How the Philippines Shoots Itself in the Foot

THE ECONOMIST—THINGS have been going pretty well for the Philippines recently. For the first time since the 1970s its economy has grown by at least 5% in each of the past three years. This year it may grow almost 7%, aided by a boom in exports, especially to China.

Inflation has fallen in recent years, while tax reforms have improved the government’s finances. May’s congressional elections were fairly peaceful (especially in light of the country’s turbulent history), raising hopes for political stability. All this has prompted analysts who had written off the country as a basket case to take a fresh look.

But a political scandal has erupted over a dubious telecoms deal that President Gloria Macapagal Arroyo’s government struck with China, reminding investors why they tend to avoid the Philippines. Read article.