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| Philippine Business Magazine:
Volume 9 No. 4 - News & Updates |
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2003 Budget
Funding Priorities
The P804-billion national budget
President Arroyo proposed to Congress embodies her priorities
to eliminate graft and corruption, ensure peace and order,
and provide basic public services. The measure will fund the
hiring of 5,000 new policemen, jail guards, and firemen as
well as 7,000 new troops; and salary increases for Armed Forces
personnel. The appropriations bill will also support the Visit
Philippines 2003 tourism campaign.
Next year’s obligation budget is
just 3% greater than the P780.8 billion expenditure program
this year. Net of interest payments, however, the core budget
will grow by only 0.8%. When viewed against the government’s
low-end inflation target of 4.5% for 2002, the 2003 national
spending program will actually shrink in real terms.
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Deficit-to-GDP Ratios
Far from Brazil
Is the Philippines the most vulnerable economy in Asia to
the financial contagion in Latin America? Why is the Philippines
being compared to Brazil?
Deficit-to-GDP
Ratios
In percent |
| |
2001
|
2002
|
| Philippines |
4
|
3.2
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| Malaysia |
6.7
|
5
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| Indonesia |
2.3
|
2.6
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| Thailand |
2
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3.4
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| 2002 figures are programmed
deficit-to-GDP ratios |
| Sources: ADB, DOF, DBM |
Among the economies in Asia outside Japan,
the Philippines is the most exposed among emerging market
borrowers to shifts in investor sentiment. Half of Philippine
government debt is owed to external creditors, and half of
such amount is in the form of bonds. This potentially endangers
the country’s access to the international capital markets.
Brazil is facing a fiscal shortfall of
between 4% and 5% of GDP. In comparison, the Philippines is
having difficulties in keeping the deficit to its target of
3.3% of GDP. According to the Asian Development Bank, other
countries in the region even project higher deficit to GDP
ratios: 5.0% for Malaysia, 3.9% for Vietnam, and 3.4% for
Thailand.
 Fitch
Ratings, however, finds comparisons between the Philippines
and Brazil unwarranted. Unlike Brazil, the Philippines does
not suffer from “pervasive indexation, short maturities,
and high real interest rates.” Fitch Ratings, in fact,
believes that the Philippines imposes only modest demands
on the international capital market, lacks an external financing
gap till next year, and has a “comfortable international
liquidity position.”
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| Signals |
The nonperforming loans ratio slightly improved to
18.1% in end-June from 18.4% in end-May. In absolute
terms, bad loans declined from P305.5 billion in end-May
to P289.0 billion in end-June, mainly the result of
a commercial bank’s sale of its bad loans amounting
to P16.3 billion to an asset management company. A year
ago, however, NPL ratios were 17.0% of the total loan
portfolio.
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| For
the fourth straight month, merchandise exports posted
a positive year-on-year growth. July exports grew 23.0%
to US$3.2 billion from US$2.6 billion a year ago. Exports
of electronic components remained the country’s top
dollar earner, accounting for 51.1% of total exports or
US$1.7 billion, and growing by 39.5% from US$1.2 billion
a year ago. By destination, exports to the United States
grew by 10.3% to US$856.0 million from US$776.0 million.
The United States accounted for more than a fourth of
the country’s exports in July. |
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 The
volume of production for manufacturing continued to expand,
but at a slower pace of 5.9% in June from 12.3% in May
and 15.9% in April. Footwear and wearing apparel, electrical
machinery, and textile were the best performing sectors
in June, growing by 88.8%, 53.1% and 27.4%, respectively.
Conversely, furniture and fixtures, petroleum products,
and machinery excluding electrical were the worst performing
industries for the period, contracting by 24.2%, 19.1%,
and 18.9%, respectively. Although manufacturing output
has improved compared to a 7.4% decline in June last year,
capacity utilization remained lower at 75.9% from 78.8%
a year ago. |
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| Net
foreign direct investments inflows were trimmed down to
US$1.29 billion in January-May from US$1.31 billion in
the same period a year ago. The Bangko Sentral attributed
this development to lower intercompany loans and higher
resident’s placements of equity capital abroad. The
bulk of equity investments, on the other hand, came from
a major Japanese investment in a local brewery company,
other manufacturing companies, financial institutions,
and transport and storage services. |
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The
number of Filipinos who left to work abroad increased
3.8% in the first five months to 403,539 from 388,898
in the same period a year ago. Around 28.1% of them or
88,440 are deployed as sea-based workers, growing 4.2%
from 84,840 a year ago. Among land-based workers, the
popular demand for nurses made the United Kingdom the
fastest growing destination for deployed OFWs. In terms
of size, the Middle East and East Asian regions continued
to draw the most number of Filipino workers.
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| FIVE
FACTS |
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• 65% of Metro Manila’s population reside in areas
where air quality guidelines are exceeded
• 6,000 to 7,000 people rush to the emergency
units of hospitals every month for respiratory diseases
• Annual average TSP (Total Suspended Particulate)
concentrations are five times higher than the World Health
Organization Air Quality Guidelines
• Nearly one half of the roughly 1.2 million
vehicles plying Metro Manila roads are smoke belchers
• Industries and electric power plants
account for 88% of sulphur oxide emissions
Source: Bantay Kalikasan Briefing Kit |
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