Death by Numbers.(Philippines economy)

President Gloria Macapagal Arroyo likes to be thought of as a hands-on leader. So a few months ago she went to a downtown Manila fish market to prove that food prices had not shot up. She was pleased with what she found: the price of the least expensive fish had remained well within the budget of most Filipinos. Even more important for Arroyo, the photo op seemed to hit the political mark: the next day's papers all led with the photograph of the coifed former economics professor in action, pointing to the fish and talking to a market vendor. For a short while, the price of fish became a much-discussed indicator of the nation's economic health.

But such publicity stunts are no longer enough to distract a pessimistic public. A November nationwide survey by Pulse Asia, a well- known polling firm, shows that among Filipinos the "sense of optimism for the coming year is at a near record low," with people surveyed saying their leading personal concerns include staying healthy, keeping their jobs and having enough food to eat every day. Arroyo's administration isn't giving them much reason for hope: budget deficits are ballooning just when terror attacks in the region have crippled the country's critical tourism industry. To make matters worse, two weeks ago Australia and Canada temporarily closed their embassies, citing credible threats that are sure to keep the tourists away even longer.

The crisis now threatens Arroyo herself. The president has been dogged by allegations of corruption against some within her political inner circle. Few presidents could keep in the public's good graces in such a political environment, and she is no exception, with her approval ratings dropping nine points to 45 percent in last month's poll. Experts say things will probably get worse before--or if--they get better. "She has to deliver a clear message, make the public understand the difficulties and prove she's in control," says Felipe Miranda, the research director for Pulse Asia. "Next year will be her Rubicon."

The Philippines' enormous budget deficit--projected to top $4.15 billion this year--has cast a shadow over Arroyo's government almost from day one. A major portion of the national budget has been spent paying off past debts or has been poured into money-losing ventures like the National Power Corporation. Arroyo is now saying that the privatization of the national utility could yield the country $3 billion, which would be a welcome infusion of cash for a government that blew through its deficit targets three times this year. "We're like a family piling up debt in order to pay for daily expenses," says businessman Arthur Aguilar.

The more permanent breakdown that plagues the government is its poor revenue collection. The Philippines has one of the lowest tax- collection rates in East Asia, attributed to corruption on the part of both collectors and taxpayers. Although the new tax commissioner, Guillermo Parayno, is a no-nonsense official who likes to talk tough, it's not ...