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Monday, February 16, 2009

The Global Financial Crisis and the Philippines



Flow of the presentation

Genesis of the crisis

Evolution of the crisis

The global crisis and the Philippines


Type your summary here

Global economic slowdown
Root of the crisis

Started with the US subprime and housing crisis

Forces at work

Search for higher-yielding investments

Increasing demand by new homeowners

Continuously rising house prices

Process of securitizing

Original mortgages à Housing & real estate investment trusts à Sold to public with implicit/explicit support of banks like Morgan Stanley and Lehman Bros. à High credit ratings




Type rest of the post here

What happens when the original mortgagor defaults?


Evolution of the crisis


Events led to lower confidence due to:

Insolvency of banks

Lack of short-term funding

Health of real economy


Effects of increased risk aversion

Other effects

· (Global) money market to remain frozen until extent of CDO exposure is known

For the Phils., this means still lower demand for exports (goods and services)

· Expected global recession

· Funds will be parked in safer havens like gold and other commodities

· Banks to hold more dollar reserves

· More regulations on financial sector

Despite bailout efforts

· Consumer credit shrinking

· Loss of jobs

- Job loss: #1 global concern (from poll of 22 nations by Ipsos Global Public Affairs)

- US jobless rate at 7.2%

-


Despite bailout efforts

Collapse of activity growth

Firm shutdowns (some temporary)

Gloomy purchasing outlook

Philippines
Policy responses

Increase PDIC limit from P250K to P1M

Reduction of reserve requirement by 2 percentage points

Option to reclassify financial assets from categories measured at fair value to those measured at amortized cost [i.e. from Held for Trading (HFT) or Available for Sale (AFS) categories to the Held to Maturity (HTM) or the Unquoted Debt Securities Classified as Loans (UDSCL)]

Suspension of balanced budget for this year

Higher spending on infrastructure and subsidies

Lower confidence in the country

Assistance to sectors affected by global financial turmoil and adjustment of income tax brackets

IDEA Forecasts
Philippine Finance sector

Expected to be on a slowdown

Finance sector growth

2007: 13.1%

2008/f: 3.7%-4.6%

2009/f: 2.6%-4.0%

2010/f: 6.6%-7.8%





Outlook on Real Estate

Trend

improved from 2.5% annual growth rate between 1996 and 2001 to 6.3% between 2002 and 2007

Prospects: mixed, but growth is likely to be limited this year

may stay afloat due to OFW households (home purchase remains a priority)

Affordable housing

Due to less HH disposable income, may capture the market of high-end residential investments


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Manila real estate said...

Thanks for sharing the details and graphical structure of how the Global financial crisis affects the Philippines. The country is affected by the financial crisis through the downfall of many big businesses. However, OFW remittances are still keeping our economy afloat.

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