MAR SAYS 2006 ECONOMIC GROWTH FORECAST IS TOO HIGH

Senator Mar Roxas yesterday said government economic managers may need to rethink their economic growth target for this year, saying the projected 5.7 to 6.3 percent growth in gross domestic product (GDP) is too optimistic.

The positive forecasts are based on too much ifs. If agriculture is not adversely affected by La Nia, if demand for electronics increases, if mining growth isn't stymied by environmental concerns and so on. These are just too many ifs to give us confidence in these projections, Roxas pointed out.

Roxas, chairman of the Senate Committee on Economic Affairs, said the National Economic Development Authority has pegged the growth forecasts on the conditions that agriculture will not be affected adversely by La Nia, growth in mining will not be stymied by environmental concerns, and demand for electronics will increase.

The government should be more realistic with its economic forecasts. It should be cautious in presenting a rosy picture as it will heighten public expectations. Failure to deliver will only lead to disappointment and discontent, Roxas said. Government projections also have a tremendous impact on the financial sector.

Roxas, pointed out that economic growth forecast by the National Economic Development Authority is way above the projections by economists, analysts, and other organizations, such as the Asian Development Bank that is expecting only a 4.8 percent growth for this year.

He said that the 20 percent increase (NOT 2% increase; if you want to use 2, say two percentage point increase) in the expanded in the Expanded Value Added Tax starting today (Feb 1) will exert a downward pressure on the countrys GDP by contracting personal consumption.

He also said the NEDA forecast did not include the possible impact of the Catholic Bishops Conference of the Philippines objections to the mining law, saying protests and social mobilizations in local communities may hamper the governments projected boom in mining.

The growth target is a little bit on the high side. This can only be attained if the so-called economic drivers as presented by the NEDA will perform as expected, Roxas said.

According to Roxas, the NEDA had to revise and lower its 2005 GDP growth forecast to 5.3% because of the increasing world oil prices, political uncertainties, and slow agricultural growth.

Roxas downplayed the governments analysis that collections from VAT will be the economic growth propellant for this year. The government said that it will use P23 billion from VAT collections to develop infrastructures in order to boost the domestic economy.

It will not be the number one economic driver. How can P23 billion drive a P5-trillion economy? There will be an impact, but it will be very minimal, he said.

Roxas called on the government to be prudent in spending the additional revenues from the imposition of the E-VAT. The government is expected to raise P156.82 billion from VAT collections this year.

The additional revenues from EVAT collections should be invested in growth enhancing and socially responsible activities such as infrastructure, education, and basic social services, he said.