Katas ng VAT

According to the latest report of the Institute for Development and Econometric Analysis, Inc. (IDEA), “the final Php4 billion Katas ng VAT (KNV) package has been approved and released by the Malacañang. The KNV is excess revenue from the value-added tax (VAT) collections on oil commodities. It was designed to mitigate the adverse effects of inflation. Two billion pesos went to agricultural guarantee funds. On the other hand, Php1 billion was allocated for the National Irrigation Authority’s loan payments to the National Development Corporation. Lastly, the remaining Php1 billion went to an industry competitiveness fund aimed at encouraging investments amid the financial crisis.”

Furthermore, it was stated that “the year-on-year growth on lending for December 2008 was reported by the Bangko Sentral ng Pilipinas (BSP) at 17.5%. The BSP has made efforts to increase liquidity for credit. Measures include the opening of dollar-denominated facilities in October last year and the cutting back of reserve requirements. However, banks have reinforced stricter lending requirements, making it more difficult for individuals and businesses to borrow.”

On the other hand, “to fuel lending, the BSP is cutting its rediscount rates for banks. The BSP has cut its overnight borrowing rate to 5.0% at present. The borrowing rate is the rate at which the BSP pays banks for short-term deposits. The peso rediscount rate was also cut by 2 percentage-points to 5.0%. The BSP has also increased its budget for its rediscounting facility from Php40 billion to Php60 billion. The rate cuts aim to urge banks to increase money lending for businesses and individuals, according to the same published report.

Moreover, IDEA reported that “the country’s 10-year sovereign bond has increased the current Balance of Payments (BoP) to a US$1.74 billion surplus for January 2009. Such is a recovery from a deficit of US$275 million in December last year. According to the BSP, the overall BoP surplus in 2008 fell to a four-year low of US$89 million.

Finally December last year, overseas remittances growth exhibited a sluggish 0.8% increase. Total overseas remittances for 2008 was posted at US$16.4 billion, 13.7% more than the previous year. The slow growth was due to the global economic downturn causing job layoffs and unemployment abroad. Demand for Filipino labor overseas is, however, expected to be somehow sustained. However, despite experiencing recession, Japan is still a vibrant market for the Philippine export industry. Under the Japan-Philippines Economic Partnership Agreement (JPEPA), the Philippines will enjoy no tariffs on agricultural and marine products. In addition, no additional trade barriers will be imposed by the Japanese government. Philippine exports to Japan reached US$ 7.683 billion for 2008, a 5.19% growth from 2007. Japan makes up 15.67% of the Philippines’ export market according to IDEA.

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