Country Report Philippines April 2009

Outlook for 2009-10

• The president, Gloria Macapagal Arroyo, will remain in power until her term ends in 2010. Following the defeat of an impeachment complaint in November 2008, the president should face no more attempts to impeach her.
• Despite persistent plotting against the president, she will retain the loyalty of the army's senior commanders and a coup d'etat would not receive the popular support required for it to succeed.
• Ms Macapagal Arroyo will continue with constitutional reforms to replace the current presidential system of government with a parliamentary one. The opposition will see the reforms as a ruse by the president to remain in power.
• The Economist Intelligence Unit now expects the economy to contract by 1.9% in 2009 (from a fall of 0.6% previously), owing to increasing concerns over remittance inflows and investment prospects.
• The government's budget deficit will widen to P195bn (US$4.1bn), or 2.7% of GDP, in 2009, as a result of lower than expected revenue and higher expenditure aimed at counteracting the economic downturn.
• A narrower trade deficit is expected to result from lower prices for commodity imports in 2009, but lower remittance inflows will cause the overall current-account surplus to fall in 2009.

Monthly review

• Corruption scandals, including the rigging of bids for a World Bank-funded road project, the diversion of government fertiliser funds and the collapse of a group of rural banks, have dominated the political scene in recent months.
• A long-standing dispute between the Philippines and China over title to a set of islands in the South China Sea has flared into life.
• The target budget deficit for 2009 was revised in February to P177.3bn, up from the previous forecast of P102bn.
• On March 5th the Bangko Sentral ng Pilipinas (the central bank) cut its main policy interest rates by 25 basis points each.
• The headline rate of consumer price inflation, which previously had fallen for five consecutive months, picked up marginally in February to 7.3% year on year, from 7.1% in January.
• January saw a 41% year-on-year decline in merchandise export earnings, which marginally exceeded the 40.3% fall in December, making it a new record year-on-year drop.

Source: Country Report

This report covers the following industry codes:
SIC Code: 39;70
NAICS Code: 31;72