Despite political crisis, economy growing
Despite the adverse political situation, President Arroyo expressed optimism yesterday that the economy will continue to grow, especially with the implementation of the expanded value-added tax (EVAT) law starting Nov. 1.
“As we are poised for the expanded VAT implementation with strong safety nets, global confidence in the Philippines is resurgent,” she said in a statement after meeting her economic advisers at Malacañang.
“Our economy continues to look up because this government is closely and consistently focused on it,” said the President, whom the opposition has been trying to unseat for the past five months on charges of election fraud.
Brushing off fears that the EVAT law would raise inflation and hit the poor the hardest, Mrs. Arroyo said the Supreme Court go-ahead for the EVAT last Tuesday, paving the way for full implementation on Nov. 1, has boosted investor confidence.
The expanded VAT is the centerpiece of the government’s campaign to control the budget deficit and forestall a looming fiscal crisis, but even Mrs. Arroyo’s allies worry that it may worsen inflation at a time when dissatisfaction with her administration remains strong.
Mrs. Arroyo said the country was “on the threshold of economic takeoff” if it could sustain the interest of foreign investors and creditors who have been encouraged by key reforms such as the expanded VAT and opening of the mining industry.
International credit rating agencies had previously downgraded the Philippines’ international credit outlook due to the failure to implement the expanded VAT.
However, analysts say the Philippines must actually implement the controversial tax measure, which faces legal challenges from opposition and leftist groups, before rating agencies will consider an upgrade.