RP investor confidence set to rebound

RP investor confidence set to rebound

MANILA (AFP): Philippine stocks and the country's battered
currency were expected to perk up with the installation of a
business-friendly government led by U.S.-trained economist Gloria
Arroyo, but analysts cautioned against over-exuberance.

President Arroyo will face an uphill task rebuilding the
economy, which has been hit by eroding investor confidence and
political uncertainty amid allegations of excessive graft and
"cronyism" under her ousted predecessor Joseph Estrada.

Newly-picked Finance Secretary Alberto Romulo said it could
take up to five years to get the economy back on a strong
footing.

"It will take a minimum of two years to get back on our feet.
Some are even more unkind, they say it will take five years or
even more," he told local radio.

Foreign investors first started packing up in January last
year after Estrada intervened to allegedly save a business crony
from being investigated in the country's largest insider trading
scandal.

The peso has since hit historic lows and the Philippine stock
market is among the worst, if not the very poorest performer in
Southeast Asia with trading volumes slashed by more than half
from a year ago.

On Friday, the peso recovered dramatically to a high of 47.00
to the dollar from the previous day's close of 54.79, as news of
mass defections to the anti-Estrada camp hit the market at the
tail end of trading. Estrada was ousted on Saturday after the
supreme court declared the presidency vacant.

"What the business community needs is transparency and a level
playing field," Arroyo said at the weekend after being sworn-in
as the 14th president of the resource-rich but poverty-wracked
archipelago of 76 million people.

Arroyo declined to forecast by how much the peso, which hit a
record low of 55.75 against the dollar last week, should recover
to allow enough breathing space for the economy, saying: "As an
economist let me tell you that it's not safe to give a number."

She said "confidence" was a vital factor for the currency.

Arroyo, the first Philippine president with strong economic
credentials, has to contend with a plethora of problems to tame
an economy hit by high interest rates, inflation and
unemployment, weak currency and stocks and a yawning budget
deficit.

But Prime Minister Goh Chok Tong of Singapore, Southeast
Asia's financial and business center, expressed confidence Sunday
Arroyo would restore confidence.

In a swift move to restore business optimism, Arroyo's first
appointment to the cabinet was Finance Secretary Romulo, whose
previous experience as a state budget planner should help contain
the ballooning budget deficit.

Romulo, also a former senator, said "the first thing we will
do is provide leadership by example.

"We will show through governance that there is a level playing
field and a rule of law," he said.

The Philippine economy was forecast to grow just above three
percent this year before the political turmoil culminated with
Estrada's removal, from about four percent last year.

Unemployment hit double digits late last year while inflation
was projected to rise to an average of up to 7.5 percent in 2001.