Despite the ongoing political crisis and the state of emergency last month, the Philippine’s economy appears bullish with the strengthening of the Peso.
President Arroyo’s economic modernization and reform appears to have paid off when the stock market hit its highest level in nearly seven years, signifying an improvement in the health of the economy. For the first time in a decade, the Philippines may receive a credit-rating upgrade as foreign investment banks gave a glowing review of the country’s economic situation. This came after the administration addressed its budget deficit woes with the full implementation of the expanded value-added tax law on Feb 1.
New York-based investment bank Bear Sterns & Co. Inc. is confident the domestic economy will expand by close to 6% this year after President Arroyo thwarted the coup attempt against her administration on Feb 24 (TMC net, 26 March). The bank cited the Philippines’ attractive valuations and the government’s progress on the fiscal and debt front for the optimism.
“The biggest near-term risk to the markets is that posed by the opposition politicians pulling off a renewed impeachment attempt against Mrs Arroyo,” said Mr Garcia, research head of ING Investment Management. According to another analyst Luz Lorenzo, “The story is now one of dwindling support for the opposition.”
Presidential chief of staff Michael Defensor claimed that “political opponents were getting so desperate that they now resorted to any means to get rid of Mrs Arroyo to achieve their goals…there is really an assassination plot against the President. This is included in their plans because they saw they could not topple the President or force her to resign, so their alternative is to harm the President.”
The military went on a nationwide full alert once again as Mrs Arroyo addressed the latest batch of Philippine Military Academy (PMA) graduates last Saturday (25 March) at Fort del Pilar in Baguio City, Manila. There was a reported attempt to assassinate her during the occasion as revealed by intelligence and police authorities.
“As your Commander-in-Chief, I will not tolerate any diversion from the path we are on. We have a plan to modernize our economy and we will fulfil it. We have a plan to modernize our system of government and we will fulfil it. And we have a plan to reform our military to protect and strengthen our nation, and we will fulfil it,” she said.
Mrs Arroyo drove the message of loyalty to the military in the face of conspiracy by opposition, disgruntled soldiers, left wing groups and their civilian backers. “I expect you to be loyal to your values, to your Nation and to your Constitution. And in return, I will remain steadfast in my loyalty to you and to the cause we all share: the fight for a just, a fair and a stable democracy,” she said.
Mrs Arroyo’s courage to change the economic system and to overhaul the policies and institutions is evident in the current economic boom. However economists are warning that the strengthening of the peso may bring the country towards a financial crisis.
Many in the private sector, especially the exporters are lobbying for government to rein in the exchange rate, as the strengthening of the peso has affected the price competitiveness of Philippine exports. (Sun Star, 27 March)
While the economy is growing, analysts have advised that the growth be sustained by the country’s dollar reserve or gross international reserve (GIS), which is a more reliable gauge in measuring the strength of the economy.
Philippine economy finally picking up steam (Straits Times, 25 March)
Philippines back on investment map (TMCnet, 26 March)
Economist warns, don’t anchor plans on current peso value (Sun Star, 27 March)
Philippine President asks military academy graduates to remain loyal (People’s Daily, China, 25 March)
Arroyo warns ‘disloyal’ detractors (Sun Star, 26 March)