EDITORIAL - Hard times ahead

The International Monetary Fund, businessmen and even self-styled psychics can’t be all wrong: 2001 is going to be a bad year for the economy. Even without the scandal that has plunged the administration into its worst political crisis, the massive government deficit had already prompted the IMF to withhold its seal of good housekeeping from the Philippines. The IMF nod is needed for the release of crucial foreign funds.

The other night, IMF chief of mission Markus Rodlauer said the economic outlook for the Philippines for 2001 is "highly uncertain" and growth is expected to slow down in the first half of the year, with consumer prices likely to rise. Rodlauer said the extent of the slowdown would depend partly on how quickly the current political crisis could be resolved. There are also world oil prices and investor sentiment to worry about.

Investor confidence flew out the window early this year, with the scandal surrounding the alleged manipulation of Best World Resources shares. The offensive in Mindanao, first against the secessionist Moro Islamic Liberation Front and then against the Islamic fundamentalist Abu Sayyaf group, added to President Estrada’s popularity but drained national coffers. Before the Abu Sayyaf could be finished off and all the hostages recovered, Ilocos Sur Gov. Luis Singson exploded his bombshell against the President.

Even government officials concede that the combined effects of the scandals, the peso’s depreciation to levels lower than in 1997, rising oil prices and the unmanageable deficit would be felt by January, when businesses are forced to shut down or lay off workers. Political turbulence is expected to linger beyond the elections in May.

In this period of crisis, there is greater need for structural reforms. The nation has seen the havoc wreaked on the nation by graft and corruption and lack of transparency. These are problems that must be addressed decisively before the nation can compete in the New Economy. The problem is that the crisis now gripping the nation has so divided the national leadership that any attempt to institute meaningful reforms at this time is likely to fail.