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.