Philippines: President Estrada Steps Up, the Economy Slips Down

1998

Professor Mark Turner

The election promises of Joseph Estrada were to elevate poverty alleviation to the highest policy priority and to continue with the liberalization program of his predecessor, Fidel Ramos. On June 30 Estrada formally takes office and will be expected to deliver on his promises. This will be a difficult task as the Philippine economy, which has been moderately successful in dealing with the Asian currency crisis, seems to be heading for tougher times. The May figures on inflation were worse than expected and saw the annual rate hit a 2-year high at 10.3 per cent. Government planners had hoped to keep it in the range of 7.5-8.5 per cent. Unemployment also jumped to 13.3 per cent in April, the highest figure since 1991. Non-performing loans of banks also rose by 1.57 per cent to 8.27 per cent, already above the ceiling of 8 per cent targeted for 1998 by the Central Bank. The IMF rapped the Philippines over the knuckles for understating the foreign debt by US$5 billion. In addition, the National Economic and Development Authority (NEDA) is recommending the downward revision of the GNP target for 1998 from between 3-4 per cent to 2.5-3.5 per cent. These declining economic conditions have led to a shortfall in government revenue with the budget deficit surging to 15.4 billion pesos in April, significantly above the target of 75 million pesos. In this economic context, President Estrada is likely to have considerable problems in achieving his poverty reduction goals. Revenue shortage will mean inadequate resources for government policies which target the poor. The President's proposal to scrap 'pork barrel' funding for Congressional representatives and divert these funds to poverty alleviation is likely to encounter stiff opposition in Congress. The revised growth figures will adversely affect job creation. President Estrada's plans for accelerated privatization might also swell the ranks of the unemployed while his proposed tax amnesty is unlikely to be a great revenue earner, going on previous experience.

WATCHPOINT: Will President Estrada's honeymoon period for economic liberalisation last a little longer?

 

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