Former Economic Planning Secretary Jesus Estanislao believes the aftershock of the 2008 worldwide financial meltdown will be felt in the Philippines towards the end of the year.
The man seemed to have never aged.
During the hour-long interview, the current Governance Advisory Council chairman shared his insights on the global economic crunch that began in September last year and how the Philippines would be affected by the ensuing downturn.
Have we seen the worst of the worldwide financial crisis? How long would it take for the country to recover from its effects?
We have to really look at the Philippines as very much at the periphery of what’s happening in the international financial centers, which essentially would be New York. So the question that you raised really should be related to what is happening in New York, what is expected in New York, and whether in fact the US financial meltdown has already reached bottom. And we are affected by that three to six months afterwards. So, what happens in the US takes sometime to really begin affecting us.
I do not think the lowest point of the US financial meltdown has been reached. Almost everybody tells you that. But you know there’s a new administration in the United States that seems to be very committed to taking a completely different approach. Therefore, it may take them six months to get to the bottom and then start moving up again. In which case, we get the worst of the financial meltdown by the end of the year. Because it takes between three months to six months for everything to come down. That’s really in terms of direct impact.
But there is such a thing in finance as hope, expectation. The moment people begin seeing that there’s movement forward--at least in terms of direction and all of the money that is being thrown by the more coordinated fiscal stimulus packages all over the world—that is the first time we’ll actually see a coordination in terms of fiscal packages.
The bottom line for the Philippines is that we’ll still continue to grow. It will not be as high as in 2007 or 2008. There will be deterioration in our growth rate, but I don’t think we’ll be in a situation where we’ll grow negative.
We are a people-oriented economy. We have three sectors that are really pushing the Philippine economy forward. One, of course, is our telecommunications sector. The other one is this Business Process Outsourcing and the third would be the middle and low-middle-income construction, which is still strong.
American experts say the need for medical personnel, specially those from the Philippines, is still on an upswing. Should we continue to rely on our service sector more?
We should continue to do that, but we should not be stupid and put all of our eggs in that basket. We have to begin developing new sources of income and move up the income ladder, the value-added chain.
Instead of just training a Filipino nurse to remain at that level, we should be training them to have supervisory skills in terms of hospital administration, and so on. A greater specialization in gerontology, which is taking care of old people, because that’s where the world is moving [is another example]. They have ageing populations everywhere and if you age, you’re gonna get sick and you need a lot of care. Instead of just nursing, let’s go to more highly-specialized health care services and cater to the needs of the world.
Have you ever advised the President that we should look into upgrading the skills of our OFWs?
Well, that advice has been there. The problem right now is the focus is not really very long term. Almost everybody’s focus is on 2010. And much of the thinking will have to go to the people who will be taking over by 2010. But we’re laying the groundwork for all of that.
You said we will feel the effects of the meltdown in the latter part of the year. Let’s say we’re there now. How long would it take for the country to get out of the downward spiral?
My prediction is the US, by 2010, will already begin moving, and moving rather aggressively. To get money out of the US takes about three months minimum. The full impact of whatever new fiscal stimulus the Obama administration is introducing will come in October perhaps this year. And then we get it three months or six months later.
What sectors would be hit the hardest? I hear there are complaints from the export sector.
Yes, the export sector. But don’t forget that the export sector is no longer complaining from the peso depreciation. So it sort of compensates. The States’ volume is lower, and will be lower because of the deterioration of the value of the US market. But for every dollar that you save, you get more pesos. While the export sector is going to be somewhat affected, it’s not going to be all that much in the final impact because you have to pay your salaries in pesos. Several of your costs will be in pesos.
The same thing is true with the OFWs. They are still increasing, surprisingly, at percentages that are much higher than expected. And with the additional kick because of the exchange rate, Filipinos are getting more pesos for the dollars that they receive through OFW remittances.
Now the biggest problem is the direct investments. Especially the free-floating investments that come in and out. Most of that has already gone out. Until the US markets begin to recover, we should not expect too much of that coming in.
(Continued in the next issue)
Print ed: 10/09