December 21, 2006 · Posted in: i Report Features, The Economy
Walking on a knife’s edge
BEFORE she entered politics, Gloria Macapagal-Arroyo was an economics professor. When she became a public servant, her earliest government posts were at the trade and industry department. It was then expected that once she became the country’s chief executive, her administration would right the wrongs in our perennially faltering economy.
Today the peso is enjoying an unprecedented uptick in value, while the creditor community is calling the Arroyo administration’s policy a success. But according to economists Maitet Diokno-Pascual and Clarence Pascual in the latest solicited analysis in i Report‘s current series on political predictions for 2010, the flaws in such a policy will become more evident in the next three years.
This is when, they say, the “knife-edge” of the Arroyo administration’s fiscal policy will cut into economic growth, job creation, and poverty alleviation. They add that while the Arroyo government’s pattern of fiscal management has certainly made the bottom line look good to creditors and credit-rating agencies, it is unsustainable.
The Pascuals say that the present administration’s fiscal policy can be likened to walking on a knife’s edge.On the one hand, they explain, continuing to pursue a tight fiscal policy creates pressures on the real economy in terms of depressed demand, weak job creation, rising joblessness, and growing poverty. On the other hand, relaxing its fiscal stance to accommodate much-needed public spending runs the risk of displeasing the country’s creditors.
Read on and find out why many of us are facing yet another bleak Christmas.
10 Responses to Walking on a knife’s edge
aus_phil
December 22nd, 2006 at 7:27 am
The article is obviously biased and politically- motivated! I’m not an economist but reading it, it’s like nit picking! The bottom line is the macro-economics, not the deficiencies attributed to each policy pronouncement or implementation. Why attack the economic benefit of lowering of interest rate? It’ actually good in macro economic sense but may not be good as revenue earner for the government due to lower interest rate from deposits, etc. The country is cash strapped and it is imperative to ensure that it follows the World Bank’s pre-requisites and this I believed what the government is doing! If there is no pain, there is no gain! Any economic adjustments require pills to shallow! Unfortunately and admittedly, it is always those in the lowest strata of society that always suffer the most hence, the need to balance tax take with social services, etc. As in most countries, it has always been the salaried and wage workers as the most source of tax base. There is nothing new to that!
Again, reading the article, it’s full of bias and it’s more of a political statement. It might be worthwhile to determine the affiliation of the writers, and then we would determine my initial suspicion!
Alecks Pabico
December 22nd, 2006 at 9:16 am
Aus_phil,
Did you read through the entire piece? There’s a note on the authors at the end of the essay that tells readers about the writers’ affiliations.
Juan Makabayan
December 22nd, 2006 at 4:33 pm
alecks,
I read through the entire piece, and frankly wanted more incisiveness. I want sharp economists to dissect GMA’s economics, cut through the layers of lies, open and lay bare the innards of Gloria’s economic philisophy. GMA is FVR’s globalisation ‘safety net’ to catch the seat of power when FVR kicked Erap out. I warned them(some instigators/mobilizers then who are anti-GMA now)as EDSA2 was unfolding. ” You’ve been had.” Naisahan kayo nila FVR.
Juan Makabayan
December 22nd, 2006 at 4:37 pm
What’s right and what’s wrong with Gloria Arroyo’s economic policies that in spite of higher GNP growth more Filipinos are hungry?
Gloria Arroyo’s ‘Dagdag-bawas’ economics: Borrow more, pay more debts, tax more; spend less for food, less for school, less for health.
Gloria Arroyo’s ‘Pass-on’ Fiscal Crisis Management: Through more and higher taxes, the national government’s fiscal crisis is passed on to family-households who now suffer from severe fiscal crises that they have less for food and education.
Gloria Arroyo’s ‘Instant noodles’ economics: Artificial economic-indicator enhancers, foreign-interest/monopoly status quo preservatives, attractively packaged but without real ‘nutritional value’.
Gloria Arroyo’s ‘Fire sale’ economics: Patrimony at a bargain, opening up for grabs large-scale mining concessions, on-going gold/mineral mining operations at full-blast, tons of gold ores shipped out, unaccounted for, un-taxed.
Gloria Arroyo’s ‘Red tide’ economics: China-Phil bilateral trade agreements – Communist China investments/loans/’grants’ for mining concessions, prime agricultural lands, control over strategic projects (Northrail, oil exploration, power gen, etc.)
Gloria Arroyo’s ‘Toxic’ economics: The JPEPA – caregivers for toxic wastes exchange deal – best illustrates the hidden cost and harm of Gloria Arroyo’s multi/bilateral deals.
Gloria Arroyo’s economic policies are unsustainable because they are inherently ‘toxic’ the long-term cumulative effect of which is fatal to many Filipinos and, if allowed to ‘succeed’, disastrous for the economy as a whole.
tongue in, anew
December 23rd, 2006 at 7:58 am
“Jobless Growth”, according to Cielito Habito.
When you have 1 million OFWS dispatched each year and the manufacturing sector is suffering heavy declines, it either means your OFWs are saving their money (which is not so) or your consumption is import-dependent.
The situation is not helped any when the gov’t collectors of import taxes and duties are the most corrupt agencies, who could have collected enough for the gov’t to make even just a small dent in the joblessness by way of infrastructure construction. The factories are laying off workers, people shift to buying “tingi”, the manufacturing sector suffers.
Not even the much-touted BPO sector is providing enough employment, as we now know, only 3 per hundred applicants are hired. This is one of the ill-effects of the kind of education our government has been providing our youth. We expect things to worsen in the coming years.
I agree with Juan M. on all points. Especially now that Gloria is on another borrowing spree, with its largest debts with WB and ADB just approved.
The P4.7B feeding program which is holding back the 2007 budget’s approval, as the senators suspect, will surely be nothing but election bribes that feeds not the hungry children but the power-hungry politicians who do not wish to give up the perks and the pork.
Why not spend the P3B on the repair of Bicol schools devastated by typhoons? She can spend the rest for feeding her lapdogs.
Juan Makabayan
December 26th, 2006 at 7:15 am
alecks,
“The Magic Mountain: Trickle-Down Economics in a Philippine Garbage Dump”
Long article from this month’s issue of Harper’s Magazine in PDF format:
http://www.dumpsterworld.com/index.php topic=4343.msg41165#msg41165
Comments
“Damn, really makes you think…”
” Very interisting reading.”
Can’t download the pdf yet.
Alecks Pabico
December 26th, 2006 at 9:56 am
Thanks, Juan.
Here’s the correct link.
For those interested, the direct link to the pdf file is here.
Alecks Pabico
December 26th, 2006 at 7:30 pm
Aus_phil,
It’s quite unfortunate that having a contrary position in this country is dismissed outright as biased and politically motivated. I hope it’s not a case of that when you claim the same about the economic analysis of the Pascuals.
Because if you read today’s news, Finance Secretary Margarito Teves actually echoes the same views espoused by the Pascuals on how the Arroyo administration is addressing the country’s fiscal deficit.
Teves does not totally agree with government’s underspending just to balance the budget, saying that even if revenue targets will be met in 2007 and the succeeding years, that achievement would still be incomplete without government translating this to development spending that would eventually spur growth.
“What you want is a combination of fiscal discipline, higher growth and the ability to translate these macro-economic improvements into a meaningful experience that can be felt by the general population,” he says.
Bob Martin
January 2nd, 2007 at 11:56 am
The Pascuals say that the present administration’s fiscal policy can be likened to walking on a knife’s edge.On the one hand, they explain, continuing to pursue a tight fiscal policy creates pressures on the real economy in terms of depressed demand, weak job creation, rising joblessness, and growing poverty. On the other hand, relaxing its fiscal stance to accommodate much-needed public spending runs the risk of displeasing the country’s creditors.
As a Fil-Am entrepreneur/investor, I see what President GMA’s plan (mentioned above) as a very critical and necessary first step towards creating jobs through business start-ups and expansion, fuel by critical infrastructure projects, etc.
HOWEVER, this important first step, MUST BE complemented by new Laws, Implementing Rules and Regulations, Performance Standards design to measure the fuits/outcome. The President tasks Congress and Senate to do their part/job as lawmakers.
UNFORTUNATELY, the Senators & Congressmen are not doing their jobs – this incompetence is sabotaging the progress of Filipinos.
As an entrepreneur/investor, who want to invest and bring other investors in the Philippines, the uncooperative nature of these Senators and Congressmen is making us nervous. Now American legislators and President Bush passed and signed into law normalizing our relation with Vietnam. This is exciting news for us investors. Why? Because now we can invest in Vietnam which offers better incentives and low costs of business operations.
CONCLUSION; Pascual’s analysis is biased, implicitly supporting views of traditional politicians, therefore, perceive by this investor as misinformation/half-truths
freewheel
January 3rd, 2007 at 8:13 pm
if anyone find the Pascual`s study as biased and of misinformation and half-truths, then you have all the reason to be nervous, since the other lot takes the couple`s prognosis seriously.
my modest fortune were made by never believing the traditional sources of data government functionaries submits, always aware that these are adulterated to deodorize to what otherwise is a bleak picture.
by way of example, i`d rather hear accounts from friends who make it a habit frequenting night spots and ticker off ages of those who serve drinks and entertain guests; for 3 years now, teenagers barely out of puberty have taken over their adult counterparts and are making rounds during nighttime and offer more than the usual drinks to satisfy libidos for a measly sum of less than 5 dollars.
for those who understand basic arithmetic and sociology it means that a large number of our nation’s kids are out of school to eke out a living in one hand, and another probable implication is the existence of heightened strains in family relations, often as a consequence of widespread poverty.
well meaning Pinoys should also be disturbed by the apparent common knowledge and acceptance by our youngsters of the initials GRO- a euphemism for a variety of seedy trades inside drinking joints and pubs. a road tour from North and South of Luzon provides a graphic display of the hiring sign ‘Wanted GRO’ without letup prompting an observer to quip satirically that indeed there’s no shortage of job for everyone!