Filipino Economics

The Philippines remains a mere cub in the Asian tiger pack, despite the efforts of newly re-elected President Gloria Arroyo to stabilise the economy since she took office in 2001. True, the Philippines was not as badly affected by the Asian economic crisis of the late 1990s as other countries in the region, thanks to significant deregulation and privatisation. However, GDP growth in recent years has averaged around 3%, barely keeping pace with population growth and falling well short of levels achieved by the country's neighbours.

Traditionally a heavily agriculture-based economy, the Philippines has moved into electronics in a big way. It has well-educated, English-speaking workers who have proved an asset in facing up to the demands of new technology. However, it is hugely dependent on economic conditions in its two main export markets, the US and Japan.

Mrs Arroyo, a former economics lecturer who helped draft much of the legislation that opened up the country's markets, campaigned strongly on the basis of her experience in the field. However, many analysts see her track record so far as unremarkable. "Most people see her as the lesser of two evils and that's why I think she won the election," says Scott Harrison, managing director of risk consultancy Pacific Strategies and Assessments. "It's also a little shocking when you think about it, as her opponent has never held public office, has never been a significant businessman, has tabled no policy, was a stealth candidate and ran a fairly inept campaign and only lost by 3 or 4% of the vote."

The economy has not kept pace with other Asian nations. In her attempts to convince the sceptics, Mrs Arroyo faces a raft of challenges. Across the country, there is a huge gulf between rich and poor, with the wealthiest 10% of the population earning more than 20 times as much as the poorest 10%. The Philippines also labours under a persistent budget deficit of more than 5% - not because the government spends too much, but because not enough tax revenue is coming in. After President Joseph Estrada was ousted by a military-backed revolt in 2001 and put on trial for economic plunder, corruption and political turbulence understandably loom large in the minds of nervous foreign investors.

The uncertainty surrounding the outcome of the election has also inflicted its share of economic pain, with the Philippines peso closing at an all-time low in 2004. The government is forecasting growth, but analysts doubt that this is sustainable. Mrs Arroyo is well aware of the problems, but her power to solve them depends more on the realm of politics than economics. Unless she can improve on her disappointing record in getting reforms through the country's stubborn Congress, the two-fifths of the population that live in poverty will see little improvement in their lot.

Adapted from BBC news, June 2004

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