‘Public sector spending key to sustaining GDP growth’

By: - Senior Reporter / @agarciayapCDN
/ 07:12 AM April 03, 2012

Higher public spending is key to sustained economic growth, said former Budget Secretary Benjamic Diokno.

This spending he added could spur the development of the domestic market, ensure jobs for new graduates, and revive the country’s manufacturing sector.


These are the three important things the Philippines must do to sustain  a healthy Gross Domestic Product growth for the next seven years. And eventually minimize poverty in the country,  said Diokno who is now University of the Philippines School of Economics professor.

“The government should pour in at least P500 billion every year or 5 percent of our GDP of P10 trillion for carefully selected projects like infrastructure such as roads, power, airports and seaports,” Diokno told Cebu retailers last Thursday at the Laguna Garden Cafe during the 2012 General Membership Meeting of the Philippine Retailers Association-Cebu Chapter.


domestic market

According to Diokno, the Philippines can take advantage of the “spending” nature of Filipinos as most of Filipinos don’t save.

“We are a spending country. Our savings portfolio is not high and Filipinos tend to spend more on household needs. That’s about 65 percent of our earnings. We spend on what we need at home or our consumption,” he said.

Diokno said that there is an increase in imported products that are being sold in the local market now,  which should have been controlled to allow more local producers to benefit from local market spending.

“Why do we import food products from other countries? We can make them here?” asked Diokno.

One of the reasons imported products are very visible now is the foreign exchange rate of our peso, said Diokno.

Despite that, there is a need to push local products among Filipinos and one initiative that Diokno sees as a good example is the slow shifting of market focus by exporters.


Exporters are now also looking at the local market, aided by the Department of Trade and Industry and the Department of Tourism.


According to Diokno, a bug chunk of the population is now hitting the “employment age.”

“This is both an opportunity and a challenge for our government because if we fail to make jobs available for this young Filipinos our unemployment rate could shoot up.”

While the country has been sending people abroad for employment opportunities in other countries, Diokno said, that many countries now are also walling off their  labor markets because they are also trying to make jobs in their country available to their locals.

“Our OFWs (overseas Filipino workers) used to be our safety box but other countries are closing. That might create a problem for us,” said Diokno.


The Philippines’ manufacturing sector used to be among the top gross contributors to our country’s GDP but over the years its contribution has decreased.

According to Diokno, there is a window of opportunity now with many companies going out of China and looking for other countries to set up manufacturing.

“Firms in China are looking for new places where they can locate because the cost of labor in China has shot up which could have been caused by China’s “one child” policy. They’re saying that the Philippines looks like a good candidate,” said Diokno.

Diokno added that this could not happen overnight and that the government should resolve some issues that would affect our attractiveness to these firms like high power costs.

“The government should look at ways to address this issue like building new plants. We need to be desirable for these companies and one of the things they always look at is the cost of power as this will affect their operations cost,” said Diokno.

According to Diokno, he doesn’t see a 7 percent GDP growth this year as possible, saying based on history, the Philippines only achieves high GDP growth during election years.

“The Philippines is in fact facing a below-normal growth rate of 4 percent in the next few years unless the government will do something really bold,” said Diokno.

According to Diokno, aggregate economic growth could only improve the poverty situation in country if the country can sustain at least 6 percent GDP growth in at least seven years.

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