Philippines shows signs of returning to coma
Jake van der Kamp
The International Monetary Fund has begun to warn that it is running out of money for bailouts of troubled economies.
It can be grateful two of its Asian patients, Thailand and South Korea, are beginning to respond to the medicine it has prescribed, although its most critical patient, Indonesia, remains in the trauma room and faces a long spell in the recovery ward.
But now an Asian outpatient, the Philippines, which checked out of the hospital earlier this year after a stay so long that it can hardly be counted, is beginning to show signs of a relapse just as this IMF hospital is not in a position to take on new patients.
After struggling back into a fiscal surplus in early 1994, the first half figures for 1998 show the Philippine Government firmly back into a deficit of 24 billion pesos. Meanwhile Philippine inflation has crawled back into double-digit figures and industrial production growth is once more sliding.
But more ominous than this is the fact that the country just cannot seem to pull itself back into a current account surplus as the rest of Asia has been doing. The latest figures are up, but this is mostly a seasonal effect.
When taken on a 12-month average basis the figures show a deficit equivalent to 4.5 per cent of gross domestic product, pretty much what it has been for the past five years.
The merchandise trade balance has improved substantially, but this has been offset by a slowdown in net service and investment receipts. Meanwhile, foreigners have kept their money at home and capital inflows have subsided.
The result over the past 12 months has been one of the biggest balance of payments deficits for many years.
It is particularly a critical matter because the Philippine economy has fuelled itself for several years on foreign borrowings, to sustain a liquidity binge resulting from an artificial fix of the peso to the US dollar.
The latest available figures are only up to December, but they show that this pushed the net foreign liabilities of the deposit money banks to almost 30 per cent of GDP. Given the trend in the balance of payments, there cannot have been much improvement so far this year.
Much the same has happened in Thailand, but the Thais have managed to swing their current-account balance sharply back into positive territory and to start unwinding the net foreign liabilities of their banking system.
Thailand shows evidence of having turned the corner. The Philippines does not. But Thailand is the IMF patient, and the Philippines is not.
One of the biggest difficulties is that the Philippine Government does not seem to have confronted the fact that its economic management has failed in some key areas over the past few years. A few admissions that things could have been better done are not the wholesale contrition one now sees in Thailand. Unless things change, Philippine President Joseph Estrada may yet find his country carted off for medical attention like the villains he used to shoot up in his movies.