Election jitters may derail Philippine economic recovery

Election jitters may derail Philippine economic recovery

Mynardo Macaraig, Agence-France Presse, Manila

Political uncertainty, spawned by impending national
elections, have shaken Philippine equity and foreign exchange
markets and threaten to stall a much-awaited economic recovery,
analysts warn.

Not even the recent announcement of stronger-than-expected
growth in the third quarter of the year has reassured businessmen
and foreign investors who are spooked by the increasingly heated
political squabbles.

Surveys show that incumbent President Gloria Arroyo is not
assured of victory in the May national elections. More troubling
is the candidacy of top movie star Fernando Poe, a high-school
drop-out with no history of public service.

Although the polls are still half a year away, campaigning for
the elections has unofficially begun with legislators jockeying
for position rather than passing vital economic reforms.

"Don't expect anything in the next six months," economist
Bernardo Villegas warned businessmen, saying legislators "will
make the political climate very adverse."

After Poe formally announced he was running for the presidency
last Wednesday, the Philippine peso plunged to a record low of
55.85 to the dollar the next day, although it has since recovered
slightly. The stock market closed on Friday at seven-week lows.

Poe has not given any platform of government, saying only that
he would identify his economic advisers later.

Coincidentally, Moody's Investors Services warned on Wednesday
it may downgrade Philippine credit ratings amid heightened
political uncertainties.

"In view of the tensions that have accompanied political
cycles in the past, the nation's fiscal policy could be
handcuffed and capital outflows become more volatile as May's
presidential election approaches," Moody's said.

Standard and Poor's also warned that "the personality-based
nature of Philippine politics and the weakness and fractiousness
of the country's institutions" could undermine confidence and the
predictability of economic policy.

The country is already reeling from the resignation this month
of Finance Secretary Jose Isidro Camacho, a senior figure in
Arroyo's cabinet who was highly respected in international
financial circles.

Other economic officials are also expected to resign in the
coming weeks, possibly so they can run for lower positions in the
May polls.

Miguel Varela, chairman of the Philippine Chamber of Commerce
and Industry, the country's main business group, said the
business community was not throwing its weight behind any single
presidential candidate.

"As much as possible we want to be apolitical but we want to
hear their platform," he said.

David Cohen of Singapore-based financial consultancy MMS
International said that economic progress "will pause amid the
heightened uncertainty, particularly investment spending by
foreigners."

But he said this would only be "a temporary freeze rather than
a serious negative consequence."

Cohen warned that "the peso will remain under pressure from
political uncertainties," but said the economy would post a
respectable four percent growth this year although it may be
outpaced by its Asian neighbors.

Concerned that the early politicking will hurt growth
prospects, Arroyo has been urging the public to re-focus on the
economy.

"It would help much if people can shake off their election
fever and get on with more productive endeavours," Arroyo
remarked.