PART I

MACROECONOMIC STABILITY WITH EQUITABLE GROWTH BASED ON FREE ENTERPRISE

Poverty and unemployment remain the country’s gravest economic problems. If the government is to win the war against poverty at the end of the decade, the economy must grow on a sustained basis and across all sectors, while generating the greatest employment. The industry and service sectors, which tend to grow faster in the course of development, offer vast opportunities for creating employment and for absorbing excess rural labor. Small and medium enterprises (SMEs) and high-growth business sectors that inherently draw on strengths in human resources such as information and communication technology and tourism, deserve attention for further development.

Macroeconomic stability is a necessary condition for sustained growth. Efficient investment and consumption decisions cannot be made in an unstable environment. Long-term stability is, however, being threatened by a large fiscal deficit and increasing public debt. Thus, the immediate task is to put the budget deficit of the national government under control. In a world where capital markets are integrated, fiscal, monetary and exchange rate policies also need to be coordinated to tap the opportunities from global markets while addressing the perils that come with internationally mobile capital.

Sustained and equitable growth entails nurturing the entrepreneurial spirit and making industries globally competitive. Hence, the government remains fundamentally committed to free enterprise and market reliance, and ensuring market-friendly regulation where indicated. To assist enterprises to become more globally competitive, the government will work to reduce the cost of doing business and remove key bottlenecks to investment. In this area, the government has already implemented various structural reforms such as the liberalization and deregulation of trade and investments and the restructuring of the power sector. However, reforms need to continue to enhance the competitiveness of Philippine industry by improving the state of infrastructure and upgrading the state of technology.

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