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Thursday, July 28, 2005
Quick solution to crisis best for RP -economist
By Jessica B. Natad
Sun.Star Staff Reporter
For the economy to post modest growth in the next few years, the Philippines must go for quick or medium-term, but credible, solutions to the political crisis that is now hurting investor confidence.
Cayetano Paderanga, an economist and former member of the Board of Governors of the Philippine Stock Exchange, warned that a slow, protracted and unacceptable solution will not do anyone in the country any good.
“And according to past experience, when everything is lost, it will take some time—five to six years—to get the economy going again,” Paderanga said on the sidelines of an economic briefing organized by Cibi Inc. and Wealth Development Bank at the Waterfront Cebu City Hotel and Casino yesterday.
President Gloria Arroyo faces impeachment, as well as calls for her resignation, after the opposition accused her of rigging last year’s presidential vote.
Paderanga defined a quick solution as a measure that would take effect within three months, and a medium-term solution as one that will take effect in three to six months. A solution is credible if it is accepted by majority of the Filipino people.
He said a quick and credible solution, such as the the resignation of President Arroyo and the succession to the presidency of Vice President Noli de Castro, will allow the Philippine economy to grow by 4.5 percent to five percent in the coming years.
A credible, medium-term solution, on the other hand—like the formation of a constituent assembly, the impeachment of President Arroyo and the installation of Vice President de Castro to power—will enable the economy to grow by 3.5 to 4.5 percent.
Paderanga said that even without the political crisis, the economy was already affected by external factors, such as the high international interest rates and the increasing oil prices that have resulted in the slowdown of the economies of the Philippines’ major export markets like the United States, Japan and Europe.
The Philippines is currently targeting 5.3 percent growth this year, down from a seven-year high of 6.1 percent in 2004.
He said the outcome of a quick and credible solution would be a return of investors’ confidence, strengthening of the peso against the US dollar, acceleration of the inflow of foreign exchange and investments, increase in domestic liquidity and decline in interest rates.
On the other hand, a slow and unacceptable resolution would result in the drying up of domestic liquidity and postponement of investment plans.
Paderanga also said shifting to a parliamentary form of government will not guarantee a stable economy.
“The advantage is that there will be a routine way of replacing the (country’s) leader. One of the disadvantages is political instability because of the constant change in leadership,” he said.
President Arroyo suggested the shift from the presidential form of government during her State of the Nation Address on
Monday.
A parliamentary system, with its unicameral structure, is said to speed up the passage of legislation.
But in a separate interview, Belgium’s Economic and Commercial Attache Vincent Butaye said one of the requirements of a parliamentary form of government is a stable and mature political system.
(July 28, 2005 issue)
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