Commentary: Wall Street Journal on Arroyo Administration's economic feat
Iloilo City (10 September) -- One of the world's prestigious papers cited President Gloria Arroyo's administration for its "harsh measures which are now paying off with the country's economic growth rate."
James Hookway in the August 31-September issue of The Wall Street Journal Asia wrote the Philippines has been rebounding after languishing for decades while its neighboring countries raced ahead.
Hookway further noted that the nation's economy is expected to post its fastest growing rate this year, since early 1990s, "despite the economic shadow cast by the global credit squeeze sparked by problems in the US."
He also said that the Philippine economy grew at a rate of 7.5% annual rate in the second quarter while the stock market has soared over the past two years besides the fact that foreign investors are coming back.
The article cited the Arroyo Administration's decisiveness in radically expanding the Philippines' sales tax in 2005 which helped stabilize the country's finances in the midst of fears of financial collapse.
It also recalled that President Arroyo's priority after she won in the 2004 presidential election was to put the nation's chronically ill finances in order, characterized by an anemic tax revenue due to endemic corruption among tax officials and loopholes in the tax code.
Hookway observed that the combination of weak state revenue and high foreign debt was more than enough to drive away investors, and as Ayala Corp CEO Jaime Augusto Zobel de Ayala said, "the Philippines needed to send a signal."
In 2005 President Arroyo warned that if the Philippines did not act decisively to improve its tax collection rate, it risked becoming the next Argentina, where economic problems led to currency collapse.
Consequently, President Arroyo and her economic advisers began looking for ways to raise more money. Arroyo increased tobacco and alcohol taxes, as her economic team began working to push an expanded sales tax (EVAT).
The article, likewise, noted Mrs. Arroyo's determination not to sacrifice long-term gains for political expediency by refusing to heed advice to limit the EVAT.
She weathered the challenges to the sales-tax increase with the peso nearly rising to 14 percent against the US dollar since the tax took effect, partly due to the inflows of foreign money. The peso is now the second-best performing currency in Asia, after the rupee.
Hookway further noted that with business confidence on the mend, inflation and interest rates have declined. The Philippine Stock Exchange made eight offerings in 2006 aimed specifically at foreign investors, which raised $1.56 billion. (PIA 6) [top]