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The Impact of the Global Financial and Economic Turmoil on the Philippines: National Responses and Recommendations to Address the Crisis (No. 23)

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USD 8.00 Publisher: TWN
ISBN: 978-967-5412-16-5
Year: 2010
No. of pages: 64
Size of book: 14.5cm x 21cm
Author: Joseph Anthony Lim

About the Book

This paper looks at the Philippine experience in 2008 and the first half of 2009 when the global financial crisis and recession was unfolding.

Prior to the crisis, economic growth in the Philippines was largely spurred by remittances from overseas Filipino workers which were channelled towards private consumption. This externally driven growth masked a lack of dynamism in domestic investment, which in turn stemmed from low investor confidence in the economy.

Economic confidence further plunged when the global crisis struck the Philippines. This paper surveys the adverse effects wrought by the crisis on the Philippine economy, including huge capital outflows, sharp currency depreciation, strong export, investment and manufacturing contractions, and an overall marked slowdown in growth. The national government’s policy response to the economic tumult has comprised a combination of fiscal and monetary stimulus, but concerns surround the effectiveness of these measures and their impact on the fiscal deficit and public debt.

In this paper, the author puts forward some alternative policy options both to counter the downturn and to prevent contagion from future crises. Among the former, he suggests monetizing fiscal deficits and establishing an Asian Monetary Fund that will provide support (including fiscal funds) to crisis-hit regional economies. In terms of preventive measures, capital and exchange controls are advanced as a means of curbing volatility in capital flows. This requires international and regional financial systems that look favourably at capital controls as an acceptable financial practice. The paper also prescribes for the Philippines a new development strategy that avoids overdependence on the external sector and focuses instead on domestic sources of sustainable growth, including investments that are crucial to building up long-run productive capacity, especially in depressed and backward regions.

About the Author

JOSEPH ANTHONY LIM is a Professor at the Economics Department of Ateneo de Manila University in the Philippines.

Contents
  1. THE GROWTH PATTERN BEFORE THE GLOBAL FINANCIAL CRASH
    Philippine Vulnerability to Global Crisis and External Shocks
    Growth Before 2008: Spurred by Overseas Workers’ Remittances, Consumption and Net Exports; Anaemic Investment
    Gross National Savings and Gross Capital Formation
    Difficult Growth Period from 2002 to 2007
    Summary

  2. THE IMPACT OF THE GLOBAL CRASH ON THE PHILIPPINES AND ASIAN COUNTRIES
    Capital Flow Volatilities
    Currency Depreciation
    The Impact on the Real Sector
    Stock Market Crash and Increases in Sovereign Bond Spreads
    The Fiscal Sector
    The Financial Sector

  3. RESPONSES TO THE CRISIS
    Financial Sector Policies
    Monetary Easing
    Fiscal Stimulus

  4. ALTERNATIVE RESPONSES TO COUNTER RECESSIONARY CONDITIONS AND PREVENTIVE MEASURES TO AVOID FUTURE CONTAGION
    Room for Monetizing the Fiscal Deficits
    Resuscitating and Remoulding the Chiang Mai Initiative: Towards an Asian Monetary Fund and Fiscal/Social Fund
    Protection Against Further Crisis of Currency Depreciation, Capital Flight, Debt Burden and Balance-of-Payments Deterioration
    Towards a New Development Strategy and a New International Financial Architecture
References    

Appendix: Decomposition of the Public Debt Burden 

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This product was added to our catalog on Tuesday 09 August, 2011.


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