RP's economic growth to slow down due to US financial crisis
abs-cbnNEWS.com | 09/30/2008 9:48 PM
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With the US economy facing an impending recession as a crisis in its financial system led to a credit crunch, Philippines' Economic Planning Secretary Ralph Recto said Tuesday that the Philippines will feel the impact through lower than projected economic growth in 2008 and 2009.
In a statement, Recto said projected growth for Gross Domestic Product (GDP) in 2008 will be scaled down to between 4.4 and 4.9 percent.
In July, the Development Budget Coordination Committee announced that GDP this year is expected to grow between 5.5 and 6.4 percent.
Recto said GDP growth projections for 2009 has also been reduced to a lower range of between 4.1 and 5.1 percent.
These figures are a far cry from the 7.3 percent growth posted in 2007. The Philippines was then considered one of the fastest growing economies in Southeast Asia.
"The economic managers have accepted my suggestion to revise the Philippine economic projections downwards in the light of recent global developments," Recto said.
After the US congress thumbed down a proposed $700 billion bailout package on Monday, the American lawmakers and politicians continue to mull their next move to stem the hemorrhaging financial system that has caused its economy to be on a standstill as consumers stall their spending.
"While that move will have a calming effect on the financial markets, it won’t stop the US economy from going into a recession, which will have an effect on the global economy. The Philippines will not be spared," Recto warned.
The impact will likely be felt in exports, where growth in both volume and value will be flat, and in the interest rates, which are expected to "slightly go up."
In recent days, the central bank governor, Amando M. Tetangco Jr., has stated that the economic slowdown in the US will affect not only our exports but also investment inflows. However, Tetangco expressed optimism that the country's own financial system is strong enough to withstand a global economic shock.
Nonetheless, Recto said there is still a silver lining: "We expect food and oil prices to stabilize and expect inflation to be lower."
Inflation, or the cost of goods and services, reached double digits in the past months and have been the focus of worries more than the impact of the US financial crisis.
