That's it! Philippines will not go into recession!

The representative of the independent Bangko Sentral ng Pilipinas Dr. Francisco Dakila Jr , Economics Ph.D. and U.P. Magna Cum Laude working for the Center for Monetary and Financial Policy announced in the 25th March 2009 convention of the Philippines Association of Realtors Board, Inc. that the effect of the global recession on the Philippines has been contained.

BSP is now back to its normal work in the Monetary Board where medium to long term monetary policies are being worked out. This is unlike in the U.S. where under the survival mode the focus is very much still on reversing the contracting economy (estimated to be -2% GDP by 2009) by injecting into the financial system a stimulus package of $700 B.

Although the U.N. has estimated that the Philippines GDP will grow by 3%, the Bangko Sentral ng Pilipinas own estimate is that the GDP will grow within the range of 3.6% to 4.4% in 2009. Compare that to GDP growth of emerging economies of about 3.5%. Filipino businessmen and economists know that the Bangko Sentral ng Pilipinas is an independent branch of government deciding on its own authority and not from dictates of the executive branch of government where announcements are perceived to be self serving.

The reasons for this according to Dr. Dakila are as follows:
1. Non-performing loan ratio has been trimmed down over the last 10 years from double digit ratio to only 4% as of today;
2. Limited exposure of the Philippine banking system to failed U.S. financial institutions;
3. There will be a growth of Balance of Payment this year because the reduction of import costs will outweigh the reduction of exports;
4. While remittance of OFWs will not decrease, neither will it increase because of new markets opening up to skilled Filipino Migrant Workers balancing out lay offs caused by recession in their host countries;
5. P330 Billion stimulus package coming from government and private financial institutions;
6. By risk aversion, the Philippines is perceived by investors to be less risky than emerging economies;
7. Bank Reserve requirement has been reduced only this March 2009 from 10% to 8%. This effectively releases P60 Billion into moneys available for loans and investments.

The bad news is that though our GDP will grow, it will do so at a slow pace until the U.S. economy has recovered. Dr. Dakila says he thinks that the Philippines GDP will grow by 7% when the time comes albeit longer in coming than we would have wanted. He said that back in 2006 he actually thought that the Philippines would grow by this much in 2007 but then the U.S. real estate bubble burst. The rest as the saying goes is history.