Balancing budget by 2011 could be crucial–Recto

By Cai U. Ordinario, Business Mirror

Posted at Feb 18 2009 10:11 AM | Updated as of Feb 18 2009 07:22 PM

If the Philippines is not able to post a balanced budget by 2011, future generations of Filipinos are expected to suffer more due to the public spending done all throughout the economic crisis, according to the National Economic and Development Authority (Neda).

Keynoting the induction of new officers of the Economic Journalists Association of the Philippines late Monday, Neda Director General and Socioeconomic Planning Secretary Ralph Recto said the government has already moved its balanced-budget target to 2011.

"On the fiscal front, we have postponed balancing the budget. The 2008 deadline was moved to 2011. That will give us greater freedom to pump-prime the economy," Recto said.

He explained that if a balanced budget is not reached by 2011, the next generation will be saddled with a lot of debt as a result of higher public spending forced by the crisis. That is why, Recto said, that in terms of getting foreign borrowing to finance projects, there is a need to find financing that requires the lowest or no interest, so that the country will not be made to pay more for the project's worth.

"If our cost of borrowing is so low, even if you borrow, it's okay. If it's loaned out at no extra charge, why shouldn't you accept it? I'm just giving you a perspective because I cannot say," Recto said during an ambush interview.

Meanwhile, apart from the balanced-budget target, Recto said there is also a possibility of revising the macroeconomic projections for average oil prices, inflation, the exchange rate and exports.

However, not all will be revised downward. Recto said projections like those for exports may be revised downward and those for oil prices and inflation upward.

In terms of exports, Recto does not expect a repeat of the 40-percent contraction posted in December 2008, which he considers the bottom of export earnings growth.

"It's [the contraction] gonna be less than that. I think there would have been a pick-up in January 2009 to a certain degree," Recto said.

Dr. Victor Abola, executive director of the FMIC-University of Asia and the Pacific (UA&P) Capital Markets Research, said he expected export earnings growth to decrease by more than 20 percent, at least in the first quarter owing to the global downturn. Hopefully, Abola said, factors that can cushion an export earnings drop, like remittances, can keep the economy afloat. "It's going to be bad in the first quarter for the Philippines," he concluded.