the central bank may keep its overnight borrowing rate at 7.5 percent through the first quarter of 2007.