‘MINIMAL IMPACT The downgrade of the United States’ credit rating by S&P would have a “relatively minor” impact on the Philippine economy, according to the country’s economic managers. INQUIRER PHOTO
The country’s economic managers on Monday assured senators scrutinizing the proposed 2012 budget that the credit-rating downgrade suffered by the United States would have a minimal impact on the Philippine economy.
“Impact on the (gross domestic product) is relatively minor, about -0.1 percent. And impact on overall sectors is -0.5 percent,” Economic Planning Secretary Cayetano Paderanga said during the first budget hearing of the Senate finance committee.
Governor Amando Tetangco of the Bangko Sentral ng Pilipinas said interest rates “would most likely remain stable.”
Meanwhile, Trade and Industry Secretary Cesar Purisima said he agreed with Tetangco that “the situation over the longer term would stabilize.”
Purisima added that the country could even benefit from the situation since it could “lead to growth opportunities in emerging markets” such as the Philippines.
All three officials, along with Budget Secretary Florencio Abad, are members of the Development Budget Coordinating Committee (DBCC) in charge of crafting the annual government budget.
Despite the assurances, however, the DBCC asked for 60 days to make a “more accurate assessment” of the impact on the Philippines of S&P’s decision to lower the credit rating given to the US from AAA to AA+.
The DBCC formally submitted a P1.816-trillion proposed budget to the Senate Monday morning.
“They want to analyze whether there would be a need to revise the budget assumptions used in the 2012 proposal (because of the US credit downgrade),” said Senate finance chairman Franklin Drilon after the hearing.
“My initial impression is that we have nothing to worry about based on their testimonies during the hearing, but they hedged. They [later] said, ‘Give us a little time to assess the situation,’” the senator added.
Senators took turns in zeroing on the Aquino administration’s seeming hesitance to spend, especially on infrastructure, to create jobs and address unemployment.
Senator Edgardo Angara said the government’s weak job-generation efforts could be traced to the lack of infrastructure projects that, in turn, was apparently caused by the government’s reluctance to acquire a higher deficit.
The government incurred a budget deficit of only P17.5 billion in the first six months compared with a ceiling of P152 billion for the same period.
“The government’s deficit spending has been less than 3 percent [of GDP] in the past three years but deficit spending is good if it stimulates the economy. We should not frighten the people with the deficit,” Angara explained.