Introduction:
The Philippine Islands became a Spanish colony during the 16th century; they were ceded to the US in 1898 following the Spanish-American War. In 1935 the Philippines became a self-governing commonwealth. Manuel QUEZON was elected President and was tasked with preparing the country for independence after a 10-year transition. In 1942 the islands fell under Japanese occupation during WWII, and US forces and Filipinos fought together during 1944-45 to regain control. On 4 July 1946 the Philippines attained their independence. The 20-year rule of Ferdinand MARCOS ended in 1986, when a widespread popular rebellion forced him into exile and installed Corazon AQUINO as president. Her presidency was hampered by several coup attempts, which prevented a return to full political stability and economic development. Fidel RAMOS was elected president in 1992 and his administration was marked by greater stability and progress on economic reforms. In 1992, the US closed its last military bases on the islands. Joseph ESTRADA was elected president in 1998, but was succeeded by his vice-president, Gloria MACAPAGAL-ARROYO, in January 2001 after ESTRADA's stormy impeachment trial on corruption charges broke down and widespread demonstrations led to his ouster. MACAPAGAL-ARROYO was elected to a six-year term in May 2004. The Philippine Government faces threats from an armed Communist insurgency and from Muslim separatists in the south, as well as from impeachment attempts by political elites and civil groups unhappy with the current administration.

Location: Southeastern Asia, archipelago between the Philippine Sea and the South China Sea, east of Vietnam

Population: 89,468,677 (July 2006 est.)

Languages: two official languages - Filipino (based on Tagalog) and English; eight major dialects - Tagalog, Cebuano, Ilocano, Hiligaynon or Ilonggo, Bicol, Waray, Pampango, and Pangasinan

Country name: conventional long form: Republic of the Philippines
conventional short form: Philippines
local long form: Republika ng Pilipinas
local short form: Pilipinas

Capital: name: Manila
geographic coordinates: 14 35 N, 121 00 E
time difference: UTC+8 (13 hours ahead of Washington, DC during Standard Time)

Economy - 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 2006 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, making it East Asia's best performing currency in 2005-06. 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.