Arroyo promises to roll out "bold measures"

By staff and wire reports

MANILA, Philippines -- President Gloria Macapagal Arroyo promised Friday to introduce "bold measures" next week to succor the ailing Philippines economy.

"I know there are many who are getting impatient but I expect it won't take long," she said. "Some bold measures will be undertaken in the coming days to overcome the internal problems that beset our economy."

When pushed to elaborate, she said she would announce the measures next week.

Arroyo did not explain whether the fixes would be political or economic. But experts say Arroyo faces a tough battle introducing reforms that may hurt the economy short-term.

Peso hits five-month low

The Filipino currency, the peso, hit a five-month low of 53.10 against the U.S. dollar this week. It has recovered only slightly, and was trading at 52.86 late Friday.

Many Philippines residents were dismayed to see the peso breach the 50 mark under Arroyo. The president said Friday she believes the peso is undervalued.

"There are momentary factors affecting it," she said. "The long-run value is stronger, even the middle-run value is stronger, but I wouldn't say how much."

Arroyo may encourage the central bank to come to the currency's support by spending reserves. But her administration has maintained the bank's independence.

There is little the government can do on the economic front, with the budget deficit already burgeoning.

"They can't spend more than they've already budgeted, otherwise the deficit just expands," said Joey Cuyegkeng, head of research at ING Barings in Manila.

A political plan likely

The government may focus its spending further on its three target areas, agriculture, tourism and education, particularly in information-technology.

But Cuyegkeng expects more of a political response. Arroyo has promised to set up an anticrime task force to combat lawlessness in the Philippines.

The peso and the stock market have both lost ground as a rise in crime undermines confidence in the economy. It has also encouraged rich Filipinos to send money and even family members abroad.

Arroyo said kidnappings by Abu Sayyaf guerrillas in the southern Philippines and other "pernicious events" had weighed on the peso.

Arroyo may have been referring to a May Day attack on the presidential palace, as well as a wave of abductions in recent weeks by crime syndicates operating in Manila.

An export lull has prompted manufacturers to start cutting output and laying off workers.

Merchandise exports from the Philippines dropped 5.6 percent for January through May, over the year before, the National Statistics Office showed Friday.

May showed a particularly sharp dip, of more than 11 percent.

Electronics accounts for more than half the exports from the country. A worldwide slump in demand has only aggravated the economic and political problems in the Philippines.

Reuters contributed to this report.