VULNERABILITY OF ECONOMY TO FINANCIAL CRISIS
Independent think-tank IBON said that government’s 2007 target of P105 billion in big-ticket privatization show the continuing vulnerability of the fiscal sector to another crisis similar to the one the country experienced in 1997.
With the passage of the expanded value-added tax into law in 2005, Pres. Arroyo had confidently claimed that the fiscal crisis she declared was finally over. In fact, the administration even moved up its target of achieving a balanced budget by two years, saying that it can be achieved next year rather than in 2010.
But IBON research head Sonny Africa pointed out that in the first quarter of the year, government had recorded a deficit of P52 billion, more than P6 billion above the targeted P45.8 billion, and was using privatization revenues to make up for the shortfall and to keep within its programmed P63 billion deficit ceiling.
He warned that the Arroyo government is on a path similar to that taken by former president Fidel Ramos in the years before the 1997 Asian financial crisis.
The Ramos administration’s P52.7 billion in privatization earnings in 1994 and 1995 was the main reason it recorded an unprecedented fiscal surplus in 1994. But such surpluses quickly declined in subsequent years as government started running out of assets to sell. Deficits started to return in the years after the Asian crisis, hitting a record-high of 5.4% of gross domesti c p roduct (GDP) in 2004.
When the Asian financial crisis exploded in July 1997, ten years ago, the Philippine economy was thrown into disarray from which it has not yet really recovered. The real economy, especially the manufacturing sector, continues to slow and actual joblessness minus statistical redefinitions remains at record highs, Africa said.
He likened the Arroyo government’s actions to those of the millions of poor and desperate families forced to sell of their most precious possessions just to make ends meet. Government’s stakes in San Miguel Corp., the Manila Electric Co. (Meralco) and the Philippine National Oil Co., which it is planning to dispose this year, are among its most profitable and valuable assets. Their disposal would allow the Arroyo government to be able to maintain its illusion of fiscal health, at the expense of revenues in subsequent years, Africa said.