RP central bank chief warns of recession

RP central bank chief warns of recession

MANILA (DPA): The Philippine economy may plunge into a recession next year if a bribery scandal engulfing President Joseph Estrada drags on, Central Bank Governor Rafael Buenaventura warned on Wednesday.

Buenaventura said the Central Bank's efforts to halt the free fall of the peso, which has fallen more than 9 per cent due to the controversy, could result in severe damages to the economy if sustained beyond "60 to 90 days".

"Obviously the peso continues to depreciate because aside from the global pressure, we now have the additional pressure of local tension," he told a television interview. "These things of course have dried up the inflow of funds."

Buenaventura said some foreign direct investments have been "delayed deliberately" until the crisis is resolved.

The Philippines was plunged into its worst political crisis in years last month when a former presidential friend accused Estrada of receiving more than US$8 million in illegal gambling pay-offs.

Estrada has rejected mounting calls for his resignation and vowed to answer all charges in impeachment proceedings at the House of Representatives.

Asked if the economy was heading for a recession, Buenaventura said, "Not yet but it's correct, if we keep these interest rates at high levels and the exchange rate doesn't correct itself, by the second quarter next year we'll probably be there."

The peso has plummeted to a historic low of below 51 to the U.S. dollar and the Central Bank has raised key interest rates by four percentage points to prop up the currency. The rate hikes and other measures, however, have done little to stop the peso's decline.

Impeachment proceedings at the House of Representatives are scheduled to begin on November 6. Experts warned the process could last for months.

Seventy-three votes in the 218-member House are required to indict Estrada. The case is then passed on to the Senate, where a two-thirds vote, or 15 members of the 22-seat upper chamber, is required to remove the president from office.