CEBU, Philippines - While the Philippine economic backbone is primarily fueled by the strong consumption base growth, the government should make complementary efforts to sustain its financial strength in the long term.
This is the recommendation made by Standard Chartered Bank head of research (East) Nicholas Kwan, in a recent economic briefing in Cebu hosted by the international bank.
Kwan said that the Philippines should rebuild the trend of reducing deficit to further expand its economy, while other countries in the Asian region has lauded the Philippine’s ability to stand two crises from 1997 Asian regional crisis, and recent global economic recession.
Although he said that he is in no liberty to give recommendation to the Philippine government on “how to run the country,” but based on his expertise as a well known Asian economist, the country has a lot of opportunities to maximize growth if supported with proper fundamentals that will support its strengthening economic vigor.
“The [Philippine] government has a lot of things to do, not really on the side of its Central Bank [Bangko Sentral Ng Pilipinas] because it has done well so far, but more important is on the fiscal side,” Kwan said.
He said there is a need for the Philippine government to give extra attention to fiscal balance, and raising more revenues, cutting expenditure to bloat the economy further and protect itself from the fragile global economic landscape.
Increasing tax on consumption, and less taxes to income earners, is highly recommendable, as this is also done by other successful economies like in United Kingdom. By fixing, the fiscal structure of the Philippines, it can well benefit from Asia’s “multi-speed” recovery.
Raising tax especially on consumption may be a painful process, but it could give over-all benefit to a country like the Philippines.
Policy like inflation control is needed too, while the oil price is on a volatile condition, he said.
While increasing taxes is beneficial to any economy, in the Philippines, the government should be very careful in implementing this policy that should not demoralize the people.
Thus, raising tax on the consumption is good, while increasing taxes to income is not good—fundamentally.
The government should also be very careful in its spending, while some governments don’t spend on the right things, to the extent of weakening its financial balance.
He said the government should spread further the investment attraction in order to provide more jobs to Filipinos and sustain a long term strength.
Kwan recommended that the government should start spending on infrastructure, as this is one of the primary needs of the country today.
He reiterated that the Philippines have been performing very well in the two crises. Except for India and China, the Philippines is the only country in Asia that managed to stand its economic ground amid the global financial turmoil.
While other giant economies suffered from economic crash, the Philippines on the other was able to achieve growth specifically on its export and import sectors, industrial production (10 percent), inflation and money supply heading up, OFWs (Overseas Filipino Workers) remittance didn’t shrink, confidence indications on upswing, and more importantly, consumption supported by remittance money is strengthening.
If the Philippines, will be able to sustain its healthy economic structure by complementing it with more sustainable fundamentals, it could expect to maximize the recovery and take advantage of the good economic outlook in Asia, he said. (FREEMAN)