Looking Ahead: Poll spending to boost economy

MANILA, Philippines – In the wake of a global economic crisis that brought the Philippines to its knees, the country is one with the world in looking forward to a recovery in 2010.

And the year’s main event—the national elections—can’t come at a better time.

Economists expect election spending to stimulate economic growth this year, after the country nearly slipped into recession in 2009.

However, they said the impact will be minimal and unsustainable.

Contribution to GDP

In the run up to the elections, more money will move around the economy as politicians spend billions of pesos in donations to make themselves and their platforms known to public.

Dennis Arroyo, head of policy planning at the National Economic and Development Authority (NEDA), had reported that the previous elections added about 0.34 percentage points to Philippine gross domestic product (GDP).

He and the rest of the country’s economic managers expect the figure to be much higher this time around.

To be exact, Finance Undersecretary Gil Beltran as well as Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco said election spending could contribute as much as 0.5 percentage points to GDP in 2010.

“Elections increase consumer spending,” Beltran said.

But Tetangco, on the other hand, noted that this positive effect could be minimal and temporary, tempered by the prolonged effects of the economic crisis and the devastation caused by back-to-back typhoons that hit the country recently.

Nevertheless, they were optimistic the Philippines would post a recovery this election year.

The country is expected to grow 2.6-3.6% in 2010, from a projected growth of 0.8% in 2009, according to NEDA.

Businesses like consumer goods, publishing and printing, media and public relations are expected to benefit a lot from this year’s poll spending.

Effect on inflation

Tetangco said elections won’t have a lasting impact on inflation too.

“Elections do not have a lasting impact on inflation,” he told reporters earlier. “If you look at the curve, there would be a slight increase then it evens out over a short period.”

This is because, he said, election spending does not really bring new money into the financial system.

“The money is already in the system, so this is just a case of redistributing the funds and redeploying the funds within the system,” he noted.

For 2010, the BSP has projected average inflation to grow to 3.5-5.5% from 2.5-4.5% in 2009.

“Inflationary pressures are expected to be dampened by soft global commodity prices owing to the severe economic slowdown and continued lack of demand-pull pressures,” the central bank explained.

Tax take

Another thing this year’s elections would boost is government tax collection.

The Bureau of Internal Revenue (BIR), the country’s main tax agency, previously issued Revenue Regulation 8-09, slapping a 5% withholding tax on all political contributions and campaign expenditures this year.

All candidates, political parties, and contributors have been required to register with the agency as withholding agents.

The BIR—whose tax take dwindled due to several factors, including slower economic growth, revenue-eroding laws, and the negative impact of typhoons—has been under a lot of pressure to meet its collection targets. The presidential election is just one of the things it had set its sights on to shore up collections.

The BIR said it was eyeing to raise P1 billion to P1.4 billion in taxes from election campaign expenditures. –Judith Balea, abs-cbnNEWS.com with reports from ANC, The Philippine Star