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DEVELOPING countries like the Philippines are in danger
of experiencing an almost 50-percent cut in potential
economic growth in 2008 and 2009 if the credit crisis in
affluent countries, the decline of the United States
dollar and soaring oil and commodity prices persist and
worsen.
In the
update of the World Economic Situation and Prospects
2008 report of the UN, developing countries are seen
under an optimistic scenario to grow by 6.3 percent and
6 percent in 2008 and 2009, respectively.
However,
under a pessimistic scenario, economic growth can be
just half—at 3.5 percent and 3.3 percent in 2008 and
2009, respectively.
“In 2008
and 2009 growth is expected to slow, owing to rising
inflation and a sharper slowdown in the
United States
economy with adverse impacts on export demand from
Europe and the
rest of the world,” the UN report stated.
Gross
domestic product (GDP) growth in
East Asia reached 8.8 percent in 2007, slightly higher than expected
owing to robust investment and net exports. But in the
next two years, the monkey wrench in the works that will
drastically reduce GDP, as previously stated, will be
the slowdown in major developed economies and high
prices of energy and raw materials.
“Because
of strong trade ties with the United States and other
industrial countries, output growth would slow to 5
percent in 2008 under the pessimistic scenario,” the UN
report predicted of the prospects in East Asia.
It
pointed to the rise in commodity prices as the single
most important factor affecting headline inflation
around the world, especially since the second half of
2007.
In the
Philippines, food-price inflation in April this year
increased 12 percent, driven mainly by a 24.6-percent
increase in rice prices. Overall headline inflation that
month was 8.3 percent, the highest in three years.
“Net
importers of energy and food commodities. . .are
suffering adverse terms-of-trade effects. Food prices,
which increased by 14 percent in 2007 and have increased
further in 2008, have become a threat to the poor and to
the prosperity and social stability of many developing
countries,” the report stated.
Other
factors putting additional pressure on inflation, the UN
said, were excess capacity utilization and higher wages,
but without reducing significantly lack of jobs.
In East
Asia and South Asia, the report said, there has been
little or no change in the employment situation, and the
outlook suggests a deteriorating trend due to growth
moderation.
In the
US and some developing economies, labor-market
conditions have begun to weaken. This trend is expected
to spread to other economies due to the weakening of
economic activity in the world in this year and next.
In the
Philippines, the recently approved P20 wage increase in
Metro Manila will unfavorably—though mildly—impact on
the country’s inflation rate this year, according to
Myrna Asuncion, National Economic and Development
Authority planning and policy staff officer in charge.
“All
other things the same, the P20 wage hike for Metro
Manila will increase inflation, but within expectation.
The impact on job loss and economic growth [would be] at
minimum while giving the workers and their families
immediate relief to price increases in basic
commodities,” said Asuncion.
Another
problem facing East and South Asian nations would be the
dilemma of choosing between controlling inflation or
stimulating the economy through looser monetary and
fiscal policies, according to the UN report.
This
means global inflation is expected to accelerate in 2008
to 3.7 percent despite a slowdown in growth. In the
baseline outlook for 2009, inflation is expected to slow
as aggregate demand will continue to be weak. |
