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WORST CRISIS SINCE LATE 90s TO HIT THIS YEAR

12M Filipinos to suffer from slowdown — Ibon

By Charlie V. Manalo

01/02/2009

The rank of unemployed and underemployed Filipinos is expected to swell to between 11 million and 12 million this year when the worst impact of the global financial turmoil is expected to be felt, think-tank Ibon Foundation said in a study.

Government data had indicated that 2.6 million Filipinos, or 6.8 percent of the local workforce, are unemployed based on October 2008 figures.

The economic slowdown which began in 2008 will not only carry through in 2009 but is also expected to be the worst the country had ever experienced after the Asian financial crisis about a decade ago.

According to the Ibon study, growth in 2008 and 2009 could easily turn out the slowest for a long time with joblessness increasing with the unemployed expected to rise to 4.1 million.

Retrenchments and closures will be most immediately felt in the goods and services export sectors.

Ibon issued the forecast for the year amid President Arroyo’s

boast yesterday that the country had prevented slipping into recession “under the battering of a worldwide slowdown.”

Foresight and careful planning has a lot to do with the country’s resiliency in the midst of the storm buffeting the global economy, Mrs. Arroyo said.

Expected to be hit hardest will be the major sub sectors of electronics that account for 67 percent of the country’s exports in 2007, apparel and clothing, and furniture and woodcraft.

Ibon said the United States in particular is the largest buyer of Philippine garments and furniture and receives 80 percent of total garments exports and 60 percent of the country’s furniture exports. The crisis will weaken global demand for laptops, cameras and cellular phones that are the primary users of the semi-conductors and microprocessors that the country exports.

As it is, the country’s export-oriented electronics sub sector employs some 500,000 to 600,000 workers. The US is also the world’s largest end-consumer of electronics.

The business process outsourcing (BPO) industry will also likely be badly affected with the US accounting for over two-thirds of foreign equity and 90 percent of BPO export revenue.

The grand target of 940,000 BPO jobs by 2010 will become even more impossible, with employment likely to be at a far lower 320,000.

Local tourism and business travel outfits where hotels and restaurants will also feel the pinch as foreign and domestic visitors dwindle.

Ibon said the jobs situation had started to worsen in 2008. The number of jobless Filipinos drastically increased by 279,000 in October from the same period last year and raised the unemployment rate by 0.6 percentage points.

The important manufacturing sector lost another 159,000 jobs from the year before, the transport, storage and communication sector lost 10,000 jobs, and financial intermediation lost 4,000 jobs.

These trends are likely to continue until next year and be aggravated by deteriorating jobs in construction, finance and wholesale and retail trade. Small and medium enterprises in particular will have a harder time borrowing with creditors preferring perceived “safer” large borrowers.

Filipinos working overseas in distressed countries and sectors face layoffs or at least lower incomes. This is not just in the US where the crisis first erupted but also wherever in the world they might be and no country is untouched by the tumult.

The US is notable though in that over half of all remittances– reaching 52 percent or $7.6 billion of $14.5 billion in 2007– come from the US or via US-based banks.

Overseas Filipinos will do their best and be making even greater sacrifices to maintain remittances to their families in the country. But remittance flows are still certain to weaken in 2009 and perhaps even significantly.

At the very least there will be a slowdown in deployments to the US , Europe, Middle East, East Asia and seaborne work where the overwhelming number of overseas Filipinos go and a corresponding drop in growth of remittances from abroad.

The corresponding drop in household incomes will have repercussions on domestic sales of consumer goods and services and even of residential real estate.

The job losses and squeeze on wages, benefits and remittances will combine with rising prices and have an immediate impact on household incomes that will cause poverty to rise.

But the spending will also have further depressing effects – possibly beginning with domestic wholesale, retailing and food services as stores and restaurants face lower consumer spending.

Additional pressure comes from the generalized slowdown due to overall economic uncertainty, lower consumption, tighter credit and depressed investments.

The poorer business sentiment and tightening of capital flows is already reflected in steep stock market drops and much higher interest rates.

External financing for the country is dropping steeply. The $912 million net outflow of foreign portfolio investments in the January-October 2008 period is a drastic reversal from the US$3.7 billion inflow in the same period last year.

Net FDI is going in the same direction and fell by more than half to $1.1 billion until August last year from $2.5 billion in the same period in 2007.

There is also a strong possibility that the rate at which official development assistance (ODA) is declining will worsen in the coming years as donor governments prioritize domestic financing needs.

As it is ODA has already fallen 30 percent to US$9.2 billion last year from US$13.2 billion in 2001.

Former President Joseph Estrada made a similar projection of a tough year for 2009.

The year 2009 is anticipated to be another year of challenges as we take stock of the crises and difficulties that confronted us in the past year, he said.

“We welcome the new year however, not with reluctance or fear, but with enthusiasm and hope. we look forward to it as an occasion that will inspire us to face whatever challenges may be in store for us this 2009,” he added.

We must welcome the new year with confidence, knowing that we have endured challenges of the past, and believing that we will not only survive but thrive in the future.

It is my fervent wish for the filipino people that we remain strong in faith and in hope, that together we may overcome hardships, and reform and rebuild our society to become the nation that we aspire to be and to achieve the prosperity that our people deserve, he said.

“As I said, we cannot predict what will happen in the future but we can plan. And, it was, you know, we were lucky this year but we worked hard to have that luck – we planned for it,” Mrs. Arroyo said.

The President pointed out that last “October, I had presented to the business community a contingency plan. But that is no longer a contingency plan because two-thirds of the world is already in recession — that is a resiliency plan.”

The contingency plan was unveiled during a meeting of the National Economic and Development Authority (NEDA) “and I have been asking him (NEDA Director-General Ralph Recto) to continue to propagate it.”

The plan, calls for, among others, the implementation of various infrastructure projects to serve as economic stimulus. “That’s why we want this 24/7 on Halsema Highway — that’s part of our stimulus,” the President said.