Only last week there were threats of massive job cuts, but now the peso has stabilised and the business community feels far more confident
MANILA—The battered Philippine economy is poised for a modest recovery this year due to overflowing business confidence that greeted the ouster of the corrupt Estrada government and the entry of a competent administration led by President Gloria Arroyo, officials and businessmen said.
Reflecting the business community's optimism, owners of big manufacturing companies announced earlier this week that they will forgo plans to lay off some 100,000 workers, which would have included a slowdown in production.
Business tycoon Raul Concepcion, head of the Federation of Philippine Industries, a grouping of 80 big manufacturing companies, said the complete turnaround of business mood led them to rethink the planned retrenchment.
They expect the economy to perk up this year with the entry of more investors now that the political question has been settled, he said.
The new government, energised by infectious business confidence, upgraded its domestic growth forecast for the year to between 3.8 and 4.3 per cent. The ousted Estrada administration had previously forecast growth at between 3 and 3.5 per cent.
New Economic Planning Secretary Dante Canlas said the
growth target is underpinned by renewed business confidence which we
are already seeing with the improvement of the reduced volatility of
the peso-dollar exchange rate.
The local currency's value against the US dollar had stabilised at 48 pesos immediately following Mrs Arroyo's move into office after months of turbulent or wild swings that reached as high as 56 pesos.
Only last month, widespread pessimism wrapped the business community due to the political uncertainties brought about by the corruption trial of impeached President Joseph Estrada.
Employers then warned of massive job cuts due to a standstill in the manufacturing sector resulting from low consumer demand. But all that had changed in little over a week.
Now there is hope, there is a chance for a turnaround and the
economy might see a recovery within the year, said Mr Guillermo
Luz, executive director of the Makati Business Club, a grouping of
captains of industry.
Last year everything was bleak because of the loss of confidence
and there was almost no hope, no faith, no expectations of change,
Mr Luz stressed.
The signs are indeed upbeat.
Portfolio investments or the so-called
hot money also started
to trickle in as reflected by the positive US$15.6 million (S$27
million) net inflow recorded for the month of January, the Central
Official data released by the Central Bank showed a reversal in capital pullout experienced last December with a positive gross portfolio investment inflow of US$28.8 million. Portfolio investments outflow reached US$13.2 million.
But Mr Canlas warned that the economy faces lingering risks which will affect recovery, such as the possible return of the El Nino phenomenon.
Severe drought brought about by El Nino weather disturbances will certainly affect agricultural production which was projected to grow by 2.4 per cent, he said. The agricultural sector contributes about 30 per cent to growth.
Average inflation for the year was pegged at 6 to 7 per cent.
The new Economic Planning Secretary said the
weak spots in this
recovery that must be
addressed immediately include the
yawning budget deficit, high unemployment rate, and the fragile state
of sectors such as banking, construction, and property development.
Latest government data show that more than three million Filipinos were out of work last year.
The Estrada administration, Mr Canlas stressed,
left the finances
of the public sector in a very perilous state.
Nonetheless, the former economics professor said, restoration of investor confidence in the Philippines is a good starting point to start rebuilding the economy that was battered by mismanagement.