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THE Philippine economy is expected
to enjoy robust growth in 2007—provided the perennial problem of
politics does not get in the way, analysts say.
A raft of
positive economic figures in recent weeks and the passing of the
P1.13-trillion ($23-billion) budget has been greeted positively by
international investors.
The California
Public Employees’ Retirement System (CalPERS) recently raised its
rating of the Philippines, placing it above China, India, Indonesia,
Malaysia and Thailand in terms of the countries in which it invests.
With an
investment portfolio valued at $194 billion, CalPERS is the largest
pension fund in the United States.
“This
positive development is expected to encourage global fund managers
to increase investments in the country as they take their cue from a
global leader in the investment industry,” Foreign Secretary
Alberto Romulo said.
Stable
inflation and interest rates, a stronger currency and revived
investor confidence as reflected in portfolio investment trends all
point to better prospects for the economy, a recent report by the
Institute for Development and Econometric Analysis (IDEA) said.
The Philippine
Stock Exchange composite index last week hit levels last seen before
the Asian financial crisis 10 years ago.
Remittances by
some eight million overseas Filipino workers last year rose 19.4
percent from 2005 to a record $12.8 billion. This year remittances
are expected to top $14 billion, according to a report by the
Economist Intelligence Unit.
Economic
Planning Secretary Romulo Neri said he was confident gross domestic
product (GDP) this year would grow at 6.1 to 6.7 percent, compared
with 5.4 percent for 2006.
The budget for
2007 should see an increase in spending on infrastructure and
services, which are expected to jumpstart economic activity, Neri
said.
This is only
the third budget President Arroyo has seen passed since she came to
power in 2001.
Under
Philippine law, if the budget is not passed by Congress, the
government is forced to revert to the previous budget.
Last year, for
example, the government had to reenact its 2005 budget, which
limited its ability to increase spending on much-needed
infrastructure projects, schools and social services.
But the
slowdown in government spending did have a positive impact on the
deficit, which
last year fell to P62.2 billion ($1.27 billion), less than half the
government’s P125 billion target ceiling for the year.
The government
intends to limit its budget deficit this year to P63 billion.
Even the
private sector is bullish.
Jaime Augusto
Zobel, chairman of Ayala Corp., one of the Philippines’ largest
conglomerates, said “the fundamentals are in place for sustained
economic recovery and growth.”
“Key sectors
of the economy are presenting opportunities that are creating
multiplier effects on other industries,” he said as his company
announced record net profits for 2006.
But while the
budget problem seems to be out of the way, political roadblocks
remain.
Arroyo is
facing congressional and local elections in May, which are widely
seen as a referendum on her administration.
Campaigning is
expected to be fierce, raising concerns the government will start
giving out cash to win votes.
Whoever wins
the election, there are likely to be charges of cheating and
political bickering for months afterwards.
“I think GDP
should be on the high end this year, especially after the elections
are over,” said Alan Araullo of Regina Capital Development Corp.
“That’s
the only obstacle. Everyone is worried about the elections,” he
added.
The government
also has earned an unfavorable reputation of reversing policies in
the face of political pressure even though officials say such
practices will not continue.
Henry
Schumacher of the European Chamber of Commerce, told a recent forum
of foreign correspondents that in 2007, “politics, as usual,
clouds [Philippine] economic prospects. That’s the overriding
message, election year or not.”
He cited
pending bills changing tax laws and other government policies as
“creating
uncertainties which potential investors don’t like.
“This drives
investors away. This delays the construction of much-needed
infrastructure,” he said.
“Investors
are deeply concerned about the sanctity of contracts,” he added,
warning that “the changing regulatory environment . . . [is] clear
evidence that long-term investment in infrastructure is risky.”
Despite
opposition accusations of corruption and poll fraud, Arroyo has been
credited with passing crucial fiscal reforms that have brought the
once-ballooning budget deficit under control.
But even the
International Monetary Fund, which expects 5.8 percent growth this
year, warns Manila that it must “sustain the reform momentum”
and maintain investor confidence in the markets to lessen
volatility.
 --AFP
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