THE ROOTS OF THE PHILIPPINES' ECONOMIC TROUBLES,
INTRODUCTION
Economic and political indicators, like appearances, are often deceiving. In mid-1983, the Republic of the Philippines appeared to be on the road to eccnomic recovery and political stability. After more than two years of deep depression, export prices had rebounded upward, industrial production had increased., inflation had fallen from double digits to 7 percent, and govern- ment spending had been slashed 30 percent below the 1982 level.
The political situation, which in the past always affected economic growth, also appeared stable. Martial law had been lifted in January 1981, presidential and barangay (city ward and rural village leaders) elections were held in April 1981 and June 1982 respectively, and the political opposition was in disarray. From all appearances, popular support for the government ran high, and the position of President Ferdinand E. Marcos was secure.
By fall 1983, however, a dramatically changed, somewhat nega- tive picture of the Philippines emerged. In mid-October, the government requested a 90-day extension on a $500 million foreign debt repayment owed between October 17, 1983, and January 16, 1984. By year's end, the nation's external debt was said to be $30 billion instead of the projected $18 billion, and*the balance- of-payments deficit had climbed above $2 billion. In September, industrial production fell for the first time in several years, and huge layoffs seemed imminent in the first quarter of 1984, given an extremely low inventory of materials in manufacturing firms. The rate of inflation doubled following two devaluations of the peso in June and October. Also, the country faced its worst liquidity crisis since 1945 due to an estimated $1 billion capital flight from late August to December
Along with these economic woes came seriW-is political insta- bility. The assassination of opposition leader Benigno "Ninoy" Aquino on August 21, 1983, incited massive demonstrations in the streets of Manila. And early in November, 700 of the country's top businessmen and industrialists confronted Marcos with their grievances about the country's mismanagement.
During early 1984 both the political situation and the econ- omy continued to deteriorate. Some observers expressed serious pessimism about the future of the Philippines. There were sug- gestions that an economic collapse would lead to anarchy or a communist takeover.
The recent National Assembly elec tions have sounded a hope- ful note. While the current crisis will probably extend through much of 1984, the long-term prospects for political stability and economic growth are not unfavorable. Since political stability .depends on dealing with economic problems, the government must give a high priority to economic development. Thus it is essen- tial to understand the roots of the Philippines' economic troubles.
