PGMA: Flourishing RP economy due to tough fiscal reforms
Manila (17 April) -- A flourish of fresh and favorable outlooks on the Philippine economy marked by lower interest and inflation rates has resulted in renewed investor confidence and a stronger peso, President Gloria Macapagal-Arroyo said today.
In a roundtable discussion with National Economic and Development Authority (NEDA) Director General Romulo Neri, one of her most trusted economic managers, the President said this flourish was brought about by the "tough decisions" to implement radical fiscal reforms, most notably the Expanded Value Added Tax (E-VAT) Law.
The EVAT Law increased the rate of VAT imposed on goods and services from the previous 10 percent to 12 percent.
It also imposed VAT on other high impact luxury and previously VAT-exempt goods such as fuel and Sport Utility Vehicles, more commonly known as SUVs.
Because of the E-VAT Law, the President said, the government was able to raise important cash resources that were used to fund vital infrastructure, health and education projects without the need of external borrowing from financial institutions.
The government was also able to provide "soft loans" to Filipino entrepreneurs who availed themselves of the grants given to small and medium enterprises (SMEs) to put up their own businesses.
All these activities did not go unnoticed as the International Monetary Fund (IMF) forecast recently that the Philippines' economic growth would be "higher than average" among its neighboring countries.
Even the World Bank, in its twice-a-year Philippine economic monitor report, had predicted three consecutive years of economic growth, a first for the country and the region since 1970.
Neri pointed out that because of these positive indicators, investor confidence on the country had picked up.
He reported that for the first quarter of 2007, the Board of Investments had recorded a 51 percent increase in foreign investments, resulting in a P28-billion influx of fresh investments.
He said these investments were mainly concentrated in the areas of the electronics sector, call centers and hotels and resorts.
He added that the lending activities of banks have increased by 10 percent due to the low interest rates on their loans, making it palatable to the prospective borrowers and investors.
Furthermore, inflation is at its lowest in 10 years at 2.2 percent, making borrowing from banks more appealing, according to Neri.
This trend in borrowing, he said, will translate to more jobs as more entrepreneurs put up their own businesses.
The President thanked the SMEs and encouraged those planning to put up their own business to partake of the flourishing economy.
"Ako'y nagpapasalamat sa mga nagpo-produce ng kayamanan ng ating bansa, maging large, medium, small or micro-enterprise, yung mga nagtra-trabaho, yung mga naglilingkod sa taong bayan," she said. (PIA-MMIO) [top]