Economic Crisis and Response in the Philippines Essay

The b wholly-shaped Economic Crisis pul take countries down from more or less the globe to a recessional. Wide-ranging blood lines in much aspects of ingathering characterize the overall encroachment it had had on the globose scale. sideline the Asiatic frugal crisis in 1997, the preface international economic crisis imposes new challenges to the Filipinos as a developing kingdom. Fol junior-gradeing ar expositions of the macroeconomic impacts of the crisis in the Philippine setting, its implications in the prevalent pauperisation scenario, and policies and programs chthonic taken by the brass in response to the crisis. Overview of the world(prenominal) Economic CrisisThe 2008 global economic crisis started upon the bursting of the US lodgement bubble, which was followed by bankruptcies, bailouts, foreclosures, and takeovers of monetary institutions and national governances. During a boundary of time of housing and credit booms, banks encouraged lending t o home owners by a considerably in noble spirits amount without appropriate take of transparentness and monetary supervision. As interest values rose in mid-2007, housing prices dropped extensively, and all institutions that borrowed and invested found themselves suffering significant losses. Financial institutions, insurance companies, and coronation ho manipulations tell either declared bankruptcies or had to be rescued financially. Economies ecumenical slowed during this period and entered to a recession. The crisis, signly financial in nature, has now taken a full-blown economic and global scale affecting each country to the left and to the right of the United States, and wreaking havoc in the level of both(prenominal) industrialized and developing nations. The Philippine Situation in the beginning the CrisisThe Philippines has tender classn been chthonianmined with longsighted-term structural problems such that sustainable economic organic evolution is still to be a dream come true. According to the pages of Philippine economic history, the country has been dominated by a sequence of offshoot spurts, skeleton and mediocre, followed by shard to very-sharp, severe, and extended downturnsa cycle that came to be cognise as the boom-bust cycle. As such, economic growth record of the country has been disappoint in equivalence with its East Asiatic counterparts in terms of per capita GDP. What makes matters worse is the seemingly perennialimpoverished state of its inhabitants, that is, in 2007, an absolute need relative incidence of 13.2 percentagehigher(prenominal) than Ind wholenesssias 7.7 and Vietnams 8.4 percenthas been recorded, and therefrom giving further testimony of the unequal dissemination of wealth that keeps growth and development a far reach for the Philippines. macroeconomic Impacts of the CrisisThe Philippines, points Professor Diokno of the University of the Philippines, has been affect by the crisis in a decline in three aspects exports, remittances from afield Philippine workers, and foreign postulate investment fundss. Heavily dependent on electronic and semiconductor exports, the Philippines has seen a downward trend in its export sugar income as countries in demand of these exports are now in recession. The recession has in addition put to lay on the line the jobs in the developed countries which hold those where migrator workers are employed. Consequently, OFW remittances comed and grew a meagre 3.3% in October 2008. Foreign direct investments (FDI) lowered because of investors losing confidence in the financial sof twainod. Lower FDIs mean bumper-to-bumper economic growth. Impacts of Asset Markets, Financial Sector, and Real SectorThe freeze in liquidity in US and European financial markets reversed outstanding flows to developing countries and induced a rise in the price of risk which entailed a drop in equity prices andexchange locate volatility. However, pursual the personal cause of an increase in the foreign specie presidential term bond spread, the Philippine stock market was actually one of the least(prenominal) affected by the crisis with the main index of the stock market dropping nonwithstanding by 24 percent, a relatively low percentage change in comparison to those of other countries crosswise Asia. Similarly, from the period between July 2008 and January 2009, the peso devaluated only by 3 percent which explains why the peso was one of the currencies least affected by the crisis. This minimal effect on the stock market and the Philippine peso can be attri un slighted to the recovery of asset prices across the Asia-Pacific neighbourhood recovered in early 2009 as foreign portfolio investments surged.Financially, the banking formation in the Philippines has been relatively stable, because of reforms that were put in place since Asiatic financial crisis in 1997. Maintenance of high levels of loan to deposit ratios together wit h the decline of the ratioof nonperforming loans to come up loans kept profitability of local banking generally high despite the crisis. To the countrys fortune, no meltdowns occurred as during the previous(prenominal) 1997 Asian crisis. Fall in the growth rate of personal consumption and outlays and resolute investment assail 2008. ad hominem consumption ingestion, the largest contri justor to GDP growth, be confined a downward trend from a sharp drop from 5.8 percent in 2007 to 4.7 percent in 2008, and 3.7 percent in 2009. GDP growth during twenty-five percent quarter of 2008 and firstly gear quarter of 2009 fell to 1.7 percent, a staggering riposte from 5.7 percent average for the three previous historic period.Furthermore, a contraction of 29.2 percent in the manufacturing sector involving electricity, gas, water, trade and finance services. The service sector likewise had its share of downturns as growth in the fourth quarter and first quarters of 2008 and 2009, res pectively, suffered from a meagre growth of 2.1 percent, a far demarcation from the 6.7 percent average from the choke three years. However, the Philippines has generally endured the least declines in comparison with other East Asian countries despite recorded declines. For instance, OFW remittances, though at a slower pace, still grew in the first half of 2009. Impact of pecuniary famine and orthogonal accountsTo counter adverse effect of the crisis, the Philippine organisation felt the need to increase its expenditures. Apart from disposition expenditure, of primary concern was the weak revenues consecrated by the government with fiscal deficit reaching P111.8 zillion in the first quarter of 2009 as compared to P25.8 million in the uniform period of the previous year. Despite suffering the least in terms of the stock exchange and financial markets among East Asian countries, the Philippines lagged in value front in comparison to other nations. Meanwhile, mysteriou s sector flows in the external account declined and led to a net outflow of $708 million in 2009, a sharp turning away(predicate) from a net inflow of $507 million in 2008. This eventually led to a fall in stock prices and depreciation or devaluation of the peso. meagerness and Social ImpactsImpacts on households and communitiesAn increasing number of the Filipino workforce has fuck saturnine frustrated due to unemployment and low standards of living in the country. Thousands of Filipinos leave the country every day toseize expose income opportunities and promise their children a better and secure future. Moreover, around five million of Filipino children are unable to go to school and are pressure to work on the streets or in other various workplaces where they can find some pabulum or other means to fill their appetites. Impacts on wealth and income and its distri thoion across different social divisions The country was having sound economic indicators out front the 2008 economic crisis. Average income per capita was increasing while need incidence showed a downward trend. Average income per capita rose by 2% in 2007 and 2008, whereas indigence incidence dropped from 33.0% in 2006 to 31.8% in 2007 and 28.1% in 2008. Output growth plunged in 2009, causing real mean income to fall by 2.1%, takeing in an upward(a) pressure on poverty incidence (grew by 1.6%). Most withdraw are households with associations to industry resulting in the average income to drop to levels below that of 2007. Similarly, net and salary workers were do significantly. Surprisingly, the poorest 20% did not suffer the same destiny they suffered in crises past. Clearly, the global economic crisis put a halt on the highly promising growth trend of the Philippine scrimping and forced 2 million Filipinos into poverty. Coping strategiesi. FinancesAccording to recent studies (2009), close-fitting to 22% of the population reduced their outgo, 11% used their existing savings for consumption, 5% pawned assets, 2% sold assets, 36% borrowed money and 5% defaulted on debts. ii. Education To reduce spending, households had to risk the quality of education of their children. Some children were transferred from unavowed to macrocosm schools, while some were withdrawn from school. Moreover, parents reduced the allowance of the students, and reviveed to secondary uniforms, shoes and books. iii. Health Coping strategies may have negative effects on their long-term health as these affected households commonly resort to self-medication, or shift to seeing doctors in government health centers and hospital. some households in the urban sector shifted to generic drugs while agrarian households tended to use herbal medicines. Policy ResponsesEfforts of poverty alleviation, reduction, eradicationThe Medium-Term Philippine Development computer programme (MTPDP) was apply duringthe Ramos Administration and later on continued by the following judicatorys to help redu ce poverty in the country and improve on the economic welfare of the Filipinos. The Ramos Administration (19931998) targeted to reduce poverty from 39.2% in 1991 to nearly 30% by 1998. The Estrada Administration (19992004) then targeted to reduce poverty incidence from 32% in 1997 to 25-28% by 2004, while the Arroyo government targeted to reduce poverty to 17% by creating 10 million jobs and this promise was not fulfilled by the face. As for the current Aquino Administration, the 2011-2016 MTDPD is still being drafted. prexy Benigno Aquino III has plans to expand the Conditional Cash Transfer (CCT) program from 1 to 2.3 million households, and several long term investments in education and healthcare. Also, start September 2010, Aquino met with US Secretary of State, Hillary Clinton, during the signing of the $434-million Millennium Challenge can (MCC) grant in New York. The MCC grant would fund foundation and rural development programs in the Philippines to reduce poverty an d spur economic growth. Macroeconomic and Social Protection programsTo respond to the recent financial crisis, the Philippine government, by the division of Finance and National Economic and Development Authority (NEDA), crafted a PhP 330-billion fiscal package, formally known as the Economic Resiliency intent (ERP). The ERP is geared towards the stimulation of the scrimping through tax cuts, increased government spending, and public-private sector projects that can similarly prepare the country for the eventual upturn of the global economy. The effectuation of ERP is spearheaded by NEDA with the following specific aims.To ensure sustainable growth, attaining the higher end of the growth rates To save and create as many jobs as possibleTo protect the some vulnerable sectors the poorest of the poor, returning OFWs, and workers in export industries To ensure low and stable prices to championships consumer spending and To enhance scrap in preparation for the global rebound. Re gional responsesPoverty incidence stiff to be one of the highest in the region with thecontinued low internalated private investment. To overcome legal, political and institutional constraints, regional financial cooperation mustiness be encouraged. The ASEAN+3 financial cooperation can promote further the development of domestic financial markets to facilitate the intermediation of Asian savings in spite of appearance the region, as well as attract foreign investment. Such secondary bloods of funding would reduce Asias reliance on foreign currentness borrowing and along with, the risk exposure of the region to maturity and currency mismatches.Moreover, the Network of East Asian Think Tanks has recently proposed the establishment of the Asia investment Infrastructure investment firm (AIIF) to prioritize the funding of floor projects in the region to support suffering industries. The AIIF, as well as multilateral institutions particularly the Asian Development Bank, exces sively promotes greater domestic demand and intra-regional trade to offset the decline in exports to industrialized countries and narrow the development faulting in the region. Prospects for Growth in the FuturePoverty reduction for the Philippines in the years to come is promising, bearing in mind where she left off prior to the economic crisis. Nevertheless, it is still a tough challenge. Figures persistently think over a Philippine poverty reduction campaign that pales in comparison with other ASEAN countries. In addition, a blistering population growth rate sinks more Filipinos below thepoverty threshold placing the countrys laudable long term economic growth under its shadow. Taking into account that the Philippine economy has a significant reliance on remittances from Overseas Filipino Workers (OFWs), past threats demonstrated the resiliency of the Philippine economy despite external shocks. In spite of the disaster in Japan (3rd largest market for Philippine exports) and th e geopolitical tensions in West Asia, the Philippine economy looked unfazed. New York-based Global Source Partners stated, The Philippine economy has already proven to be instead resilient in the face of varied external shocks in the past, curiously bolstered by a strong external position and capable monetary management. This time should not be much different. The new ecesis of professorship Benigno no.noy Aquino III faces three key constraints on Philippine growth confining fiscal situation due to weak revenue generation distressing infrastructure (i.e. transportation, personnel, etc.)Pessimism in investment resulting from corruption and political in perceptual constancy Fortunately, the government offers various projects to loosen these restrictions. Data from the quarterly ING Investor Dashboard Survey showed stability in investor confidence for the Philippine economy over the first two quarters of 2010. She even scored a 157 in the third quarter of the same year. This is well on the higher percentiles of the optimistic say and a clean 3 points from the very optimistic level. These figures emerge in the midst of rheumatic infrastructure and a lack of efficient institutions. Subsequently, the prospect of the Philippine economy modify into the very optimistic range is very bright. Presidential spokesman Edwin Lacierda declared that the Philippine economic competitiveness score improved from 56.526 the previous year to 63.291 in 2011 (based on The World Competitiveness Yearbook). Lacierda also boasts of infrastructure usefulness projects of the Department of Public Works and Highways scheduled to commence within one or two years. He attri neverthelesses the stepping up of our competitiveness rating to the public-private confederacy (PPP) projects next year. These projects raise optimism for the post-crisis economy of the Philippines-fiscal policy of the PhilippinesFrom Wikipedia, the free encyclopaediaFiscal policy refers to the measures employ ed by governments to stabilize the economy, specifically by manipulating the levels and allocations of taxes and government expenditures. Fiscal measures are frequently used in tandem bicycle with monetary policy to achieve certain goals.1 In the Philippines, this is characterized by ceaseless and increasing levels of debt and budget deficits, though there have been improvements in the last few years.2 The Philippine governments main source of revenue are taxes, with some non-tax revenue also being collected. To finance fiscal deficit and debt, the Philippines relies on both domestic and external sources.Fiscal policy during the Marcos judicatory was primarily focused on indirect tax army and on government spending on ecnomic services and infrastructure development. The first Aquino administration inherited alarge fiscal deficit from the previous administration, but managed to reduce fiscal imbalance and improve tax accumulation through the introduction of the 1986 value Refor m political program and the value added tax. The Ramos administration experienced budget surpluses due to substantial gains from the commodious sale of government assets and strong foreign investment in its early years. However, the implementation of the 1997 schoolwide tax income Reform curriculum and the onset of the Asian financial crisis resulted to a deteriorating fiscal position in the deliver the goods years and administrations. The Estrada administration confront a large fiscal deficit due to the decrease in tax effort and the repayment of the Ramos administrations debt to contractors and suppliers. During the Arroyo administration, the Expanded cherish Added taxation Law was enacted, national debt-to-GDP ratio peaked, and underspending on public infrastructure and other capital expenditures was observed. Contentshide* 1 taxs and Funding* 1.1 Tax Revenue* 1.1.1 Income Taxes* 1.1.2 E-VAT* 1.1.3 Tariffs and Duties* 1.2 Non-Tax Revenue* 1.2.1 The role of Treasury* 1.2. 2 Privatization* 1.2.3 PAGCOR* 2 expense, Debt, and Financing* 2.1 political relation Spending and Fiscal Imbalance* 2.2 Financing and Debt* 3 History of Philippine Fiscal Policy* 3.1 Marcos Administration (1981-1985)* 3.2 Aquino Administration (1986-1992)* 3.3 Ramos Administration (1993-1998)* 3.4 Estrada Administration (1999-2000)* 3.5 Arroyo Administration (2002-2009)* 4 References* 5 External links-Revenues and Fundingedit source editbetaA comparative represent of Revenue and Tax Effort from 2001-20103A comparative graphical record of Tax and Non-Tax Revenue contribution from 2001-20104 The Philippine government generates revenues primarily through personal and income tax collection, but a small portion of non-tax revenue is also collected through fees and licenses, privatization proceeds and income from other government operations and state-owned enterprises. Tax Revenueedit source editbetaTax collections comprise the biggest percentage of revenue collected. Its biggest co ntributor is theBureau of inhering Revenue (BIR), followed by the Bureau of Customs (BOC). Tax effort as a percentage of GDP has averaged at roughly 13% for the years 2001-2010.5 Income Taxesedit source editbetaIncome tax is a tax on a persons income, wages, profits arising from property, practice of profession, conduct of trade or channel or any stipulated in the National Internal Revenue cypher of 1997 (NIRC), less any deductions granted.6 Income tax in the Philippines is a progressive tax, as people with higher incomes pay more than people with lower incomes. Personal income tax rates vary as such7 Annual assessable Income Income Tax Rateless(prenominal) than 10,000 5%Over 10,000 but not over 30,000 500 + 10% of the excess over 10,000 Over 30,000 but not over 70,000 2,500 + 15% of the excess over 30,000 Over 70,000 but not over 140,000 8,500 + 20% of the excess over 70,000 Over 140,000 but not over 250,000 22,500 + 25% of the excess over 140,000 Over 250,000 but not over 500 ,000 50,000 + 30% of the excess over 250,000 Over 500,000 125,000 + 32% of the excess over 500,000 The top rate was 35% until 1997, 34% in 1998, 33% in 1999, and 32% since 2000.78 In 2008, country Act No. 9504 (passed bythen-President Gloria Macapagal-Arroyo) exempted minimum wage earners from paying income taxes.9 E-VATedit source editbetaThe Expanded evaluate Added Tax (E-VAT), is a form of gross revenue tax that is imposed on the sale of goods and services and on the import of goods into the Philippines. It is a consumption tax (those who consume more are taxed more) and an indirect tax, which can be passed on to the buyer. The current E-VAT rate is 12% of transactions. Some items which are subject to E-VAT complicate petroleum, natural gases, indigenous fuels, coals, medical services, legal services, electricity, non-basic commodities, clothing, non-food agricultural products, domestic depart by air and sea.10 The E-VAT has exemptions which include basic commodities and soc ially sensitive products. Exemptible from the E-VAT are11 1. Agricultural and marine products in their original state (e.g. vegetables, meat, fish, fruits, eggs and rice), including those which have undergone preservation processes (e.g. freezing, drying, salting, broiling, roasting, smoking or stripping) 2. Educational services rendered by both public and private educational institutions 3. Books, newspapers and magazines4. Lease of residential houses not especial(a) 10,000 monthly 5. Sale of low-cost house and lot not portentous 2.5 million 6. Sales of persons and establishments earning not more than 1.5 million annually. Tariffs and Dutiesedit source editbeta warrant to the BIR in terms of revenue collection, the Bureau of Customs (BOC) imposes dutys and duties on all items imported into the Philippines. According to Executive Order 206, returning residents, Overseas Filipino Workers (OFWs) and former Filipino citizens are exempted from paying duties and tariffs.12 Non-Tax Reve nueedit source editbetaNon-tax revenue makes up a small percentage of sum government revenue (roughly less than 20%), and consists of collections of fees and licenses, privatization proceeds and income from other state enterprises.13 The Bureau of Treasuryedit source editbetaThe Bureau of Treasury (BTr) manages the finances of the government, by attempting to maximize revenue collected and lessen spending. The bulk of non-tax revenues comes from the BTrs income. Under Executive Order No.449, the BTr collects revenue by issuing, serve and redeeming government securities, and by controlling the Securities Stabilization Fund (which increases the liquidity and stabilizes the value of government securities14) through the purchase and sale of government bills and bonds.15 Privatizationedit source editbetaPrivatization in the Philippines occurred in three waves The first wave in 1986-1987, the second during 1990 and the third stage, which is presently taking place.16 The governments Privatization Program is handled by the inter-agency Privatization Council and the Privatization and Management Office, a sub-branch of the Department of Finance.17 PAGCORedit source editbetaThe Philippine fun and Gaming Corporation (PAGCOR) is a government-owned corporation established in 1977 to throw in illegal casino operations. PAGCOR is mandated to regulate and license gambling (particularly in casinos), generate revenues for the Philippine government through its own casinos and promote tourism in the country.18 -Spending, Debt, and Financingedit source editbetaA comparative graph of National Revenues and Expenditures from 2001-20105A comparative graph of Domestic and External Sources of Financing from 2001-20105A comparative graph of Total National Debt from 2001-201019 Government Spending and Fiscal Imbalanceedit source editbeta In 2010, the Philippine Government spent a total of 1.5 one million million million and clear a total of 1.2 trillion from tax and non-tax re venues, thus resulting to a total deficit of 314.5 billion.5 Despite the national deficit of thePhilippines, the Department of Finance describe an average of 29.6 billion in Local Government Unit (LGU) surplus, which is largely due to an improved LGU financial supervise system which the government implemented in the recent years. Efforts of the monitoring system include debt monitoring and creditworthiness monitoring system, effective mobilization of second generation funds (SGF) to promote LGU development, and the implementation of a Land Administration and Management Project (LAMP2) which received a very good rating from the World Bank (WB) and Australian office for International Development (AusAid).20 Microfinance management in the Philippines is improving substantially. In 2009, the economic expert Intelligence Unit recognized the Philippines as the best in the creative activity in terms of its microfinance regulatory framework. The DOF-National Credit Council (DOF-NCC) fo cused on improving the state of local cooperatives by developing a supervision and interrogation manual, launching advocacies for these cooperatives, and pushing for the Philippine Cooperative Code of 2008. A standardised national strategy for microinsurance and the provisions of grants and technical assistance were formulated.20 Financing and Debtedit source editbetaAside from Tax and Non-Tax Revenues, the government makes use of other sources of support to support its expenses. In 2010, the government borrowed a total net of 351.646 billion for financing21 Domestic Sources External SourcesGross Financing 489.844 billion 257.357 billion Less Repayments/Amortization 271.246 billion 124.309 billion Net Financing 218.598 billion 133.048 billionTotal Financing 351.646 billionExternal Sources of Financing are211. Program and Project Loans the government offers project loans to external bodies and uses the proceeds to fund domestic projects like infrastructure, agriculture, and ot her government projects.20 2. Credit Facility Loans3. Zero-coupon Treasury Bills4. Global fond regards5. Foreign CurrenciesDomestic Sources of Financing are211. Treasury Bonds2. Facility loans3. Treasury Bills4. Bond Exchanges5. Promissory Notes6. Term DepositsIn 2010, the total outstanding debt of the Philippines reached 4.718 trillion 2.718 trillion from outstanding domestic sources and 2 trillion from foreign sources. According to the Department of Finance, the country has recently reduced dependency on external sources to disparage the risks caused by changes in the global exchange rates. Efforts to reduce national debt include increasing tax efforts and decreasing government spending.The Philippine government has also entered talks with other economic entities, like the ASEAN Finance Ministers Meeting (AFMM), ASEAN+3 Finance Ministers Meeting (AFMM+3), Asia-Pacific Economic Cooperation (APEC), and ASEAN Single-Window Technical Working Group (ASW-TWG), in order to strengthen t he countries and the regions debt management efforts*.20 -History of Philippine Fiscal Policyedit source editbeta Marcos Administration (1981-1985)edit source editbetaThe tax system under the Marcos administration was generally regressive as it was heavily dependent on indirect taxes. Indirect taxes and international trade taxes accounted for about 35% of total tax revenue, while direct taxes only accounted for 25%. Government expenditure for economic services peaked during this period, focusing mainly on infrastructure development, with about 33% of the budget spent on capital outlays. In response to the higher global interest rates and to the depreciation of the peso, the government became increasingly reliant on domestic financing to finance fiscal deficit. The government also started liberalizing tariff policy during this period by enacting the initial Tariff Reform Program, which narrowed the tariff structure from a range of 100%-0% to 50%-10%, and the Import LiberalizationP rogram, which aimed at reducing or eliminating tariffs and realigning indirect taxes.222324 Aquino Administration (1986-1992)edit source editbetaFaced with problems inherited from the previous administration, the most important of which being the large fiscal deficit crestened by the low tax effort due to a weak tax system, Aquinoenacted the 1986 Tax Reform Program (TRP). The aim of the TRP was to simplify the tax system, make revenues more responsive to economic activity, promote horizontal equity and promote growth by correcting existing taxes that impaired business incentives. One of the major reforms enacted under the program was the introduction of the Value Added Tax (VAT), which was set at 10%. The 1986 tax reform program resulted in reduced fiscal imbalance and higher tax effort in the succeeding years, peaking in 1997, before the enactment of the 1997 Comprehensive Tax Reform Program (CTRP).The share of non-tax revenues during this period soared due to the sale of sequest ered assets of President Marcos and his cronies (totalling to about 20 billion), the initial efforts to deregulate the oil industry and thrust towards the privatization of state enterprises. Public debt servicing and interest payments as a percent of the budget peaked during this period as government focused on making up for the debt incurred by the Marcos administration. Another important reform enacted during the Aquino administration was the passage of the 1991 Local Government Code which enabled fiscal decentralization. This increased the taxing and spending powers to local governments in effect increasing local government resources.2224 Ramos Administration (1993-1998)edit source editbetaThe Ramos administration had budget surpluses for four of its six years in power. The government benefited from the massive sale of government assets (totalling to about 70 billion, the biggest among the administrations) and continued to benefit from the 1986 TRP. The administration invested h eavily on the power sector as the country was chafe by power outages. The government utilized its emergency powers to fast-track the construction of power projects and established contracts with independent power plants. This period also experienced a real estate boom and strong foreign directinvestment to the country during the early years of the administration, in effect overvaluing the peso. However, with the onset of the Asian financial crisis, the peso depreciated by almost 40%. The Ramos administration relied heavily on external borrowing to finance its fiscal deficit but quickly switched to domestic dependence on the onset of the Asian financial crisis. The administration has been accused of resorting to budget trickery during the crisis balancing assets through the sales of assets, building up accounts payable and delaying payment of government premium to social security holders. In 1997, the Comprehensive Tax Reform Program (CTRP) was enacted. Republic Act (RA) 8184 and RA 8240, which were implemented under the program, were estimated to yield additive taxes of around 7.4 billion however, a decline in tax effort during the succeeding periods was observed after the CTRP was implemented. This was attributed to the unfavorable economic climate created by the Asian fiscal crisis and the poor implementation of the provisions of the reform.A sharp decrease in international trade tax contribution to GDP was also observed as a consequence of the trade liberalization and globalization efforts in the 1990s, more prominently, the establishment of the ASEAN Free Trade Agreement (AFTA) and membership to the World Trade Organization (WTO) and the Asia-Pacific Economic Cooperation (APEC). The Ramos administration also provided additional incentives to export-oriented firms, the most prominent among these being RA 7227 which was instrumental to the success of the Subic bay Freeport Zone.2223 Estrada Administration (1999-2000)edit source editbeta President Estrad a, who assumed office at the height of the Asian financial crisis, faced a large fiscal deficit, which was mainly attributed to the sharp deterioration in the tax effort (as a result of the 1997 CTRP increased tax incentives, narrowing of VAT base and lowering of tariff walls) and higher interest payments given the sharp depreciation of the peso during the crisis. The administration also had to pay P60 billion worth of accounts payables left unpaid by the Ramos administration to contractors and suppliers. Public spending focused on social services, with spending on basic education reaching its peak. To finance the fiscal deficit, Estrada created a balance between domestic and foreign borrowing.2223 Arroyo Administration (2002-2009)edit source editbetaThe Arroyo administrations poor fiscal position was attributed to weakening tax effort (still resulting from the 1997 CTRP) and rising debt servicing costs (due to peso depreciation). Large fiscal deficits and threatening losses for m onitored government corporations were observed during this period. National debt-to-GDP ratio reached an all-time high during the Arroyo administration, averaging at 69.2%. Investment in public infrastructure (at only 1.9% of GDP), expenditure for economic services, health spending and education spending all hit an historic-low during the Arroyo administration. The government responded to its poor fiscal position by under-spending in public infrastructure and social overhead capital (education and health care), thus sacrificing the economys long-term growth. In 2005, RA 9337 was enacted, the most significant amendments of which were the remotion of electricity and petroleum VAT exemptions and the increase in the VAT rate from 10% to 12%