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.