For at least a year now, most, perhaps nearly all of the world has been mired in a deep recession. People in most parts of the world are really suffering. Jobs are being lost and new jobs are scarce. People in many parts of the world, especially in the USA are losing their houses to foreclosure. Times are lean. Most people agree that the current world recession is the worst recession since the Great Depression in the 1930’s.
The Philippines, however, has yet to go into recession. The Philippine economy is still continuing to grow. The latest economic performance statistics for the Philippines become official last week and showed that the Philippines maintained economic growth during the 1st Quarter of 2009 – January through March 2009. The growth indeed slowed from previous economic growth, but was still growth nonetheless.
Recession is defined as two consecutive quarters of the economy shrinking. But, the Philippine economy has yet to shrink at all. First Quarter statistics showed a growth rate of 0.4%. The 4th Quarter of 2008 showed a Philippine economic growth rate of 2.9%, so the rate of growth did show dramatically. However, at this point, the earliest that the Philippines could officially be said to be in recession would be at the end of the 3rd Quarter of 2009, and then only if the economy shrinks in the 2nd and 3rd Quarters. Philippine Government economists were indeed surprised that the growth rate had gone as low as it did, and are now warning that the Philippines may go into recession. Previously it was expected that the Philippine economic growth would slow, but it was unlikely that the Philippines would enter a recession.
The last time that the Philippines experienced economic decline was in the first quarter of 1998, following the 1997 Asian Financial Crisis that saw the Philippine Peso lose almost half of it’s value.
So, what is making the Philippine economy lose it’s resilience? The biggest factor is exports. Because so much of the world has gone into economic meltdown, they are needing to purchase fewer goods from the Philippines. Because of this, exports declined by more than 18% in the first quarter, quite a huge loss. Imagine, though, other sectors of the economy must have grown nicely during the first quarter, since the overall economy grew by 0.4% while a huge economic sector like exporting declined by nearly 1/5th.
Here in Davao, where I live, though, the economy seems to be still growing very nicely. There is a boom in construction in Davao, stores are full of shoppers, the job market seems pretty resilient. Things look bright here. Currently, Sutherland, a US BPO company is renovating a huge building to open as their new call center in town. At least one other new call center location recently completed construction in town, and I am aware of two other new call center locations that are either under construction or in the preliminary states before construction will start. So, things look bright for the economy in Davao City.
So, is the Philippine Recession-proof? Probably not, at least right now it is teetering on the edge of a recession. However, it will, in my opinion be a mild recession if the Philippine economy actually does slip into recession. I don’t expect that Davao itself would be in or near recession if local statistics were available.
We are starting to hear some sectors in other country saying that the worst has already been seen. I personally don’t believe that to be the case, but I hope it is true. If the rest of the world begins to emerge from recession soon, I believe that the Philippines can still avoid a recession. If the exporters are able to reverse the declines, it would appear to me that the Philippine economy could post some very nice numbers soon. It all depends, though, on the world economy.
These days, globalization affects us all. Economies are inter-tied. That’s why the Philippine economy has slipped to the brink of recession. Maybe it can still be avoided, though.
Hi Gerry – Now, your comment, the last part of it leads to a whole different discussion. You mention 12%+ unemployment. I just read an article in the newspaper here in Davao yesterday saying that unemployment in Davao City has risen to 5.4% now. OK, what is the real unemployment rate? Where do the numbers come from? I mean, I personally don’t believe that the unemployment rate in Davao is 5.4%, I think it must be higher than that. 12%, I really don’t know.
I just have to wonder, I see all kinds of statistics reported by the Philippine Government, and LGU’s in the Philippines. Where do the numbers come from? Are they accurate? They don’t seem accurate. However, who am I to question them?
What do you think, Gerry?
Hi Bob,
I think you have hit on a Positive side to NOT being fully integrated into the Global economy. Everyone seems to think that if the Philippines were more attractive economically to foreign businesses, then it would benefit from the relationship. In the current situation perhaps they have been insulated from the worst of the economic downturn by the lack of global exposure.
Maybe it's not always a good thing to run with the Big Dogs; when they get hurt, they bite the ones nearest to them.
Mark C.
Maayong Buntag Bob
The present crisis is more of a banking crisis. So the Philippines where cash is king has been and maybe will be buffered. Guess only time will tell.
Hi Bob,
I feel its wise to remain cautious,the recent small upturn in some economies could well be a false dawn, as experienced in past recessions.
Sorry to sound like a doom monger,but glad to hear PI is holding up well.
regards Chas.
Good to hear Bob, back home stateside it feels like I've got a ticket on the Titanic….just praying we don't hit the proverbial iceberg.
Hi Mark C. – In many ways, you may be right on with that.
Hi Larry – Yeah, I agree, I've written that before myself. I mean, not many people here go into debt the way Americans do.
Hi Bob,
I think the Philippines will avoid this one. The country has
the same employment demographics as Arlington, Virginia or District of Columbia- places in the U.S that are not in recession. The common denominator is government jobs. The Philippines biggest employer is the government.
Also, the Philippines has been late in hopping into the globalization conveyor belt. This is supported by the findings in this week's Businessweek edition that the Philippines, Indonesia, and Vietnam will have a GDP of 2.5 to 4.5% this year. Thailand will be -4.0%. Malaysia will be -3.5%. Singapore will be -7.0%. The latter three being more into the globalization sea lanes.
Another anecdotal report is that the Philippine outsourcing industry is poised to grab 10% or more of the global outsourcing market—-thanks to a well-educated English-speaking workforce. The Philippines is now graduating from call centers to work in finance, accounting, and corporate back offices. Wipro, Accenture, HSBC, JPMorgan Chase, S.C. Johnson and Sons, Siemnes, Visa, etc are expandiong their back offices in the Philippines….Businessweek
reports. "We are growing like crazy", the Philippine chief for Cincinnati-based Convergys said.
Another one is, majority of OFW's remittances in dollar amount is still overwhelmimgly comes from the U.S. The whole of the U.S. might be in recession but not in the healthcare industry where majority of Filipinos are.
Cheers.
Hi Dr. Long – Most here are now saying that the Philippines will be lucky if growth stays positive this year. I'm not sure that 2.5 to 4.5% is achievable any longer. But, I feel pretty good that negative growth can be avoided.
Hi Bob
What is sustaining the Philippines is the high level of remittances. Remittances to Mexico has dropped by a lot to only 1.8b dollars in April. They have more then twice the number of workers abroad (U.S.) compared to the Philippines. Filipinos are much more widely dispersed compared to Mexicans who are basically all based in the U.S.
The one thing you have to consider is that the population in the Philippines is growing much faster then the U.S. so they need to maintain a much higher growth rate compared to the U.S.
Hi neil – In my opinion, you are only partially correct. Of course OFW remittances are a huge factor. But there are other things. As Dr. Long mentioned, BPO operations and other types of Call Center operations are having a huge impact in the Philippines as well. There are no fewer than 4 large call center structures currently rising in Davao, possibly others that I am unaware of, can't say for certain. But, no doubt that OFW remittances play a big role in sustaining the Philippine economy.
Hi Kuya Bob,
Just hoping that the coming presidential elections will not affect the economy in the last quarter of 2009.
Hi Philmor – Usually, having an election would have a positive impact on the economy! This is due to two reasons:
1. The government spends money on the elections – paying election workers and other things. Buying supplies for the election, etc. This has a positive impact on the economy.
2. Candidates spend money on their campaigns. They are buying things like posters, campaign materials, etc. which stimulates the economy. I'm not even going to mention vote buying! Oops… I guess I just did!
Very serious topic, IMHO. 🙂
Hi Bob,
As you have mentioned, recession is defined by 2 quarters of negative growth as measured by the country's GDP. It is good to know that the Phil is still on the positive territory in any of the quarters since the economic crisis started, hence we are not in a recession. This was brought about by the stable money remittance of overseas foreign workers, continued growth of the BPO/call center business and the minimum exposure of local consumers and banks to the Wall Street financial crisis. The local construction industry has yet to be affected by this economic slowdown and prices for land and real properties are still on the upswing. And you know who the main market for these new condos, golf communities in the Fort, Davao and Cebu? Mostly are OFW's and the very few rich in the Phil.
Which leads me to my main point… yes, technically we are not in recession because the majority of the Filipino population are living in DEPRESSION since the 1980's. We are not worried of our mortgages, health insurance and jobs because 1)we don't have jobs anyway (12%+ unemployment), 2)no health insurance for the average person (you covered this extensively in your site) and 3) unaffordable housing (look at the squatters around big cities).
Unfortunately, in my opinion, 80-90 percent population is in a depression but the Filipino is one resilient, religious and happy-go-lucky kind of people. I guess the product of being under the Spanish convent for 400 years and 40 years of Hollywood.
Hi Bob
Yes I agree that remittances are only one part of what makes the Philippines economy. Call Centers and BPOs are becoming much larger parts of the economy as well as the travel industry. I do believe though, remittances do play the single largest part of the economy after eletronic exports and has the widest impact on the economy (dispersed economic benefits throughout the country).
Hi
I found your website from another blogger. It is interesting that you live in PI whilst I live in USA. I lived in Davao years ago but has moved to several countries before I settled in USA. I am married to a caucasian American.
Talking about recession, I find it hard to believe that unemployment is less than 6% in Davao. It has got to be more than 15%. Many Filipino grown up children are actually looking for jobs but would not work if that job does not suit them.
I dont know how many call centers are there in the Philippines but I suspect it must be a lot. Each time I call customer service, a Filipino accent is what I hear.
I agree with the other comments above. OFW remittance keep the Philippines stay afloat. I myself have been an OFW and I have witnessed the growing numbers of Filipinos who wanted to move for better pay.
The state where I am (California) has been hard hit with the downturn. It is not only home foreclosures that's causing it but also the credit crunch of many Americans. For many years Americans borrowed or have easy access to credit (my husband is one of them). It is something that many developing countries were not exposed to.
I still have a job but my husband was laid off a year ago. Why would a US worker born and educated in the US could not get an IT job? I have to tell you another reason why we (here in the US) are still in recession. Many of US workers are out of jobs because of H visa workers who are favored to be employed (specially in the IT industry). The local workers however are left with the unemployment insurance. I worked for an IT firm who employs over 600 employees US wide. This year, letting go of some employees is a trend. I do wonder why the employees that have to go are local workers when there are so many H visa workers doing nothing but the management seemed or determined to keep them. The H visa was created in order to fill the gap of skilled jobs in so much demand. Many US employers though manipulated or taking advantage of the loophole. Nowadays, it is not only IT employees who are affected but it spread to accounting, lawyers, administrators who are losing jobs because H workers, whose salary are cheaper than local employees, are hired as programmers, then move to USA on H visa but working as an administrator. It is unfair but what can we do. The law must be amended.
I guess it could also explain that most Filipinos are in the health sector, and at the moment, is still a thriving industry. These Filipino workers are still sending remittances back home. Hence the recession in the Philippines can be avoided.
Hi neil – I had kind of left the question unanswered to draw response, but I agree with you that figures are misleading in that they don't include everybody who doesn't have work. I don't know if they calculate the same as the US does or not. They may calculate it in ways that make it look better than what the US even does. It's just hard to know.
Hi neil – Actually, the largest part of the Philippine economy is OFW remittances. It's bigger than electronics exports or travel or anything else at this time.
Hi Ashley – I fully agree that unemployment is very high here. The 5.4% reported in the paper, is in my opinion, simply nowhere near what the true rate is.
Bob,
I really do hope that recession will not hit the Phils. coz our country already been struggling for survival for so many yrs, w/ lack of employment oppurtunities most of us force to leave home and left their families behind to work in another countries to provide a better life for them. I'm just happy that the phil. economy is not so bad compared to other countries.If recession hit our country i don't want to see my families and my next generation to encounter this kind of situation in the future. just take a look at this short film,it brought tears on my face and touched my soul and break my heart……….
http://www.cultureunplugged.com/play/1081/Chicken…
i too am curious about the mix of the current economic climate & the upcoming election. you've made some great point in one of your replies about the effect of elections in the philippines.
one thing that i just can't get out of my mind is that philippine elections is such a crapshoot in terms of scandals, violence & the social emotions in play. plus, the insurgency factor & the con-ass talks going into the campaign. hopefully, none of these things don't rock the economy too much.
another point is the source of these numbers. i'm sort of a skeptic when it comes to government sponsored statistics (if this is one of them). they are quite notorious about fudging the stats to their advantage (probably in play with your davao unemployment stats).
one example would be the time when department of education was ordered to improve their annual report by using some crafty math gymnastics. something along the lines of 100 students in a class or something like that (i can't recall correctly).
Hi Bob,
The government figures of unemployment have nothing to do with the reality. If a person sells bananas on the street making 50 pesos a day if he is lucky, without health insurance or unemployment benefit, as far as the governement is concerned, he is not unemployed. If a house made is cleaning a house for a couple of houres a day, no insurance of any sort, as far as the governament stadistics , she is not unemployed.
I think, recession will arrive in pi sooner or later. I think negative grows 1st quater 2010, recession 2nd quarter 2010.
Manufacturing industries have allredy started desmising workers, specially those producing for exports. Building industries are slowing down, the sales of properties comming down as well, many developers are offering 20 per cent discount for cash payment of propeties that are allready build and they can not sale, when this discount was only 10 percent a few months ago.
When USA gets a cold…
Hi macky – I just can't imagine those figures having any accuracy at all. I am very skeptical, like you.
Hi Antonio – I agree that the government is very likely counting the guy selling bananas for P50/day, and that throws the figures way off, no doubt about it. If the Philippine economy experiences negative growth, then by definition it cannot enter recession until 3Q, because it must experience 2 consecutive quarters of negative growth. We'll have to wait and see.
Hi Bob- What I've noticed in both CdeO and Manila(Makati) in particular is the lack of people shopping during week days compared with previous years.In Makati only 2 weeks ago I was horrified to see the demise of the range of shops in Glorietta Mall, there is lots of boarded up shop fronts.Is this a sign of the times or is there another explaination?
Regards.
Jim.
Hi Bob,OK ,that is what i ment,but if you what me to be more presise,resetion is going to start ,in 1st. of july at 00.01 houers 2010 LOL.
Hi Gerry,I dont think it is beacause of 400 years of the spanish convent ,or the 40 years of hollywood,but the 2.000 years of Malay"PACHAMAMA".
As president Kennedy said,"dont ask what the country can do for you,but what you can do for the country".
Have a nice day ,all of you.
I salute your courage in raising such a controversial topic Bob. A significant factor that must be considered when looking at GDP rates is the population growth rate. This contributed to the number of people entering the work force. The growth rate in the Philippines is almost two percent. This means the economy has to grow at at the rate of 7%+ just to keep up with the demand for more jobs. By comparison, the growth rate for the U.S. is .88% (one of the highest rates of any industralized country).
By my calaculations, factoring in population growth, the Philippines is in recession
Hi Jim – In my travels, I haven't seen this at all. Certainly every area is different, but this has not been my experience.
Hi Antonio – 😉
Hi David – It depends on how you define recession. In the classical definition of the word, the Philippines is not in a recession.
Because developing countries like the Philippines and Indonesia are coming from such an incredibly low base, it is not difficult for them to achieve economic growth. Hence, when the world economy is healthy annual GDP increases of at least 6% (in real terms) are not uncommon at all, while when times are bad (such as now) they are still expecting growth of at least 3% for 2009.
Ok, technical reccession is defined by two consecutive quarters of negative growth – but I still think this will not happen in the Philippines as they've already survived so far in this crisis without posting negative growth and the global economy looks like it may start to grow again before the end of the year. Indeed, the rising oil price, rising stock markets and declining dollar (versus 'riskier' currencies such as the £, € or AUS$) seem to point to a recovery.
However, I think that this technical talk of a recession is not really relavant to developing countries. As mentioned above, given the huge population growth in the Philippines, annual growth below 4% in GDP will certainly feel like a recession to many ordinary people, particularly when unemployment is on the rise.
I to believe unemployment figures are not good indicators of a a countries overall economic condition . I tend to look at the numbers posted by International and independent agencies rather than those of the government .
I can not remember the names of the agencies but recently there was at least one published article suggesting Philippine unemployment rate was in the 30% range rather than the 5 – 7 % stated here . Just my opinion but i believe the 30% figure would be much closer to the truth than the lower numbers .
Hi Alan – An unemployment rate that high would not surprise me. It actually feels pretty accurate to me.
i haven't read the whole thing yet, but your article was the first think i thought of.
a 1% decrease in GDP is being predicted & the source is the IMF: http://business.inquirer.net/money/topstories/vie…
Hi Macky – there are some people saying that there will be a period of negative growth, but most are still saying that there will just be very anemic positive growth. Either way, it's not good, although better than most countries.
bob,
i guess as to my observations being an economics student,
what others say about the negative growth that will happen,
uhm, i guess it will never happen,
looking to the factors,
yes of course, we are affected by the recession in terms of our exports,
but what we export are still the basic commodities,
1 nation would not cut off trades with the Philippines.
the reason why Philippines experience a slow growth is because
and specially, there are foreign based companies established in NCR,
pulling them out, caused such a decline in the GNP,
and by sending back most of our OFWs, caused a large amount of loss in the net factors income from abroad.
…
going back to the agriculture sector,
im making a hold, and a view,
that Philippines will never have a negative growth.
because Agriculture still holds a large amount of
percentage on the Philippines' productions.
just the last hold the Phil. can stand
and still survive and continue its economic growth.
Thanks for sharing your opinion, Theodore.