Impact of the Economic Global Crisis: Current Situation and Prospects in the Philippines

Impact of the Economic Global Crisis:

Current Situation and Prospects in the Philippines

Asia in general was not affected by the current global financial crisis (1). The source of the crisis did not come from the developing countries as seen in the 1990s during the Asian crisis. In 2008 - 2009, the developed world initiated the global financial crisis with the sub prime lending implosion; thus, affected the rest of the world. The Philippines in particular did not fall into a recession since the banks were not exposed to toxic assets as seen in the European banks and other developed world. Despite the disaster in the world trade and credit markets affecting trade in the Philippines, the large volume of remittances from overseas Filipino workers and migrants helped alleviate the crisis. In addition, the Philippines had a tremendous balance of payment excess due to banking reforms implemented after the Asian financial crisis. Furthermore, the ASEAN (Association of South East Asian Nations) Swap Arrangement under the Chang Mai Initiative with a supply of foreign-exchange reserve of about US$ 2 billion, was available to the Philippines and the region; but, there was no need to use it (2).

Looking through the Lens of the World Bank. The Philippines can sustain growth that benefits the poor over the next decade and emerge stronger from the global crisis with a deeper structural reform. The World Bank foresees the Philippines to increase by 3.5 percent in 2010 and 3.8 percent in 2011, as a result of the rising remittances from overseas Filipino workers and increase in government spending. If the Philippines manages the challenges of its perennial bottlenecks (poor investment climate, reduced infrastructure spending), higher growth...

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...s to improve the nation’s competitiveness in the South East Asian region. As seen in the first quarter of 2010, growth is accelerating. However, focus on improving business efficiencies (i.e. lowering the cost of doing business) and critical infrastructures including health, education, environment and technology, are much-needed. Also since the tax collection effort is substandard, substantial improvement of the revenue collection system will raise funds for critical infrastructure and public investment. As recommended by the IMF, improved revenue collections combined with improving regulations, reducing the cost of business, investments will increase, employment opportunities will be available, and development will accelerate (7). Therefore, all these together would allow the Philippines to develop at the same rate as its neighboring South East Asian countries.