I am no economist, so this post is a question.
It almost seems like you’re listening to a choir.
Public, private, and even foreign financial and economic experts are saying the Philippines will be able “to ride out the” the economic contagion that’s threatening to engulf the world.
But will the Philippines really be able to avoid going into recession like what Singapore is now said to be going into?
If you take a snapshot, the Philippines’ own trade deficit is ballooning and our only real buffer consists of the foreign currency remittances of our compatriot OFWs?
The government is keeping up a brave face and claims that at worse, the 7.2% economic growth in the past year could slow to 4% with export earnings taking a hit.
So there. Are we really on stable ground? Do we have a golden parachute somewhere with a rip cord we can pull?
Popularity: 1% [?]
The answer would depend on whether you belong to the rich, the middle class or the poor.
Yes, cvj.
But wanted to get your insight from a macro view, not demographically. More please, after your morning coffee or tea, ? :)
that’s right. but without philosophizing, the questions seem rather obvious: we only have US$56 billion in our foreign reserves right now. where do we get the additional funds if we, indeed, encounter an economic slowdown.
oh, by the way, this statement about “well, the rest of Asia is burning, but we are’nt” by Jesus Dureza is not doing us any good. this misplaced bravado will only hurt us in the long run because it would make us very complacent. trust your investment experts and they’ll tell you the real situation.
Ding, thanks for asking but it will require a bit more time for me to write my reply. [because of my #@!% day job] For now, i believe there are ways we can insulate ourselves from the crisis and, in fact, turn it into an opportunity to do things right.
We won’t be directly hit by the financial storm. imho, largely because we don’t really have that much skin in the game. indirect impact: lost of jobs, etc. but i think it would be a minimum for our ofws and a slow down in exports like furniture. Going forward, as a response to this financial crisis, imho, it will become hard to finance projects.
the biggest problem really for the Filipino is the double digit inflation. now, that hurts the poorest of the poor. heck it affects everyone.
second— the same problem that has plaguing the country for over a decade is unemployment *and* underemployment. third— the lack of substantial and sophisticated industry whether in agriculture, or technology or any other industry.
So i cringe really when Arroyo measures everything in GDP and GNP. my first post on FV was “On what Gross National Product Measures”.
before anybody get any ideas about the “voodoo” and romanticization of stocks and such, the layman need to remember that the stock market in its simplest denominator is an IOU. it is one of many ways for a company to raise capital as an alternative (for example), from loaning money from a bank. it is just one of many tools . the same goes for corporate bonds and tbills and such.
that said, the best advice really that i’ve heard since december 2007 (the last month when stocks were stellar) is to invest in oneself. build your business. make it grow. make your money breed for when the market goes up, you’ll be in prime position to take advantage. imho, it is the best advice for OFWs. best advice for any Filipino really even without this financial storm. Fortune passes everywhere.
as a matter of disclosure, i’m not an economist.
Our net International reserves are even less it is 35 billion usd.
we only have 915 million usd from the short term loans from june to september as buffer.
we will know soon enough how much can come from ofw money because it is christmas time.
After that, let us see if come January ganyan pa din kapostive ang mga economic managers at pr staff ng gov.
in the 97 crisis if our neighbors fell from the rooftop tayo sa second floor lang tayo nahulog.
Ganon pa din ngayon . Kaya siguro sinabi na malayo tayo sa contagion.
CVJ,
Tonight, maybe you can have an answer if oil from Palawan will all go to singapore.
chuck,
sorry, palipat lipat ako ng topic dito sa Fv
di ko namalayan na nasagot mo na pala.
well, i dont think that we will not be directly hit. Don’t think about this crisis only in the US sub-prime crisis term. Think of the economic slowdown.
one of the solutions is for government to pump-prime the economy. when we say pump-prime, we mean that government should strive to further grow the local economy through a stream of infrastructure and agri-based projects. Cut the fat off bureaucracy and infuse funds only to projects that would benefit critical sectors which have been identified as possible weak areas. the budget right now should be properly allocated and disbursed.
likewise, government should encourage banks to lend money, albeit regulated. we have the philippine insurance commission and the philippine deposit insurance commission to oversee that. we need to make sure that the economy continues to function regularly and avoid a momentary stoppage of economic activities.
Access to credit.
Sa micro lending natutlungan ang mga micro investors,but when it comes to our agricultural development,walang access to credit ang mga farmers.
On infrastructure.
I have just been to Benguet,mountain province,to ifugao interesado kasi ang grupo ni erpat kahit konti dun sa project na yun.
They have some expertise in procurement and the system,because they have the author of the procurement law as the owner of the construction company (abaya of abaya vs. ebdane case na sumikat nung zte hearing)
Yun nga lang, I tell you all you can do is to minimize the tongpats because you have to face DPWH,THE congressmen,the mayor and the governor,and it does not stop there.
so many stakeholders that makes investing here a headache .
One thing I do think went well for the Philippines is that we were able to weather our own sub-prime crisis a few years back. Let me explain.
During my time in PNB it was on rehabilitation: it had incurred the largest amount of non-performing assets and they have become land-tax liabilities. In 1998, PNB’s net assets were almost in the negative. This was the reason it was sold off to Lucio Tan.
Over the next seven years PNB was under receviership and rehab, but in that time it was able to sell off all its bad loans, benefitting from the Special Purpose Vehicle Act of 2002 (which is actually a very good achievement of the Estrada administration, on hindsight). This allowed banks to sell off, in bulk, their non-performing assets without the red tape and legal impediments the usual avenues had.
By the time the US sub-prime crisis hit, our own sub-prime crisis (with other banks, like DBP and Landbank and government banks benefitting from the same law — as well as private banks who had bad loans) had already subsided.
On the other hand, we also have relatively low exposure to US investment instruments (the reason why, i do not know. I suspect the local banks have only started affording them recently) and this allowed for little direct impact on the banking sector. It is unlike Iceland which loaned low-interest from Japan and invested that money on high-risk instruments in the US: the day the US went kaput, Iceland went kaput with it.
So why are people saying that we’re better off than everyone else. One real answer: we got lucky. That’s it. Measures that were taken to recover from the 1997 Asian Financial Crisis have paid off as well, so I guess it’s time that the measures are re-reviewed to see if they should be adjusted for the current financial crisis.
Jon,
The non-performing assets of the PNB came from the behest loans to the cronies. You will be surprised that one of the borrowers was a famous action star.
When Lucio Tan offered to buy majority stock ownership of the PNB, much of these NPL were charged to the PDIC.
A few years ago, the non-performing loans of our banking system were also purchased by some European banks.
It is not only the Philippines where there was low exposure of these investment instruments. All Asian countries.
well, you’re all right. actually, we may yet to see another SUB-PRIME CRISIS and this time, it will be worst.
Think of Noli and Pag-Ibig. They’re urging people to enter into 30-year loans with 6-7% interest. Question–how many of these people will be able to pay off their amortizations?
also, the national home mortgage finance corporation needs to sell 30 billion pesos to keep itself afloat this November. Any buyer?