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.