Can Philippine Economy Withstand Crisis in 2009?
By IBON Foundation
IBON Features— The global economic situation is expected to continue deteriorating until 2010 and even beyond, and the Philippines is going to be severely affected by the worsening crisis. Yet it is still possible to mitigate the effects on the country, and more importantly, to emerge from this period of crisis with a genuinely strengthening and forward-moving economy.
Various factors will come into fuller play by next year and action must be taken as soon as possible. The economy has been deteriorating steadily in recent years despite government hype and, as it is, growth has been slowing since the start of the year. The onset of global financial and economic turmoil however now pushes it into a deeper crisis that it is poorly equipped to deal with.
Economic distress
The slowdown that begun in 2008 and will carry through until next year is clear. Growth this year and next year could easily turn out the slowest in a decade. Joblessness will increase and add to the 4.1 million unemployed – estimated to include the jobless statistically removed from the labor force to lower officially reported figures – and 6.8 million underemployed as of 2007. The number of jobless and underemployed next year will very likely rise to well over 11-12 million.
Retrenchments and closures will be most immediately felt in the goods and services export sectors. Particularly affected will be the major sub sectors of electronics (67% of exports in 2007), apparel and clothing (5%), and furniture and woodcrafts (2%). The US in particular is the largest buyer of Philippine garments and furniture and receives 80% of total garments exports and 60% of total furniture exports. The crisis will weaken global demand for laptops, cameras and cellular phones which are the primary users of the semi-conductors and microprocessors that the country exports. As it is, the country’s export-oriented electronics sub sector employs some 500,000-600,000 workers. The US is also the world’s largest end-consumer of electronics.
The business process outsourcing (BPO) industry will also likely be badly affected with the US accounting for over two-thirds of foreign equity and 90% of BPO export revenue. The grand target of 940,000 BPO jobs by 2010 is even more impossible especially with employment at most at just 320,000 now. Similarly with local tourism and business travel outfits where hotels and restaurants will feel the pinch of less foreign and domestic visitors.
The jobs situation has clearly started to worsen in 2008. The number of jobless Filipinos drastically increased by 279,000 in October from the same period last year and increased the unemployment rate by 0.6 percentage points. Rough approximations correcting for the government’s recent maneuver of underestimating unemployment place the number of jobless Filipinos at around 4.3 million and the unemployment rate at over 11 percent.
The important manufacturing sector lost another 159,000 jobs from the year before, the transport, storage and communication sector lost 10,000 jobs, and financial intermediation lost 4,000 jobs. These trends are likely to continue until next year and be aggravated by deteriorating jobs in construction, finance and wholesale and retail trade. Small and medium enterprises in particular will have a harder time borrowing with creditors preferring perceived “safer” large borrowers.
Filipinos working overseas in distressed countries and sectors face layoffs or at least lower incomes. This is not just in the US where the crisis first erupted but also wherever in the world they might be and no country is untouched by the tumult. The US is notable though in that over half of all remittances– reaching 52% or US$7.6 B of US$14.5 B in 2007– come from the US or via US-based banks.
Philippines Vulnerable to Global Financial Crisis: Ibon
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February 22nd, 2009 at 11:18 am
whoever wrote this article, i say “you’re brilliant dude.” I wonder why Aroyo, whose an economist herself couldnt figure this out. Half of the suggestions may not have instant results, but its all worth trying rather than passively sitting on the problem.
February 22nd, 2009 at 4:51 pm
wow,i was impressed!almost of the content says so relevant..
“In the concrete economic and political conditions of Philippine society today this can only mean genuine agrarian reform and national industrialization.”
-good!
February 27th, 2009 at 8:46 pm
After several decades I am quite surprised to see the same worn out socialist prescription to solve our national ills. The only thing that is missing is the call for the removal of the US bases. Unfortunately many Filipinos still subscribe to antiquated Cold War era arguments.
What many refuse to realize is that the Philippines remains largely unscathed (compared to our neighbors) because of the economic policies that the country has been following. This is true during the Asian Financial Crisis in the late 90’s and once again in today’s financial crisis.
Now whether the policies were due to IMF, World Bank, ADB, or even American dictates is beside the point–what matters is it worked when our country needed economic stability the most.
Economic prudence is sometimes beyond the grasp of leftists. You speak of protectionism when the whole world is fighting it–even the US. Ask your parents what it was like when there was free trade in the country before the protectionist policies of Pres. Marcos took effect.
And if the writer truly believes in the measures that he is proposing then I hope he is aware that he is actually justifying Marcos’s economic policies.
Remember (or maybe you are to young to know it) that it was Marcos who drained the finances of the country though pointless subsidies more than corruption. It was the regime of Cory Aquino who bravely stood against populist demands of widespread subsidy.
Now looking back, tell me under whose regime was the Philippine economy at its worst?
Careful, careful!
May 10th, 2009 at 1:49 pm
Don’t forget that the inflation rate is very low and are attracting many filipinos to buy. A large percentage of our population are youth and are economically active, about 10 million OFWs times the families they support back here in the country, only a small percentage of our economy is dependent on exports (29 percent from 49 percent on year 2000). We also have one of the largest populations in asia and even in the world, this means that our domestic economy is large and will still grow added by the increase of outsourcing companies establishing their business here because of the continuing hike of cost on most advanced economies.
i believe that the country can and will withstand the crisis.
Our resiliency has helped us survive many crises and even recessions that plagued our country since the end of the 2nd world war.
May 18th, 2009 at 6:38 pm
ur ideas were reli brilliant!!
i adore ur spirit..
keep it up so others
will awaken..
June 2nd, 2009 at 2:38 am
On the lighter side, setting aside the numbers and the science a bit…I’d say there is a need to focus instead on the solutions on how not to fall instead of emphasizing the trend and the projections which “might lead” the country into a downturn. The Philippines has been resilient and resourceful in dealing with crises of different forms; a focused mind would survive the storm. It is the clever and not the brave who survive wars. Has anyone thought that this crisis may have simply been started by a propaganda create a shift?think again.The wheels are turning.