|
It is
not yet fashionable to mention this—but the Philippines
is economically “sneaking up” on its neighbors.
Most of
the time when you read articles in the international
press about the economy in Southeast Asia, the
Philippines gets lost in the chain of statistics.
However, when you look at the actual
numbers, the country is moving ahead faster, stronger
and with less trouble than all the others. The
Philippine growth rate for 2008 is projected to be
higher than countries like Malaysia and Singapore.
Inflation is lower than in countries like
South Korea.
Nonetheless, there is this great overhanging paranoia
that the Philippines is teetering on the brink of
disaster because of a real —or perhaps
potential—economic slowdown in the United States.
First,
the economic slowdown that is going to push the United
States back to the economic Stone Age is more hype than
reality. The latest comments from such sources as
investment bankers Merrill Lynch and, potentially,
Morgan Stanley, seem a bit biased. Remember, these were
the types of financial institutions that convinced the
smart money people that subprime mortgages were the same
as prime mortgages. It is in their best interest to
scream that the economic sky is falling so that the US
Federal Reserve will lower interest rates. A decrease in
interest rates would save the Merrills’ and the Morgans’
financial backsides two ways.
The US
stock market is trading with an “end-of-the-world”
mentality. A drop in interest rates might stop the free
fall on the New York Stock Exchange, which would be very
good news for these brokers and the bankers. Further, a
continuing reduction in interest rates would help save
some of the very bad loans and investments that Merrill,
Morgan and the others are carrying on their books.
These
comments remind me of the man here in the Philippines
who was convinced that brownouts would continue for
years, despite the efforts President Ramos took for
emergency-power supplies that brought the lights back
on. The man’s business? He sold generators, and the end
of the brownouts forced him out of business.
Nevertheless, IF the
US
economy slows significantly, I disagree with the words
of a local economist that this slowdown “will soundly
impact on the Philippine economy.” I think that analysis
is built on faulty reasoning.
Let us
assume (and this is a big assumption) that we lose 10
percent of our export market to the
United States
because Americans will be too poor to buy Filipino-made
products. So what?
Our net
trade balance with the United States as of October 2007
is $141 million. Therefore, the trade surplus would go
to $125 million. . . . Compare this with our other
trading partners. Our trade surplus with China is $184
million, with Hong Kong is $389 million, and even The
Netherlands buys $324 million more than we import from
there.
The
United States may be our biggest trading partner, but it
is neither our most important nor our most profitable
global customer. If I were to worry about the effects on
the Philippine economy of the problems in the
United States,
I would be more concerned about US investment in this
country. . . but I am not.
The
Philippine Stock Exchange is sour right now because
dollar-denominated money is pulling out. Two reasons.
Equity markets around the world are confused right. And
it is a very good time for foreign money to run away
since they came in when the peso was 50 to $1. Foreign
money made profits on our exchange on both price
appreciation and peso appreciation. Do not feel sorry
for them.
Further,
US-based money is looking around the world for
investment opportunities that it cannot find at home.
This is another reason US companies are buying into our
outsourcing business here.
Now
comes the greatest nightmare of a US economic slowdown:
remittances.
Statistically, more than 50 percent of overseas Filipino
remittances come from the United States. There is little
data available on how much of that comes from
“temporary” workers versus permanent residents. In fact,
much less than 3 percent of all overseas workers are in
the United States. In none of the articles I have seen
on this “nightmare” of lowered remittances has there
been any estimate of how much remittances might fall in
real dollar terms and, more important, how it relates to
a US slowdown. It is a theoretical nightmare, or maybe I
should say, an imaginary daydream.
Last
year remittances were up over 15 percent from 2006. And
the economic problems in the
United States
started early in 2007 and, certainly, the sentiment
there has been bad for months. Yet, remittances climbed
17 percent in October 2007.
I am
sorry to break this news, but the success or failure of
the Philippine economy does not depend on what happens
12,000 miles away in the United States. It depends more
on the people who live on these 7,100 islands every
day.
E-mail comments to mangun@email.com. |
