Editorial

Tinkering with targets

The Philippines is set to come up shortly with revised targets for the year that will set the direction of the economy. The new targets, in sum, give the clearest indication of how the economy will fare amid the global recession and broadly spell out a plan to preserve growth, if this is still possible.

The new estimates on inflation, budget deficit, interest rates, foreign exchange rate, balance of payments and commodity prices, including crude oil, will also tell companies, employers and workers as well what to expect in the coming months and, possibly, how to respond from them.

The Cabinet body Development Budget Coordinating Committee will finalize and endorse the new economic targets to President Arroyo tomorrow for her official approval. So far, the DBCC has agreed to raise the budget deficit ceiling this year to around P160 billion, from the original target of P102 billion. The bigger deficit implies pump-priming from the government and more borrowings to finance infrastructure projects.

The International Monetary Fund, meanwhile, has also been revising relevant Philippine economic targets due to developments in the international front. The 40-percent fall in Philippine exports in December, for one, suggests a slowing domestic economy and has implications on the exchange rate and employment.

The Fund recently revised its balance of payments deficit target for 2009 to $500 million from $800 million because of lower commodity (rice and oil) prices. It also earlier projected a 2.9-percent growth in the Philippine gross domestic product in January but lowered the target just this month to 2.25 percent.

“It is important to keep in mind that we live in very challenging times and these forecasts are updated much more frequently than before,” says IMF resident representative to the Philippines Dennis Botman.

“Despite the strong headwinds, the current account balance is expected to remain in surplus and remittances are projected to increase although at a markedly slower rate than in the past. Gross international reserves will be stable and the exchange rate is assessed to be broadly stable,” adds Botman.

IMF’s statements are reassuring to the Philippines amid the deep recession being experienced by Japan, Singapore and other major economies. But uncertainty in the local economy still lingers, especially with growth of remittances from migrant Filipino workers slowing down. The new economic targets, hopefully, will try to address some of these uncertainties.