Country Report Philippines March 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, 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.
• In 2009 the economy will contract for the first time in ten years, with real GDP down by 0.6%, as exports of goods and services decline by 8% owing to weaker global demand.
• The government's budget deficit will widen to P195bn (US$4.1bn), or 2.6% of GDP, in 2009, as a result of lower than expected revenue and higher expenditure aimed at counteracting the economic downturn.
• The current-account surplus will widen in 2009, as the merchandise trade deficit narrows as a result of lower global commodity prices. In 2010 the current-account surplus will also narrow.

Monthly review

• An opposition senator, Panfilo Lacson, has accused the president's husband, Jose Miguel Arroyo, of accepting bribes in exchange for attempting to influence a tender for government road-building contracts.
• On January 29th the Bangko Sentral ng Pilipinas (the central bank) cut its overnight borrowing and lending rates by 50 basis points for a second time in as many months.
• Plans to liberalise the electricity market have been delayed by the decision of a consortium led by a French energy company, GDF Suez Energy International, to pull out of the purchase of a 600-mw coal-fired power plant.
• The economy did not slow as sharply as expected in the fourth quarter of 2008. Real GDP expanded by 4.5% year on year, compared with growth of 5% in the previous quarter.
• Three leading US computer-chip manufacturers have announced plans to cut thousands of jobs at their production facilities in the Philippines.
• In December merchandise exports fell by 40.4% year on year—the sharpest fall since records began in the early 1980s. A 47.6% drop in exports of electronic goods accounted for two-thirds of the fall.

This report covers the following industry codes:
SIC Code: 48;49
NAICS Code: 517;22