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Zero growth for export industry

Sergio Ortiz-Luis of the Philippine Exporters Federation warned that with the US downturn and even the high cost of power in the Philippines the export industry may have a “zero growth" for 2008.

“We may have zero growth because of our exchange rate, US recession and cost of power," Ortiz-Luis said.

This, despite government's claim that diversified trade will save the export industry. Government officials have reiterated that the Philippines has improved economic ties with India and China, and is not as dependent on the world's largest economy as it used to be.

In a text message sent on Wednesday from Zurich, Switzerland, Press Secretary Ignacio Bunye reiterated the Palace stand that the Philippine economy is strong enough to withstand an external shock like a possible US recession.

"Clearly there will be some impact on all countries... (but) while a possible slowdown or recession in the US economy could dampen the growth of emerging markets, the Philippines will likely withstand the adverse effects of such a development largely because of its improving economic fundamentals," Bunye said. Bunye then explained that from a fifth of total exports in past years, exports to the US have lessened to 16 percent as a result of healthier trade with China and India.

Economist Diokno counters this claim, explaining that while Philippine exports to the US may have thinned in percentage to total, other economies in the world are still dependent on the US, which will indirectly affect the strength of the local economy.

“The simultaneous plunge in 43 stock markets in the world – including India, China and Europe – is the best proof that the theory is false," he said. On January 22, stock markets all over the world suffered heavy losses due to worries that the US may be facing a recession.

Although Diokno noted that the government's move to improve relations with other countries can offset a possible slack in US consumption, it will only have a limited impact to the Philippines' economic performance “so soon and in a big way".

“And don’t expect diversification to work in a big way at this time when the world’s premier market – the United States – is slowing. With decoupling theory discredited, a US recession means less imports from China, Japan and the rest of the world. It also means less direct foreign investment from US and the relatively weakened developed countries," he said.


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Government action

The government is planning to do just that, pump-prime the economy, that is, once the 2008 budget is approved.

“We are looking to pump prime the economy to head off any possible adverse effects of the US," National Economic and Development Authority chief Augusto Santos said.

In the meantime, Santos said the government will closely monitor the US situation while sticking to its Development Budget Coordination Committe targets for 2008 of a gross domestic product of 6.3 percent to 7 percent.

He added that there is high hope that the Fed rate cut and the $150-billion economic stimulus plan being outlined by President Bush will be enough to keep the US economy afloat.

However, some analysts doubt that the US will be out of the economic slump soon. This was further bolstered by the emergency rate cut by the Fed from 4.25 percent to 3.5 percent as a sign of panic.

Abola said that with the impact of the US, the Philippine GDP will grow 6 percent to 6.3 percent, lower than the government's target of 6.3 percent to 7 percent for this year. - GMANews

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The fear of recession is a self-fulfilling prophecy.

This started with the collapse of the subprime mortgage market in the US. A great number of housing properties are being foreclosed. Because of increasing bad loan, financial instutions are tightening their belt, if not folding up altogether.

No money to lend to industries, businesses are folding up or laying off, the hordes of the unemployed or underemployed are growing everyday... consumption is down...

The sight downhill is really that of recession.  Even in Japan, supposedly an economic stronghold in Asia, the prospects are bleak.

Many at first believed that Japanese banks were not exposed to the US housing market. But they are, directly or indirectly. And so a dark cloud hovers on the mind of the Japanese. They are tightening their pursestrings as well.

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Pathetic to be homeless in the supposedly richest country in the world. Maayo pa sa ato kung naay payag....

Watch this "Foreclosure of the American Dream".

http://www.youtube.com/watch?v=SejeITkaOWc&feature=related

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