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Impact of the Global Financial and Economic Crisis on the Philippines

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  • Yap, Josef T.
  • Cuenca, Janet S.
  • Reyes, Celia M.
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    Abstract

    The 2008 global economic and financial crisis spawned a synchronized recession among industrialized countries leading to a contraction in world trade. Exports from developing countries fell sharply dragging many of them into the global economic downturn. The Philippines was not spared the fallout from the crisis as GDP growth decelerated considerably in the fourth quarter of 2008 and first half of 2009. Asset prices experienced volatility but unlike the 1997 East Asian crisis, the financial sector remained fairly stable. Unemployment increased moderately, but was more pronounced in the manufacturing sector which felt the brunt of the slowdown mainly through the export channel. Remittances from overseas Filipino workers continued to grow, however, albeit at a lower rate. Foreign exchange reserves therefore maintained an upward trend despite the fall in exports and larger capital outflows. A cause of concern is the widening fiscal deficit, which is largely due to the need to increase government expenditures to offset lower consumption, investment, and exports. The Economic Resiliency Plan is a key component of the government's response to the crisis and 2009 first half data indicate modest success. However, another factor behind the wider fiscal deficit is the weak tax effort and if this persists, the resources to finance achievement of the Millennium Development Goals will likely be reduced. Thus, even if preliminary survey data derived from the Community-based Monitoring System indicate a moderate adverse effect on the income and employment of lower income households, lower economic growth and fiscal troubles imply that the government will not have enough resources to improve their situation in the medium term. This is definitely a problematic scenario given that the poverty situation in the Philippines deteriorated even when economic growth was relatively robust. To its credit, the government embarked on a campaign to increase and expand social protection in response to the deteriorating poverty situation. In the wake of the crisis, resources were increased and programs were improved. However, many social protection programs continue to be hindered by low coverage and inadequate benefits, poor targeting, and operational constraints due to lack of coordination among program implementers. This is a microcosm of the institutional problems that have constrained economic development in the Philippines over many decades.

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    File URL: http://serp-p.pids.gov.ph/serp-p/download.php?d=4499&s=3
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    Bibliographic Info

    Paper provided by Philippine Institute for Development Studies in its series Discussion Papers with number DP 2009-30.

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    Length: 77
    Date of creation: 2009
    Date of revision:
    Handle: RePEc:phd:dpaper:dp_2009-30

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    Postal: NEDA sa Makati Building, 106 Amorsolo St., Legaspi Village, Makati City,
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    Web page: http://www.pids.gov.ph/
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    Related research

    Keywords: millennium development goals (MDG); social protection; financial and economic crisis; macroeconomic impact; impact on households; economic resiliency plan;

    This paper has been announced in the following NEP Reports:

    References

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    1. Manasan, Rosario G., 2007. "Financing the Millennium Development Goals: The Philippines," Discussion Papers DP 2007-06, Philippine Institute for Development Studies.
    2. repec:sae:ecolab:v:16:y:2006:i:2:p:1-2 is not listed on IDEAS
    3. Emmanuel S. de Dios, 2008. "Institutional Constraints on Philippine Growth," UP School of Economics Discussion Papers 200806, University of the Philippines School of Economics.
    4. repec:phd:dpaper:dp_2008-04_(revised is not listed on IDEAS
    5. Rosario G. Manasan & Janet S. Cuenca, 2007. "Who Benefits from the Food-for-School Program : Lessons in Targeting," Development Economics Working Papers 21929, East Asian Bureau of Economic Research.
    6. Josef T. Yap, 2008. "Managing Capital Flows : The Case of the Philippines," Development Economics Working Papers 22703, East Asian Bureau of Economic Research.
    7. Rosario G. Manasan, 2007. "Financing the Millennium Development Goals : The Philippines," Development Economics Working Papers 21928, East Asian Bureau of Economic Research.
    8. Yap, Josef T., 2008. "Managing Capital Flows: The Case of the Philippines," Discussion Papers DP 2008-04 (revised), Philippine Institute for Development Studies.
    9. Manasan, Rosario G. & Cuenca, Janet S., 2007. "Who Benefits from the Food-for-School Program and Tindahan Natin Program: Lessons in Targeting," Discussion Papers DP 2007-10, Philippine Institute for Development Studies.
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    Citations

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    Cited by:
    1. Haughton, Jonathan & Khandker, Shahidur R., 2014. "The Surprising Effects of the Great Recession: Losers and Winners in Thailand in 2008–09," World Development, Elsevier, vol. 56(C), pages 77-92.
    2. H. Son, Hyun & A. San Andres, Emmanuel, 2009. "How Has Asia Fared in the Global Crisis? A Tale of Three Countries: Republic of Korea, Philippines, and Thailand," ADB Economics Working Paper Series 174, Asian Development Bank.
    3. van der Meulen Rodgers, Yana & Menon, Nidhiya, 2012. "Impact of the 2008–2009 Twin Economic Crises on the Philippine Labor Market," World Development, Elsevier, vol. 40(11), pages 2318-2328.
    4. Layug, Allan S., 2009. "Triangulation Framework for Local Service Delivery," Discussion Papers DP 2009-37, Philippine Institute for Development Studies.

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