ADB sees no recession in Philippines in 2009
The Asian Development Bank does not see the Philippines plunging into a recession next year as some businessmen fear, but believes that an economic slowdown has become the most pressing issue that policymakers have to deal with.
Neeraj Jain, ADB country director for the Philippines, said the Philippine government's decision to abandon the goal of balancing the budget by 2010 was a welcome move given the need for pump-priming measures. Higher public spending is indeed necessary to cushion the impact of a deteriorating global economy, he said.
"It is difficult to make a precise projection [as to how much the Philippines will grow next year] but based on the current situation, we [ADB] don't think the Philippines will be in a recession," Jain said in a briefing Thursday.
Technically, recession is two consecutive quarters of year-on-year drop in economic output.
While the ADB considers projections of a recession exaggerated, Jain agreed with forecasts made by some economists from the government and the private sector that the Philippines would definitely suffer from a growth slowdown next year.
He said the problem of easing growth has taken over accelerating inflation as the biggest cause for concern.
As prices of fuel drop and as increases in prices of food products ease, Jain said inflation should no longer be much of a concern for economic managers as it had been the past months.
What was more worrisome, he said, was that the financial turmoil in advanced economies would likely affect the Philippines in terms of a pullout of investments. This, in turn, could result in higher unemployment and sluggish domestic demand.
"What you spend today is also based on what you will earn tomorrow. If you think you may not have a job tomorrow, then that will affect your consumption today," Jain said.
Jain said the government needed to boost spending on social services and infrastructure to ease the ill-effects of weakening consumption. He said pump-priming was a wise move during a crisis, even if this meant pushing back the goal of balancing the budget beyond 2010.
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