Thousands of protesters have descended on Manila Enlarge Image

Ms Arroyo used her annual State of the Nation address to list her government's economic successes and promise greater opportunities for the poor.

She pledged to try to bring peace to the troubled south, and also defended a controversial new anti-terror law.

Security was tight as some 3,000 people protested about her time in office.

Ms Arroyo has long been dogged by allegations of fraud during the 2004 election, as well as human rights abuses.

A 4m (13ft) effigy of her as a witch was burned by the protesters, who were prevented from gathering too close to the House of Representatives where Ms Arroyo was delivering her speech.

Political killings

Ms Arroyo told the joint session of Congress that her reforms to strengthen the economy had been adopted "at great cost to me in public disapproval".

"But I would rather be right than popular," said the president, whose term in office is due to end in 2010.

I would rather be right than popular President Arroyo

Ms Arroyo promised record funding for both "human and physical" infrastructure, to boost business confidence, create jobs and improve education, health and welfare.

And she said she hoped the Philippines would be able to join the ranks of wealthy nations in 20 years.

"By then, poverty shall have been marginalised, and the marginalised raised to a robust middle-class," she said.

Ms Arroyo, who was making her seventh annual address, said her government would also be pouring resources into efforts to bring peace to Mindanao region, where a Muslim insurgency is being fought.

She defended the Human Security Act, introduced earlier this month, which allows the government to detain suspects for up to three days without charge, use wiretaps and seize suspects' assets.

But she also called for legislation to deal with a spate of political killings that have brought international criticism to her presidency.