WE JUST SEEM TO ALWAYS SHOOT OURSELVES IN THE FOOT WHEN THINGS START TO LOOK BETTER - CAMACHO
MANILA, August 28, 2003 (STAR) Last month’s failed military rebellion has slowed economic growth in the Philippines and punished the local currency but prospects for the second half of the year are bright, Finance Secretary Jose Isidro Camacho said yesterday.
"We just seem to always shoot ourselves in the foot when things are beginning to look better," Camacho told the Foreign Correspondents Association, detailing what he said was a "sense of frustration" among the business sector.
The peso went into a tailspin over the past month amid a confluence of adverse political developments, topped by a military rebellion that was put down by President Arroyo on July 27.
A controversial court order suspending central bank governor Rafael Buenaventura for a year, which the bank intends to contest, as well as corruption allegations against Mrs. Arroyo’s husband Jose Miguel Arroyo are also being cited as possible reasons.
The local unit rallied strongly in late morning trade Wednesday, rising to 55.000 to the dollar compared with 55.450 later Tuesday as Mrs. Arroyo ordered the central bank to use monetary tools to stabilize the foreign exchange market and punish speculators.
Camacho said "there was momentum picking up" after the gross domestic product (GDP) rose by a stronger than anticipated 4.5 percent in the three months to March.
"If anything it (the mutiny’s fallout) would be loss of momentum as far as the economy is concerned."
He said this deadweight would be felt most acutely in investments, with government spending having only limited impact because of self-imposed austerity measures over the past two and a half years to rein in the national budget deficit.
The government is scheduled to release GDP figures for the three months to June today.
Camacho said it was already a given that the numbers would be weaker compared with the first quarter due to the fallout from the SARS epidemic, the Iraq war, El Niño drought and a general slowdown in Asian economies that have become "a more important market for the Philippines."
He did not give specific figures.
But Camacho said GDP growth should resume its momentum in the second half.
Japan’s expected economic recovery should give "a strong push," he said, adding that exporters are seeing increased orders for the second half.
Camacho also said the "peso is undervalued today" because of the political premium, adding that the situation would put pressure on Manila’s foreign debt servicing requirements.
"The sensitivity estimates for this year would show that there’s about ( P1.5 billion dollars) in terms of additional debt servicing and maybe interest payments for every peso decline," he said.
The government hopes to make up the added burden with increased import duties, he added.
Camacho said he did not discount "the possibility of adjusting the borrowing program" of the government after the central bank raised concern over Manila’s decision to rely on external sources for only 30 percent of financial requirements for next year.
He said the central bank was concerned the government could be forced to tap the local foreign exchange market to service debt, putting further pressure on the peso.
He said the central bank’s policy-making monetary board was expected to meet Thursday to discuss a strategy to ease the peso’s fall. — AFP
Reported by: Sol Jose Vanzi
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