Sunday, July 08, 2012

How Did RP Managed To Escape The Global Recession?


I came across a very informative article of former NEDA chief Cielito Habito Where Did the Growth Come From?”, discussing the very current debacle of global recession and how the Philippines have somehow found a way to snuggle away from it, insulating itself from it effectively and even posting growth figures as opposed to other contracting economies worldwide. This situation had even gained the Philippines some notable commendations from veritable financial institutions abroad.



However, Mr. Habito pointed out mainly to ‘government spending’ as the main and only instigator of such growth, increasing demand through construction activities thereby allowing job generation as such. In fact, significant sectors like agriculture and manufacturing had contracted or decreased.



This tells us how fragile is the basis of our economic growth even to the extent of artificiality, when purely government spending is mostly depended on and none much else. As Mr. Habito had pointed out, increased government spending means increased government debt and this is not a good situation at all.



Somehow, this kind of strategy is deemed commendable as even America implements the so-called stimulus fund to augur in public consumption, in order to enthuse market activities. It was smart maneuvering on the part of our government.



Although in simpler mathematics, it would still be a negative. How long can we lift up the economy using artificial means and planned intervention?



Public consumption aside from those generated by government spending should be instigated by all means.



Mr. Habito views the housing sector to be one good area where government should focus on as it has that multiplier effect of generating more jobs (being labor intensive) and encouraging increased manufacturing activities.

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