The Philippines will not “[plunge] into a recession next year as some businessmen fear,” the Philippine Daily Inquirer quoted a statement made last week by Neeraj Jain, the Asian Development Bank's country director for the Philippines. An economic slowdown will “become the most pressing issue that policymakers have to deal with,” he said.

Jain also welcomed the “government's decision to abandon the goal of balancing the budget by 2010...given the need for pump-priming measures,” according to PDI. “Higher public spending,” he said, is needed to soften the effect of a “deteriorating global economy.”

Jaime Zobel de Ayala II, chairman and chief executive officer of Ayala Corp., said on Tuesday that the country will “likely experience an economic slowdown next year, but it has the tools to weather the storm...[such as a] strong economic performance last year and the upward flow of remittances from overseas Filipinos,” the Philippine Star reported.

However, the slowdown “can lead to severe unemployment,” Zobel warned audience members in a forum sponsored by the Rural Bankers Association of the Philippines yesterday at Manila Hotel.

The business experts' warnings serve to lessen local entrepreneur's fears that the worldwide economic crash will affect them so much that they will lose everything they have.

Philippine Star financial expert Boo Chanco countered ADB and Zobel's optimism in his column.He quoted Paul Krugman, the 2008 Nobel Prize laureate in economics, to express dissatisfaction with the government's measures to avoid a meltdown.

According to Chanco, Krugman “pointed out the usefulness of using 'depression economics' to respond to the worsening economic meltdown.”

“[We are already] well into the realm of what I call depression economics...[which is] a state of affairs like that of the 1930s in which the usual tools of economic policy—above all, the Federal Reserve's ability to pump up the economy by cutting interest rates—have lost all traction. When depression economics prevails, the usual rules of economic policy no longer apply: virtue becomes vice, caution is risky and prudence is folly,” Krugman said.

Krugman mentioned economic stimuli, Chanco said, emphasizing that the government cannot afford to be too picky “because big changes for the worse are already happening, and any delay in acting raises the chance of a deeper economic disaster. The policy response should be as well-crafted as possible, but time is of the essence.”

Chanco said that Gov. Joey Salceda's economic briefing paper, presented to President Gloria Macapagal Arroyo, was “along the lines” of “Krugman's prescriptions made in the American context.”

“Our problem now,” Salceda wrote in his paper, “is that our policy responses appear to be largely bracing for a United States slowdown, not a global economic downturn with a financial meltdown.”

According to Salceda, Arroyo should “fully and quickly implement the P75-billion economic stimulus package she herself approved early this year, [which] provides for incremental spending for: social welfare for the poor, food production, [and] tax relief for the middle class.” These measures, Salceda said, will result in “a one-percent NG deficit to GDP instead of a balanced budget.”

Salceda's paper gives other suggestions for the administration to avoid financial disaster. “Actually, if only we can trust [Arroyo] to play it right, [Salceda's] prescriptions make sense,” Chanco said. “But the track record of this administration is so bad we can expect it to play politics in the course of doing the right things to address the impact of world economic crisis. Oh well, again, bahala na (it's up to God)?”

However, other financial institutions remain optimistic about how the country will fare next year. An article in the Digital Journal by Leo Reyes said that the Philippines is “in a better financial position than most of its Asian neighbors to withstand the world's financial meltdown.”

“A recession will happen only following two successive quarters of negative economic growth, something the Philippines has not experienced since the Asian financial crisis about a year ago,” the Digital Journal quoted John Forbes, chair of the American Chamber of Commerce in the Philippines.

Forbes gave the same reasons as Zobel for the “preparedness” of the Philippines for an economic near-drought: OFW remittances. These remittances, he said, “give in terms of inward foreign exchange remittance which is now estimated at US$15 billion.”

The rush of assurances by financial experts regarding the country's prospects next year come in the wake of the results of a survey by the Makati Business Club last week which revealed that most local businessmen are expecting the worst—a recession, not just a slowdown.

“Almost nine out of ten businesses in the Philippines expect a recession in 2009, marked by a credit squeeze and job cuts,” AFP reported. The “most alarming,” AFP quoted the MBC report, is “an expected spike in layoffs projected towards the end of the first quarter of the year, which coincides with the end of the school year, when tens of thousands of fresh graduates will begin competing for jobs.”

The survey was conducted “between October 24 to November 7 among [the MBC's] 738 members who are mostly senior executives in medium and large companies in the Philippines,” ABS-CBN News said. 

Photo: “Ayala/ADB” taken from WikiPilipinas.org.
Video: “Migrant Workers Hurt by Global Economic Slowdown” uploaded by VOAvideo to YouTube.com.

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3.25 Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved."