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Saturday, November 26, 2011

Social Watch Philippines had adequately prodded solons to review 2012 budget marcoeconomic assumptions

Social Watch Philippines today said it is the prerogative of the bicameral conference committee to approve this week the reconciled version of the 2012 national budget without much change, as she stressed the SWP had done everything to persuade senators and congressmen to further scrutnize the appropriations proposal by primarily reassessing its macroeconomic assumptions,

According to Prof. Leonor Magtolis Briones, Social Watch Philippines lead convenor, the SWP had done its part in trying to convince lawmakers to make a final review of the marcoeconomic assumptions of the budget and make the necessary adjustments before Congress ratifies a budget measure which may be dangerously inaccurate.

"Deep in their heads, the passing of the proposed budget is not realistic because it is not responsive to recent realities of national and global developments,” said Briones.

Briones said the budget proposed by the Palace and presented to Congress by the Department of Budget and Management was premised on a “stable macroeconomic environment” which, however, is not anymore the case now.

“The macroeconomic assumptions which form the basis of the 2012 proposed budget were formulated during the first quarter of 2011. Since then many unsettling events in the economy have occurred in the succeeding months. The recurring question is “What are the effects of current global developments, especially in the U.S. and Europe, on the GDP forecast for 2012?,” Briones said.

She said the Development Budget Coordination Committee (DBCC) in its briefing of senators last Oct. 12 cited no changes in the forecasts for inflation, foreign exchange rates, and Dubai crude oil for this year and the coming year. However, the assumptions for the domestic and foreign interest rates, imports and exports growth for 2011 and 2012 were lowered on account of the weak external environment.

The DBCC also noted that the revised real GDP growth for 2011, at 4.5-5.5 percent, is now expected to be lower than the 5.0-6.0 percent growth assumption that was approved by the DBCC in July 2011. This was ascribed to the weaker than expected performance of the Philippine economy in the first half of 2011 because of the external global shocks as well as domestic issues, particularly the fiscal under spending of the government.

Briones said only about a month after the DBCC briefing of senators, the World Bank for the second time this year, revised its annual growth forecast for the Philippines, citing lower demand for Philippine exports and the impact of natural disasters on the local economy.

“In its East Asia Pacific (EAP) Economic Update released last Tuesday, the World Bank (WB) said that the country’s gross domestic product in 2011 would settle at 4.2 percent, lower than the previous 4.5 percent growth forecast it announced in October. It also projected that GDP growth for the whole of 2012 may hit 4.8 percent which is lower than the 5 percent earlier projected,” said Briones.

The WB also noted that Philippine exports were affected this year by the calamities in Japan as well as the recent floods in Thailand. “According to Bert Hofman, WB’s chief economist for East Asia and the Pacific region, the disasters abroad affected the supply of raw materials to the country, disrupting production of local manufacturers. But the biggest threat came from weakened demand for Philippine goods as the financial turmoil took its toll on some of the world’s most advanced countries,” she said.
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“So where do these recent developments put our planned projects and programs next year? Are our macroeconomic assumptions accurate and reliable enough to ensure the doability of these projects and programs next year? We have priorly urged our lawmakers to make a final review of the macroeconomic assumptions and on the basis of their reexamination make the necessary adjustments and corrections on the government’s revenue targets as well as the expenditure priorities,” said Briones.

Even the Aquino administration was urged by SWP to reexamine its macroeconomic assumptions and device means of dealing with the consequences of global instability in the light of developments in the global scene, particularly the downgrading of the United States and other turmoil elsewhere in the world.

Briones then said the administration’s budget and finance officials should also figure out how to face the challenges of poverty, the increase in population, and the very real possibility that the country’s Millennium Development Goals (MDG) may not be reached.

As she had previously warned, Briones said the debt crisis of the United States and Europe, the natural disasters in Japan, political instability in North Africa and the Middle East, and the turbulence in financial markets will all surely impact on the Philippines. Prof. Leonor M. Briones, Social Watch Philippines

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