Fears linger that politics may trump economy in 2004

With national elections coming up in May, there is growing concern in the Philippines that political conflict will overshadow economic priorities in 2004 – just like they did in 2003.

"The major factors that have been dampening sentiment are non-economic: basically political (concerns), peace and order," said Cecilia Tanchoco, economist of the Bank of the Philippine Islands.

Government planners are confident that the country’s gross domestic product (GDP) will hit at least 4.2 percent this year and are expecting growth to range from 4.9 to 5.8 percent in 2004.

The Asian Development Bank (ADB) forecasts four-percent GDP growth in 2003 and 4.5-percent growth in 2004.

While this is respectable by Philippine standards, it lags behind the country’s neighbors such as Malaysia, Thailand and Vietnam.

Mired in debt and with about one-third of the 82 million Filipinos living in poverty, an unemployment rate in double-digits and a high birth rate of 2.36 percent, the country has become the laggard in a region of economic "tigers."

Ernesto Pernia, a senior economist of the ADB, said the Philippines, like many other countries in the region, was hit hard by overseas developments in early-2003 such as the Iraq war and the outbreak of Severe Acute Respiratory Syndrome (SARS).

Local problems too took their toll in the second half of the year, among them a foiled coup attempt in July. Although the attempt by some 300 soldiers to topple President Arroyo was quashed in less than a day, fears of another mutiny have continued to fester.

Congress, meanwhile, became absorbed in corruption allegations against President Arroyo and an opposition-led attempt to oust the Supreme Court chief justice, ignoring vital and much-needed reforms.

"If not for the negative factors ... locally-made political disturbances, the growth rate would have finally hit five percent" in 2003, said Pernia.

The next few months will be dominated by the political uncertainty related to the upcoming national elections.

"We know the political noise will intensify ... We know that uncertainty will be more intense," Tanchoco of BPI said.

Investor fears have been heightened by surveys showing that the apparent front-runner in the presidential race is movie star Fernando Poe, a high-school drop-out with no experience in public service.

Gomer Tan, analyst of Regina Capital Development Corp. says that even in the best case, "any sitting president would have a hard time uniting the politicians as well as moving the economy."

If it were not for such political concerns, the outlook would appear to be improving for the Philippines, which is expected to benefit from an upturn in the developed countries, particularly its main export markets, the United States and Japan.

Sergio Ortiz-Luis, president of the Philippine Chamber of Commerce and Industry, the country’s main business organization, said that election spending will likely boost the econom"The economy will end up growing at least 4.5 percent this year and next year it will be better," he said, citing the latest economic indicators.

However, recently-resigned finance secretary Jose Isidro Camacho warned that the Philippines must undertake massive reforms if it wants to take advantage of opportunities offered by the worldwide economic recovery.

"The Philippines indeed is faced with this dilemma: do we keep the old pace of growing at three to five percent, even at the best of times, or do we start aspiring for better things, growing at eight to 10 percent so we can really fulfill our ambition of lifting our poor people out of poverty?" he said. – AFP