Press Release
August 8, 2011


Senator Edgardo J. Angara warned against focusing too much on deficit reduction at the expense of making much needed investments to raise the country's competitiveness and standards of living.

"I support the budget in terms of its goal of reducing poverty, but disagree with the policy tools and instruments proposed to address them," said Angara at the Development Budget Coordination Committee (DBCC) hearing today.

The government proposes to lower the deficit from 3.9 percent to 2 percent of gross domestic product (GDP).

Angara, vice-chair of the Senate Committee on Finance, stressed that government must instead redirect its efforts towards expanding the capital market and strengthening the financial system.

Citing studies by multilateral institutions, Angara pointed out that 1 percent deficit spending, when put into infrastructure and human capital development, will increase GDP growth by .0161 percent.

Furthermore, a 1 percent increase in GDP will boost employment by a corresponding 0.76 percent.

On the other hand, a 1 percent reduction in GDP will cause poverty incidence to rise by 1.35 percent.

"If we are serious about reducing poverty, we need to create jobs and improve infrastructure, two of the government's weakness," said Angara. "Yes, deficit spending could be detrimental in some cases, but it is a good way to stimulate economy when necessary."

He said that the government must focus on sustaining a 7 percent rate of growth to ensure that the benefits of progress will trickle down to all segments of the population.

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