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BY FEDERICO M. MACARANAS SPECIAL
TO THE MANILA TIMES
THE forecasts of the global
economic conditions are deteriorating faster as the United States
brings down the European and Japanese economies in 2009.
Yes, the cooling down in 2008 is
expected to worsen through the next quarters of next year, but many
analysts point to late 2009 as the beginning of an uptick in the
real economy.
The latest World Bank forecast of
Philippine real GDP growth is between 4 percent to 4.5 percent in
2008, and 3.5 percent in 2009, and back again to 4 percent to 4.5
percent in 2010.
The Asian Development Bank has
just revised its 2008 growth forecast to 4.5 percent (down from its
earlier 6-percent projection) and 3.5 percent in 2009.
Consumer spending growth will
slow down; so will private sector investment.
The already low foreign direct
investment will grow under 1 percent in 2009 and even lower in 2010
at 0.3 percent.
Government pump priming is likely
to be recoursed and early election spending will boost local
businesses (printing, transport, retail food, public relations,
media advertising, etc.).
Trade too will register lower
growth, exports at 2 percent and imports at 1.9 percent in 2009,
picking up to 3.8 percent and 4.5 percent, respectively, in 2010 as
per the World Bank.
Impacts
First to be impacted are about
50,000 (even up to 100,000 in the Department of Labor and
Employment’s (DOLE) worst-case scenario) Filipinos working in
countries already hit by credit crunches and other financial
problems that have translated to slower production and hence to
layoffs.
Because many overseas Filipinos
hold vital jobs, some are not given termination notices; moreover,
the Filipino worker is adaptable and flexible (documented in the
yearly surveys of the Institute for International Management
Development in Switzerland for some 60 countries).
Job opportunities are also open
in Canada (Alberta, Manitoba, Saskatchewan, etc.) as per DOLE and
the Department of Foreign Affairs, but more doubtfully in Australia,
New Zealand, France and Sweden reported in a recent AIM Policy
Center forum on “Reintegrating Displaced Workers into the Local
Economies.”
These countries are already in
recessionary stages. Better business intelligence is needed to
provide early warning signals to planners in the country.
Next to be impacted are those
engaged in foreign trade, especially exporters that cannot
immediately respond to changing consumer needs (modularized and
knockdown furniture for smaller apartments, cheaper apparel and
processed foods).
The US is the largest buyer of
Philippine furniture, getting 60 percent of exports. The declining
demand of US consumers for houseware and furniture would have an
impact on the exports of Philippine products.
In 2007, nearly 80 percent of
Philippine garments exports, valued at $1.7 billion, went to the US.
Trouble will begin next year if no preemptive action like looking
for other markets will be taken.
Suppliers in the international
supply chain—like agricultural raw materials and
electronics—will be affected. The electronics industry that
accounts for about two-thirds of all Philippine exports is now
bracing for no growth at all.
In agriculture, corn will be a
bonanza. This is reflected in the P1-billion financing aid from
South Korea for post-harvest facilities and two bulk grains
terminals in Mindanao and Cagayan Valley. To hike production, the
Department of Agriculture will open 75,000 hectares of new
cornfields.
On another positive note, as
cost-cutting strategies are implemented by American, European and
Japanese firms, the business process outsourcing industry of the
Philippines will gain clients.
These clients range from the
banking and financial sector that have been bailed out but must show
better bottom lines with more cost-efficient operations.
A note on electronics trade with
Japan: the Japan External Trade Organization (Jetro) says that 10
percent of Philippine exports to Japan are in electronics, but they
lag behind the rest of Southeast Asia in terms of growth through
August 2008.
“The end-market demand of Japan
is the US,” says Semiconductors and Electronics Industries in the
Philippines Chairman Arthur J. Young.
India appears to be a good
alternative market. Semiconductors were the sixth-biggest Philippine
export to India in 2006 and cornered a 4.72-percent share of total
exports to India that year, bringing in $5.673 million.
Banks, insurance, investment
funds
Philippine banks are sound and
stable, says Amando Tetangco, head of the Bangko Sentral ng
Pilipinas (BSP).
The Philippines has no solvency
issue as we learned our lesson in 1997, according to Nestor
Espenilla Jr., BSP deputy governor for bank supervision and
examination.
Seven local banks exposed to the
bankrupt Lehman Brothers can withstand the financial shakeout, as
the amount exposed will not exceed 1 percent of their total assets.
Compared to South Korea and
Taiwan, with $720-million and $2.5-billion exposure to Lehman,
respectively, Philippine banks’ exposure to Lehman is much less,
valued at $386 million.
The local insurance industry is
resilient and stable enough to weather the crisis abroad, according
to the Insurance Commission.
As for investment funds, “the
Philippines remains protected from complications arising from events
in both US and Europe because investment is limited, and that the
banking industry continues to be awash in cash,” said Espenilla.
“Domestic financial
institutions secure funds from local sources instead of
international capital markets as what was the practice of foreign
banks,” he said.
(Dr. Federico M. Macaranas is
the Executive Director of the Asian Institute of Management Policy
Center.)
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