|
By Maricel E. Burgonio, Reporter
Governments must institute strong
fiscal stimulus and accommodative monetary policies to keep the
global economy from sinking deeper since trade flows would continue
to decelerate sharply this year, an economist from “Moody’s
Economy.com” said.
In its Global Outlook 2009
report, Tu Packard, Moody’s Economy.com senior economist, said the
global economy, as measured by gross domestic product (GDP), would
grow slower at 0.2 percent this year from 2 percent last year due to
lower trade flows and plummeting investment and consumption
spending.
This means that the unemployment
is expected to continue to rise and financial markets are expected
to be stressed further.
To prevent the world economy from
sliding into a deep and protracted recession, Packard said strong
and coordinated policy action is urgently needed.
“Strong fiscal stimulus
programs and accommodative monetary policies should help the global
economy gain traction in the second half of 2009, though a
self-sustaining expansion is not expected to take hold until well
into 2010,” Packard said.
“With absolutely no risk that
private investment will be crowded out, there is no better time for
massive public spending on programs with high social returns that
can increase the world economy’s growth potential,” he added.
In East Asia, Packard said the
economies have been badly hurt by falling external demand and the
reduction in trade flows is compounded by the credit crunch, which
disrupted trade finance in China and other Asian countries.
Credit to private exporters dried
up as banks refused to honor letters of credit, therefore, shipments
were held up.
Packard cited that China, South
Korea, Taiwan, Hong Kong and Singapore have suffered sharply
decelerating or contracting export growth, falling industrial
output, and widespread layoffs.
In China alone, an estimated
670,000 firms shut down in 2008, putting over 10 million people out
of work.
Packard said the unparalleled
magnitude of the financial crisis increases the likelihood of a
longer, more severe and broader downturn not just in the US but also
in other major developed countries.
“Compared with previous
downturns, this one is more tightly synchronized because of the
global spread and depth of the financial shock,” the economist
said.
In Philippines, GDP is expected
to sustain at 4 percent in 2008 and 2009, slower than its
7.3-percent growth in 2007.
The central bank recently cut its
interest rates by 50 basis points to boost lending growth this year
and to fuel economic growth. The Bangko Sentral ng Pilipinas
overnight borrowing and lending rates stood at 5.50 percent and 7.5
percent, respectively.
Remittances from overseas
Filipino workers and earnings from the business process outsourcing
sector are expected to sustain its support the country’s growth
this year.
Moody’s Economy.com is a
subsidiary of Moody’s Corp. and separate legal entity to Moody’s
Investors Service.
|
