With both President Arroyo and her main contender, movie star Fernando Poe Jr., yet to offer hard financial policies, the peso has gone into nosedive as the business community holds its breath.
Beyond agreeing that the Philippines needs to get past its low economic growth-mode and rural-based insurgencies that have fueled massive internal migration, there has been scant talk about the country’s parlous finances.
Mrs. Arroyo views closer integration with the global economy as the best hope for the eight in 10 of Filipinos who earn P100 a day or less.
Poe, a self-made multi-millionaire, has vowed to "re-orient" Manila’s globalization policy and restructure sovereign obligations, pledging to address a debt crisis he blames on Mrs. Arroyo’s incompetence.
With the two candidates neck-and-neck in the polls, the peso has hit record lows and investors, already wary after the Philippines suffered a credit downgrade in January, are waiting for the dust to settle.
Donald Dee, former head of the Employers Confederation of the Philippines, says investors are likely to postpone major decisions until December, when the new administration acts on its priorities after its first 200 days in office.
The Makati Business Club predicts 2004 economic growth will be spotty and track last year’s 4.5 percent clip.
"Political uncertainties related to the national and local elections may further delay entry of foreign investments until the second semester," said the group’s economist Michael Mundo.
Wracked by communist and Muslim rebellions and a jobless rate of 11 percent, the Philippines is kept afloat by an army of maids, seamen, nurses, and bar girls who work abroad. They send home $8 billion a year, the equivalent of 13 percent of the country’s economic output.
But with just over two million Filipinos paying income taxes, the government has been forced to run up debts approaching 90 percent of the gross domestic product.
Interest payments now eat up 37 percent of the national budget and the rest go to salaries and operating expenses, leaving the government precious little for infrastructure or anything else.
This leads to "a continuing dependence on external capital to accelerate economic growth, raising the vulnerability of Philippine financial markets to adverse external developments, and constraining macroeconomic stability," said credit analyst Takahira Ogawa of Standard and Poor’s.
"Unless corrective measures are taken now it could find itself in that situation," Asian Development Bank country director Thomas Crouch said when asked if Manila was now in a debt crisis.
Recession struck with 12-hour daily blackouts during an energy crisis in the late 1990s, which officials warn could return within three years, threatening electronics, the country’s top export industry.
University of the Philippines economist Gerardo Sicat believes the low investment rate underlines the need to amend the 1987 constitution, which locks out much-needed foreign capital in many sectors.
"As a nation, we failed to appreciate that national patrimony resides in the power of the state to tax any economic activity. We mistook control of investment by nationals as a definition of that patrimony," he adds.
Amending its protectionist provisions would allow the Southeast Asian nation to tap "more foreign investment to finance the nation’s development needs."
Both Arroyo and Poe favor rewriting the constitution, with the President agreeing that "the country’s problems stem from our economic and political systems."
The President, who has often blamed legislative gridlock for delaying the passage of revenue measures, has pledged to call for the election of a constitutional convention by 2005 to work for a shift to a parliamentary system. — AFP