Why Gloria’s P330-B “Stimulus Package” Will Fail: A Critique of the Economic Resiliency Plan (ERP)

Part 1 of a two-part series

Publicized as a “stimulus package”, the Economic Resiliency Plan (ERP) is criticized even by neoliberal economists as severely lacking in funds to stimulate economic activity amid the global downturn. Aggravating these funding problems is the perennial shortfall in government revenues to support its expenditures thus, government will further increase its borrowing and impose new taxes. Even the social security programs under the ERP are extremely limited both in funding and scope.

BY ARNOLD PADILLA
Contributor
Bulatlat

The Economic Resiliency Plan (ERP) is a package of programs put together by the Arroyo administration in response to the global financial and economic crisis. Its stated objectives include the mitigation of the crisis’ impact and the invigoration of the domestic economy through a mix of accelerated government spending, tax cuts and public-private sector investments in infrastructure projects.

For the Filipino workers, the ERP aims to save and create as many jobs as possible and to protect the returning overseas Filipino workers (OFWs) and workers in export industries. The whole package costs P330 billion, of which almost half would be funded by the increase in the 2009 national budget. (See Table)

Funding issues

Publicized as a “stimulus package”, the ERP is criticized even by neoliberal economists as severely lacking in funds to stimulate economic activity amid the global downturn. According to them, a real stimulus package needs significant additional resources on top of what the government has already planned to spend. But it is estimated that of the P330 billion (US $6.92 billion based on current exchange rate of USD 1 = PhP47.672) allocated for the ERP, only P50 billion ($1.85 billion) can be considered as new funds. The said amount represents the sum realigned from the P252 billion allotted for servicing debt interest payments in the P1.41-trillion ($ 29.58 billion) national budget for 2009.

The P50 billion ($1.85 billion) forms part of the P160 billion ($3.35 billion) allocated for the ERP from a total P188-billion ($3.94 billion) increase in the 2009 budget. Thus, P110 billion ($2.3 billion) of the said amount could not be considered a stimulus fund because it was already a planned increase without accounting the global crunch. If we compute the P50 billion as a portion of the gross domestic product (GDP), it is equivalent to only 0.67 percent, said economist Winnie Monsod. Compare it with, say China’s stimulus package, which is about 18 percent of its GDP. In a briefing paper, think tank IBON Foundation pointed out that the 2009 national budget is equal to only 16 percent of the GDP – the lowest since 1986! It confirmed that the current budget was not designed to respond to the global crisis.