Lahiri, Ashok, K., “Dynamics of Asian Savings: The Role of Growth and Age Structure”, Staff Papers, International Monetary Fund, Vol. 36, Washington D.C., March 1989.
Larrain, Felipe and Vergara, Rodrigo, “Investment and Macroeconomic Adjustment: The Case of East Asia”, Striving for Growth After Adjustment: The Role of Capital Formation, World Bank, 1993.
“The East Asian Miracle: Economic Growth and Public Policy”, A World Bank Policy Research Report, World Bank, Washington D.C., 1993.
Prepared by David Nellor.
As this has occurred, the consolidated public sector deficit has declined commensurately, to 1 percent of GNP.
The role of saving and investment, in defining the prospects for Philippine economic development, has been presented in several World Bank reports. See, for example, The Philippines Country Economic Report, No. 10056 (February 1992) and The Philippines: An Opening for Sustained Growth, Report No. 11061 (April 1993).
The authorities also plan to privatize many of the assets of the National Power Corporation (NPC), but receipts from this exercise may be retained by the enterprise itself, to improve its weak balance sheet.
Of course, to the extent that the balances have been used to repay debt—as was largely the case in 1994—there will also be a compensating expenditure saving, in the form of lower interest payments.
Two factors could boost revenues from international trade taxes in the short term; first, replacement of quantitative restrictions by tariffs and second, the rationalization of incentives, including duty free importation of capital goods.
For this reason, direct tax revenues depend heavily on withholding taxes, especially on wages.
The formula also provides, under RA 7171 and RA 7160, for some minor tax revenues to be transferred to local governments. The allotment to local government units is divided into current and capital transfers, with the former typically accounting for about four-fifths of the total.
Two factors hamper the government’s ability to adjust the wage bill. Annual wage increases are constrained to be in line with the 1994 Salary Standardization Law (SSL II), which specifies that the salary of most civil servants must be doubled over a four-year period. Employment levels, meanwhile, cannot be changed radically until Congress passes the government reorganization bill that was submitted in mid-1995.
At the same time, the primary balance, indicating the role of noninterest fiscal developments, has shown less improvement. In fact, the primary balance recorded a surplus of 4 1/2 percent of GNP in 1992 and, in the absence of privatization receipts, would not have been as large since.
In 1994, the public saving rate increased to 3 percent of GDP.
See, for example, Larrain and Vergara (1993, pages 264–5), who examine this relationship for some Asian economies.
More recently, the average has increased to over 3 percent of GDP.
This comparison with ASEAN countries, as well as subsequent comparisons, draw on IMF data for purposes of cross-country comparability. The data may not be consistent with data used elsewhere in this report.
Including receipts from excises.
The IMF provided technical assistance to the authorities in these areas.
See “Philippines - Staff Report for the 1995 Article IV Consultation and Review Under the EFF Arrangement” (EB S/95/153, 9/12/95).
Exemptions are provided for the Department of Education and Local Government Units.