It’s sad, really, because oftentimes, histrionics overshadow the reality. For some reason, some sectors in our society are caught in a time warp. They still think it’s 2004. Maybe it has something to do with 2007. Your guess is as good as mine.
The reality, circa 2006, is that our country is getting over the hump.
To those who have reservations about President Arroyo’s claims of achievements, they need not take her word for it. Economists, analysts, multilateral institutions such as the World Bank and the International Monetary Fund, credit rating agencies and investment firms — whose job it is to make an objective assessment of any particular country, sector or industry — have been one in saying that the Philippine economic performance is more than satisfactory. The outlook turned positive last February, when we started to implement the Revised Value-Added Tax Law. It was monumental because the move allowed our government to address the budget deficit by widening the net for tax collections.
To those of us who keep track of the news, this is really nothing new. However, the good news has to be emphasized because this was a major hurdle that we overcame, yet it is unbelievably overshadowed by our politicians’ noise.
Historically, our government has been impeded in its development agenda due to lack of funds. In fact, the same economists, analysts, multilateral institutions, credit rating agencies and investment firms who now say we’ve done a good job, had issued warnings in the past about our country’s fiscal woes.
It was a very serious condition: had the RVAT law not taken effect, we would find ourselves not only coughing up more money for loans, but worse, creditors would have stopped lending money to us.
While Budget Secretary Rolando Andaya Jr. says it will take two more years before we can actually live within our means — meaning zero budget deficit for the government, the significant thing at this time is that with the increased VAT collections, our government now has the money for infrastructure spending, which will spur growth throughout the country.
My economist friends call it pump-priming. And with its unrelenting focus on reforms, the Arroyo administration has placed our country in a position to carry it out.
Starting this year until 2010, P2.9 trillion worth of projects will get underway to improve the country’s infrastructure, as well as education and social services. The spending will be spread strategically according to the "super regions" project spelled out by the President in her State of the Nation speech last month.
According to Finance Sec. Gary Teves, P8.6 billion of the VAT collections have been spent already for infrastructure and social projects as of July 25. This is equivalent to 30 percent of the total VAT collected thus far. Next year and into the future, the same proportion will be applied for pump-priming, and even more as we tame the budget deficit.
This is why the country will likely earn a credit rating upgrade by the first quarter of 2007. In its latest country report on the Philippines, ING Bank said there’s a 70 percent chance that could happen due to the much-improved economic fundamentals. It expressed confidence that the government would sustain the fiscal performance for the rest of the year.
Standard & Poor’s Rating Services and UBS Investment Research agree a credit rating upgrade is highly likely, citing the improved fiscal performance.
Already, Fitch Ratings, which is the most optimistic about the country’s credit worthiness, has upgraded the "country ceiling" for the Philippines to "BB+" from "BB" - an assessment of lower risk on cross-border foreign currency lending and investment based on events happening in the country.
International Monetary Fund Representative Reza Bakir said during a roundtable with the President earlier this month that the Philippines was one of the economies that rebounded well despite much "global market volatility" in May and June, noting that the country’s economic team managed to do so despite soaring international oil prices. He expressed optimism that the strong revenue performance in the first semester would be sustained for the rest of the year.
Goldman Sachs, in its latest Asian brief, likewise noted that business confidence in the Philippines has rebounded, reversing the trend of the past few decades. It observed that the President is very focused on fast-tracking at least P150 billion of the infrastructure plans enunciated during her Sona, and lauded her record of execution as "better than her neighbors in the last few years."
In its latest quarterly poll, Reuters reported that economists expect the economy to grow by 5.3 percent this year and 5.5 percent next year. Economic growth last year was recorded at five percent. During the April poll, the expectation had only been 4.9-percent growth for 2006.
According to National Economic and Development Authority Director-General Romulo Neri, the pump-priming activities outlined in the country’s medium-term investment plan — recently revised to reflect the super region concept that aims to develop North Luzon as RP’s agri-business center in the North; Metro Luzon as the urban beltway; Visayas as RP’s tourism center, Mindanao as the agri-business center in the South, and the Cyber Corridor — would place the country’s infrastructure spending at around five percent, at par with our Asian neighbors.
"The key for Philippine GDP (gross domestic product) growth to break out of the 4.5-5.5 percent range is a revival of investment. A history of poor fiscal management, minimal infrastructure spending by the government, a weak banking sector and low savings rates has left the Philippines with the lowest investment-to-GDP ration in Asia," UBS Investment Research noted in its July 28 country assessment.
Over the weekend, more good news came in as our country’s trade deficit dramatically shrank to $1.83 billion in the first semester from $3.19 billion last year. Analysts attributed this to improved economic conditions.
Dr. Emilio Antonio, president of the Center for Research and Communication Foundation Inc., has observed that our traumatic past tends to cloud our vision, noting that temptations to squander our modest gains have reappeared. He stressed that private investors – both foreign and local – have more resources than they have actually plowed into the economy. But they hesitate to take risks due to the political turbulence. And there’s the rub.
Some politicians with tunnel vision must take heed of the people’s growing disenchantment with their antics. With their endless preening in media for the "pogi points" spouting one nonsense or another, they just might find themselves on the losing end of their ambitions. In this information age, their tactics fall flat on the populace they seek. These days, it is performance that matters. And those who cannot deliver simply fall by the wayside.