Speech for the Induction of Officers
of the Economic Journalists Association of the Philippines
Socioeconomic Planning Secretary and NEDA Director General Ralph G. Recto
16 February 2009 7:00pm
Petron Cultural Hall, Sen. Gil Puyat Ave., Makati City
A pleasant good evening to everyone. To the real head of the economic team,
Governor Tetangco; Mr. Francisco of Meralco; to the better-looking Recto, my nephew, Eric
Recto; Larry Tampingco of Napocor; Rolly Concepcion; to my uncle, Elpi Cuna—I saw him
earlier, happy birthday too; and a happy valentines to all the ladies in the room.
You know, I was also surprised coming here earlier. Coming out of this building was
a representative of Shell. So I wonder if prices tomorrow will go up.
Officers and members of the Economic Journalists Association of the Philippines,
distinguished guests, good evening.
Let me first thank you for inviting me as the guest of honor for your induction
ceremony this year. Likewise, congratulations to EJAP’s new officers. Our economic
journalists have been helpful through the years in popularizing accurate and timely business
information to the public.
Let me now segue to the most topic of interest, the global economic crisis and how
the Philippines is coping with it. I will discuss measures that we have undertaken to protect
the economy, in particular the Economic Resiliency Plan or ERP.
FALLOUT FROM THE GLOBAL STORM
Japanese Prime Minister Taro Aso has said, ―The world economy is in a once-in-a-hundred years recession.‖ As put by Miguel Angel Fernandez Ordonez, the Governor of the
Bank of Spain, ―The lack of confidence is total… consumers are not consuming, businessmen are not taking on workers, investors are not investing, and the banks are not lending.‖ Last
November in the United States, consumer confidence fell to a 28-year low, spiking
unemployment to a 15-year high --- 3.6 million have lost their jobs and counting. One
American economist has described the labor report as "almost indescribably terrible." China
for its part has shed an estimated 20 million jobs already.
A stagnant world economy has lowered foreign demand, hitting Philippine
merchandise exports. In December, exports contracted by a startling 40 percent. As the
current situation negatively affects consumer confidence, this weakens consumer demand,
which was already dampened by rapid inflation and high oil prices last year. This translated
to a slowdown in financial services, retail trading, transportation and communication. The
dampening effect on investor confidence also delayed some expansion plans and postponed
investment decisions. Capital flight is drying up funds available for investment. Our workers
are vulnerable, particularly those in the exports sector, and overseas Filipinos in the US with
temporary working visas.
Nevertheless, our fundamentals remain strong, and they help explain why the impact of the crisis on the Philippines has been softened.
Let’s begin with the financial sector. The Asian Crisis of 1997 was a blessing of sorts,
for it led to reforms that have made our financial system more resilient. The banking system
has remained adequately capitalized: its capital adequacy ratio of 15 percent is well over the
BSP’s minimum of 10 percent and the global standard of 8 percent.
Our banks have not bitten into the temptation of fancy but shady instruments that were the rotten core of the Wall Street meltdown. For example, our banks’ exposure to
Lehman Brothers was not even 1 percent of their total assets. Asset reforms have led to a
continuing drop of the ratio of non-performing loans. The NPL ratio, once at 18 percent, is
now down to less than 4 percent, or at pre-Asian crisis levels.
Amid the global credit crunch, healthy lending continues, unlike in the most industrialized countries. Bank lending net of banks’ reverse repurchase (RRP) placements
with the BSP, grew by 21.3 percent, and outstanding loans of commercial banks including
RRPs, increased in November by 22.9 percent. Loans for production activities continued to
rise by 18.4 percent. Lending to almost all sectors has increased.
Remittances of overseas Filipinos coursed through banks reached a little less than US$17 billion in 2008. This is roughly 15 percent higher than the level recorded for the same
period a year before. This is above the original 10 percent growth target. Note that Filipinos
in the US hardly work in the hardest hit financial and construction sectors. They are often
found in sectors that are least sensitive to recession. They work as teachers, caregivers, nurses,
doctors, engineers – professions that are last to be fired because of the shortages there. In the
Middle East there is still a big demand for engineers, architects, interior designers, and
construction workers because of the building boom. And there is new demand from emerging
labor markets like South Australia, New Zealand, and Guam. Not to mention that not only
are Filipinos productive, but they are very loyal workers as well.
An ace up our sleeves is the outsourcing industry, which is seen to post good growth
this year. In a recession it makes sense for American and European firms to outsource their
work to the Philippines, where labor costs are much, much cheaper. We can actually benefit
from the crisis as well.
Despite the global flight from emerging markets, we still have a balance of payments
surplus, and if I’m not mistaken as of January of 2009 it was recorded to be about US$1.7
The country’s gross international reserves (GIR) is now almost US$40 billion – or 4
times the level we had during the Asian crisis.
Inflation has been dropping. In 2008, it averaged 9.3 percent. The Bangko Sentral
says their forecast for 2009 will be less than 4 percent.
The National Government (NG) or NG deficit for January to November 2008 stood at
PhP66.7 billion, still below the 2008 target of PhP75 billion. The primary balance in the first
11 months of the year remained in surplus.
Total external debt fell to US$53.5 billion as of September 2008, down by US$1.3
billion from the end-June level. Likewise, the external debt to GDP ratio posted a significant
drop from 41.2 percent in end-June 2008 to only 32 percent in end-October 2008. Just to
give you an idea from where we came from—in 2004, debt-to-GDP ratio was a 120 percent.
That’s now down to roughly 70 percent. External debt was 70 percent of GDP, and now
down to below 32 percent.
Just to give you a perspective on this as far as debt is concerned, the US total debt
stock today is roughly US$11 trillion with the size of the economy roughly US$14 trillion.
Their contingent liabilities is roughly US$6 trillion and growing as well.
The Philippine economy remained robust as gross domestic product grew by 4.6
percent in 2008, and gross national product even grew by 6.1 percent. In the fourth quarter
last year, the time when the global economic crisis unfolded, we registered a 4.6 percent GDP
growth, faster than the growth of our neighbors such as South Korea (-3.4%), Thailand (-
3.5%), and Singapore (-3.7%).
And as I mentioned earlier, the US has lost 3.6 million jobs, China lost around 20
million jobs. Last year, the Philippines still created a net of 530,000 jobs.
Standard and Poor’s has described the Philippines as an ―Island of Calm‖ because of
these strengths and reforms. Others share that view:
―The Philippines is inherently strong, a potential beneficiary of these financial woes,‖
said the Bank of New York Mellon’s chairman for Asia Pacific, Christopher Sturdy.
―The Philippines is in a relatively strong position to weather the global downturn with
the economy driven by private consumption and services, which are less vulnerable to
external shocks,‖ said JP Morgan.
ECONOMIC RESILIENCY PLAN
We are an island of calm not only because of our strong macroeconomic
fundamentals. We are inherently strong as well because we have done our homework.
We drew up the Philippine Economic Resiliency Plan which pursues the following
1. To ensure sustainable growth and attain the higher end of the growth targets;
2. To save and create as many jobs as possible;
3. To protect the most vulnerable sectors: the poorest of the poor, returning OFWs,
and workers in export industries;
4. To ensure low and stable prices to support consumer spending; and
5. To enhance competitiveness in preparation for the global economic rebound.
Even before the Economic Resiliency Plan, our monetary authorities led by Gov.
Tetangco, have worked to secure our financial institutions. As you all well know, globally
there are only three types of responses to this global financial crisis. The first is monetary,
the second is fiscal and the third is regulatory reform.
The Bangko Sentral has embarked on monetary easing: lowering interest rates to spur
investment and consumption. To ensure the proper functioning of the interbank market and to
guard against credit tightness, the Monetary Board cut the regular reserve requirement on
bank deposits by two percentage points effective November 14.
The Monetary Board slashed BSP’s key policy interest rates to 5.0 percent for the
overnight borrowing facility and 7.0 percent for the overnight lending facility on January 29.
Bangko Sentral believes that with decelerating inflation, there is greater latitude to ease
policy rates. And money supply is growing by roughly 15 percent, and that’s why we have many in the private sector today willing to come out with their bonds—San Miguel, probably
the new owner of this building as well, will be issuing a PhP40 billion note or bond. Not to
mention PLDT, Ayala, Globe, so on and so forth.
On the fiscal front, we have postponed balancing the budget. The 2008 deadline was
moved to 2011. That will give us greater freedom to pump-prime the economy.
We accelerated the implementation of infrastructure projects in the latter half of 2008.
We granted additional tax exemptions under Republic Act 9504, exempting minimum
wage earners from paying income tax and increasing personal exemptions for all employees,
and this will help spur greater consumption.
Under the EVAT law, crafted in 2004, realizing that it is those selling goods and
services who liable to pay the VAT, and not necessarily the consumer, and it the one selling
the good or service who is not a VAT-registered enterprise—there must be light at the end of
the tunnel—and that’s why under that law, corporate income tax for 2009 will be deduced
from 35 percent down to 30 percent. I suppose that is very timely as well.
We are improving revenue collection through better tax administration, too.
Now let us talk about the Economic Resiliency Plan or the ERP. I will discuss a few
fiscal principles, the push for infrastructure, and protecting the vulnerable.
I would call the ERP a responsible fiscal stimulus. Responsible because it realizes that
the Philippines—we don’t have the same foot size like the US. They may afford to have a
deficit of 8 or 10 percent of GDP, but not necessarily in the Philippine context, so one size
does not fit all. In the case of the Philippines, a maximum of maybe 2 to 2.5 percent of GDP
that’s it, will be more realistic. It is also fitting balance between expansionary public
spending and tax cuts. We do not want the spending to swell our national debt or to worsen
inflation or to crowd out private initiative. Hence, we seek to increase our national
government deficit within prudent limits. The international benchmark for the deficit is
roughly 2 percent of GDP.
We are maximizing the Personal Services (PS) portion of the budget. Incidentally,
the budget is PhP1.4 trillion for 2009. And just to give you a biblical perspective of that
budget, if Jesus Christ was born until today, 2009 years times 365 is roughly 735,000 days to
spend our budget of PhP1.4 trillion. That means you have to spend PhP2 million a day for
2009 years. That’s how big the budget is also.
As I mentioned, to maximize the PS portion of our budget, specifically to respond to
the crisis, the lack of manpower and misallocation of personnel will be addressed. We are
hiring more teachers, policemen, and soldiers. We are deploying doctors and nurses to
underserved areas in the country.
We are maximizing the Maintenance and Other Operating Expenses or MOOE
Budget by stepping-up the repair and rehabilitation of government buildings. We are fast-
tracking the purchase of supplies and equipment, like ambulances and patrol cars.
In general we are now ensuring that agencies fully utilize their PS and MOOE budget
I have said before that our mantra, especially at NEDA during the crisis is ―Infra, Infra, Infra.‖ We are investing much in infrastructure to create and save jobs, to boost growth,
and to upgrade our capital stock so the economy grows more efficient and at a faster rate in
the future. Speed in hatching new jobs is critical. We are improving the absorptive capacity
of government infrastructure agencies by ensuring that they hit the ground running in the first
half of 2009. The program of works and procurement plans must be prepared under tight
deadlines. Contracts will be awarded in the first half and first quarter of 2009. Sixty to 80
percent of each agency’s budget must be awarded in the first half of 2009.
Funds are being moved away from the slow-moving projects to the fast-moving ones. Projects with right-of-way problems will have to wait. We may also defer the implementation
of new projects that do not have ICC and NEDA Board approval, or those that are difficult to
We are stressing quick-disbursing high-impact infrastructure projects that are labor intensive and with great local value added. Examples of such rapid projects include the
construction, repair, and rehabilitation of irrigation systems. During this critical time we will
closely monitor project implementation.
While upgrading infrastructure and creating jobs, we will also enhance social protection. We are intensifying our social protection services such as the Pantawid Pamilyang
Pilipino Program (4Ps), which involves conditional cash transfers. Same too for the hunger
On the conditional cash transfers, we are pumping in another PhP5 billion so as to cover an additional 321,000 poor households, double the original 2009 target, giving them
maximum cash grants of PhP9,000 per year. So that will also improve local consumption.
We are adding a billion for PhilHealth to ensure full national government contributions to the National Health Insurance Program.
We are increasing TESDA’s allocation to PhP 5.6 billion to cover around 566,000 additional beneficiaries, from the age brackets of 15 to 24 years old, which is the biggest
segment of the unemployed population. In the first place, they should be in school, and not
be looking for work. And this also helps us for the global rebound. It will be hard for them
to look for new jobs this year anyway, so might as well put them back in school, and get them
trained. Once the global rebound hits two years from now, then they’re in a better position to
As regards off-budget interventions, we will work so that our social security institutions—PhilHealth, GSIS and SSS—will provide additional benefits to their members.
The intervention will be time-bound—12, 18 or 24 months—aimed at increasing purchasing
power. The resources can be taken from the difference between the contributions, claims and
benefits, would entail roughly about PhP25 to PhP30 billion for the Social Security
Institutions (SSIs). You may probably notice or read in the papers as well that PhilHealth is
already ready to give out PhP7 billion additional benefits to members of PhilHealth
I am sure you’re aware of the PhP100 billion fund with the private sector to lower
borrowing and financing costs for CAPEX spending and redirect these resources to important
infrastructure projects. We are tapping the resources of other Government Financial
Institutions (GFIs) for infrastructure projects.
The government has formulated programs to assist OFWs and vulnerable domestic workers. The DOLE and OWWA will establish a stand-by fund for displaced seafarers and
land-based OFWs. A program is being carried out to help expatriate workers who might
return home from host countries now buffeted by the crisis. This program is being made
available as well to workers being laid off in export-oriented industries.
The DOLE is the lead in carrying out the government’s program for the returning expatriates and the retrenched export workers. The first component of this program is an
Expatriate and Export Workers’ Livelihood Support Fund in the amount of PhP1 billion
financed by OWWA for the OFWs and supported by government lending institutions such as
the Development Bank of the Philippines, the Land Bank and the SB Corporation. Displaced
workers can access the fund to help capitalize start up businesses or finance further studies
The Department of Labor is also engaging its tripartite partners – business and the
workers – to implement coping mechanisms, like shortened work shifts and work week; maximized vacation leaves; and adopted rotating forced leaves, among others.
We are also implementing training programs, training interventions specifically targeted for workers displaced as a result of the global financial crisis at the community level.
The TESDA will do this starting in CALABARZON, then Subic, Clark and Mactan.
Government and industries will share information on industry employment, the number of companies affected, the number of workers displaced and other relevant
We are creating a multitude of ―green collar jobs.‖ People will be hired for reforestation, for the regeneration of mangrove areas, for the coastal clean-up by Baywatch
groups, for jatropha cultivation, for replanting coconut farms, for retrofitting tricycles with
LPG, for installing solar-powered street lights.
Also, some 6,000 short-term jobs have been opened up in the government’s PhP650-
million poverty mapping project which the DSWD will undertake once the 2009 budget takes
effect in about six weeks, just in time when school is out. This project will be a major
component of the government’s Youth Employment in Summer or YES program.
Likewise, we are launching NARS or Nurses Assigned in Rural Areas. They will be deployed to initiate primary health services, to inform communities about sanitation practices,
to immunize children and mothers. They shall also serve as roving nurses for rural schools.
How much will this cost? If the nurses are paid an allowance of PhP8,000 a month, and you
have two 6-month tours of duty, and there are five nurses deployed for each of the 1,000
poorest municipalities, that will cost less than half a billion pesos.
This is a long list of running projects, and it will keep getting longer as we get other minds into the loop.
And finally, let us take this opportunity to improve our regulatory environment. You are aware of the problems hounding the pre-need industry and the Securities and Exchange
Commission. Much needs to be done, and this includes sharpening the teeth of Bangko
Sentral, and fixing the MWSS, the Toll Regulatory Board, and the Energy Regulatory
Yes, the Philippines is feeling the impact of the global crisis. But our economy is tough, and this has been acknowledged by many rating agencies. The economy will be even
more resilient as pesos are poured into kilometers of concrete.
Experiences with Economic Reporters
On a more personal note, I would like to specially mention the NEDA beat reporters who welcome me very warmly when we have informal chats on the economy at the NEDA
press office ? Cai, Benjie, Ann, Mitch, Ron, Iris, Cheryl, Darwin, Cel, Albert and Jake.
Please give them a round of applause.
These people are some of the most hardworking reporters I have ever met. Some of them make ambush interviews with me early morning in the elevator. All of them pressure
me for statements so they could file stories and meet their deadlines. Nonetheless, they are
able to write fairly, objectively and accurately. I know a couple of them have won awards in
economic journalism. But I believe all of them deserve to be recognized as well.
All of you are our ―buddies‖ in spurring economic development. Through the stories that you write, we are able to communicate our efforts to the public. More importantly,
through your stories, we are able to get feedback from them ? positive or negative ? which
prompts us to work harder and more effectively.
Certainly, economic journalism is a special craft. Many ordinary people do not
understand the ins and outs of the economy. But they should, as they are also involved with
businesses or workers and as consumers or taxpayers. And you are doing a good job of
making these ordinary people understand these things better. That is what makes your role as
members of EJAP significant in our quest to keep people informed of the socioeconomic
conditions of the country.
Given this, let me again congratulate EJAP and its new officers. May you continue to
be the government’s partner in responsibly communicating socioeconomic information to the
Thank you very much. A pleasant good evening to all of you.