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LOWERING EXPECTATIONS IN 2008
The Philippine Star Before we can give our prognosis for the new year, let us review some of the more fundamental developments of 2007. Last year's economic and fiscal performance was almost phenomenal. Annual gross domestic product growth is likely to hit 7 percent for the first time since the 70s, and the budget in all probability will post a surplus for the first time in a decade. Such glowering data is indeed difficult to believe, given our tendency to be skeptical. Do the figures really jive with reality, ergo, are they factual? And if the numbers are accurate, would the good news be sustainable? On close scrutiny, most of last year's strong numbers appear warranted. The growth of 7 percent, given the strong government spending in infrastructure during the year and improved consumption figures fueled by overseas workers' remittances, is plausible. Such positive figures are supported also by profit reports of most Philippine companies – from fastfood operators to airlines, oil companies, telecommunication companies to real estate developers. Whether the growth is felt at the ground level remains to be seen. Definitely, if you ask poor families or kids on the street if their lives improved, you would not likely get a positive response. Yet hunger, or the condition of having nothing to eat, has eased to 16.2 percent in the Social Weather Station's latest survey from 21.5 percent in September. Again, our cynical side is to take this survey with a grain of salt as we do television ratings. More from asset sales Then there's a probable surplus as early as 2007 on account of privatization receipts. The government is booking about P90 billion from the sale of assets last year: P25.2 billion for the indirect stake in PLDT, about P60 billion from PNOC-EDC, and the rest from smaller items. Privatization sufficiently covered the P70-P75 billion shortfall in the BIR and Customs collections. Without it, the deficit would have more than doubled from the P63-billion target; government spending would have been curtailed substantially. And here now is where all the doubt, mistrust and skepticism come in. What happens when the government runs out of assets to sell? Or what if global economic condition slows down, and asset prices deflate as they did five, seven, 10 years ago? Looking at more selling This year, though, the prospects for privatization still remain upbeat. The San Miguel shares are worth conservatively P50 billion; the Food Terminal Inc. property, around P16 billion; and the Manila Electric Co. stake, another P7 billion. Pieces of property in The sale of San Miguel, however, depends on how well the government can convince the group of coconut farmers to cooperate. Proceeds from the sale of supposedly sequestered assets are earmarked for agrarian reform. The SMC shares are doubly tricky because the coconut levy, believed to have been used to buy the San Miguel stake, were collected from the coconut farmers and therefore should benefit them. Interesting as this is, the subject deserves a separate piece altogether. So if the coconut farmers aren't on board, government can't sell the SMC shares and there goes its promise of balancing the budget starting this year; much more sustaining last year's surplus. Tax collection still anemic The government's fiscal recovery is obviously stumbling on the most fundamental area of tax collection. Both BIR and Customs are not only missing their goals, they are blaming the finance department for making wrong assumptions on the peso, inflation and interest rates that led to their failure. But then, the better-than-expected economic growth numbers should have more than compensated, given the strong correlation between GDP growth and tax collection in a supposedly efficiently collecting economy. Yet collections still fell short. On the macro economy, corporate profits are soaring as inflation and interest rates decline, while the peso continues to attract more foreign funds. The trend appears intact unless the much-ballyhooed slowing Looking ahead Considering the higher price of oil which has spiraled to almost double from about $50 at the start of 2007, we should in all probability see slower growth this year, a view also shared by a number of economic managers. While slower from an estimated 6.9 percent to 7.3 percent growth last year, GDP growth this year may still range between 6.3 percent and 7 percent. At least, the prognosis is still on the positive side. The strengthening of the peso is hitting 40 percent of GDP, something that the Bangko Sentral ng Pilipinas is painfully aware of. Being directly hit are exports along with new lifestyles and consumption patterns of families of overseas workers. The peso is seen to average between P42 and P45 this year from an average of P46.17 last year. Doing our part Unlike in previous years, 2008 is at least coming from a period of robust performance, giving the economy and the fiscal sector enough ammunition to fight off challenges this year. As we journey in what promises to be an interesting year, a healthy dose of disbelief and confidence will help us assess the performance of this government. As we do that, we should also take the time to evaluate whether we, as taxpayers, are part of the solution or aggravating the problem. “Pag-usapan Natin” at IBC-TV 13 Watch “Pag-usapan Natin,” a segment of the IBC-TV 13 news program News Tonite, from Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center,
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