RP gov't urged to focus on unemployment, not budget deficit

ABS-CBN News

Posted at Feb 17 2009 06:54 PM | Updated as of Feb 18 2009 03:57 AM

Instead of focusing too much on the country's budget deficit, the government should use the P330-billion stimulus package to address massive unemployment, an economist said Tuesday.

University of the Philippines professor Benjamin Diokno said the proposed stimulus fund should be used efficiently to maintain the strength of the local economy and propel it forward amid the global financial crisis.

"There's an internal conflict going on in the government. You've got [NEDA] Secretary (Ralph) Recto who wants to spend, and Finance Secretary (Margarito) Teves who's thinking too much about how big the deficit is. The issue here is unemployment and protecting the jobs and workers," Diokno said in a forum.

Central bank Deputy Governor Diwa Guinigundo, for his part, stressed the need for continued review of government growth targets to make sure that such remain achievable in light of the changing landscape.

Both Guinigundo and Diokno pointed out that the economy was not adversely affected by the crisis as compared to its neighbors particularly on the financial aspect, owing to measures implemented by the BSP.

Meanwhile, 2001 Nobel Prize Winner for Economics Prof. Andrew Michael Spence said the US recession is likely to last until 2010, dragging down growth for developing economies worldwide.

Spence said the effects of stimulus packages in the US will take time before making a dent on the damaged economy since the crisis stomped on three vital engines for growth: export, retail, and automobile sectors.

He said the world arena is in the midst of a downward spiral with economies worldwide grappling with rising unemployment, flagging export demand and continued credit tightness.

"We'll be seeing two years of substantially diminished economic opportunities, and that means negative growth for large economies like the US and Europe, which will definitely have an effect on developing economies," Spence said.

Spence said risk mitigation measures are key, including conditional cash transfers and efficient use of stimulus funds. With a report from Michelle Orosa, ABS-CBN News