no extra export

Recto:growth targets to hold on export drop by Cai U. Ordinario / Reporter

B' Mirror/Tuesday, 18 November 2008 00:13

EVEN with the Philippines’second-largest export market, Japan, announcing a -0.1-percent gross domestic product (GDP) growth in the third quarter, the National Economic and Development Authority (Neda) remains confident that the government’s growth targets this year and in 2009 will hold. The National Statistics Office (NSO) reported that from January to September 2008, exports to Japan amounted to $6.03 billion, or 15.51 percent of the country’s total export, for the first nine months of the year. This made Japan the Philippines’ second-largest export market, second to the United States. Neda Director General and Socioeconomic Planning Secretary Ralph Recto said the government has already factored in its growth assumptions the possible slowdown in its export markets, such as Japan and the US, in the recent downward revision of its economic forecast for 2008 and 2009. The Development Budget Coordination Committee (DBCC) now projects that the economy will post a growth of 4.1 percent to 4.8 percent in 2008 and 3.7 percent to 4.7 percent in 2009. These were the latest economic target revisions done by the government after the US financial crisis snowballed into a global economic recession. “It’s a fact that our external accounts will be negatively affected. We have factored this in the last revision of the government’s growth targets,” Recto said. What is important right now, Recto said, was the implementation of mitigating measures to help the economy cope. He said this includes encouraging Filipinos to invest in local banks, especially with the global recession. Recto estimates that Filipinos have around $70 billion to $80 billion in foreign banking accounts. If all these funds are invested in domestic financial institutions, this will help cushion the effects of the crisis and strengthen the country’s financial system. “I don’t know why Filipinos still trust foreign fund managers when the credit crisis was made in the West,” Recto remarked. Apart from this, Recto said he believes there is also a need to adopt a more comprehensive tax rate in the medium and long term in order to keep the Philippines’ revenues afloat, even in times of crises. Recto said while the government’s revenues to GDP ratio has been flat and is going down, this is mainly due to problems encountered with individual tax payments. However, Recto said, this is not to say that the individual tax exemptions to be implemented next year will be a cause for concern for the government. Starting January 1, 2009, minimum-wage earners will be exempted from paying income tax, while taxpayers will get higher tax exemptions. Companies will also start to enjoy a lower corporate income tax at 30 percent next year from the previous rate of 35 percent. The Neda chief said while the finance department has not yet released a formal study on how much this will cost the government, tax exemptions and the lowering of corporate income tax can still help the economy next year. Recto explained that higher exemptions and a lower corporate income tax can also spur consumer demand and give more financial room for companies to cope with the crisis and possibly to prevent them from laying off workers next year. This will prove to be crucial, especially with some economists seeing higher unemployment levels next year. State-owned Philippine Institute for Development Studies president Josef Yap earlier estimated that the country’s unemployment rate may hit 8 percent to 9 percent in 2009.