Published: February 24 2005 02:00 | Last updated: February 24 2005 02:00
It is not every day that government leaders warn that their countries are heading for an Argentina-style fiscal crisis. Gloria Macapagal Arroyo, the
Not, apparently, members of the national Congress, who are holding up Mrs Macapagal's proposals for badly needed tax reforms - yet who reacted indignantly when Moody's rating agency sharply downgraded the country's sovereign debt this month. Nor is the stock market, which remains strong. Nor, so far, do foreign investors seem any less tempted by the relatively high yields on Filipino issues.
The president's alarmism may seem overdone. Unlike
Yet those measures have, at best, only slowed the sharp deterioration in the country's public finances since
The country is far from achieving a primary budget surplus large enough to stabilise debt levels - a goal Mrs Macapagal has set for 2010. Congress has put even that leisurely timetable in doubt by passing only two of eight emergency fiscal measures she had vowed to enact by last autumn.
The economy's outwardly robust performance has fuelled political complacency. It grew more than 6 per cent last year and the current account is in surplus. However, this was due largely to remittances and call-centre earnings. Manufacturing exports to
Those structural weaknesses increase the
Mrs Macapagal understands the urgency. However, she has too often vacillated in public and yielded too readily to opposition from vested interests. Her re-election last May handed her valuable political capital. She should now spend it by staking her future on ramming her fiscal programme through Congress.
Congress's dawdling is as hard to justify as foreign investors' willingness to indulge it by snapping up public debt. Although some investors sense a crisis in the making, they reason they can get out in time. The longer Filipino politicians procrastinate, the more likely that is to prove a delusion.***
While the current flow of regional economic developments tend to favor the recovery of the Philippines, complacency by the country's political leaders are likely to cause a setback on its recent gains.
The deep-seated problem with most politicians of all nations are that they tend to be short sighted and reactive instead of being pro-active and work for the long term interests of their constituents.
Political impediments would likely cause short term volatilities, until the domestic leaders realize that the 'crisis' is staring them on their face. As for the Philippine President, hasn't she learned from Aesop's fable "The Boy Who Cried Wolf"?