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The
Philippine economy is in a peculiar situation: in
general, business is bullish—some will even dare say
it’s booming.
On the
other hand, there is trouble outside our borders: the
United States is worried about a recession after it was
hit by the subprime crisis, and other countries are
concerned that a US recession will lead to a global
slowdown.
So far,
with the exception of exports, it is business as usual
in the Philippines.
Consumption, which is being fueled by remittances from
overseas Filipino workers and migrants, is still driving
demand, not only for consumer products but also for
services and even for real estate.
Banks
try to outdo each other by offering low interest rates,
and that’s one factor behind the continuing high demand
for housing and condominiums, as well as the
double-digit growth in car sales for the first two
months of 2008.
Amid
this domestic boom, we read in the newspapers and see on
television the deteriorating economic conditions in
other countries, companies shutting down and thousands
of employees being laid off.
There’s
a theory that many countries have decoupled from the US.
Even the Philippines no longer depends so much on the US
market for exports, but it still accounts for 17 percent
of our exports.
In
addition, our exports to
China,
like semiconductors, are used to manufacture products
that are exported to the US.
Eventually, a recession in the US will have an impact on
the Philippine economy. And that is what we should be
prepared for.
We
should not be celebrating the domestic boom to the point
that we take for granted what is happening in the US and
the world economy. We’re now living in the era of
globalization, which means that what happens in one
country will somehow affect the rest of the world.
Economists should be able to dissect the situation in
the US and the global economy and its relation to the
Philippine economy. It will be unfortunate if we
suddenly become conservative when there’s no need to be.
But it will be equally unfortunate if something is
happening and we don’t do anything.
It’s
undeniable—the
US
is still a big market. We may not be affected directly
right now but our other markets are affected, and sooner
or later we will be part of the chain reaction. Also,
sometimes even perceptions play a role, even without
actual statistics.
On the
part of the private sector, many companies have already
adopted coping mechanisms, usually cost-cutting
measures, and often utilizing technology.
For
instance, credit-card companies are encouraging
cardholders to enroll in online delivery of the monthly
statements of account. The credit-card company saves on
delivery costs, while cardholders—at least those who
have computers—avoid defaulting on their bills.
Utility
firms have discarded envelops when they mail the bills
to their clients. Paper is expensive, and the savings
are great, when you consider the hundreds of thousands
of utility bills being mailed every month.
These
are the most basic coping mechanisms adopted by
businesses to keep control of overhead. Other companies
adopt more sophisticated schemes, but the objective is
the same: to be able to ride over the storm, even before
it comes.
The
government must also play a part in coping with the
US-led global slowdown. Already, the projections are
getting mixed. While the government maintains its
6.3-percent to 7-percent gross domestic product growth
target for 2008, analysts are beginning to lower their
projections to below 6 percent, as they watch the
developments abroad, including the recent record-high
oil prices.
The
signing of the P1.227-trillion budget for 2008 should
help us keep our growth momentum. The immediate release
of P45 billion for infrastructure and social services
will help pump-prime the economy. Let us be vigilant in
monitoring infrastructure projects to make sure that
most of the funds actually go to construction and not to
some pockets.
Revenue-collecting agencies should continue improving
their efficiency, given the negative impact of the peso
appreciation on taxes.
And the
government, more than ever, should present a picture of
stability and consistency. As I said earlier, sometimes
perceptions play a role. Investors are very sensitive
about what they perceive is happening in the
Philippines, and any perceived change in our business
environment, such as inconsistent or unpredictable
policies, will influence their decision to bring in or
withdraw capital.
Business
will thrive—successfully —even in a peculiar situation
like what we find ourselves in right now. I see a mixed
trend in the private sector, depending on the type of
business or industry.
In
general, I am optimistic but I am also cautious—one foot
ready to press the brake, while the other is on the gas
pedal.
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