(STAR) By Marianne V. Go - Philippine Chamber of Commerce and Industry (PCCI) chairman Miguel B. Varela, who is also the chairman of the Employers Confederation of the Philippines (ECOP), foresees business conditions to continue to improve especially in the first quarter of 2007.

According to Varela, "all indicators point to bright prospects for 2007."

Varela pointed out that the growth of investments appears to have surpassed targets and the budget deficit is lower than expected.

He also noted that government revenues continue to grow, while the country’s international reserves level is "unprecedented". Varela added that "the outlook for our stock market is bullish for next year."

Furthermore, Varela predicts that the peso would continue to appreciate.

"I think the peso will continue to climb up to P48:$1 by the new year due to the increased surge of foreign remittances." Moreover, Varela noted, investor interest, especially in the massive infrastructure program highlighted in President Arroyo’s State of the Nation Address, continues to improve.

The PCCI and ECOP chairman also commented that "the privatization of our power sector would help sustain and boost opportunities for more investments."

Varela acknowledged that one important element contributing to the good economic prospects for next year is the improved capacity of the government to raise revenues.

Improved collection of government revenues, Varela said, enable the Arroyo government to cut the country’s chronic deficits.

"Those revenues allowed us, in fact, to repay some of our indebtedness. Improved revenues allow government, as the 2007 budget indicates, to raise public sector wages and thus prevent the migration of talent out of the bureaucracy. It helps strengthen the currency by easing repayment concerns on our debt and diminishing interest charges on them," Varela said.

The Bureau of Internal Revenue (BIR), Varela further acknowledged, has done a good job pushing internal revenue collections up by 23-percent year-on-year.

"Our revenue inflows are now at unprecedented levels. This is so despite the fact that it appears there has been no increase in the budget for BIR," Varela said.

He pointed out, though, the need to ensure the sustainability of revenue performance if the government is to keep the momentum of its resurgent economic growth going.

Varela stressed that sustaining revenue collection is an important factor in the virtuous cycle we need to see in the domestic market and the fiscal situation.

The PCCI, however, expects the first half of 2007 to experience an economic slowdown as the country braces for the forthcoming elections.

Thus, for the first half of 2007, the PCCI expects increased spending and the usual political bickering normally associated with Philippine politics to somehow derail the economic momentum.

Fortunately, Varela assured, "our strong economic fundamentals would enable us to bounce back despite losses from three successive super typhoons."

Overall, Varela said, the PCCI expects the economy in 2007 to be better than this year.

Varela reiterated that the Philippine economy is gaining momentum on the back of stringent economic and fiscal reforms.

Thus, Varela concluded, with the huge support of the national enterprises, our continued partnership with government will definitely result in improving the country’s business climate.

Chief News Editor: Sol Jose Vanzi

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