Impact of Makati siege on FDIs minimal — ADB

A senior official of the Asian Development Bank (ADB) said the Makati siege staged by young military officials over the weekend has a minimal impact on existing foreign direct investments (FDIs) in the Philippines.

Pradumna B. Rana, director of ADB’s regional economic monitoring unit (REMU), said the projected growth rate of the country’s economy will still hover at the three- to four-percent range.

Rana said the weekend military adventure Impact of was a "short event" and was well negotiated by both sides although there were some knee-jerk reactions in the financial markets.

"One should not be an alarmist," the ADB official said, adding that foreign markets should also await the results of the two commissions before making any significant decisions.

He said that in the long term, the impact would be on FDIs although fund managers and other foreign investors "know the Philippines very much and they will continue to stay."

"We have to see what will be the outcome of the two commissions, the investigating committees that have been set up, what recommendations they come up with, and how they are implemented by the incumbent administration. So there is some uncertainty there."

"Despite slower growth in government consumption due to the fiscal consolidation programs of the government, private consumption and investments contributed to an improvement in domestic demand (for the Philippines)," the ADB said in a report called Asia Economic Monitor (AEM).

The report said the peso remains steady, appreciating by an average one percent in the first semester of the year.

Concerns however were expressed regarding weakening export growth and "worsening external environment."

East Asia’s growth could pick up in the second half to reach 5.6 percent for this year and 6.3 percent in 2004, as the economic impact of the Severe Acute Respiratory Syndrome (SARS) has turned out to be moderate, the ADB said.

An unfavorable external environment and the SARS epidemic have combined to keep first half growth muted in East Asia, the AEM said. East Asia comprises the 10 ASEAN member countries plus the People’s Republic of China (PRC) and Republic of Korea.

The slow first half has dragged down the projected figure for the whole of 2003, which will fall short of the 6.6 percent growth achieved in 2002, the report added.

Other external conditions putting or reducing pressure on East Asia environments are the direction of world stock markets, the end of the Iraq conflict without adverse effects on oil prices, and the SARS.

China is expected to post the highest growth this year at 7.5 percent while Singapore is projected to turn in the lowest growth of a little more than one percent. Indonesia, Republic of Korea, Malaysia, Philippines, and Thailand will grow at around three to four percent, the ADB has projected.

Growth should be higher next year for almost every country of the region, the report says, with most expected to exceed five percent, and the PRC reaching  7.5 percent.