DESPITE POLITICAL CRISIS, ECONOMY GROWING -- GMA
MANILA, October 23, 2005 (STAR) By Aurea Calica - Despite the adverse political situation, President Arroyo expressed optimism yesterday that the economy will continue to grow, especially with the implementation of the expanded value-added tax (EVAT) law starting Nov. 1.
"As we are poised for the expanded VAT implementation with strong safety nets, global confidence in the Philippines is resurgent," she said in a statement after meeting her economic advisers at Malacañang.
"Our economy continues to look up because this government is closely and consistently focused on it," said the President, whom the opposition has been trying to unseat for the past five months on charges of election fraud.
Brushing off fears that the EVAT law would raise inflation and hit the poor the hardest, Mrs. Arroyo said the Supreme Court go-ahead for the EVAT last Tuesday, paving the way for full implementation on Nov. 1, has boosted investor confidence.
The expanded VAT is the centerpiece of the government’s campaign to control the budget deficit and forestall a looming fiscal crisis, but even Mrs. Arroyo’s allies worry that it may worsen inflation at a time when dissatisfaction with her administration remains strong.
Mrs. Arroyo said the country was "on the threshold of economic takeoff" if it could sustain the interest of foreign investors and creditors who have been encouraged by key reforms such as the expanded VAT and opening of the mining industry.
International credit rating agencies had previously downgraded the Philippines’ international credit outlook due to the failure to implement the expanded VAT.
However, analysts say the Philippines must actually implement the controversial tax measure, which faces legal challenges from opposition and leftist groups, before rating agencies will consider an upgrade. Seeing the signs As she convened a National Security Council-National Economic Development Authority Cabinet group meeting yesterday, the President cited signs of economic growth despite the political crisis of the last few months.
"Gross domestic product from July to September is expected to be stable at five percent over the same period last year — untrammeled by the political noise," Mrs. Arroyo said.
She also cited other signs of economic growth, such as Nomura International’s upgrading of its investment recommendation of Philippine dollar bonds from neutral to underweight after the Supreme Court lifted the temporary restraining order on the EVAT law last Tuesday.
"We must seize every moment for future prosperity," the President said. "We are at the threshold of economic takeoff and each key sector of society must focus more on building the momentum for growth."
Mrs. Arroyo said the revenues generated from EVAT would spur development and improvement of social services for Filipinos.
Nomura credit analyst John Teng noted that selling pressure on Philippine bonds had eased after the Supreme Court ruled with finality that the EVAT law was constitutional.
He recommended that investors buy sovereign bonds maturing in 2011, 2013 and 2015.
"Despite the doubts and uncertainties, we believe there is scope for the rating agencies to remove the negative rating outlook on the Philippines’ sovereign ratings," Teng said.
Thus far, all rating agencies have a negative outlook for the Philippines.
Despite this, the President said the foreign press has also begun taking a second look at the country’s prospects for stability and growth.
The President added that her government created the Minerals Development Council, an inter-agency body to oversee the development of the country’s mineral resources by forging reputable investments to bring in more jobs.
She also reported that Dell announced it would set up a major customer call center in Makati City early next year.
Dell plans to initially hire and train approximately 700 technical support and customer service agents and has begun recruiting candidates for 70 key executive and administrative positions.
The President is facing nearly daily street protests after the opposition failed to impeach her on charges of electoral fraud. She said her enemies would not stop their efforts to oust her from office.
But the President said she has survived "wave after wave" of destabilization attempts and vowed to continue with her mission to build a strong republic.
During the Cabinet group meeting, Press Secretary Ignacio Bunye said the potential economic scenarios involving the EVAT law implementation and the continuous rise in oil prices were discussed.
The President also expressed elation that despite the political turmoil, "the peso hit a four-month high against the (US) dollar (Friday) in a highly energized market otherwise hampered by street protests."
She said the peso’s four-month high contributed to the historic high of the country’s dollar reserves, and the government’s tightening of its monetary policy dampened investor appetite and triggered foreign selling.
Based on the report of the Philippine Dealing System, the peso gained P0.26 from Thursday’s finish of P55.71 to the US dollar after opening at P55.61 and reaching an intra-day high of P55.43 before closing at P55.45. — With AFP
Chief News Editor: Sol Jose Vanzi
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