P360B for subsidies urged

MANILA, Philippines - A switch to long-term and incremental spending from a "one-time" stimulus will be key for the Philippines to ride out the crisis, a Palace economic adviser Tuesday said. The government, said Albay governor Jose "Joey" C. Salceda, should shell out some P10 billion every month for the next three years, funding conditional cash transfers (CCTs), scholarships, and training programs, to complement infrastructure outlays as the economic crisis deepens. This would require sourcing P360 billion in funds and would be separate from the P330-billion fiscal stimulus planned by the government, Mr. Salceda said. Government economic managers were not immediately available for comment, but changes to official targets and assumptions, including a higher deficit due to the need to spend, are expected to be announced Wednesday. "At first, we were only looking at a short and sharp recession, so we wanted to reverse the downward spiral with a spending jolt. But now, we know that this will be a sharper, slower and more prolonged recession," the former stockbroker, legislator, and Cabinet official told an economic forum Tuesday. Of the government’s planned P330-billion fiscal stimulus, he said less than half of this comprise new spending, with the bulk of planned expenditure already incorporated in the budget. The latter includes some P30 billion in social benefits coursed through the government and private sector pension funds and over P100 billion for infrastructure spending which has to be spent, crisis or not. Mr. Salceda proposed a "social stimulus," wherein the government would spend about P10 billion every month for the next three years, focused on CCTs, healthcare, and educational services. The added outlay will balloon the budget deficit to 3.2% of gross domestic product and also likely curb growth, he said. These disadvantages, however, will be offset by growth in employment and increased spending power for the public, Mr. Salceda claimed. He said the "social stimulus" should not try to reverse the effects of the economic crisis. Instead, it should prepare the country for the worst effects of the global downturn. The government, he said, needs to make sure that the market corrects itself by letting conglomerates go bankrupt and by letting asset prices reach their bottoms. "Some state actions are simply postponing, delaying and even contradicting the needed market adjustments," he said. "Companies must close and asset prices must collapse before a meaningful recovery can begin." - BusinessWorld