January 30, 2009 11:07 a.m. EST
Manila, Philippines (AHN) - Compared to other nations, the Philippines has been relatively holding well on its own despite the global economic crisis. While major western and developed economies like the U.S., U.K., Japan and Germany have entered a recession phase, the Philippines is even expecting from a 4.1 to 5.1 percent gross domestic product growth for 2009, according to the National Economic and Development Administration.
Although that figure is less compared to previous quarters, beyond numbers, proof of the country's relatively better economic standing are reports from international ratings agencies and banks.
However, on an industry and micro level, industry leaders and company owners admit that the financial crisis has affected their bottom lines. But like many other industries and firms dealing with the crisis, they are adopting measures to cope with and are hopeful of a recovery by middle of 2010.
Standard & Poor's associate director for Sovereign Ratings Agost Bernard was quoted as saying, "The Philippines is an island of calm", while Credit Suisse commented that the Philippines has the lowest-macroeconomic risk. FitchRatings managing director for Asia-Pacific Sovereign ratings James McCormack said the country's economy remains reasonably healthy.
Two U.S. banks have the same positive observations about the Philippines, despite the country's share of poverty, corruption and slow economic growth compared to its neighbors in the ASEAN region. JPMorgan said "The Philippines is in a relatively strong position to weather the global downturn with the economy driven by private consumption and services, which are less vulnerable to external shocks." The Bank of New York Mellon found Manila to be inherently strong and a potential beneficiary of the financial woes besetting major economies.
One bright spot often mentioned is the business process outsourcing industry, which experts believe may even thrive despite a possible downscaling because while U.S. and European companies are laying off workers by the thousands, there are some back-office jobs and frontline tasks that they could not do away with. It makes more business sense for these foreign firms to outsource these services offshore because of the relatively low labor cost and quality as well as good English-speaking manpower pool in the Philippines.
Outside of the BPO sector, the publishing industry has to contend with a reduction of advertising budget, which leads to less newspaper pages and less stories to read, said Liza Almonte, publisher of PortCalls, a bi-weekly newspaper for the cargo industry. But while advertising income of PortCalls declined by 5 percent compared to last year, subscription revenues even rose for PortCalls.
"It seems that in tough economic times, there is greater demand for information," observed Almonte.
To cope with the tough business environment, ProQuest, which publishes PortCalls, keeps a tight watch over cost and cash flow by seeking lower-priced supplies and negotiating for longer credit lines with suppliers, while placing expansion plans on hold. Almonte added downsizing on manpower would be a last resort.
Ricardo Puig, analyst at stock brokerage firm ATR-Kim-Eng Securities, said the wild fluctuation in commodity prices led to a higher inflation rate, which increased the cost of Philippine companies dependent on imported raw materials. "What tempered the impact on the economy is that it has been largely dependent on domestic rather than global demand. Domestic spending, more than exports, have been fueling Philippine economic growth," Puig told AHN.
He added it was the stock market which took a more significant beating after foreign investors "have to unwind their positions to meet redemptions from their clients abroad or just simply to cut their losses."
CitisecOnline president Conrado Bate said although the volume of trading in the Philippine stock market has been reduced by 60 percent from a daily turnover of $74.4 million (3.5 billion peso) to the current average of $21.2 million (1 billion peso). Bate is nevertheless confident the market will recover, while encouraging Filipinos with a little bit of extra cash to consider investing now because share prices are at a record low.
Because of the volatile market, CitisecOnline launched a cross averaging product which builds stocks gradually for small retail investors over a period of time on the theory that stocks, despite the bear and bull market cycles, are still the best hedge against inflation and bring a decent return on investment rate compared to savings deposits or government stocks.
Puig said the stock market will always be a good venue for investments. "The stock market is just as good as the economy it represents. If the economy recovers and will exhibit good fundamentals, it will be recognized by investors and the positive sentiment will be reflected through the stock market. Prudent investors will always be on the lookout for good investment outlets with strong fundamentals that could generate the most returns," Puig explained.
One business which is thriving is the First Medical Team run by Dr. Paul Teves, director of The Maritime Clinics and Doctors Association of the Philippines. While local doctors are suffering from a patient slump, it is not the case for First Med which provides pre-employment physical examination from 40 to 70 seamen a day. Even if the global economy is on a downhill, the number of Filipino seafarers, who comprise 20 percent of the global shipping crew, who seek job opportunities in foreign vessels is constant, Teves told AHN.
But Teves recounted that his colleagues who have local patients all reported a decline in income as sick Filipinos only visit their doctors when their condition have worsened. While his business is thriving, Teves nonetheless feels the impact of the economic crisis since he has become a fallback for his siblings who are less financially secure.
He foresees the Philippines' economic health tied up to a certain extent with the well-being of the American economy. "As America's economy improves, so will the Philippine economy also," Teves said.