Press Release
November 24, 2008

Investment-based reforms to spur growth -- Loren

Senator Loren Legarda yesterday said the government should stimulate the economy by adopting long-term measures and instituting investment-based reforms that will give the country enough buffer during hard times.

Legarda made the statement in reaction to the Philippine economists' warnings on the grim prospects facing the country's economy owing to the prevailing conditions in other big countries.

"If the economy of big countries like the United States is vulnerable, the likeliness of our very own economy contracting too should make our economic managers realize the urgency of instituting reforms," Loren said, citing the reported 0.3 percent contraction in the US GDP.

While the world's biggest economy has reported contraction in its GDP, RP's economists have somehow brought some good tidings following their projections of 2-to-3 percent GDP growth next year.

But the per capita GDP growth rate, according to University of the Philippines economist Benjamin Diokno, may be for naught because of the country's 2 to 3 percent growth in population.

However, some businessmen had aired the possibility that recession may also hit the Philippines in 2009.

Recession refers to a contraction of GDP over two consecutive quarters.

"People would on average be getting poorer each year, even though the overall economy is growing," Loren said. "That is why the government should act now."

The per capita GDP rate is especially important as it indicates the actual increase in average income being experienced by the people of the country.

If a country had a 2-3% GDP growth rate, but also a 2-3% population growth rate, its per capita GDP would actually be stagnant or might even fall, Loren said.

"Investments in much-needed infrastructure to generate jobs, and in agriculture to increase food production would do well to slow down the looming recession," Loren said.

Loren, who had earlier said focus must be on micro, small and medium enterprises (MSMEs), explained that by increasing the investments in infrastructure, agriculture, education and health, thousands of jobs would be generated to cushion the impact of the expected massive layoffs predicted by the Makati Business Club (MBC).

Loren also said the government must improve its revenue collection without necessarily imposing new taxes.

"Imposing new taxes to fund its expenditures would further drive down consumer spending," Loren said, adding that the US economy's contraction was attributed to the 8.7 percent decline in American's consumers' spending.

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