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.