Economic managers see OFWs to help RP weather global crisis -- again
WASHINGTON D.C. The Philippine’s top economic and finance managers, attending the annual World Bank (WB) - International Monetary Fund (IMF) summit here, said the country is certain to take a hit from the global financial crisis and the only question left is how bad it will be.
Remittances from an estimated 11 million overseas Filipinos are again expected to buoy the Philippine economy and help the country weather this latest storm.
Finance Secretary Margarito Teves said in a briefing at the Philippine Embassy last Friday that there would be a “sympathetic effect” between the Wall Street market meltdown and shifts in the Philippine economic and financial sectors.
“The flow of capital to developing countries like the Philippines has been impeded or constricted,” he explained. “This flow of capital is necessary because it will find its way to companies listed in the stock market and this can be used for working capital to increase output of these companies and therefore help economic and business activities.
“Because of the downward trend, this will adversely affect jobs and employment – that is the direct effect of the difficulties we are facing in the United States and Europe,” Teves elucidated.
National Economic Development Authority (NEDA) Director-General Ralph Recto said that every one percent drop in America’s Gross Domestic Product will result in a corresponding 0.6 percent fall in the Philippine’s own GDP.
The GDP is a measure of the total value of goods and services produced by a nation.
“The US is roughly 15 percent of our export market, and there is also a percentage of our exports to China and the rest of the region that find its way to the US as well,” Recto averred.
In addition, foreign and local investments reportedly account for 20 percent of Philippine GDP.
Large crowd fill the Philippine Embassy's Romulo Hall to hear briefing by top Philippine finance officials. (RODNEY JALECO)
The Philippine officials were in town for the annual WB-IMF meeting. This year’s gathering was especially important because of the global financial crisis. The central banks of the so-called G-7 nations have agreed to coordinate efforts to stave off a global recession and save troubled banks.
WB president Robert Zoellick warned the global crisis will hit the world’s poor more severely.
Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco said the country’s Balance of Payments (BOP) surplus is expected to decrease from a record $8.6 billion in 2007 to about $2 billion by the end of the year. He added that dollar reserves stand at $36.7 billion – equivalent to six months of imports and 2.6 times short term debt.
Propping up the peso
“Last year the peso appreciated by 19 percent. If we look at the movement of the peso over the past five or six years, it has appreciated by a little over 8 percent. If you compare this to the movement of other currencies in the region, it moved more or less in tandem.
“So when you talk about the relative competitiveness of Philippine exports, we’ve been basically able to maintain our position over the last five or six years,” Tetangco explained.
The World Bank and International Monetary Fund headquarters buildings in Washington DC. (RODNEY JALECO)
“The (peso’s) movement in 2008 is partly a correction of the significant appreciation last year but because of global developments there has been some risk aversion towards emerging markets including the Philippines. This has had an impact on capital flows,” the BSP chief averred.
“What we have seen in the stock market is year-to-date there is a net outflow of portfolio investments which has led to some weakening of the peso,” he disclosed.
“But in the 4th quarter of this year, it is expected inflows are going to go up particularly remittances from overseas Filipinos and this will provide support for the peso,” Tetangco said.
This would not be the first time that remittances of overseas Filipino workers (OFW) are going to rescue the Philippine economy from domestic as well as international turbulence.
Remittances are estimated to grow from $14.7 billion last year – over half of that from US-based Filipinos and Filipino Americans - to about $16 billion this year. There are fears though the global crisis may pull down actual remittances. Nonetheless, the widely-respected Economic Intelligence Unit (EIU) expressed doubt foreign remittances will be enough to offset the drop in investments.
Philippines better off than US?
Despite the gloomy picture, Philippine officials exuded confident. Department of Budget nad Management (DBM) Secretary Rolando Andaya Jr. jestingly told the Philippine Embassy audience – “I thought the reason we were invited here is to contribute to the (US) bail-out”.
While Teves and Tetangco took a more circumspect view of Philippine prospects, Recto and Andaya insisted the nation has reason to feel confident.
Andaya, for instance, argued that Philippine banks had much fewer toxic assets, adding that the Philippines’ savings rate was about 30 percent compared to a negative rating for the US. This, he opined, indicated Filipinos trust their banks more than the Americans did theirs.
“If we look at the exposure of our banks in structured products of the institutions that have been in the news lately, the total would only be about one percent of total assets of the banking system,” Tetangco averred. The officials pointed out the Philippines, much like the rest of Asia, was hit hard by an almost similar financial meltdown in 1997. While US woes stem mainly from the collapse of the housing mortgage market, the Asian crisis was likewise triggered by the bursting of the real estate bubble. Some see a common thread to both events – the reckless exposure of banks in what turned out to be very volatile assets.
“The (Philippine) banking system continues to reap the benefits of reforms implemented over the last several years, particularly reforms in the areas of increased capitalization, improved risk management, good corporate governance and risk-based supervision,” the BSP chief said.
“Another reason is that we really have good, prudent bankers in the Philippines. All of these, the reforms and good banking, have allowed us to weather the pressures that are basically coming from overseas,” he stressed.
He also pointed out that crude oil prices were falling, which should reduce the country’s inflation rate in the last quarter of 2008.
Protesters deliver their message outside the World Bank-IMF headquarters. (RODNEY JALECO)
Putting a handle on the global crisis
Makati City Mayor Jejomar Binay was invited by the WB-IMF to report on the city’s disaster response program. Makati is home to most of banks and multinationals operating in the Philippines.
ABS-CBN News caught up with the city executive at a dinner dance organized by the Washington DC chapter of the Alpha Phi Omega (APO) fraternity at the US Army’s Fort Myer clubhouse in Arlington, Virginia.
“The reports coming out of Manila say that there are banks affected, ”he said in the vernacular, adding that the world has yet to see the extent or intensity of the raging financial crisis. “This would still be long, as they say when the US sneezes, other countries catch the cold,” he added.
“What is difficult though is that we could not figure out Malacañang’s policies. We read in the papers that ‘we are prepared’ but whenever they say ‘we are prepared’ the problems get complicated. ‘We are prepared’ but people queue for rice,” Binay averred.
Teves said the government was already bracing for the effects of the global crisis. “We’re allowing for a budget deficit of about P75 billion which is equivalent to about one percent of GDP so we’ll have more resources to help our people, principally those people affected by these developments – the very poor,” he explained.
By RODNEY J. JALECO, ABS-CBN North America News Bureau
Remittances from an estimated 11 million overseas Filipinos are again expected to buoy the Philippine economy and help the country weather this latest storm.
Finance Secretary Margarito Teves said in a briefing at the Philippine Embassy last Friday that there would be a “sympathetic effect” between the Wall Street market meltdown and shifts in the Philippine economic and financial sectors.
“The flow of capital to developing countries like the Philippines has been impeded or constricted,” he explained. “This flow of capital is necessary because it will find its way to companies listed in the stock market and this can be used for working capital to increase output of these companies and therefore help economic and business activities.
“Because of the downward trend, this will adversely affect jobs and employment – that is the direct effect of the difficulties we are facing in the United States and Europe,” Teves elucidated.
National Economic Development Authority (NEDA) Director-General Ralph Recto said that every one percent drop in America’s Gross Domestic Product will result in a corresponding 0.6 percent fall in the Philippine’s own GDP.
The GDP is a measure of the total value of goods and services produced by a nation.
“The US is roughly 15 percent of our export market, and there is also a percentage of our exports to China and the rest of the region that find its way to the US as well,” Recto averred.
In addition, foreign and local investments reportedly account for 20 percent of Philippine GDP.
Large crowd fill the Philippine Embassy's Romulo Hall to hear briefing by top Philippine finance officials. (RODNEY JALECO)
The Philippine officials were in town for the annual WB-IMF meeting. This year’s gathering was especially important because of the global financial crisis. The central banks of the so-called G-7 nations have agreed to coordinate efforts to stave off a global recession and save troubled banks.
WB president Robert Zoellick warned the global crisis will hit the world’s poor more severely.
Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco said the country’s Balance of Payments (BOP) surplus is expected to decrease from a record $8.6 billion in 2007 to about $2 billion by the end of the year. He added that dollar reserves stand at $36.7 billion – equivalent to six months of imports and 2.6 times short term debt.
Propping up the peso
“Last year the peso appreciated by 19 percent. If we look at the movement of the peso over the past five or six years, it has appreciated by a little over 8 percent. If you compare this to the movement of other currencies in the region, it moved more or less in tandem.
“So when you talk about the relative competitiveness of Philippine exports, we’ve been basically able to maintain our position over the last five or six years,” Tetangco explained.
The World Bank and International Monetary Fund headquarters buildings in Washington DC. (RODNEY JALECO)
“The (peso’s) movement in 2008 is partly a correction of the significant appreciation last year but because of global developments there has been some risk aversion towards emerging markets including the Philippines. This has had an impact on capital flows,” the BSP chief averred.
“What we have seen in the stock market is year-to-date there is a net outflow of portfolio investments which has led to some weakening of the peso,” he disclosed.
“But in the 4th quarter of this year, it is expected inflows are going to go up particularly remittances from overseas Filipinos and this will provide support for the peso,” Tetangco said.
This would not be the first time that remittances of overseas Filipino workers (OFW) are going to rescue the Philippine economy from domestic as well as international turbulence.
Remittances are estimated to grow from $14.7 billion last year – over half of that from US-based Filipinos and Filipino Americans - to about $16 billion this year. There are fears though the global crisis may pull down actual remittances. Nonetheless, the widely-respected Economic Intelligence Unit (EIU) expressed doubt foreign remittances will be enough to offset the drop in investments.
Philippines better off than US?
Despite the gloomy picture, Philippine officials exuded confident. Department of Budget nad Management (DBM) Secretary Rolando Andaya Jr. jestingly told the Philippine Embassy audience – “I thought the reason we were invited here is to contribute to the (US) bail-out”.
While Teves and Tetangco took a more circumspect view of Philippine prospects, Recto and Andaya insisted the nation has reason to feel confident.
Andaya, for instance, argued that Philippine banks had much fewer toxic assets, adding that the Philippines’ savings rate was about 30 percent compared to a negative rating for the US. This, he opined, indicated Filipinos trust their banks more than the Americans did theirs.
“If we look at the exposure of our banks in structured products of the institutions that have been in the news lately, the total would only be about one percent of total assets of the banking system,” Tetangco averred. The officials pointed out the Philippines, much like the rest of Asia, was hit hard by an almost similar financial meltdown in 1997. While US woes stem mainly from the collapse of the housing mortgage market, the Asian crisis was likewise triggered by the bursting of the real estate bubble. Some see a common thread to both events – the reckless exposure of banks in what turned out to be very volatile assets.
“The (Philippine) banking system continues to reap the benefits of reforms implemented over the last several years, particularly reforms in the areas of increased capitalization, improved risk management, good corporate governance and risk-based supervision,” the BSP chief said.
“Another reason is that we really have good, prudent bankers in the Philippines. All of these, the reforms and good banking, have allowed us to weather the pressures that are basically coming from overseas,” he stressed.
He also pointed out that crude oil prices were falling, which should reduce the country’s inflation rate in the last quarter of 2008.
Protesters deliver their message outside the World Bank-IMF headquarters. (RODNEY JALECO)
Putting a handle on the global crisis
Makati City Mayor Jejomar Binay was invited by the WB-IMF to report on the city’s disaster response program. Makati is home to most of banks and multinationals operating in the Philippines.
ABS-CBN News caught up with the city executive at a dinner dance organized by the Washington DC chapter of the Alpha Phi Omega (APO) fraternity at the US Army’s Fort Myer clubhouse in Arlington, Virginia.
“The reports coming out of Manila say that there are banks affected, ”he said in the vernacular, adding that the world has yet to see the extent or intensity of the raging financial crisis. “This would still be long, as they say when the US sneezes, other countries catch the cold,” he added.
“What is difficult though is that we could not figure out Malacañang’s policies. We read in the papers that ‘we are prepared’ but whenever they say ‘we are prepared’ the problems get complicated. ‘We are prepared’ but people queue for rice,” Binay averred.
Teves said the government was already bracing for the effects of the global crisis. “We’re allowing for a budget deficit of about P75 billion which is equivalent to about one percent of GDP so we’ll have more resources to help our people, principally those people affected by these developments – the very poor,” he explained.
By RODNEY J. JALECO, ABS-CBN North America News Bureau
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