Economy on a Roll, But Danger Signs Ahead. PHILIPPINE SUCCESS STORY

ECONOMISTS and diplomats in the Philippines sing praises to the economic boom that has taken place during the presidency of Corazon Aquino. But they sing them softly.

Although clipping along at about 7 percent a year, the economy's growth is fragile, they say. It may fizzle soon - for lack of basic investments or because of a tumble in export prices - possibly fueling a communist insurgency and placing Mrs. Aquino's reborn democracy at risk.

At present, though, the Philippines is perhaps the best example of a heavily indebted developing country that is ``growing out of its debt,'' says one Western embassy economist.

Its foreign debt, once the world's highest at $29 billion, has dropped from being 94 percent of the gross national product to near 65 percent since Aquino came to power three years ago, he says.

Aquino, whose free-market policies only heighten her popularity with Western leaders, admits she has a delicate dilemma in her country's new-found prosperity.

Few factories are being constructed. Much of the boom is consumer-driven, resulting from pent-up demand built up during the lean latter years under Ferdinand Marcos, when the economy contracted by 10 percent.

But the high growth is not high enough to reduce joblessness or to match the higher growth in many neighboring Asian nations.

The boom has two outside - and some say unreliable - props. World prices for prime Filipino commodities - sugar, copra, and metals - are presently high. And Hong Kong Chinese are in the lead of the few foreign investors here, moving assets from the British territory in anticipation of China's 1997 takeover.

But without more financial help from the United States, Japan, and foreign investors and creditors, the economy is vulnerable to collapse, Western economists warn.

Aquino officials fear, however, that such outside help will come with high political costs, both at home and abroad.

For instance, the economic boom and an estimated 7-10 percent inflation rate has pitted Aquino against demands to raise the minimum wage for organized labor, which threatens strikes.

As a possible but unlikely scenario for the Philippines, Aquino officials cite February's violent riots in Venezuela, which were ignited by prices rises. Aquino has already taken much heat for price hikes, such as for fuel, that will come out of a recent agreement with the International Monetary Fund (IMF).

That IMF pact, which will bring in $1.3 billion over four years, was the stamp of approval that Aquino needed for a host of pending promises of foreign aid, credit, and investment. IMF-required reforms, however, such as allowing bankrupt state enterprises to close, will require Aquino to ``spend a lot of political capital,'' a European diplomat says.

So far, she has fended off demands in Congress for repudiation of foreign debt repayments and interest, which make up 17 percent of the budget. Instead, her financial advisers began talks this month with foreign creditors, seeking $1.6 billion in new loans and debt reduction to fill an anticipated financing gap next year.

The talks stalled, however, because both sides want to see whether the Philippines might be a good candidate for the new proposal by US Treasury Secretary Nicholas Brady to help highly indebted nations. The plan, still lacking full support, would involve IMF guarantees.

In foreign policy, too, the fragility of economic growth is forcing tough choices on Aquino.

She postponed a trip to Moscow this summer, according to her aides, to avoid losing any Western support for a multi-nation assistance package being prepared by the US.

That package, the Philippines Assistance Program (PAP), is often described as amounting to $10 billion in aid over five years.

But how much would be new money or just re-packaged present programs is unclear. President Bush asked the US Congress for $200 million for PAP and is nudging other nations to commit to the package.

What is clear is that US officials expect Japan to foot the lion's share of PAP, under World Bank coordination. Japan's Prime Minister Noboru Takeshita still plans to visit Manila in early May, despite announcing his resignation Monday.

Like US officials who have visited here, the Japanese leader may be concerned whether Aquino has a detailed plan for spending the largess, which would likely go for roads, communications, power, and other infrastructure needed to sustain the boom.

Past criticism of her government's inability to implement projects quickly and efficiently led her to appoint a well-respected businessman, Roberto Villanueva, to draft a PAP plan and ``unclog the spending pipeline.'' But some US officials doubt he can rally the bureaucracy fast enough to satisfy foreign donors.

Reluctance by a budget-conscious US Congress to grant the $200 million in startup money could also kill the plan. Privately, US officials admit that Aquino's hesitancy to open talks on renewing a treaty granting the US rights to large military bases in the Philippines will influence votes in Congress.

Aquino, after canceling her Moscow trip, said she plans to visit the US later this year to lobby for the money.

Any linkage between PAP and base rights could give left-leaning groups and political opponents more ammunition against Aquino. Her race to save a booming economy has already put her on the defensive over wage hikes, price rises, and IMF conditions.