Political crisis hampers: RP economic recovery

With strong economic fundamentals boosted by the recent implementation of Reformed Value Added Tax (R-VAT), the Philippines is in no doubt on its way to economic recovery, however, with the current political squabble festering investors' confidence, the economy remains far from reaching the light at the end of the tunnel.

In an economic briefing hosted by the Money Market Association of the Philippines held at the City Sports Club recently, former treasurer of the Philippine government Sergio Edeza said improving peso is foreseen next year, unless there will be major political issues that destabilizes the positive movement of the "surviving" economy.

He said if the anti-Arroyo administration parties are going to file another impeachment case to oust the President next year, the Philippines will expect another "bumpy" economic road.

Because of the recent implementation of RVAT, investors' confidence in the foreign market, the Philippines credit picture have improved, while stock market performance has shown encouraging movement.

The peso value has strengthened further, as the effect of improving economic picture in the country, through the passage and implementation of RVAT law.

Although the RVAT or eVAT has roused negative reaction from the majority of Filipinos, with fears that it could result to much higher cost of living with the onset of non-stop increases of oil price, Edeza said eventually the mainstream Filipino people can adjust, especially if they see the positive result of the eVAT initiative.

If the country's "destabilizers" would come to their senses and stop the political war for the sake of the nation's recovery next year, the peso is seen to stabilize below P54 versus US$1.

There are three major factors that brought and will bring the peso to gain strength again, these are the growing OFW remittances, improvement of the Philippines credit rating, and Chinese Yuan revaluation.

"It is only the country's political environment that will cause to change a lot of positive projections next year," said Edeza who is no longer with the government, and now plays as an outside observer of the Arroyo-ran administration.

If the political climate will not stabilize next year, this will again create jitters to investments, stock market, thereby affecting the currency value performance.

Although, he said that some foreign investors have discounted the "unattractive" political condition in the Philippines, but only basing their investment plans on the successful corporations operating the Philippines, Edeza reiterated that political bickering must be out of the picture next year, otherwise, the country will continue to suffer, especially its people.