Mixed reports on RP reforms

Mixed reports on RP reforms

MANILA (AFP): U.S. investment house Goldman Sachs praised recent Philippine economic reforms, even as a World Bank report warned the country against complacency, according to reports obtained here yesterday.

Goldman Sachs, in their assessment of Asian economies, said the passage last month of a key excise tax on cigarettes and beer "should prolong capital inflows, needed to finance growth."

The report said passage of the key tax reform, despite strong opposition from affected sectors, was "an important coup" for President Fidel Ramos and would "enhance the country's reputation as a nascent Asian tiger."

The report also said the passage of the excise tax would pave the way for other tax reforms next year.

However, the World Bank, in a study entitled, "Philippines: strengthening economic resilience," warned "authorities need to be wary of a situation in which undue reliance is placed on surging remittances and capital inflows."

This was a reference to the huge remittances from the four million Filipinos working overseas, as well as the foreign loans and large portfolio investments that were coming in.

The World Bank said "the pace of expansion (of these inflows) over the medium term is unlikely to be sustained," and warned that the Philippines would have to watch its trade deficit more closely.

The Philippine trade deficit hit US$10.09 billion in the first 10 months of this year, up 17.6 percent from the same period last year.

The World Bank also warned of the expansion in credit, saying if sustained it could lead to higher inflation, a balance of payments deficit and would also affect banks' management of their loan portfolios.

It suggested tighter monetary policies, stronger guidelines on foreign currency deposit units and possible taxation of foreign borrowings to address this.