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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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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