Press Releases

Salceda Statement on the Reduced World Bank GDP Growth Forecast for the Philippines

June 9th, 2021

What matters to us policymakers when faced with an adverse forecast is what we can do to prevent it from fully materializing. The forecast certainly has some standing. Long but half-hearted quarantines still appear to be the knee-jerk reaction among some local governments. I personally would have preferred early and very hard lockdowns in an efficient manner, so we can limit the scale of the problem in the first place.

The Senate and the Executive are also not yet fully on board with a large-scale infusion of household income support as envisioned in Bayanihan 3. This could spur consumption if we pass it.

Another thing to consider: there are some emerging threats. The US is about to increase interest rates, and this could have adverse effects on our foreign borrowing program. Fortunately, the economic managers have sufficiently diversified our borrowing across various currencies, so the impact on overall debt servicing costs should be limited. As we resume imports (especially of capital goods) to fuel recovery, this may also have some minor limiting effects on overall capital formation. Capital outflows are also a possibility with rising US interest rates, although I see that happening more in China than in the ASEAN.

Another emerging threat is regional competition. Vietnam has done very well in making the best of a very bad global situation. For the first time in modern history, the average Vietnamese is now richer than the average Filipino. We should stay the course of trade and investment liberalization to create new industries. We should also invest in value-adding research and development to optimize the multipliers of these new industries.

In the meantime, the lowest hanging fruit is the full implementation of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which I principally authored. I appeal to the inter-agency group crafting the rules to set aside their differences and come up with a procedure that investors could follow as soon as possible.

I expect to continue working with the economic manager to ensure that we can prevent this lackluster forecast from materializing. Growth lifts people out of poverty; growth delayed is poverty sustained.

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