Political problems batter RP economy

Political problems batter RP economy

Agence France-Presse, Manila

Political problems such as a military mutiny and clashes between the administration and the opposition are the main problems weighing down what should be a vibrant Philippine economy, officials said on Monday.

Politics is the main reason the Philippine peso has fallen to 31-month lows while foreign direct investment has slumped despite the government's success in controlling the budget deficit and spurring domestic demand.

The economic officials told a mid-year briefing to businessmen that the country had done well in weathering international crisis such as the Severe Acute Respiratory Syndrome (SARS) outbreak and the Iraq war.

"It is a good situation from an economic point of view. But our political situation today is not as good," Central Bank of the Philippines governor Rafael Buenaventura said.

Finance Secretary Jose Isidro Camacho said the economy was growing better than expected but remarked that "constant politicking (is) enough to depress and demoralize all of us."

The officials cited the failed military mutiny by some 300 renegade soldiers on July 27 and continued reports that another destabilization attempt was being planned.

They also cited a court ruling last month, suspending Buenaventura as well as opposition accusations against the family of President Gloria Arroyo.

These political controversies had caused the Philippine peso to fall to 31-month lows of 55.60 to the dollar last week although it recovered to 54.96 to the dollar in late trading on Monday.

"The peso's weakness is brought about by too much politics. If we can surmount this, the peso should go back to normal levels," Buenaventura said, adding he considered the local currency to be competitive to the Thai baht.

He expressed confidence the local unit would recover by the fourth quarter of the year when the millions of Filipinos overseas traditionally remit huge amounts into the country.

However he warned this improvement of the peso could still be derailed if political problems worsen.

Despite the politics, the Philippines still posted 3.2 percent gross domestic product (GDP) growth in the second quarter of the year, the officials remarked.

Buenaventura said inflation should still be within the 4.5 percent to 5.5 percent target set for 2003 while Budget Secretary Emilia Boncodin said the budget deficit -- once a major government concern -- was likely to be within the 202-billion- peso ($3.67 billion) ceiling set by Manila.

Thanks to the huge savings in the first half of the year, "now we have a lot of room to spend in the second semester" to further boost growth, Boncodin said.

Economic Planning Secretary Romulo Neri reiterated that GDP growth for the full year would still hit the 4.2 percent target set by government.

The officials cited figures showing that exports and the agriculture sector were set to rebound while business and consumer confidence remained strong in the second half of the year.