Growth outlook in RP enhanced by Estrada dismissal

Growth outlook in RP enhanced by Estrada dismissal

MANILA (Dow Jones): The outlook for the Philippines' economy
is brighter following the ouster of President Joseph Estrada, but
economists warn the new leadership will still have to grapple
with various problems, including a runaway budget deficit,
political division, and a resurgent Muslim secession in the
South, the direction of the U.S. economy.

These may be beyond the control of the new leadership,
although economists said Gloria Macapagal-Arroyo's assumption to
the presidency has renewed sorely needed investor confidence,
which for the moment is sufficient for them to revise their
economic forecasts upward.

Economists interviewed by Dow Jones Newswires said growth this
year would still be under 4 percent - which means the Philippines
continues to lag the region in economic growth - given the
various problems Arroyo would have to grapple with.

The Asian Development Bank forecast the Philippines gross
domestic product growth in 2001 at 3.5 percent, compared with 4.6
percent in Thailand, 7 percent in Malaysia and 6 percent in South
Korea. Even crisis-hit Indonesia's economy is expected to grow 5%
this year.

Song Seng Wun, regional economist for G.K. Goh Securities in
Singapore, said that still, "the change in confidence will spur
private consumption. But I'm not as certain with investments."

Song said international investors will likely wait before
returning to the Philippines. They would still want to get a
clearer picture of how the new leadership undertakes reforms, he
said.

Domestic companies, meantime, are still operating under excess
capacity, he said.

Even before the corruption allegations against Estrada
triggered a leadership crisis last October, foreign investment
had fallen in the first eight months of 2000 by 43 percent to
$909.7 million from the year-earlier level.

"The political change is a good thing, but the problems are
still there," said Song, who raised his gross domestic product
forecast to 3.8 percent this year from 3.4 percent.

He also projected a stronger peso, expecting the local
currency to rise to average 46 pesos against the dollar this year
from 48 pesos.

David Fernandez, economist for JP Morgan, said the first real
test for the Arroyo administration is the passage through
congress of the budget for this year. The budget has been stalled
by the Estrada's impeachment hearings.

He said investors will be looking closely at how officials
will outline in the budget the measures needed to correct
structural problems, such as poor tax collection, that had led to
the deficit.