ROXAS: INTEREST RATE HIKE WILL COST PEOPLE THEIR JOBS
1ST HALF 2008 GDP MARKED WITH 200,000 JOB LOSS, GOVT UNDERSPENDING

Liberal President Senator Mar Roxas warned the government against blindly raising interest rates in an attempt to counter high inflation, saying this will only lead to more jobless people and lead to further weakening of the economy.

"We know that the BSP's policy and role is to respond to inflation by adjusting interest rates. But the situation now calls for a rethinking of this policy, not the blind application of the same, because it will lead to more jobs lost," he said.

"Sa pagtaas ng interest rates, sinasakal ng pamahalaan ang kabuhayan ng masa, mas maraming masa ang mawawalan ng trabaho at lalong hihina ang ating ekonomiya," he said.

He said the government must use its annual budget of more than a trillion pesos in spending on employment-generating infrastructure and maintenance projects and food-for-work programs, instead of constricting further incomes of the people.

"Kaya nga talagang nakapagtataka kung bakit sa loob ng kalahating taon ay mahigit P300 bilyon pa lamang ang ginagastos ng gobyerno gayu'ng dapat at gumastos na sila ng P600 bilyon. Hindi natin nararamdaman ang epekto ng budget ng gobyerno. Tingi-tingi na nga, bungi-bungi pa ang paraan ng kanilang paggasta," he said.

Roxas said that the economic growth recorded in the first two quarters of this year is not only slower growth but "jobless growth", reflecting poor government responses to oil and rice supply shocks, including government underspending despite these shocks. And increasing interest rates at this time will further depress demand, in particular, on domestic investment, housing and durable goods.

GDP in the second quarter of this year has decelerated to 4.6%, from 8.3% recorded in the second quarter of last year: a far cry from government's own targets. Roxas also stressed that the absolute number of jobs decreased from 33.7 million in April last year to 33.54 million in April this year, which is already an improvement, as almost half a million jobs were lost from January 2007 to January 2008.

"Instead of creating more jobs--a million per year, as promised--roughly 200,000 Filipinos lost theirs in the span of a year," he said.

"Inflation is high not because of increased economic activity, but because of external supply-side shocks especially on food and oil. To hike interest rates now will not 'cool down' an overheating economy but will further choke a fatigued economy," he said.

"If we hike interest rates now, we will just be depriving cash-strapped small farmers, small businesses and households who are dependent on affordable credit for their survival. Domestic investment will be choked because of the high credit cost environment, and more jobs will be taken away," he said.