|
THE
first instance the financial meltdown in the United
States would be felt by the Philippines will come not
from closure of banks but the destruction of jobs in the
formal sector.
“Because
they are in a sector that has been fully integrated in
the global economy, those holding formal jobs would be
the first to be hit,” economist and lawyer Nepomuceno
Malaluan said.
Malaluan
and other economists spoke on Wednesday as markets
worldwide continue to plunge despite US government
officials’ moves to save their faltering financial
system.
Former
finance undersecretary Ernest Leung forecast the impact
would be fully felt by the Philippines mid-2009 as the
financial sector’s woes jump to the “real sector.”
“Exports, of course, would remain in trouble and the
capacity to borrow would be suffering,” Leung said.
He said
it remains to be seen if remittances of overseas
Filipinos would be affected. “There will be a relocation
of the flow as some of them would be laid off, I
presume.”
He said
the country should expect a repatriation of investments
from the country as multinational companies pull the
plug on their subsidiaries here.
“As the
capital market in the US plunges, the consequence to the
Philippine market is that buying equities would be
lessened,” Leung said.
Malaluan
said those in the informal sector, some 9.5 million
Filipino farmers and fisherfolk should not feel relieved
by the notion that “they weren’t integrated into the
global economy and hence, unaffected: they remain poor
with or without the meltdown.”
There
are fundamental problems inherent in the way the
Philippine economy is structured, so that meltdown or no
meltdown, it is hobbled from growing, he explained.
“Why is
growth low or sluggish? Why is there a low level of
investments and entrepreneurship? Does it stem from low
return to economic activity, poor appropriability, or
from the high cost of finance?” were the questions posed
by Filomeno Sta. Ana, Malaluan’s colleague in the
nonprofit Action for Economic Reforms.
What
Malaluan and Sta. Ana pointed to are “binding
constraints” on growth. Sta. Ana cited as example the
binding constraint of Brazil—an inadequacy of domestic
savings resulting in high cost of financing for
investments.
Zimbabwe has the problem of governance while Mongolia’s include
poor transportation, corruption, and distortionary
taxes, among others.
Sta. Ana
echoed the World Bank and Asian Development Bank’s views
that the Philippines’ binding constraints are governance
and the fiscal problem.
University of the Philippines School of Economics
Professor Raul Fabella concurs, saying the country would
be far from mimicking the subprime mess of the US, as
“it is a matter of exposure of Philippine banks to Wall
Street.”
“The
crisis is manageable and would not precipitate a local
credit crunch,” Fabella said. It’s even favorable for
us, he explained, as the crisis would force government
and companies to seek local capital.
“However, with the ‘binding constraints’ in our economy,
pain will be very severe” when the meltdown’s impact
hits.
“Jobs
will be destroyed,” Fabella added.
Still,
Rogaciano S. Buenviaje, speaking for Finance
Undersecretary Gil S. Beltran, said the government’s
fiscal program remains on track despite the meltdown. He
didn’t speak on the fiscal problem as a binding
constraint.
According to his presentation, Buenviaje said that while
the national government expects to lose huge amounts of
tax revenues starting the second half of this year,
debts are expected to decline to 45 percent of gross
domestic product in 2009.
Buenviaje added a stronger revenue position is relative
to legislators’ passage of the law rationalizing fiscal
incentives and restructuring excise taxes on alcohol and
cigarettes. |
