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NEWS UPDATES 1 November 2009

Philippines will miss MDGs on growth decline  

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Lower-than-desired economic growth and declining tax effort could widen the Philippines’ annual resource gap to finance the Millennium Development Goals (MDGs) and possibly lead to the nonachievement of the goals by 2015, the Business Mirror reported, quoting state-owned think tank Philippine Institute for Development Studies (PIDS).

In a forum, PIDS president Josef   Yap said the country’s resource gap in financing the MDGs could have increased to about 1.8 percent of the country’s gross domestic product (GDP). Using a GDP absolute value of around 7.497 trillion peso posted in 2008, this would mean a resource gap of around 134.95 billion peso every year. (1$=47 peso)

An estimate of the country’s financing gap for the MDGs was initially made by PIDS senior fellow Dr Rosario G Manasan where she said that a low growth scenario of around 5 percent would lead to a financing gap of around 1.4 percent of GDP in 2009 and 2010.

“If the low-growth scenario [of Dr. Manasan led to a financing gap of] 1.4 percent of GDP, there should be a lower growth scenario [which could mean a financing gap of] 1.8 percent of GDP,” Yap said during a forum on the Impact of the Global Economic Crisis on the Philippines in Makati City on Thursday.

“This, together with low tax effort, [could mean that] we are in serious danger of not achieving the MDGs,” the PIDS official added.

Yap said the country’s tax effort has been declining since 2006. Yap said the country’s tax effort gradually went down to 13.5 percent in the first half of 2009 from 14.3 percent in 2006.

This, Yap said, is worrisome especially with some economists predicting that tax effort, due to the crisis and twin typhoons Ondoy and Pepeng, could fall to around 11 percent. He said the country’s tax effort peaked at around 17 percent but has slowly gone downhill to 14 percent.

Compared with the country’s Asean neighbors, the tax effort in the Philippines was only able to eclipse that of Indonesia in 2008, when it posted a tax effort of 13.3 percent. In 2008 the Philippines posted a tax effort of 14.1 percent.

“The major concerns is tax effort, which is only marginally related to the crisis. Fiscal reforms have to be implemented to ensure the achievement of the MDGs,” Yap said.

“The decline in the tax effort is worrisome [because] it affects our chance of achieving the MDGs.”

In the medium term, Yap said the government should focus on fiscal reforms by removing fiscal incentives to sectors that do not need them like telecommunications, as well as improve tax administration by conducting more lifestyle checks.

Yap also said coverage or funding and targeting of social-protection programs should be improved. These social-protection programs must also become more inclusive like the Conditional Cash Transfer program of the government, the Pantawid ng Pamilyang Pilipino Program.


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