"More political bombshells in the last quarter of the year could glorify early doomsday forecasts that the peso will record new highs," said former Socio-economic Planning Secretary Cielito F. Habito. "Your guess is as good as mine."
Habito said the P54 to P54.50 range is consistent with the country’s economic fundamentals, but the peso is being pushed closer to the P55 range by speculative forces. "Political reasons are pushing it up, depending on the perceptions that would motivate market movers," he added.
Described as "political noise," the prospects of ending the year at a good note is clouded by uncertainties foremost of which is the 2004 national elections.
President Arroyo makes a public announcement on whether she is running or not. "It creates an atmosphere of uncertainty and that affects economic planning and long term planning for business. The margins of uncertainty and unpredictability is heightened, thus the sooner we can narrow down that level the better for the economy."
From an economic standpoint, the outcome of the election would be of less consequence than the credibility of the elections itself, said the Ateneo Center for Economic Research and Development (ACERD) of which Habito is the director.
"Any indications to the contrary could fuel renewed adventurism on the part of those who would resort to extra-Constitutional means to gain political control. Such an eventuality would be disastrous, and could very well bring the economy to a fatal crash landing," ACERD said.
The Bangko Sentral ng Pilipinas (BSP) had predicted that the peso would stay within the 54-to-a-dollar range, taking into account an inflation level of three to 3.5 percent although the economy is believed to be capable to dealing with a rate of over 4.5 percent.
Even if the country’s gross domestic product (GDP) results in the lower end of the forecast, the experts still see a stable peso in the P54 range. The national government is targeting a GDP growth of 4.0 to 4.5 percent while private sector analysts including themultilateral agencies are looking at a modest average growth rate of 3.6 percent.
All agree that the most critical factor that would tell on the economy and the peso, would be the fiscal deficit.
Revenue collection is the weakest link in solving the- deficit problem.
Perceptions drive the economy, perceptions can likewise dictate the peso value.
Other key "political noise" are the Jose Pidal scandal, the Oakwood mutiny, destabilization and threats of military takeover, the final ruling on. Kuratong Baleleng case, the ruling of the civilian Feliciano Commission, the Fathur Al-Ghozi escapade, and the settlement of the rebellion case against the Estradas.