Oct. 12 (Bloomberg) -- Philippine President Benigno Aquino unveiled a 72 billion-peso ($1.7 billion) stimulus package of public works and poverty reduction projects as a weakening global economy forced the country to cut growth forecasts.
The additional spending authorized between now and the end of the year includes a support fund for local governments of at least 6.5 billion pesos for infrastructure development and poverty alleviation, Aquino said in a speech in Manila today. Economic officials cut their 2011 growth forecast to a range of 4.5 percent to 5.5 percent, from 5 percent to 6 percent.
“We want to put ourselves in a position to grow faster when the world recovers,” Finance Secretary Cesar Purisima told reporters today. “When markets abroad weaken, no economy will be unaffected. The only question is how much growth will be affected and what we’re doing is to help counter the slowdown.”
The Philippines became the first Asian nation outside Japan to announce a stimulus plan this year to bolster slowing growth, with neighboring Indonesia choosing to cut interest rates yesterday while others including Malaysia and South Korea have refrained from further monetary tightening. The spending package will use funds from other projects that are behind schedule, the government said, enabling it to trim its budget deficit forecast.
“This is a positive movement for the domestic economy especially if the central bank wants to remain on hold for the rest of the year,” said Betty Rui Wang, a Hong Kong-based economist at Standard Chartered Plc. “But the current package is quite small. I doubt whether the impact will be substantial.”
The Philippine Stock Exchange Index rose 0.3 percent today to the highest level since Sept. 21. The measure is down 1.9 percent this year as Europe’s deepening debt crisis and a struggling U.S. expansion prompted investors to sell emerging- market assets. The peso, which had its worst monthly loss since May 2010 in September, rose less than 0.1 percent at the close of trading in Manila, according to Tullett Prebon Plc.
“If the fiscal stimulus does its job, this should give the necessary push to keep our economic growth in a solid upward trajectory,” central bank Governor Amando Tetangco said today. The Philippines has sufficient liquidity, a stable exchange rate and a “manageable” inflation outlook along with “fiscal space” to help support economic growth, he said in an e-mail reply to questions.
Growth in the $200 billion economy may range from 5 percent to 6 percent in 2012, compared with a previous forecast of 5.5 percent to 6.5 percent, Economic Planning Secretary Cayetano Paderanga said today. Growth this year would have missed even today’s lower forecasts without the stimulus package, the government said.
The Southeast Asian nation will accelerate a plan to upgrade railways in Manila, build low-cost housing, and repair roads and bridges damaged by typhoons, Budget Secretary Butch Abad told reporters today in Manila after presenting the new economic targets to lawmakers.
Still, the government narrowed its budget deficit target for this year to 2.6 percent of gross domestic product, or about 260.6 billion pesos, from a previous goal of 3 percent, or about 300 billion pesos, Purisima said. Officials kept the goal for 2012 at 2.6 percent of GDP or about 286 billion pesos, he said.
Aquino’s government had a budget surplus in August, helping narrow the eight-month shortfall to 34.5 billion pesos from 228.1 billion pesos in the same period in 2010. It lowered its spending plan for this year to 1.62 trillion pesos from 1.71 trillion pesos previously because of project delays and savings on debt payments, Abad said today.
The Philippines scaled down a plan to offer 10 projects this year to investors under the so-called public-private partnership, with the government planning to provide at least two projects this quarter, Cosette Canilao, executive director at the Public-Private Partnership Center, said last week.
Economic officials also slashed export and import growth targets for this year and next, while keeping the inflation targets and exchange-rate assumptions, Abad said.
Bangko Sentral ng Pilipinas will consider global developments, including Indonesia’s rate cut and the slump in Philippine exports in next week’s policy meeting, Tetangco said.
“In most jurisdictions, inflation seems to have become less of a pressing concern,” he said. “The weakness in advanced economies is seen to weigh more on emerging economies than previously anticipated.”
Philippine exports slid the most since 2009 in August, falling 15.1 percent from a year earlier, a report showed yesterday. Economic growth slowed for a fourth straight quarter to 3.4 percent in the three months through June.
--With assistance from Max Estayo, Joel Guinto and Cecilia Yap in Manila. Editors: Stephanie Phang, Clarissa Batino
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