Is the Philippines heading for a recession?

[valvura]

Do you believe in this? What are the impacts to the common tao if we are indeed in recession? Aren't we feeling the pinch right now or are we expecting things to become worst?

Is the Philippines heading for a recession?
(Following is the transcript of the segment "Analysis by Winnie Monsod"
which aired on News on Q on June 15, 2009. Prof. Winnie Monsod is the resident analyst of News on Q, which airs weeknights at 9:30 p.m. on Q Channel 11.)

Let's break that question down into several sub questions, and let's start with, what exactly do we mean by recession?

A recession is a period of temporary economic decline, generally identified by a fall in GDP in two successive quarters. In other words, the growth rate is negative during those quarters.

The good news, therefore, is that this has not happened, so far anyway, in the Philippines, unlike in Thailand, for example, or Singapore or Hong Kong, where the growth rates have been negative, 6 per cent for Thailand.

The Philippines has not posted a negative growth rate since 1998. That's good news.

The bad news is that the country's most recent growth rate of 0.4 per cent is four tenths of 1 per cent is actually very close to negative, which is the reason National Statistical Coordination Board Secretary-General Romy Virola said that the economy is "teetering" into recession.

So, the next question is, given that we are "teetering" or at the brink of recession, what is the probability that we will actually fall into recession?

Let us see what the historical data tell us about this.

I looked at the quarterly growth rates from the first quarter of 1982 to the first quarter of 2009 - that's a 27-year period - and found out that in 19 out of those 27 years, or more than 70 per cent of the time, the first quarter growth rates were either lower than the annual growth rates in 15 of the 19 or equal to them, 4 of the 19.

So that is good news - because 70 per cent of the time, the country didn't get worse after the first quarter, it either remained the same, or it got better.

The bad news though, comes out when we zero in on the country's recession years.

Four times in the past 27 years the country experienced recession - in 1984, 1985, 1991, and 1998. And in three out of those four recession years, or 75 per cent of the time, the first quarter growth rates were higher than the growth rates for the year. Meaning to say, things got worse after the first quarter. Ouch.

Let's take this one-step further.

Independent forecasts predict that the country would grow at about 2 per cent this year.

So, why then did we grow much slower than expected in the first three months of the year? Well, let's look at the usual suspects.

International trade figures show a very large contraction but then, exports and imports had been contracting since October of last year, so that was already part of the equation, factored in the forecasts.

So, hindi na 'yan kasali.

Was the culprit the remittances from OFWs? The answer is NO.

The forecasters had factored in that these remittances would be reduced, and slow down the economy as a result, but surprise, surprise remittances from overseas Filipinos increased - by 18.9 per cent in dollar terms, and 38.5 per cent in peso terms, thanks in part to a hefty 44.7 per cent rise in deployment in the first quarter, from 254 000 to 368,000 Filipino workers. Credit for that, by the way, must be given to the Arroyo administration, whose efforts in seeking jobs abroad have been unstinting. Let's face it.

Well then if it’s not trade, if it’s not overseas... sirit na.

One identified culprit is the marked slowdown in personal consumption expenditures - which accounts for roughly 80 per cent of GDP.

These expenditures grew by only 0.8 per cent in the first three months of this year, compared to a 5.1 per cent growth last year, a 5.9 per cent growth two years ago.

In fact, the last time it was anywhere near .8 per cent was in the last quarter of 1991, that was 17, 18 years ago, a recession year, when consumption increased by only 1 per cent.

Another identified culprit is more a crime of omission. The sad fact is that not a single centavo of the government's much touted stimulus package, was spent in the first quarter.

Why? Well, Congress didn't pass the budget until mid-January, and the President didn't sign it until mid-March. Tapos na ang quarter.

So, is there hope of averting the recession? Yes! Please, households, don't try to save more at this stage of the game.

Because when individual households try to save more at this time, you might end up saving less because you might lose your jobs.

And please, government, spend that stimulus package in a manner that will end up in the pockets of the people rather than in the pockets of politicians.
Posted by Winnie Monsod at 20:28

http://blogs.gmanews.tv/winnie-monso...recession.html

[uls]

yep

it's gonna get worse

[loidch]

naku naramdaman ko na ito since last june 2008 pa.....tsk tsk tsk

[uls]

hoy, gumastos daw tayo

huwag daw tayo mag ipon sabi ni Monsod

So, is there hope of averting the recession? Yes! Please, households, don't try to save more at this stage of the game.

Because when individual households try to save more at this time, you might end up saving less because you might lose your jobs.

[ghosthunter]

Do you believe in this? What are the impacts to the common tao if we are indeed in recession? Aren't we feeling the pinch right now or are we expecting things to become worst?

http://blogs.gmanews.tv/winnie-monso...recession.html

Hasn't the Philippine economy have been in recession for YEARS? The only thing holding up the economy are the OFW remittances.

[ghosthunter]

hoy, gumastos daw tayo

huwag daw tayo mag ipon sabi ni Monsod

Maybe Winnie should lead by example...

[uls]

hehe

Monsod also said the govt should increase spending

And please, government, spend that stimulus package in a manner that will end up in the pockets of the people rather than in the pockets of politicians.

but she didnt not mention anything about govt borrowing

to fund stimulus spending, the govt has to borrow A LOT of money

Phil. govt borrowing:

RP debts rise after selling securities to fund spending
http://www.gmanews.tv/story/165039/R...-fund-spending

MANILA, Philippines - The Philippine government’s outstanding debts increased in end-March this year after selling more securities, the proceeds of which were used to bankroll faster and accelerated spending to ward off the effects of the global economic slowdown.

Money raised from the sale of government securities also helped narrow a burgeoning budget deficit.

The Philippines’ total debts reached P4.229 trillion in March, 8.9 percent higher than its obligations during the same month last year, the Bureau of the Treasury (BTR) said.

debt-to-GDP:

Debt allowed to rise to 57.6% of GDP
http://businessmirror.com.ph/home/to...76-of-gdp.html

THE government will end with P223.78 billion more debt this year than it originally planned as its debt-to-GDP ratio was allowed to expand to 57.6 percent of the gross domestic product instead of 54.8 percent originally.

while tax revenue is declining:

BIR misses May revenue goal: source
http://www.abs-cbnnews.com/business/...ue-goal-source

MANILA - The Philippines' main tax agency missed its revenue target in May by P3 billion ($62 million), a government source said on Thursday, straining further already fragile government finances.

The Bureau of Internal Revenue (BIR), accounting for two-thirds of total state tax collections, had aimed to collect P77 billion in May. But initial data showed the agency raked in just P74 billion last month, the source told Reuters.

---

to pay foreign loans, we need dollars

with exports down, foreign direct investments down, the only source of dollars is OFW remittances

mabuti nalang tuloy tuloy parin ang OFW remittances

Remittances grow 2.6% in 1st 4 mos.
http://businessmirror.com.ph/home/to...1st-4-mos.html

THE remittances of overseas Filipino workers (OFWs) rose 2.6 percent in the first four months to $5.5 billion, lifting hopes it should still rise this year despite widespread expectations to the contrary.

but looking forward, foreign creditors will look at RP as a higher risk borrower

sooner or later, the credit ratings agencies will downgrade Phil sovereign risk rating

creditors will demand higher interest rates on Phil govt bonds

(to avoid that, the Phil govt will show the foreign creditors it can meet its obligations --- by raising taxes)

---

Monsod said consumer spending is down

One identified culprit is the marked slowdown in personal consumption expenditures - which accounts for roughly 80 per cent of GDP.

maybe those who have no access to credit are cutting back on spending

but those who have access to credit are still borrowing

yun nga lang dumadami ang hindi makabayad ng utang

Consumers keep borrowing but bad loans also increasing
http://www.bworldonline.com/BW061609/content.php?id=003

MORE CONSUMERS are taking out loans but a rising number have apparently also been unable to repay their debts, data from the Bangko Sentral ng Pilipinas (BSP) indicated.

Of commercial and thrift banks’ consumer loans, advances which have remained unpaid for over 30 days went up slightly to a ratio of 9% in the first quarter. This compares to 8.6% in the prior period and 8.1% in January to March last year.

Total consumer loans, meanwhile, grew by 18.7% in the first quarter from a year earlier, or by 1.5% from the prior period.

"The quarter-on-quarter increase in the ratio occurred as the growth in non-performing consumer loans (2.36% for commercial banks and 2.74% for thrift banks) outmatched the 1.5% expansion in total consumer loans," the Bangko Sentral said in a statement.

OVERALL, this doesnt look good for RP

[ghosthunter]

I wonder what is the requirement for Singapore Citizenship? Para maging kababayan ko si Jet Li.

[CVT]

Hasn't the Philippine economy have been in recession for YEARS? The only thing holding up the economy are the OFW remittances.

That is true. Sad, but true.

It's a vicious cycle. There isn't any motivation for the government to create jobs. So, people seek out opportunities somewhere else and the cycle abuses the pull of the family(our greatest strength as a nation) to keep the economy afloat....

8101:oops2:

[ans_lim168]

This is already happening, ask the people around if they are contented with what they are earning and is the economy on the upswing, the government is so out of touch with reality if they think they could sell to the people that we are outside the scope of the financial crisis.