LISBON, Portugal – The Philippines can learn from the experience of Portugal to avoid a debt crisis, a European Commission representative said here.
On the sidelines of a reporting trip on water and climate change issues organized by the Netherlands-based European Journalism Center, European Commission press officer Rui Cavaleiro Azevedo said that while the economic situation in Portugal is different from the experience of other countries and is unique to the country, there are general lessons that may be learned.
He said that governments including the Philippines should always be conscious of its fiscal situation.
“Managing the fiscal situation is a must,” said Azevedo, press officer of the European Commission Representation in Portugal.
Last month, Portugal’s government collapsed because of a debt crisis and is now seeking a bailout from its big brothers in the economic zone.
Azevedo said that a one-year recession is inevitable because Portugal is a construction-driven economy.
Already, many shops around Lisbon have put their items on sale by giving hefty discounts to consumers in a bid to boost local spending.
The construction of many buildings has stopped, as many companies cannot Azevedo said that governments, whether developing or already developed, should also have mitigating measures in case a crisis starts.
“There must be alternatives,” he said, referring to stimulus programs by governments to boost spending.
A Portuguese bus driver says the crisis has a significant impact on personal consumption because people cannot afford to spend that much anymore.
At the same time, he fears that a bailout by bigger European countries may lead to higher taxes for the Portuguese because the country would have to pay its white knights later on. “Nothing is free,” the driver said.
In a separate interview in Manila last week, Finance Undersecretary Gil Beltran said that the key to avoiding a debt crisis is to be transparent with one’s fiscal situation and to do everything possible to manage it.
“Governments should be transparent with its budget deficit,” Beltran said.
He said that the Philippines’ deficit remains manageable, with the deficit-to-gross domestic product ratio at three percent.
In contrast, the budget gap of debt-stricken Portugal is at eight percent level, hitting 8.6 percent of GDP last year.
The Philippines has a target to contain this year’s budget gap at 3.2 percent of GDP or roughly P300 billion from the P314.4 billion or 3.7percent of GDP last year.