Next admin's toughest test lies in the financial sector

CEBU, Philippines - The government’s economic managers said the next administration would be facing a lot of challenges but the toughest would be on the fiscal sector.

 “The biggest challenge for the next administration [after the election] is the fiscal sector,” said Department of Finance undersecretary Gil Beltran during yesterday’s Yearend Philippine Economic Briefing held at the Cebu City Marriott Hotel.

Beltran said the new government must continue to drive the country’s revenues stressing that hopefully the next administration will continue what the present administration has implemented such as going after tax evaders and improving the IT capabilities of the Bureau of Customs (BoC) and Bureau of Internal Revenue (BIR).

National Economic and Development Authority (NEDA) acting director-general Augusto Santos for his part, said that while the next government is fortunate enough to start while the global economy is improving, it has to seriously look into the government deficit issue.

“We are hoping that 2010 will be a better year, maybe deficit will be much lower,” Santos said. He hopes that the new leadership after the May 2010 election will continue to accommodate the fiscal and monetary policies already put in place by the preceding administration to sustain the solid cushion.

Both Beltran and Santos acknowledged that the El Niño phenomenon has affected some sectors in the economy, especially the agriculture. However, while other sectors are suffering from the negative effects of El Niño, some sectors are surprisingly benefiting from the excessive heat, such as the tourism sector as more and more tourists now flock to the country’s famous beaches.

The economic team was composed of NEDA’s Santos, DOF’s Beltran, Budget Undersecretary Laura B. Pascua, Agriculture Assistant Secretary Preceles H. Manzo, Energy Undersecretary Mary Rose Magsaysay-Crisostomo, Trade and Industry Regional Director Asteria C. Caberte, NEDA Regional Director Marlene Ca P. Rodriguez and Bangko Sentral ng Pilipinas (BSP) Acting Director Zeno Ronald R. Abenoja.

The team provided the key highlights of the economic reform over the last nine years in each of their sectors and further discussed the key pillars of strength that are ensuring continued economic growth and positioning the Philippines to capture opportunities that are arising from the global rebound.

“As the economy recovers, we are returning to the path of fiscal consolidation as we aim to bring down our budget deficit to 3.6 percent of GDP this year from 3.9 percent last year. To ensure that we will be on track with our fiscal program, we will vigorously implement more effective tax administration measures, intensify collections of non-tax revenues, tighten implementation of the rules and regulations of recently enacted revenue eroding measures, and work closely with the academe, business sector, our development partners in the preparation of a tax reform strategy,” Beltran said.

From the perspective of the BSP, Acting Director Abenoja said that the Philippine economy was able to hold its ground against the backdrop of the worst global recession in post-war history due to “sound macroeconomic fundamentals—as evident in the favorable inflation environment and strong external payments dynamics—and a sound and healthy banking system.”

With a stable macroeconomic environment in place, he said the Philippines is well-positioned for self-sustaining growth in the period ahead.

The balance of payments, gross international reserves and OFW remittances remained strong.

Meanwhile, inflation averaged at 3.2 percent last year, well within the target and significantly lower than the 9.3 percent posted in 2008, he said.

Cebu is the third of six destinations that the Economic Team and BSP officials are set to visit over the course of the month as part of the domestic roadshow on the Philippine Economic Briefing.

The economic roadshow aims to share with the local business community how the economy has fared amidst the global crisis and how the economic reforms implemented in the past nine years contributed to the country’s growth story. The delegation has been to Dagupan and Baguio and will also visit Davao, Pampanga and Laguna.