Economic crisis foreseen, preparations delayed

Manila, Philippines -- Despite assurances offered by the Philippine government, the adverse effects of the global financial crisis are already felt by most Filipinos, one way or the other.

As world trade slowed down and stock markets plunged, shockwaves of uncertainty spread to every part of the globe. Experts from research institutions, non-government organizations, and top universities warned that the effects of the US crisis on Filipinos may be worse than what government expects.

Independent think-tank Ibon Foundation warned that businesses could be forced to cut production or lay off workers. According to Ibon, the weakening of the stock market, drop in remittances by overseas Filipino workers (OFWs), rising domestic interest rates, and slump in the real estate market are just some of the immediate effects of the crisis.

OFWs will be among the first to feel the impact of a recession in any country. Connie Bragas-Regalado, chair of Migrante-International, said there could be massive layoffs from among the 5 to 8 million OFWs and worst to be hit will be the undocumented workers. Migrants express fear that unemployment, repatriation and declining remittances will aggravate the country's poverty situation. Benjamin Diokno and Rene Ofreneo, former Budget secretary and former dean of the UP School of Labor and Industrial Relations respectively, confirmed these views. Deployment of new OFWs was also predicted to go down by 70,000.

Dr. Cayetano Paderanga Jr., former director-general of the National Economic Development Authority (NEDA), said "the global crisis is certainly slowing down our exports, slowing down foreign direct investment inflow, soaring inflation and increasing risk aversion of investors." Paderanga added that layoffs, rising costs of living, and more borrowings are expected to worsen next year.

The US, a major economic partner of the Philippines, accounts for about 17 percent of total Philippine exports, 38 percent of remittances, and more than 30 percent of net foreign direct investments (FDIs). Thus, Philippine export will suffer as a result of the US slowdown, as forecasted by the International Monetary Fund (IMF) and international economic intelligence agencies.

Local telecommunications companies Globe and Smart reported declining revenues due to decreased usage of OFWs and their relatives, lower remittances from abroad and higher inflation. The electronics industry also experienced a decline in exports this month, yet the Semiconductor and Electronics Industries of the Philippines Inc. (SEIPI) is optimistic that the markets for cell phones, computers and automotive electronics will grow in the long run.

Delayed Interventions

Legislators from the partylists Bayan Muna, Anakpawis and Gabriela already initiated discussions on the possible repercussions of the US subprime crisis on Philippine economy. That was in December 2007. In January this year, they filed a resolution calling for a legislative inquiry into the impact of the economic slowdown in the US in order to craft mitigating or remedial measures. Hearings were held until mid-2008. However, the Arroyo administration made its contingency plans just recently.

In the legislative hearings, Bayan Muna Representative Teodoro Casiño proposed 'radical' steps to re-orient the economy by developing and strengthening domestic industries, to modernize agriculture and to re-think the old model of development. For its part, the House Committee on Economic Affairs resolved to support the creation of an enabling environment for capital market growth, the development of the domestic capital market, and the pursuit of export product and market diversification with other countries.

In September, the Philippine stock market plunged while the peso slid to almost P48 to a dollar. House Speaker Prospero C. Nograles admitted that the country needs strategies to mitigate the effects of the US economic meltdown and to provide possible opportunities that may arise out of the crisis.

The Arroyo administration, relying on its 'sound' economic fundamentals to shield the country from a global slowdown, had been complacent up to a few weeks ago. It took a few months before the administration admitted that Philippine economy is slowing down. Contingency plans are being laid, such as the recently announced P100 billion fund to support infrastructure projects and the P250-million livelihood fund.

The government is geared to use the P1.415-trillion budget for 2009 to fight the global financial contagion. Development Budget Coordinating Committee (DBCC) officials said the proposed budget addresses the crisis by investing heavily on food, social services and infrastructure. This will fund safety nets for the poor and spending on vital sectors to insulate the country from the global slowdown of economies. NEDA officials said there was no chance of a crash and no cause for panic since a positive economic growth was still seen to be at 4.2 percent in 2009.

President Gloria Arroyo said the construction boom in the Middle East, the growing demand for OFWs in Europe and Canada, and the local business process outsourcing (BPO) industry can offer new employment opportunities for the growing number of job seekers. Malacanang's contingency plan for OFWs include monitoring of displacements and labor demand, registering and redeploying of OFWs, and assisting in repatriation. Likewise, it encourages returning OFWs and interested entrepreneurs to engage in businesses and investments as potential sources of income.

Emphasizing the progressive legislators' views, Gabriela Women's Party Representative Liza Maza dared the Malacanang to stop sugarcoating the global financial crisis and its impact on the Philippine economy. Rep. Maza challenged Malacañang to "put in place immediate relief measures to cushion the impact of the crisis on ordinary, low-income Filipinos." She pushed for the removal of the regressive RVAT on oil, implementation of a nationwide across-the-board wage hike, increases in the budget for social services, and the suspension of debt payments to address the people's urgent need for resources and support.