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Last Updated: Monday, 18 July, 2005, 12:26 GMT 13:26 UK
Philippines seeks economic rescue
President Arroyo swears in finance secretary Margarito Teves (left) and budget secretary Romulo Neri
Ms Arroyo is fighting to restore confidence in her government
Embattled Philippine President Gloria Arroyo has begun rebuilding her economic team following a series of mass resignations and street protests.

Ms Arroyo appointed new finance and budget secretaries on Monday, after several leading members of her cabinet stepped down earlier this month.

Ms Arroyo is embroiled in a row over allegations of electoral fraud, charges which she has denied.

Last week, 30,000 protesters marched through Manila calling for her to quit.

Spiralling deficit

Mr Arroyo's appointment of Margarito Teves as finance secretary and Romulo Neri as budget secretary was widely seen as a sign that the president will continue to resist calls for her resignation.

Realistically speaking, the economy should weather the current political storm - there is likely to be positive economic growth in the Philippines this year
David Webb, Economist Intelligence Unit

She has apologised for calling an election commissioner while votes were being counted during last May's elections, but has refused to quit.

The new appointments helped ease tensions among some investors in Manila. Mr Teves replaces Cesar Purisima, who was widely respected in the international financial community.

But Ms Arroyo still faces an uphill task bringing the Philippines' spiralling budget deficit under control, while decisions by three international ratings agencies to cut their outlook on the country's sovereign debt has raised the spectre of higher borrowing costs.

On Monday, two more senior aides to Ms Arroyo - including her special adviser on investments - said they were joining the ranks of those abandoning the president.

Positive growth

Although Ms Arroyo's fate remains uncertain, many economists believe the Philippines economy will emerge largely unscathed from the current political turmoil gripping the country.

A picture of Philippine President Gloria Macapagal Arroyo is placed on a body of an insect effigy, in the financial district of Makati, south of Manila on Wednesday July 13, 2005.
President Arroyo has faced anger from thousands of protesters

"Realistically speaking, the economy should weather the current political storm," said David Webb of the London-based Economist Intelligence Unit (EIU). "There is likely to be positive economic growth in the Philippines this year."

The EIU forecasts that the Philippine economy will grow by 5.1% this year, down from 6.1% in 2004.

Despite problems in the agricultural sector, Mr Webb said the country continued to benefit from inflows of cash from Philippine nationals living abroad, which totalled $8bn last year.

Court ruling

On Saturday, about 120,000 people gathered in Manila to demonstrate their support for Ms Arroyo, while the country's influential Roman Catholic bishops refused to back calls for her resignation.

However, hopes that the government could meet its self-imposed target of eliminating the budget deficit by 2010 suffered a setback earlier this month after the Philippines supreme court suspended the introduction of a new value-added tax law designed to tackle the problem.

The Philippines budget deficit reached 186bn pesos ($3.3bn; 2bn) in 2004.

Opposition groups have indicated that they will consider launching an impeachment process against the president when the Philippines Congress meets next week.

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13 Jul 05 |  Asia-Pacific
Philippines' credit woes escalate
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Embattled Arroyo refuses to quit
10 Jul 05 |  Asia-Pacific
Press abuzz over Arroyo crisis
08 Jul 05 |  Asia-Pacific
Gloria Arroyo's toughest week
30 Jun 05 |  Asia-Pacific
Profile: Gloria Arroyo
27 Jun 05 |  Asia-Pacific

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