Gov't needs to boost spending to fuel economy - economists

MANILA, Philippines - The government needs to boost spending to fuel the economy, economists agreed during a recent forum concluded jointly by the Philippine Institute for Development Studies (PIDS) and the Asian Development Bank (ADB).

The ADB for instance revised downward its economic growth forecast for the year to be 4.7 percent from the original five percent and for 2012 to 5.1 percent from the original 5.3 percent.

ADB senior economist Norio Usui attributes the downward revision partly to weak government spending.

The multilateral institution said that despite higher consumption and stronger private investment, the country’s economy will not grow as expected since exports significantly fell along with the continued economic uncertainty in major industrial countries.

For his part, ADB’s Philippine country director Nareej Jain said the institution remains optimistic about the country’s economic outlook.

He noted that a 4.7-percent growth should not be underrated.

At the same time, he said the country needs to improve its performance especially in social services delivery and poverty reduction.

PIDS president Josef Yap attributed the slow economic growth to a host of factors including lack of entrepreneurship and inadequate physical infrastructure that hinder development.

He also said that weak institutions that give rise to chronic problems in governance also affect the country’s economic performance.

“The government’s difficulty in addressing market failures has led to a narrow industrial base. Likewise, the seeming failure to provide more equitable access to basic social services has exacerbated the poverty situation,” he said.

Yap also believes that the country lacks “social cohesion.”

Social cohesion or collective action, Yap believes is necessary in poverty reduction. This, he said, is about “building shared values and communities of interpretation, reducing disparities in wealth and income, and generally enabling people to have a sense that they are engaged in a common enterprise, facing shared challenges, and that they are members of the same community.”

The government, for its part, has vowed to make up for lackluster spending as it hopes to still achieve an economic growth target of five percent to six percent this year.

In the second quarter of the year, the economy grew by 3.4 percent, slower than the 8.9 percent recorded in the same period last year.