President Gloria Macapagal Arroyo addressed the Philippines yesterday ?on an issue of vital concern?, but oil prices and the economy may be higher on her agenda than a political storm over claims of wrong-doing. With Arroyo facing separate allegations that members of her family took kickbacks from illegal gambling, the talk in this rumour-loving nation went as far as her resigning as president or declaring martial law. But as oil prices soar above $ 60 a barrel, Filipinos are also angry and concerned over the rising cost of living and an expanded national sales tax due to take effect on July 1. Mike Moran, regional economist at Standard Chartered Bank in Hong Kong, said Arroyo must offer clarity to investors concerned about the economic impact of the recent political volatility. ?She really needs to reaffirm her policies and really shore up the sales job about these tough fiscal reforms,? he said.

?It?s possible she could make a statement on the election cheating allegations. But certainly I don?t think any comment she makes tonight is going to draw a line under the issue, which is a real shame given some genuinely positive developments.? The peso, which hit a 5-month low of 55.94 to the dollar last week on perceptions of rising political risk, was around 55.55 on Monday, stronger than its close at 55.65 on Friday. The main stock index ended 0.84 percent higher yesterday.

Nothing has been proven against Arroyo or her family. The government says the accusations are part of a broader plot to undermine and replace Arroyo. Her ratings are the lowest of any Philippine leader since the overthrow of dictator Ferdinand Marcos in 1986 as she tries to raise revenues to reduce chronic budget deficits. There have been relatively small protests against Arroyo in recent weeks but analysts say there are no signs of the volcanic public anger that fuelled ?people power? revolts that toppled Marcos in 1986 and then Joseph Estrada as president in 2001.

The opposition has been trying to raise the temperature with recordings of a telephone conversation it says was between the president and a senior election official during the May 2004 polls. Arroyo won a fresh term with 3 percent of the vote. Arroyo has said she would comment ?at the appropriate time? but analysts say she faces a dilemma over the recordings: If she admits the conversation is genuine, she risks emboldening the opposition and stoking public outrage.

Bolstering the view that Arroyo?s speech would focus on the economy, newspapers yesterday quoted Bunye that the president was about to order a cut in tariffs on imported crude oil and petroleum products to cushion the blow of high prices. No timetable was given in the reports. On Friday, fuel and energy are due to become even pricier for Filipinos when the value-added tax (VAT) of 10 percent is broadened to include previously exempt sectors. ?We have talked about it,? Energy Secretary Raphael Lotilla told Reuters. ?Once the VAT kicks in, the excise and tariff taxes will be reduced.?

<B>John O?Callaghan</B>