IT IS disheartening to hear and read about families losing homes in the U.S., companies being denied access to credit, and retirement funds losing in value.
But here in the Philippines, it is not so bad. At TriNoMa mall last Friday, people milled about, going in and out of stores and lugging shopping bags with them. Agents for credit cards were still handing out application forms in the mall. Several other malls in Metro Manila were also on sale this past weekend and people trooped to shop at a discount there and at village bazaars.
As JP Morgan said, the Philippines may weather the financial crisis even if it has significant exposure to an emerging global recession. This is because of internal buffers built in the system. Indeed as the Bangko Sentral ng Pilipinas has assured the public, the banking system is adequately capitalized.
Butch Mossesgeld, a certified securities representative for PCCI Securities Brokers Corp., believes God has a hand in it. “You know, I observed that God spared our country from this crisis because during the Asian Crisis that started in 1997 the financial and property sector were restructuring their portfolio and capital structure to stay afloat. Fortunately it was only two years ago that they were starting to recover so they didn't have the opportunity to invest aggressively. That’s the reason I believe we were spared,” he says.
"A man's steps are directed by the Lord." -- Proverbs 20:24
Why the Philippines is not as badly hit financially
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You are right God's protected the Philippines from this economic crunch, filipino people are more resilient and can stand the weather crisis - meaning we should returned back to God and fear Him. Blessed are those whose hope is in the Lord.
Filipinos do not live on credit unlike the Americans and our banking industry is conservative. I always remember an incident that happened inside a bank where three Fil-Ams were complaining to the bank manager saying in loud voice "Why is it too hard to get loan here in the Philippines?" In the States, you can avail of a loan in ten minutes without collateral. The bank manager kept on saying we need at least 20% equity, that's the policy. Hmmmmm, Im just wondering what is happening now with the three FilAms?
bullshit! if we are not as badly hit as they claim to be, then why are the prices of primary commodities still very high?
blah! blah! blah!
"Why The Philippines isn't as badly hit as financially?"
The worst is yet to come... hold your horses and get ready for the ride of your life...
Inflation is still high...
The Financial Crunch is not End Yet. To say that we are not badly hit financially is too early. US and other EU countries are the major business partners of the Philippines whatever happen in thier financial activity will surely affect our economy. I think we have to plan our expenditure accordingly.
Commodities are high because of our trade imbalance. We have trade imbalance because we pay little attention to industries that create real value i.e. agriculture, manufacturing, fisheries, etc. Hence we import more than we produce, and that makes prices rise.
The US banking system has created financial products that are very sophisticated to the point of madness but have no real value. Thankfully, we have been "blessed" by our lack of sophistication, and did not subscribe enough to these forms of investment to negatively impact our economy.
Hard to believe, but I learned that banks and financial institutions in the US and Europe has on average 1 is to 25 leverage. Meaning for every $1 they have they also have $25 being used as leverage. Wow, very aggressive and risky indeed. In the Philippines, the reverse is true. Only 80% of their real worth is loaned. Meaning they can pay all their obligations. Mark was right. Here, you cannot go to say Megaworld to buy a house without a downpayment and banks don't just give you a loan without studying how are you going to pay for it. I wonder why international credit agencies put low ratings on local banks here when it now shows we are more solid than them. We don't have complicated and unregulated instruments like credit default swap (CDS) that runs in trillions of dollars that crippled the global economy.
Uhhh..didn't really explain much why we're not that badly hit.
a a- The answer to your question is simple, the price of oil and gas to produce it has gone up. Thus the price of food, transportation, manufacturing, and commodities have gone up in aggregate as the depend on oil to be produced. This is not a problem caused by the credit markets or the the Philippine government, but is caused by speculators and OPEC within the oil industry. This problem of rising prices of goods is a world problem not just the Philippines.
To elaborate on the article, the Philippine real estate sector has high credit requirements. Meaning that you have to put a whole lot of money up front before you can start building this can be upwards to about 50% cash. In America this is quite lax - 0% cash can get you started based on your credit. If you don't have credit then you have the problem in America right now.
Philippines credit markets compared to the rest of the world is in a good position-it is responsible.
I agree, most of Filipinos do not rely on credits as much as the US does. In the Philippines, there are only a handful of people do pay mortgages, many lives on provinces with only electric, water and cable(if any) to pay. These are the primary reasons why I think the Philippines has not been hit really hard.. And the prices of commodities being high, of course all you have to look is the supply and demand, the oil prices has dramatically been down in the past few weeks but it will take time before consumers feels the difference. Sometimes common sense is your best asset.
After all what is said and done by our Govt. if global recession continue to persist thru 2009...You bet on it, the Phil. economy will be in for a tough ride this. And yes we Filipinos dont live in credits like the americans do..in the first place why need more credits;since majority of filipinos dont have enough cash to pay them afterwards.
Filipinos are not spared. The effect of the financial crisis to us is just delayed by the coming remittances for the spending season. Let us prepare ourselves from February 2009 where our country spends more USD for industrial imports. Let us work harder, invest wiser, reduce or eliminate wastes, spend less, save more and save more.
It is not so bad? It is because the money(tons of it!) that should have been circulating were pocketed by goverment officials and politicians instead. My goodness, why can't we be like our neighboring countries?? Only in the Phillipines that you can steal in billions, committ henious crimes and get away with it. We wanted to return back home when we retire, but how can you, knowing that goverment officials are only concerned about themselves? It's so sad indeed.... It is one scandal after another...
I agree that there is a Divine intervension in our economy, I remember before when Dr. Bill Hammon a teacher and a Prophet of God from US, na nag Prophesy before the election noon na ang lumabas ay si Pres. J. Estrada nguni't ang sinabi niya na babae ang susunod na Presidente at ito ang mag establish ng economic prosperity ng bansa at mamangha ang karatig nation ng Pilipinas. Thank God for having your hand in the Phil. at Praise God marami na satin kasi ang tunay na mga sons of God. "O taste and see that the Lord is good: blessed is the man trusteth in Him"(Psalms 34:8) continue praying to
our Country, but not bulshiting!
hi aa,
I think you are not buying basic needs. baka you keep on gimiking... :) mahal talaga ang gimik pag yan ang basic mo.
all the crisis that our materialistic world is experiencing is written in the Holy Bible,time is running out for each one of us,the Justice Hand of GOD is imminent,so we must be always be prepared!
God has nothing to do with this. It's because the Philippines doesn't securitize its mortgages; therefore, doesn't provide liquidity into the system for home loans. Banks end up keeping these loans on their portfolio but have little money left to loan out. Result: Less people able to get their first homes. Securitization is not bad, but if regulations are lax, then problems arise with bad loans. Actually the defaulting sub-prime loans in the U.S. are a very small part of the problem compared to the CDSs (Collateralized Debt Swaps) that are insuring those underlying mortgage bonds. This is going to be the major problem. Presently, banks are scared to lend to each other and to consumers, thereby causing a credit crunch, leading to a slow-down in the economy. The Philippines is insulated only to the point that they had little exposure to Lehman's CDOs (Collateralized Debt Obligations).
count our blessings. things could be worse for the country. we must learn to appreciate things around us even if the prices of basic goods are going up at least we are still not at the point where inflation is reaching very critical levels...
What blessings are we talking about? With or without this 'world economic meltdown', we are a different breed. Ours is a corrupt government, ours has over borrowed beyond our capacity to pay (were shall we get the 862 billion pesos interest payment for 2009?),Our Government is a stupid one and only good for making empty speeches and slogans.
So many self appointed experts in Malacanyang. Look what this stupid government did last SONA. The son 'congressman' spend 200 million pesos refurbishing the Batasan for his mother's (PGMA) 30 minutes speech amidst widespread poverty.
What blessings are we talking about? Our peso today has passed 48 is to one dollar, and rapidly depreciating; if Argentina may default anytime, what more with our stupid government headed by PGMA?
Only fools believe in PGMA speeches. Even foreign businessmen are laughing behind her back when ever she speaks of Macro-Micro financing, and other trite speeches. She is running out of subjects. She is running out of lies.
Our government is bankrupt! And it is runnel by clowns, pretenders, jesters, and self-appointed experts!
So many self appointed experts in Malacanyang. Look what this stupid government did last SONA. The son 'congressman' spend 200 million pesos refurbishing the Batasan for his mother's (PGMA) 30 minutes speech amidst widespread poverty.
What blessings are we talking about? With or without this 'world economic meltdown', we are a different breed. Ours is a corrupt government, ours has over borrowed beyond our capacity to pay (were shall we get the 862 billion pesos interest payment for 2009?),Our Government is a stupid one and only good for making empty speeches and slogans
What blessings are we talking about? Our peso today has passed 48 is to one dollar, and rapidly depreciating; if Argentina may default anytime, what more with our stupid government headed by PGMA?
Only fools believe in PGMA speeches. Even foreign businessmen are laughing behind her back when ever she speaks of Macro-Micro financing, and other trite speeches. She is running out of subjects. She is running out of lies.
Our government is bankrupt! And it is runnel by clowns, pretenders, jesters, and self-appointed experts!
Prices of commodities are still high because bec of a lag of at least four to six months before prices adjust. Since oil prices are going down now expect prices of commodities to adjust by february next year.
I think the Philippines will not be hit hard by this on-going economic crunch. Not only because we are outside the radar screen of greedy financial pawns and the lack of sophistication of our economy, it is more of our ofw heroes. They should be treated with utmost respect.
I suggest to readers with extra money to buy equities third quarter of next year when it reaches rock bottom. Defer your pruchase of a car or other luxury items. In every crisis there are opportuinities. I bet your money will double in two years time if you will put it in equities and unload it after at least 18 months.
We have differences on beliefs but according to the author the hand of God is working here and I agree. There will be more catastrophe and more scandals but God has the sway of all things.
The Philippines is not as badly hit because we do not have a lot of "sophisticated investors" that has caused the subprime mortgage mess.
The root cause of the subprime mortgage mess is wonderfully explained in this youtube video.
http://www.zdiaz.com/index.php/2008/09/18/subprime-mortgage-bloopers/
What are you talking about? We were already badly hit since ordinary Filipinos start working abroad for a better living! Why do we always turn to God for better future? The future lies in our hands! It is we who can make our future better! That's why we let corruption reside in our country because of our inaction and self-denial that there is corruption!
The goverment did a good job last year of reducing the ratio of foreign debt against domestic debts, they also boosted our foreign reserve by significant amount. Although our exports in the US went down, they were able to compensate that with a boost in exports in china, japan and south korea. This somehow help cushion the impact. There were reports abroad of layoffs and recessions but fortunately we have yet to see some mass layoffs of OFWs. We still cannot say how it will go in the future. It can go bad or it can also be not that bad as OFWs mostly occupies the skilled and not the executive part of labor abroad. Hopefully, skilled workers with their lower income bracket will be retained and the companies that will downsize will hire more lower income filipinos. Well, lets just hope for the best and not add to panic reports that other people, who wants this govt to fall, have been doing for many years. Let's get rid of the classic crab mentality of the filipinos.
I couldn't agree more!! We are neither rich nor poor.
It all depends on what standard we apply to judge whether we are "hit badly." It seems the author is applying the status quo of the Philippines as normal case, and anything below it is being "hit badly." This means that it is normal to have half the population living on $1/day, a double digit inflation of 11.8%, 20% of the population experiencing hunger without anything to eat within the last 3 months.
Come to think of it, the author was thanking a god who thinks that the poor are blessed. That explains the low standard.
We don't have to agree on everything, but let's agree to hear each other out.
The Philippines is not as badly hit in this global financial crisis as the US where people are losing homes, big financial institutions like AIG and Lehman Bros have fallen, etc.
But it's not all rosy either. I am dismayed, like you, at the extent of graft and corruption here, at the rising prices, at the poverty situation. The Philippines can do better financially if there is no graft and corruption.
Still, it's good to note that we're not at rock bottom because our financial institutions are still standing, a lot of people still have jobs, etc. It's not the best scenario, but it isn't the worst either.
This is not a special investigative report on why our country isn't as badly hit as the US. With the short space we have in this blog, I just focused on what JP Morgan and BSP (based on news reports) and my source, Mr. Mossesgeld, said about why we're still standing. You are welcome to agree or disagree.
Thank you for your passionate comments and opinions. Keep 'em coming, positive or not. :)
The Philippines is actually doing ok in terms of the economy. The latest GDP growth projection for 2008 is about 4.2%. This was revised several notches downward from above 6%. Some says its getting bad but it is still a respectable growth compared to other countries. Even China GDP growth went down from 13% to now 9%. The inflation of 11.8% is high but there are many countries that are a lot higher than us because of the global credit crunch. Zimbabwe is the worst with 231milyon % as of Oct 9. Unfortunately majority of the Filipinos are not that aware of what is happening outside the country. Local media are not reporting it that much to the masses fairly. Some of the negative statistics is I believe far off from the truth. I recommend everybody to read a new book ECONOMIC FACTS and FALLACIES if the moderator permits to have a better understanding.
Trinoma shopping? Credit card application still being handed out? And by observing these, you believe the Philippines economy is not affected at all?
C'mon!!!
A very unscientific way of measuring the economy. How about lower remittances to relatives? Slowdown in purchases of condos by OFWs? Decline in enrollment at pricey schools & universities? Lower passenger count of Balikbayans at the airport? How about interviewing the family of OFWs whose spending is affected by their parents from abroad?
From the surface, it would lokk like business as usual. But it would still affect a lot of Filipinos who depend solely on remittances for their survival. When millions of OFWs get laid off, or their home equity completely gone, retirement funds almost decimated, they will feel "less wealthy", meaning less cash to spend, then the benificiaries in the Philippines will also suffer. This is esp. true when almost 40 million out of the 90 million Pinoys are dependent on these overseas remittances.
Maybe it hasn't impacted them yet, but it will soon be apparent within the next few months.
When a poor country (such as the Philippines) depends on 10% of their GDP from overseas remittances, then you'll know there's going to be some financial setbacks as well. Just a matter of time...
After all, it took a while for the subprime meltdown to actually strangle the US financial market.
USA = Easy Credit (Instant Gratification)
RP = Tough Credit (Cash & Carry)
See the difference?
Huhuhu!
I agree that we Filipinos were not badly hit by the financial crisis coz' our financial and banking system are conservative (segurista)..unlike the US which is very sophisticated...anyway majority of Pinoys don't mind about this economic blah, blah, blah.
Whatever, we'll see...
Just look at the back of an One US dollar bill, as you can see in GOD WE TRUST and we have an enourmous Dollar Reserves and well capitalised banks even though we are all heading to World Global Recession, we dont have much imaginary global weatlh where this problem started by quant a trillion funds that was inflated and created 62 trillion imaginary wealth.
It's still too early to tell the effect of market slowdown (recession). Since our main market for our products and services is US. A slow down in the US economy will mean less order and it will correspond to layoffs and company closure. A good economic indicator to test for the health of the Philippine economy is crime and suicide. You can see the increase of this two factors in the news daily. However, Filipinos are very resilient, flexible and innovative people. We can weather this storm to pass.
The issue about rich and poor is kinda tricky. As the other bloggers said it depends on one person's criteria and standard.
About the OFW dependents, they will definitely affect their way of living. Before they can change cellphone every month or two weeks. Now they i have to do it every quarter or six months. But still we're the one of the country where majority of the citizens own at least one cellphone.
If we're really poor, we shouldn't be able to buy a cellphone, right? We used to live without it. Now it became a necessity that even students will borrow or use all their "baon" to buy load just to text their friends. and not all of the topics of their text is important.
about the graft and corruption, remember that the government is not only one who is corrupt. even normal businesses, normal Filipinos are corrupt. Do not point fingers. It's like when you're dealing with a police. If you don't give money and just paid for your penalty in the right way. these policemen/women won't even think of doing "kotong". it's because we're so "busy" and we don't want to be bother so we just pay whoever off. and it happens to almost all of the transactions here in the Philippines. Not only in the government.
Just my two cents. :)
In the first place, the average Filipino don't have much money for savings and ivnestment in stocks. There's not much money to lose because there's not much money lef anyway. What we earn we spend. Sometimes it's not even enough.
But is there a study how much foreclosures we have? Isn't it that government lending institutions are having difficulty themselves foreclosing several properties because of the cost of foreclosures that they would rather give amnesties and condonations than foreclose ? Something to think about and consider.
it is ridiculous.
compare average american versus average filipino, even hundred even more powerful economic turnoils won't bring the third of americans to live on less than $2 a day.
it is why even thousand years ago jews didn't advice to mention the maker's name explicitly :)
referring to bags of made in china junk sold in those malls even more preposterous, if you noticed over time the quality of items sold in SM went down and prices went up, you get now the same but much cheaper in 168 mall.
This is an overly optimistic view that i cannot really share, and i believe is flawed on a few points. Yes, perhaps the US is no longer the sole influence of global markets, but if the US goes into a recession, china and japan will most likely slowdown as well. in fact, we're beginning to see the reaction of global stock markets, which are performing even worse every time the US stock markets plunge.
As the saying goes, if US sneezes, the world catches a cold. The world is more linked to each other now, with the US having the largest mass. if a mountaineering group is chained to each other, they would really not want their heaviest member to slip. I say, if the US goes to recession or, God-forbid, to a depression, we're f*cked... It's as simple as that.
That's because the underlying causes of this financial crisis is a credit crunch. Liquidity is getting tighter and as the creditors become more in crisis, the creditors suffer.
Our revenue is $23.96 billion while our expenditures is $25.24 Billion, hence the deficit. But our public debt is ----- suprise.... $316.65 billion (or 69.9% of GDP).
We are dependent on external credit, there's no way sugarcoating around that. And if there's a US-led credit crunch? Well, as i said, we're f*cked.
The Americans truly cannot live in less than $2 a day in their country unlike here in the Philippines. Two dollars can buy you much less in the US because prices there is a lot more expensive if converted to peso. We cannot just equate the value of two currencies of two different countries while not equating what it can buy on their local markets respectively.
A household maid in the US earns a lot compared to a maid in the Philippines. That may be true only if they spend their hard-earned dollar in the Philippines. But in the US, it's not that much. That's why you hear of OFWs that has 2 or three jobs at the same time to earn more. Suddenly these OFWs learns how to save when they are abroad. They don't just spend unnecessary things unlike when they were here. They follow all laws and dont complain or criticize unlike when they were here. They got disciplined.
Already, several big banks in the US either got bankrupt, bailed-out or bought by another bank. These are no ordinary bank. These are some of the biggest in the world. Some are more than a century old.
The Philippine financial institution are still holding up and strong. We have yet to see a single bank that will fail. This is the real situation locally no matter how many critics are downgrading there own country. It's unfortunate that the local media don't report much what is happening to the financial world today with the needed balance and without bias unlike the foreign media.
the Philippines is not as badly hit financially is because we have no money to get affected. Besides, with the kind of living situation that most Filipinos are in these days, to some, death is bliss and sweet.
when you got no money, you dont feel when money got scarce.
Not badly hit financially? Come on, are we fooling ourselves ! ...... We have been hit long long long time ago.....Why millions of filipinos have been going abroad? if not for financial reasons? How about the e-mail brides getting married to foreigners more than twice their age? if not for financial reasons? Why our teachers, aside from teaching, selling tinapa, fruits, candies in the classrooms? if not for financial reasons? Why our country's debt keep on filing up to billions of dollars every year? if not for financial reasons?
Why more than 60% of the population below poverty line? Why our basic infrastructures such as road network, water system and health facilities in state of deterioration?
Not badly hit financially? Please wake up........ Unless we know that we are in serious financial problem we will not be able to find solution..... Hoyyyyyy Gisingg....... Palpak ang inyong mga analysis !
moderator: please leave only the last post and delete this remark, i'm sorry, was typing blindly and not spell checking enough, many thanks in advance, i've just got up after working through the night :)
jim:
prices in the philippines are higher, and frequently much higher than in US for comparable quality items.
only rent and housing is still cheaper (maybe that partly explains the housing bubble in US, it just corrects itself), but sometimes the housing quality is matching as well.
i'm used to order good quality items to be shipped from US or taiwan because here they are so expensive and what is cheap is of inferior quality.
mostly what is sold is made in china low quality items, the toys you can buy here will normally be broken after one or two days.
groceries, vegetables are more expensive than in US, prices on some products like vegetables went up 5-10 times during last 5 years, sometimes they higher than in Europe and US. goverment cooperates fully with land owners and resellers (since those poor people who actually farm the land get even less) by prohibiting cheap shipments of vegetables from china or taiwan.
on the top of that you have corruption and weak legal system, just check the latest case of the PNP general carrying bags of cash (and everyone knows here that giving no bribes to police is rather an exception than the rule, so only a complete outsider which didn't have a chance to spend a couple months in the philippines may wonder where the money came from) or take for example the apparent price fixing which has now place with diesel&gasoline prices and goverment basically mum instead of taking legal steps (with for sure other heavy bags of cash changing hands to keep them mum).
alex
Well because only few companies in the Philippines put their investment in United States. Before financial problem occured in the United States maybe last September, I heard that most businesses in the US are having a sale and many starbucks outlet were closing. While in the Philippines more starbucks were opening. For instance in Timog Avenue in Quezon City, three starbucks outlets were operating. So it means that next economic prosperity will be felt in the East. But the big question shall be " Is the Philippines will be included in the economic prosperity? " No, unless the Filipinos are willing to change. Not just always blaming the government. Actually one article was published in Singapore that Philippines shall be domestic helper of Asia. Well its true, nowadays the trend in our country is to study nurse to go abroad. Its not bad to become nurse if its your passion to serve and work abroad if that is your destination. Bottom line, we priotize money that's why the blessing of our Maker is not in our country.
Certainly, we will never hit by this financial crisis which is now hovering the world. Its because more than 90 percent of Filipinos are living in poverty, they don't have money to invest in stock markets and mutual funds, they don't have assests to be affected by price devaluation, they don't money to save in the bank just to be eaten up by higher inflation. Yes, we are very lucky..be proud to be a Filipino.
I think we will be affected. But this may not happen within the year since the main fallout is in the financial markets.
Once finance companies start implementing their strategies to absorb the shock, these will slowly affect the services and consumer industries.
I hope Ateneo or UP will come up with a paper/study that will present the possible impact on our economy, including possibly the effect on OFW remittances.
Our country will not be affected so much because the "TRUTH" is coming out in the open. The truth is many of us didnt know what is really going on until now. It has something to do with IBM 007 instruction to all local and international banks that he has instructed them years ago that he is the rightful owner/redeemer of all the investment porpolios that then late president Marcos has invested to all developing and develop countries. The time is near that his time will come and he will make changes in this country for i only know once he comes out the philippines will control the world economy.
To Rex Smith
I agree with you. In the immediate term, Superman will be the next president of the Philippines. He will make the right decision and invest properly his "porpolios" to save and redeem the world.
Way to go!