Govt cuts back stimulus fund by a third to P100b

THE government has earmarked P100 billion for stimulus spending this year, only about a third of what it spent last year, as it struggles to trim its fiscal deficit estimated at P293 billion.

Finance Secretary Margarito Teves said the stimulus fund would be spent on telecommunications, power, airports and water projects.

Last year, the government spent about P330 billion to pump-prime the economy amid the global economic slowdown.

The special spending package, already part of this year’s budget, is meant to ensure the economy grows by as much as 3.6 percent this year from 0.9 percent last year.

The economy would probably grow between 2 and 3 percent in the third quarter, helped by a rebound in exports and election-related spending, Economic Planning Secretary Augusto Santos said.

The government did not have plans “as of now” to cut its full-year growth target as the losses due to the Niño dry weather would likely be offset by gains in other sectors, Santos said.

He agreed with the Bangko Sentral’s monetary policy stance of keeping interest rates stable.

“This is a signal to the market that we don’t sacrifice economic growth,” he said.

Santos’ optimism jibes with the prediction by the International Monetary Fund that emerging Asia, including China and India, is expected to grow at more than twice the pace of the global economy this year.

The economy of “the world’s most dynamic region” would expand by about 8.5 percent in 2010, IMF First Deputy Managing Director Lipsky said Monday in a speech in Hanoi. The world economy was forecast to “bounce back” to growth of about 4 percent in 2010 and 4.25 percent in 2011, he said.

“Asia is benefiting from this rebound, while at the same time helping to lead the way to stronger global growth,” Lipsky said.

“A great challenge is to ensure that all Asians benefit from the region’s dynamism, and to insure that rising prosperity reaches as many of the region’s citizens as possible.”

Asia is leading a global recovery from the worst slowdown since World War II, prompting the region’s central banks to start removing some emergency steps taken to counter the slump. Policy makers in China, India and Vietnam have tightened monetary conditions amid signs that accelerating growth is fueling inflation and increasing the risk of asset bubbles.

“China cushioned an export collapse with strong domestic demand, lifting credit constraints and implementing an exceptionally large fiscal stimulus,” Lipsky said, explaining the region’s performance.

“Others reaped rewards from China’s stimulus, including those relying on commodity and capital goods exports.” –Elaine R. Alanguilan with Bloomberg