Country Report Philippines January 2009

Outlook for 2009-10

• The president, Gloria Macapagal Arroyo, will remain in power until her termends 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 support of the army's senior commanders, and a coup would not receive the necessary public backing for it to succeed.
• Mrs 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 Philippines' economy will slow sharply in 2009-10. Exports will contract owing to the global economic downturn, while lower inflows of foreign direct investment will depress private investment.
• Inflation will fall in 2009 following an estimated 9.6% increase in consumer prices in 2008, as crude oil prices fail to recover from their current low levels. The rate of inflation will begin to pick up in 2010.
• The current account will remain in surplus in 2009-10. The merchandise trade deficit will narrow in 2009 as imports fall faster than exports.

Monthly review

• The fourth impeachment complaint to be filed against the president in as many years was defeated in Congress (the legislature). The House of Representatives (the lower house) voted 183-21 to dismiss the complaint.
• The Bangko Sentral ng Pilipinas (the central bank) lowered interest rates for the first time in 11 months. At its meeting on December 18th the bank cut overnight borrowing and lending rates by 50 basis points.
• Open access in the wholesale electricity market moved a step closer with the sale of two power stations. More than 70% of the country's power-generation assets are now owned by the private sector.
• The economy had a better than expected third quarter. Real GDP grew by 4.6% year on year as strong consumption and investment made up for a smaller contribution from net exports.
• Inflation slowed sharply in November. Consumer prices rose by 9.9% year on year, compared with an increase of 11.2% in October.
• In October merchandise exports (on a customs basis) fell by 14.9% year on year, the sharpest contraction since December 2001. Sales of electronic goods were down by 18.9%.

Source: Country Report