Manila announces strong showing in its economy

Manila announces strong showing in its economy

MANILA (AFP): After weeks of bad news about the Asian financial crisis, the Philippines raised eyebrows last week by announcing that its economy had weathered the storm better than expected.

Gross domestic product (GDP) expanded by 5.1 percent and gross national product (GNP), which includes income from abroad, rose 5.8 percent in 1997, exceeding the forecasts of both the government and the International Monetary Fund.

Both the government and the stock market were heartened by the news with the exchange's composite index rising 8.4 percent on Jan. 30, a day after the figures came out.

"This growth performance is even more significant in light of the more dramatic slowdowns projected... for other Asian economies as a result of the currency turmoil," President Fidel Ramos said in a statement.

He noted that GDP and GNP rose 4.7 and 5.2 percent respectively during the last three months of 1997 with the agriculture, industry and services sectors all posting growth despite both the regional turmoil and a drought caused by the El Nio phenomenon.

The growth figures have been taken by Ramos as a vindication of earlier statements that the country was more resilient than its Asian neighbors and was being unfairly affected by a crisis that had its roots overseas.

He and other officials have said the country's economic fundamentals remain sound with no unnecessary foreign debts or grandiose "ego-boosting" projects, a strong banking sector and limited lending to real estate projects, preventing any glut in the property market.

But analysts warn more troubles could still lie ahead if the government does not take the necessary measures. The full impact of the crisis will only be felt in 1998, they warn.

GDP is expected to grow only between 2.4-3.5 percent and GNP by only three to four percent in 1998, the government says although even this would be an improvement from the flat or negative growth experienced by some of the troubled economies of the region.

The foreign exchange rates, while having improved last week, remain volatile and businessmen have been complaining for months that high interest rates, imposed to stabilize the exchange rate, are constricting their operations.

A major concern is the fiscal position which, sources say, could go from years of surpluses to a deficit of 4.291 billion pesos (US$102 million) in 1998.

Previous budget surpluses were achieved through privatization of state assets which are running out.