Financial Recession and Its Effects in the Philippines

How the Global Economic Recession Is Affecting the Philippines

Technically speaking, the Philippines is not yet in recession, like other countries in the rest of the world. The Philippine economy certainly did not have a negative growth in 2008 and in the first quarter of 2009 (jury is still out for the second quarter of this year), but there has been hardly any growth at all. The first quarter 2009 GDP growth was less than .5% while the World Bank predicted an over-all decrese of .5% for the whole of 2009. Scary thought!

But with or without these dire predictions, it cannot be denied that my country, along with all the other countries, had been affected by this crisis. Here are some of the effects of the global economic recession in the Philippines.

http://www.gov.ph/images/bigmap.gif
http://www.gov.ph/images/bigmap.gif

On the Negative Side

Intel Shuts Down Philippine Operations

On Jan. 21, 2009, Intel Philippines announced that it is shutting down its test-and-assembly facilities in the country, ending two decades of operations in the country. As early as November 2008, Intel already announced the first batch of lay-offs. As of the day of the January announcement, the company still employed about 1,800 employees.

Goodyear Shuts Down Philippine Plant

In a more recent development (see news feed below), Goodyear Tire & Rubber Co. has announced the shutting down of its Philippine plant, causing about 500 Filipinos to lose their jobs. Goodyear opened same plant in 59 years ago and it produces around 2 million tires annually. Reason for the shutdown: transfer to less costly locations in other parts of Asia (no specific place yet).

Lost Overseas Jobs

The Philippines is the home of around 11 million overseas Filipino workers or OFWs. With there more than $14.4 billion (about 700 billion pesos) annual remittances, the OFWs are the major contributors to the country's economy. The largest number of OFWs can be found in the U. S., U. K. and the Middle East. With the recession, countless OFWs have been forced to leave these countries and return to the Philippines without jobs, making their reintegration a major problem for the country and its government.

Stock Market Plunged

Since the Philippines' stock market follow closely stock markets around the world, particular the NYSE, the Philippine stock index fell during the second half of 2008. Investors lost as much as 50% of their investments in the local stock market.

General Economic Slowdown

The first quarter of 2009 posted the lowest growth in GDP (.4%). For the rest of the year, some entities have predicted zero growth for the country while others have predicted negative growth. As of the moment, the country has not yet met the technical description of a recession. But some people believe that it is just a matter of time before the country itself will hit this phase.


On the Positive Side

Country Not Yet in Recession

On the other hand, the country has not yet reached the negative growth required for it to be classified as "in recession". This has been attributed to the strengthening of its banking system (due to the 1997 Asian financial crisis), the continuing flow of OFW remittances from other countries, the pump-priming by the current government through construction works and the increasing number of outsourcing jobs obtained by Filipinos from foreign countries. With the gradual reversal (?) of the financial crisis around the world, it is to be hoped that the recession will not actually reach our shores.

Stock Market Recovering

The stock market may have been badly battered during the last half of 2008 and the first quarter of 2009 but it is now slowly but surely recovering. From a stock index of below 2,000 last year, the index is around 2,500 now, and has been steadily rising during the past two months.

More Savings

Historically speaking, the Filipinos are some of the lowest savers in the world. However, a recent survey conducted by Nielsen Media showed that Filipinos want to save more, and spend less. This is a welcome development.

To encourage Filipinos to save, the government has approved the increase of the maximum deposit insurance coverage to 500,000 pesos or about $10,000. This may not be much in a developed country, but here, it is a very significant amount (you can build a house with this amount or buy a 300-square meter lot in some areas of the country).

Caveat

Although this is a published hub, this is nevertheless a work in progress as the recession is still ongoing, the Philippines is still largely affected and the economic growth is still in the low end.

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Comments 19 comments

rb11 profile image

rb11 7 years ago from Las Vegas

The corruption in the U.S. has finally caught up with the world. Here is a tidbit: Paulson (former sec. treasury) and Cheney (former VP)had to sell their stocks when asked to serve in government, ideal timing when Paulson sold and made a profit of 200 Million (remember the word Profit) and Cheney did the same. The little know rule was when asked to serve any profit from these sales are tax exempt. 200 million free and clear, I make $200.00 and the IRS is all over me to claim it.

The point is this kind of practice has now caught up with us and the rest of the world is feeling the effects. Thanks for letting me rant a bit.

Regards


emievil profile image

emievil 7 years ago from Philippines Author

No problem rb11. Feel free to rant anytime. Thanks for the little tidbit.


Svea profile image

Svea 7 years ago from Florida

I can see why the savings tips are different in the Phillipines. No coupons. Any thrift stores? I have found a lot there but you really have to wade through some junk as well. We will all become better savers. One of the good things to come out of this. I just wrote a hub on how the global economy has caused me to re-consider my politics. By the way, my daughter-in-law is from Lati..


emievil profile image

emievil 7 years ago from Philippines Author

Hi Svea. Thanks for the comment. Unfortunately no coupons =(. I think we have our local equivalent of thrift stores here (called the ukay-ukay, meaning to wade through). eBay has helped us buy good quality cheaper products / second-hand products but so many Filipinos are not yet Internet-savvy.

Lati as in a place here in Mindanao? Is your daughter-in-law a Filipina?


maribin profile image

maribin 7 years ago from USA

nice hub


emievil profile image

emievil 7 years ago from Philippines Author

Thanks maribin


emievil profile image

emievil 7 years ago from Philippines Author

Sure Misstikal. Sorry it took me this long to read your comment. I don't know why but it did not reflect on my statistics. Good thing I checked the hub. Thanks.


IslandVoice profile image

IslandVoice 7 years ago from Hawaii

Do you have any stat on the outsourced call centers operating in the Phil? Are they affected as well?


emievil profile image

emievil 7 years ago from Philippines Author

Hi IslandVoice. As far as I can tell (though I don't have hard facts with me), the answer seems to be no. The effects were more felt by their parent companies (some of which are in US). One call center here was acquired by another company from an Asian country from the call center's former parent company in the US. I haven't seen any slowdown in their hiring also so I guess call centers here are still okay.


Wil 7 years ago

Hi i'm planning to write a thesis about how our locals specifically the small enterprise survived the recession but was there really a recession in the phil. During the 2nd half of 2008 and early part of 2009 businessmen said there were but the government claimed only economic slowdown, any explanation out there email me pls if u were able to reply, just a simple link to this hub, thanks a lot

regards

wilam_96@yahoo.com.ph


lchris7 profile image

lchris7 7 years ago

Nice hub! The World news is depressing. It is the opinion of much of Europe (and possibly the world) that recovery will begin in the US and trickle down to the rest (no pressure!). I figured their had to be some place not experiencing the recession, I did not think it would be the Philippines. I expected it would be some where more secluded from the World economy.


Eastern Rainbow profile image

Eastern Rainbow 7 years ago

I am grateful you of support


[s0nichriS07-02] 6 years ago

Hi,

I'm a graduatng student, and a teacher of mine declared that our finals in Economics would be reporting, and the subject given to me was about global recession and its effects on the phillipine economy. i am totally clueless about the subject matter, so can you pls help me out? I've learned a lot from your hub, do you have statistics as well as other things? more information would be a lot of help.


DrewAxe 6 years ago

Thank you for the nice hub!Thank you for writing something about the Outsourcing in the philippines..

http://outsourceit2philippines.com


Johnny Bridges 5 years ago

Many thanks for this write-up about the recession. At least one job that's virtually recession-proof is trucking. There are always goods that have to be transferred, and truck driving jobs will always be in demand. Just a thought...


furnitureman profile image

furnitureman 5 years ago from Manila, Philippines

Thanks for the info, Kabayan. More power to you.


jenn 5 years ago

true


nora aldav 5 years ago

great


al samson 4 years ago

To know more about stocks, stock market and stock investing, you can visit our PSE Website- www.pse.com.ph and PSE Academy Website- www.pseacademy.com.ph .We hope that we could help you give information to your readers about basic stock investing. Thank You.

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