I came across a very informative article of former NEDA chief Cielito Habito “Where Did the Growth Come From?”, discussing the very current debacle of global recession and how the Philippines have somehow found a way to snuggle away from it, insulating itself from it effectively and even posting growth figures as opposed to other contracting economies worldwide. This situation had even gained the Philippines some notable commendations from veritable financial institutions abroad.
However, Mr. Habito pointed out mainly to 'government spending' as the main and only instigator of such growth, increasing demand through construction activities thereby allowing job generation as such. In fact, significant sectors like agriculture and manufacturing had contracted or decreased.
This tells us how fragile is the basis of our economic growth even to the extent of artificiality, when purely government spending is mostly depended on and none much else. As Mr. Habito had pointed out, increased government spending means increased government debt and this is not a good situation at all.
Somehow, this kind of strategy is deemed commendable as even America implements the so-called stimulus fund to augur in public consumption, in order to enthuse market activities. It was smart maneuvering on the part of our government.
Although in simpler mathematics, it would still be a negative. How long can we lift up the economy using artificial means and planned intervention?
Public consumption aside from those generated by government spending should be instigated by all means.
Mr. Habito views the housing sector to be one good area where government should focus on as it has that multiplier effect of generating more jobs (being labor intensive) and encouraging increased manufacturing activities.
curacha says; September 26, 2009 @ 2:49 am
has Philippines really escaped global crisis? could it be that we are already immune with the crisis that any other crisis wouldn't affect us anymore?
bw says; September 26, 2009 @ 10:35 pm
Stimulus plans are a necessary stop gap measure to revive and stimulate the economy but it could have dire consequences in future if not managed prudently because it is really nothing more than deficit spending. The country's deficit balloons to avert the impending threat of economic catastrophe therefore plans to fight the deficit and the consequential by-product of inflation must be in place and rigorously followed if the country were to turn around economically when the stimulus spending is over and done with.
India escaped the recession because it has a very strong local economy. In the case of Pinas the fall in agricultural production is a cause of concern.
Major Tom says; September 28, 2009 @ 10:49 pm
To Curacha: That is the main query sis, if in fact we had been that sturdy to weather the global financial crisis. We are in fact among the fewest to ever still post a positive growth despite of it all.
Now it turns out that our growth is not that absolute and lies on government intervention.
Yet, it couldn't be denied that strong remittances from abroad has mostly kept us afloat.
At the most, it's an 'either' or 'scenario'.
Major Tom says; September 28, 2009 @ 10:53 pm
To BW : Exactly bro, if government spending should be effective in the long term, then it should start stimulating public consumption and consumer spending for otherwise, if it'll be so prolonged and overextended, interest rates might go up sharply and high inflation ensues.