AS a result of continued inflows of remittances, the Philippines remain largely stable to render support for consumption demand, according to the 2009 Economic and Social Survey of Asia and the Pacific.
However, the worse is yet to come—the economy is expected to grow by no more than 3 percent this year, observes the survey released on Friday by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
A bright spot within the gloomy picture is the increase in money sent home by Filipinos working abroad.
In 2008, remittances totaled $16.4 billion, which is 13.7 percent higher than in 2007.
However, the growth rate in remittances decelerated to 0.1 percent in January 2009 compared to the same time last year, reflecting the impact of the recession on immigrant workers in the United States.
Still, the small current account deficit of 0.9 percent of gross domestic product (GDP) would be substantially larger if it were not offset by the remittances the country receives from overseas workers, which represented 11.6 percent of the country’s GDP in 2007.
Data for the first nine months of 2008 indicate that remittances increased 17.1 percent compared to the first nine months of 2007.
A reversal in remittances is not expected in 2009, but a slowdown is foreseen because many of the country’s overseas workers are based in recession-hit economies.
As a result of the global financial crisis, the Philippine economy grew at a noticeable slower rate during 2008, at 4.6 percent—down from 7.2 percent in 2007.
The survey states that the slowdown in GDP growth in the Philippines is a result of a sharp contraction of exports started in the last quarter of 2008—a consequence of the country’s linkages to global supply chains in the electronic industry, which have been badly hit by the recession in the United States and other industrialized countries.
While domestic demand did not fall as sharply as exports did, the growth in private consumption, gross fixed investment, and public consumption was slower in 2008 than the year before.
To support the economy in the face of the deepening crisis, the central bank cut its policy rate on three occasions between December 2008 and mid-March 2009, from 8 percent to 6.75 percent.
In addition, in January 2009, the government announced a fiscal stimulus package of P330 billion (4.6 percent of the GDP) which aims at upgrading infrastructure, providing seed funding for small enterprises, boosting social protection and creating jobs.
It reflects a P160-billion increase in expenditures and P100 billion in infrastructures.
Most of the stimulus packages in the region are relatively small as in Malaysia, Thailand,
Vietnam and Indonesia. The exceptions are the Philippines (4.6 percent of GDP) and Singapore (11.5 percent of GDP). –ESCAP
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