iven an average seven percent GDP growth target in the next seven years, the government’s economic planners are now preparing a medium-term plan to flesh out its economic growth and job creation strategy. Within the next two years, however, UP economists see an economic collapse unless urgent and “painful” reforms are undertaken. Meanwhile, economic prospects remain bullish this year as record farm harvests and robust consumer spending drove GDP growth to 6.3 percent in the first semester.

PLAN FRAMEWORK
According to Socio-Economic Planning Secretary Romulo Neri, growth prospects in the medium term hinge on critical reforms, which include a balanced budget by 2009; decentralized development through upgrading of transport and digital infrastructure; and the development of agribusiness and the promotion of entrepreneurship in small and medium enterprises.
The government’s plan framework for economic growth and job generation likewise focuses on trade and investment; the financial sector; environment and natural resources; as well as tourism. The plan also lays out government directions in terms of energy independence; social justice and basic needs; education and youth opportunity; and anti-corruption and good governance. In short, the plan revolves around President Arroyo’s ten-point program.

“747” TARGETS
Under the medium-term plan framework, GNP is projected to grow from at least 5.5 percent in 2005 to 7.2 percent in 2010. GDP is likewise expected to grow from at least 5.3 percent in 2005 to 7.0 percent in 2010.
Fiscal managers also target to cut the ratio of consolidated public sector deficit to GDP from an estimated 6.7 percent in 2004 to 3.0 percent and the ratio of public sector debt to GDP from an estimated 135.6 percent in 2004 to 90.0 percent in six years through legislative and administrative measures.

Socio-Economic Planning Secretary Romulo Neri says growth prospects in the medium term hinge on critical reforms

CRISIS-BOUND?
In a study entitled “The deepening crisis: the real score on deficits and the public debt,” eleven faculty members from the University of the Philippines’ School of Economics note that economic output has grown at a yearly average of 4.2 percent in the nineties up to the present, excluding the non-crisis years.
“At no time in recent memory,” they report, “has the economy ever demonstrated the ability to achieve, much less sustain, GDP growth of 7.0 to 8.0 percent.” They believe that this can only be achieved if “growth happened to be export-driven or accompanied by accelerating worker remittances.” Both instances, they assert, will be unlikely “under present circumstances.” Thus, the economy cannot “‘grow’ itself out of the crisis trajectory” to make the existing debt more manageable in relation to GDP.” Some of the fiscal solutions they propose jibe with President Arroyo’s proposed new tax measures such as the indexation of sin taxes, an additional P2 excise tax on petroleum products, and an increase in the value-added tax rate.

UPBEAT MOOD
Although the average inflation rate will likely breach government’s 5.0 percent higher-end target this year owing to continuing fuel price hikes,
owing to continuing fuel price hikes, the mood remains upbeat. For 2004, the government projected a GDP growth rate of 4.9 to 5.8 percent from 4.7 percent in 2003. When the domestic economy’s growth accelerated to 6.3 percent in the first half from 4.5 percent in the same period last year, the National Economic and Development Authority raised its expected GDP growth rate to 5.9 to 6.1 percent from 4.9 to 5.8 percent.
Given a 6.3 percent growth in agriculture, fishery, and forestry sector in the first semester from 2.5 percent a year ago, NEDA upgraded its growth target for the sector to 5.4 to 5.6 percent from 4.0 to 5.0 percent. For industry, the economic planning agency likewise improved its forecast to 5.3 to 5.5 percent from 4.4 to 5.2 percent since the sector’s output rose 5.6 percent in the first six months from 4.2 percent last year. In services, the planning agency sees a more robust sector growing at an average 6.6 to 6.8 percent this year, instead of its previous expectation of 5.7 to 6.6 percent, after posting a 6.9 percent performance in the first two quarters compared to 5.6 percent in the previous year.