Philippines posts biggest deficit since 2004
Updated
The Philippines government is the latest to expand its budget deficit and cut its forecast for economic growth. In an effort to avoid the recession that has gripped other Asian economies, the government will post its biggest deficit since 2004 as it increases spending.
Presenter: Karon Snowdon, Finance Correspondent
Speakers: Peter Wallace, president, Wallace Business Forum
SNOWDON: At first blush the Philippine economy looks in quite good shape compared to others in Asia.
Hong Kong's Finance Secretary says the economy will shrink by 2 to 3 per cent this year - its first annual recession in a decade.
Hong Kong and Indonesia are the latest governments to announce stimulus packages.
Japan, Singapore and Taiwan are all in recession and Japan has just had more bad news.
Its trade deficit ballooned to ten billion US dollars in January as exports plunged 46 per cent from a year earlier.
The Philippines relies less on exports and that's what has sheltered its economy - at least until now, says Peter Wallace, President of Wallace Business Forum.
WALLACE: What we really have is an economy that is not particularly well connected into the world, so exports for example are only about 30 to 35 per cent of total GDP, unlike in Singapore where it's 100 per cent.
SNOWDON: So is the domestic economy going to be strong enough to see the Philippines through the worst of the global recession do you think?
WALLACE: I think that's too hard to say yet, you know I think everybody's grasping at the moment for what really is the impact everywhere, and the news seems to be coming out worse and worse almost every day. I think we've still got the momentum if you like of this crisis to impact on the Philippines.
SNOWDON: In an effort to ward off the impact the Philippines government has announced its intention to carry a budget deficit almost three times the size of last year's which stood at one-point four billion dollars.
The 2009 target is now about 3.7 billion US dollars or just over two per cent of GDP.
As the economy cools further the government hopes its spending on infrastructure will keep it from freezing altogether.
One of the unknowns is how many jobs of Filipino workers overseas will be cut - how many might have to return home and how big the loss of their remittances will be.
The government is clinging to the hope that economic growth this year will reach more than four per cent.
At his most pessimistic Peter Wallace believes it could fall to as low as two per cent, with dire consequences.
WALLACE: What we have here unfortunately is a very unequal economy; the poor see no real benefit out of the growth in GDP, that affects if you like the middle class and rich more than the poor (who) remain poor. They have seen no real improvement and we haven't had much of a shift with them into jobs etcetera, so the unemployment rate has stayed pretty much the same.
SNOWDON: So will government spending target the right areas
WALLACE: The main thing is, will those funds be properly utilised to stimulate the economy, to get the economy moving, and in particular to create jobs for those people without one. It's too early to say yet, the President has said that is her intention and that's certainly what government would tend to do, but as we've seen here quite often intention doesn't always result in effective action.
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