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REACH YOUTH MINISTRIES INC.
3/F ACCM Building, 102 Valero Street, Salcedo Village, 1227 Makati City, PHILIPPINES
TELEFAX : (+632)562-5750
EMAIL : ryouth@live.com
www.reachyouth.org
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Reach Youth Ministries Inc. seeking to minister and to address the spiritual, physical and emotional needs of the underprivileged. Our core values are based on the life, teachings and example of our Lord Jesus Christ and the revelations contained in Holy Scripture. Nothing beautiful, nothing noble, ever comes into being by mere well wishing. To begin one must start with open eyes, open heart, willing hands and ready feet.
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OPERATING ENVIRONMENT


economic overview


ECONOMIC OVERVIEW


The Philippines was less severely affected by the Asian financial crisis of 1998 than its neighbors, aided in part by its high level of annual remittances from overseas workers, and no sustained runup in asset prices or foreign borrowing prior to the crisis. From a 0.6% decline in 1998, GDP expanded by 2.4% in 1999, and 4.4% in 2000, but slowed to 3.2% in 2001 in the context of a global economic slowdown, an export slump, and political and security concerns. GDP growth accelerated to about 5% between 2002 and 2005 reflecting the continued resilience of the service sector, and improved exports and agricultural output. Nonetheless, it will take a higher, sustained growth path to make appreciable progress in the alleviation of poverty given the Philippines' high annual population growth rate and unequal distribution of income. The Philippines also faces higher oil prices, higher interest rates on its dollar borrowings, and higher inflation.

Fiscal constraints limit Manila's ability to finance infrastructure and social spending. The Philippines' consistently large budget deficit has produced a high debt level, and this situation has forced Manila to spend a large portion of the national government budget on debt service. Large unprofitable public enterprises, especially in the energy sector, contribute to the government's debt because of slow progress on privatization. Credit rating agencies have at times expressed concern about the Philippines' ability to service the debt, though central bank reserves appear adequate and large remittance inflows appear stable.

The implementation of the expanded Value Added Tax (VAT) in November 2005 boosted confidence in the government's fiscal capacity and helped to strengthen the peso, which gained 5.7 percent year-on-year, making it East Asia's best performing currency in 2005. Investors and credit rating institutions will continue to look for effective implementation of the new VAT and continued improvement in the government's overall fiscal capacity in the coming year.


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