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Muslim fighters to force Philippines to lower economic growth expectations

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June 17, 2000 

 

MANILA, 16 (AP) - The cost of a military offensive against Muslim rebels in the southern Philippines will force the government to lower its economic growth expectations for this year, Finance Secretary Jose Pardo said Friday.

      

Pardo said the amount of the slowdown will depend on how long the fighting continues.

      

"We still project growth in our economy," he said.

       

Pardo said the government is preparing various "simulation models" to evaluate the impact of the crisis on the economy.

      

Pardo did not specify how the government's 4 percent to 5 percent growth target may be affected, although other officials have said the focus now is on achieving the lower end of the projection - a goal some economists believe is beyond the government's grasp.

      

Even before the fighting flared in the southern Mindanao region, the Asian Development Bank forecast the Philippines' gross domestic product would expand 3.8 percent this year.

      

Growth in the first quarter was 3.4 percent and probably would have been around 4 percent were it not for weak agricultural production. Officials acknowledge that farm output in Mindanao, an important rice and corn growing region, has been affected by the fighting.

      

The government has not disclosed the cost of funding military operations in Mindanao. Some estimates put the amount at between 10 million pesos (dlrs 235,000) to 20 million pesos (dlrs 470,000) a day, although some observers believe these figures may not be accurate.

      

Budget data issued this week clearly show it is digging into its coffers.

      

In May alone, the government's deficit totaled 20.8 billion pesos (dlrs 489 million), far higher than the targeted 11.2 billion pesos (dlrs 263 million). In the first five months of 2000, the deficit totaled 34.1 billion pesos (dlrs 802 million), compared with a targeted 32.5 billion pesos (dlrs 764 million).

     

Other factors, such as rising interest rates and the weak peso, also weighed on the budget deficit, but funding the fighting was cited by Pardo as among the "severe constraints" that the fiscal system has been under this year.

      

With the Philippines viewed as a big political risk by many investors even before the escalation in fighting, any signs that the government will badly overshoot this year's 62.5 billion peso (dlrs 1.5 billion) budget deficit target could inflict further damage on an already weak peso and stock market.

 

 


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