RP to feel impact of slowdown in 2009

The larger impact of the global economic slowdown will be felt by the country next year, according to a senior economic manager of the President.

While it has been acknowledged that the Philippines has not been too hard hit by the global financial crisis, Finance Secretary Margarito Teves said that the impact on the country would be greater in 2009 than it was this year.

Interviewed at Malacañang, Teves explained that there is a time lag in terms of the impact of the global economic slowdown and this would mean that the Philippines and the rest of Asia would feel the fuller effects next year.

“The financial turmoil initially affected the United States and Europe. In Asia, it will probably take place more next year. There’s a time lag in terms of the impact of a global economic slowdown. The time lag will affect Asia by next year more than this year,” Teves said.

According to Teves, the impact of the global crisis on the Philippines would be on the real economy as expectations would be that there will be a slowdown in business and economic activity. He specifically cited the export sector as the one to be affected greatly.

As demand for goods has slowed in the major markets because of their weakening economies, this has affected the manufacturing sector, particularly those in the emerging markets where exports play a significant part in economic growth.

“I used the word slowdown because usually Asia doesn’t suffer a recession,” Teves emphasized.

The technical definition of a recession is two successive quarters of negative growth.

Teves said that the duration of the slowdown would depend on how quickly the US and European economies recover from the financial crisis.

He added that the impact on Asia could also go by faster based on some positive trends that are taking place such as the reduction of interest rates in the US, Europe and China. “For all you know the effects might be faster,” Teves said.

Teves cited forecasts indicating that a recovery could be seen by the second half of 2009 throughout the world.

“How quickly it is depends on the kind of measures that are put and how effective they are in the US and Europe and how quickly we’re able to put in our reforms in Asia and ASEAN,” he said.

On the part of the Philippine government, Teves said that measures are being taken to mitigate the adverse effects of the slowdown on the economy.

“It’s a combination of accelerated implementation of infrastructure programs, making sure this time that infrastructure spending is done more in a larger way during the first semester of the year to take advantage of the good weather,” Teves said.

He added that investments in food and agriculture must also continue and that Congress should pass the remaining economic reform measures.

The government is pushing for the rationalization of fiscal incentives and sin taxes.

Next year, the law reducing the corporate income tax would also take effect so this should also help the businesses in coping with the slowdown.