Filipino businessmen expect a grim economic scenario in 2009 as a more difficult credit environment is expected to translate to a recession, which will lead to job losses. 

In a survey of Makati Business Club (MBC) members, 87 percent of respondents expressed pessimism as they said the Philippine economy will likely go into a recession next year. 

MBC said in a statement that it conducted the survey between October 24 to November 7 among its 738 members who are mostly senior executives in medium and large companies in the Philippines. About 113 members responded to various questions, which hope to get an indication of their outlook over the next six months. 

Of those (87 percent) who responded that the domestic economy will likely be in recession next year, 16 percent said they "somewhat agree," while 71 percent said they "completely agree." 

A recession technically means two consequtive quarters of negative economic growth, usually measured by the gross domestic product or GDP figures. 

MBC executive director said that GDP growth will post a "mild downturn" towards the first quarter of 2009.

The respondents' sentiments on the possibility of a recession in the Philippines defy forecasts by economic managers and various analysts who have pegged the 2009 GDP growth at over 4 percent.

Credit difficulty, lower consumption

One of the potential reasons for the prevailing pessimism is the expectation that access to traditional financing sources will be difficult. 

More than 76 percent of the respondents agreed that "obtaining bank loans for your company will be more difficult [in 2009]," while 75 percent said "access to trade credits for your business will be more difficult."

The Bangko Sentral ng Pilipinas has made several moves, including cutting policy rates and reducing banks' reserve requirements, to stir financing institutions into keeping credit flowing.

The BSP has been following leads of central banks abroad that have been using similar traditional monetary tools, but these have had little effect as they are not being passed on to the real economies in the form of easier lending by banks.

While the Philippines and several Asian countries have explained time and again that their economies have no similar subprime-led financial crisis, which originated in the US, its impact have started to creep into the real economy as businessmen grow increasingly nervous.

Recently, one of the units of Ayala conglomerate, capital-dependent Globe Telecoms, announced that it would tap the local retail bond market to diversify its funding sources as it forsees that the traditional loans and equities here and abroad will be less friendly. It also said it will cut its investment budget for new and upgrades in existing technology as it expects consumers to use their mobile phones less. 

The reductions in consumer spending--highly dependent on the almost $15 billion remittance money from overseas workers--is seen to be a persistent concern despite one bright spot: lower inflation. 

In the MBC survey, 59 percent of the top business executives expect that inflation rate will slow in 2009. Food and fuel prices have been dropping since they reached record highs in the past months. 

Weaker peso, job losses

Moreover, the survey respondents anticipate other major economic factors to weaken, with 87 percent saying they expect the peso to depreciate against the US dollar. 

A depreciating peso will squeeze profit margins of companies, especially those who export since it will make their products less competitive in the global market and their cost of imported raw materials more expensive. 

Given their bleak reading of the economic environment in early 2009, some businessmen said they will lay off some of their workforce and cut their investment budgets. 

About 62 percent of the respondents said their "company's workforce will contract" in the coming year and 55 percent said their capital expenditures "will drop."

However, about 35 percent percent of the respondents seem to be contrarians. They said investments for future businesses "will rise."