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.