FITCH RATINGS: AQUINO MUST SUPPORT OUTGOING

PRESIDENT'S ECONOMIC PLANS

MANILA , JUNE 30, 2010 (GMANews-TV) JESSE EDEP, GMANews.TV - Aquino

needs to manage deficit or lose credibility.
There are a few things President-elect Benigno Aquino III must think of before
breakfast if the Philippines is to recapture anything like the economic potential it once
seemed to hold when it was bracketed with Japan.
Aquino, for one, needs to think of how to fix the nation’s fiscal purse. His focus on this
pressing reality is a must, because a government with a coffer in negative territory will
not be able to fund growth and spend on infrastructure and other projects to stimulate
the economy.
Fitch Ratings said Aquino must support the administration of outgoing President
Gloria Macapagal-Arroyo's plan to increase spending and raise more revenue this year,
as the nation seeks to continue its recovery from last year’s global economic slump.
Should the government spend extra revenues effectively, it could push the economy’s
long-term growth in a way that could “lead to a sustainable rise in incomes and higher
ratings in the future," said the New York- and London-based global rating agency that
supplies the world credit market with independent and prospective opinions, research,
and data on credit.
The government has raised this year’s spending budget for public works, salaries and
debt payments to a record P1.62 trillion from a previous forecast of P1.58 trillion.
Revenue, including gains from the sale and lease of assets, may climb to P1.3 trillion
compared with an earlier estimate of P1.28 trillion.
Stand on taxes
“We’re still cautious about [this] deficit, especially with the stand of the new
administration not to impose new taxes," said Michael Joseph Delfino, Metropolitan
Bank & Trust Co.’s head of fixed-income trading of local-currency debt.
Policy makers predict the budget shortfall to be little changed at P297.2 billion this year
from a record P298.5 billion in 2009. That is more than the P293.2-billion gap forecast
earlier.
According to government forecast, this year’s budget gap is estimated at 3.6 percent of
gross domestic product (GDP) from 3.9 percent last year. Fitch expects the deficit will
be 4 percent of GDP, excluding asset sales. A widening budget gap means less
government spending on social services and infrastructure.
The government may opt to borrow more to fund its shortfall to maintain the delivery of
its services. This could push interest rates higher that roughly translates into higher cost
of doing business.
For Juan de la Cruz, this could mean some adjustments in the cost of living and a
salary increase may be hard to get.
“Aquino’s biggest challenge is how to manage the deficit," said Steve Sevidal, who
helps manage $880 million at United Coconut Planters Bank.
Put under question.