RP to enter 'mild' recession by Q2- Joey Salceda

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abs-cbnNEWS.com | 06/08/2009 

Albay Gov. Joey Salceda on Monday said he expects the Philippines to enter into a mild recession as early as the second quarter this year, which can only be countervailed by pump-priming the economy through increased spending. 

Salceda, an economic adviser to President Arroyo, said he expects the country to go into recession in the second quarter after gross domestic product reached a two-decade low of 0.4 percent in the first quarter. The GDP grew by 3.9 percent during the same period a year ago.

"We are experiencing significant downturn that will reach into the next quarter. My estimate is that, even including 60 percent increase in public construction, 1.4 percent in services, two percent in agriculture on the supply side, we will only reach 0.92 percent [GDP growth] in the second quarter," the governor told ANC television.

"Theoretically, in the Philippine definition of a recession, we will enter into a recession."

Salceda said the Philippines has technically entered into a recession when GDP drops below the population growth rate of 1.92 percent for two consecutive quarters. 

The Albay governor said the government should seriously consider his proposal to approve a P100-billion stimulus package for scholarships, health care, mass housing, and tax rebates for the middle class to boost the economy. 

He said one problem affecting the economic climate is that personal consumption and expenditures is at an all-time low of 0.8 percent in the first three months. 

"That is the source of the weakness. PCE is very weak. The money is going to the middle class but they are not spending it, they are saving it. On the other hand, the poor always have basic needs so if you give them money, the economy will run. Anything for the poor at this point or stage of the economic cycle is good economic policy. But then you can target it so dole it out through conditional cash transfers," he said. 

"I'll define it by extremes. Find a helicopter and drop the money in Tondo or Payatas where all the poor families are. I think that is the best way to do a stimulus." 

He said his proposed stimulus plan includes increasing government allocations to conditional cash transfers to poor families from P10 billion to P35 billion from P10 billion and increasing tax rebates to middle class earners. 

He also proposed that tax filers be given cash vouchers worth P7,000 in major department stores "so they will be forced to spend." 

Condone agri loans

Salceda said the government should boost college scholarships and Technical Education and Skills Development Authority benefits from P3 billion to P15 billion. He noted that at least 52 percent of jobless Filipinos in the country are ages 15 to 24. 

"Why would they be looking for jobs when they should be in school? So keeping them in school would be better, it will make more sense," he said. 

He also said the government should condone  P42 billion in unpaid agricultural loans and continue to give out land to landless farmers. He noted that from 1972-2007, only 18 percent of total agrarian liabilities have been paid. 

"There are 4.2 million hectares of arable land that have been mortgaged to the Landbank. Those are just frozen assets. We need to liquefy it and inject real assets into the rural property market," he said.

Con-Ass to affect economy

He also warned that a House of Representatives initiative to change the Charter though constituent assembly would have a contractionary impact on the economy and spook local businessmen. 

"Consumers aren't spending and now you want to affect the businessmen? Usually elections are a source of uncertainty and now you want to make the elections uncertain? It's a double whammy. I think we would be better off without those discussions. If we could just shelve it and archive it...because the economy is realy teetering on a recession, so we need to focus on it," he said. 

He said, however, that one silver lining in the current Cha-cha talks is the five-year extension granted by Congress to the government's Comprehensive Agrarian Reform Program. 

Salceda said the government could readily absorb 3.2 to 3.4 percent GDP deficit in the next three years without any repercussions. He said government should consider launching a "preemptive strike" on the recession before the economy sinks further. 

"We need to jolt the economy before it plunges into recession. We are already on the brink. We need a preemptive strike on the recession," he said.