Friday, January 18, 2008

Will the US recession hurt the Philippine economy?

America is definitely in recession. Lately, US president George Bush has lately called on the US Congress to give tax relief to consumers and business to boost the American economy. Many of us are probably wondering how it will impact the Philippine economy.

When America sneezes, the Philippines catches cold. We used to say that to highlight the Philippine economy’s dependence on the America economy. It’s a relief therefore to learn from experts from the World Bank that emerging economies including that of the Philippines could actually deal with this recession in America quite well. The reason? The continuing rapid growth in the Asia-Pacific region, particularly China, is going to cushion impact of the US recession. Says the World Bank lately:

“Resilience in developing economies is cushioning the current slowdown in the United States, with real GDP growth for developing countries expected to ease to 7.1 percent in 2008, while high-income countries are predicted to grow by a modest 2.2 percent."

The World Bank adds:

"GDP in East Asia and the Pacific is expected to grow about 10 % in 2007, with China expected to grow by more than 11%. Growth for the region should ease to 9.7 % in 2008 and to 9.6 % by 2009. The effects from the turmoil in the world’s financial centers may be small in most economies in the Region. Except for China, direct exposures of financial institutions in the region to mortgage-based securities (or sub-prime crisis) are limited.”

The Bank has a favorable prognosis for the Philippine economy in 2007 and expects it to grow by a decent 6.2 percent in 2008. What explains this trend? Simple: these trends are a part of the economic and social transformation obtaining in the Philippines, a trend I call the “Revolution from Beyond.”


Lester said...

I'm just afraid that if the Philippine economy gets badly affected by the predicted US recession, many anti-government activitists might blame the RP recession on the present administration and calls for another EDSA will loom in the sky (if it's not already there).

I just hope that if people start protesting in the streets against Gloria, it's for the right reasons and not because they were tricked that Pres Arroyo is to be blamed for this and that and a million other things.

Dave Llorito said...

we have to wait for the first quarter report 2008 before we could have the feel of the impact of the US recession. but im hoping though that the WB prediction takes hold.

re protests, im sure there would always be protests (this is a democracy), but i dont really think it will lead to another "people power revolution." i guess its because the 2010 election is just around the corner. political players these days are focusing on that one. it was stupid of trillanes not to consider this fact.

Anonymous said...

Am intrigued by your use of "transformation" (and "revolution") to describe growth in the Philippine economy, as if the increases are radical to turn the economy around. Others see it as growing positively, but not strong (or transformative) enough to propel an ailing economy to real take off. A 6 or 7% growth is still low to make up (catch up is perhaps better) after a heavy wave of economic downturn and explosive population growth, among others.

Dave Llorito said...

haha, well i live here in the Philippines so i have the reason to be optimistic. others who have left the country in fact tend to dismiss the changes happening here. i guess the reason is that any good news happening here since to challenge the raison d etre why they have jumped ship. i used the word "revolution from beyond" to describe a process, albeit a slow one for those who expect miracles, that's also happening in the rest of the world, a process of change driven by technological and demographic factor. this is not an original term; i borrowed if from Tom Friedman and but every body uses it now since he used the term in his first book 'the lexus and the olive tree.'

a 6 to 7 percent growth rate indeed is not impressive when china has been growing at 11 percent. come on; we are china. but lets face it; any country that has to grow should start somewhere and a 6 to 7 percent growth is decent enough.

will you be happy if you continue seeing the philippines growing a 3-4 percent just like 20 years ago?