2010 SIGNS

The Philippine Star
01/04/10

The big question lingers: Are we poised for growth?

For most local companies, the planning cycle had ended in the last quarter of 2009, but the big question still begs answering since much is still dependent on how the economies of developed countries will perform this year.

While the U.S., Japan and many European countries announced modest growth in last year’s third and/or fourth quarter, economists continue to be cautious mainly because much of the change witnessed is due to temporary factors – the cranking up of the manufacturing machinery, thus an upswing in the inventory cycle, and the effects of the massive fiscal stimulus packages.

The global recession, as most agree, appears to be likely headed for the exit door. This, however, does not automatically mean that the world can expect a sharp V on the charts; for the rest of 2010, it looks more like a flat line.

Deflation threat

Still, this is good news after the world had gone through probably the worst economic crisis since the last World War. The sigh of relief may be temporary though as warning bells are being raised on the possibility of negative growth – or deflation – towards the end of 2010 or early 2011.

Deflation, being the opposite of inflation, is generally understood to mean a drop in general price levels when there is a reduction in the supply of money or credit or a strong contraction in spending, either by government, consumers or business.

Deflation also is seen to cause increasing unemployment, which in turn would result in further dampening consumer demand. With unemployment figures at all-time highs, reduced consumer spending has been a growing trend that is causing gross domestic product figures to drop.

Inflation is being ruled out as economists predict overcapacity to be the prevalent condition especially in the labor markets and commercial and manufacturing sectors.

External factors

There are other external factors that are seen to affect a speedy return in the well-being of the global economy’s health. Oil, both on the supply and price side, continues to be a wild card as reported dwindling sources of the non-renewable energy pushes prices upwards.

On the other hand, a global economy that will continue to post flat growth in the next quarters may restrain the erratic and wild swings that have been seen in the price of crude oil over the last two years. This does not mean though that prices will go back to the $30-$40 per barrel era.

The other factor that could shape how the world’s economy will grow this year would be the pressure of global warming. Early this year, nations’ leaders are planning to ink an agreement that could be regarded as a breakthrough to over two decades of negotiations.

The imperative to lower emission levels or even stop the deterioration of the world’s ailing environmental condition is real. But it will not be government incentives and/or improved technology that will be the compelling reason for such a change.

Do we see people power on a global level at work to save the world?

Lifestyle change

Especially for the years after 2010, a new consumer profile is being seen. Spending, which had been fueled by the increased speed of manufacturing and technology changes, is now being reined by the recent economic crisis.

Consumers are restructuring and reducing debt, setting aside heftier amounts of their income as savings, and heading to safer, albeit more conservative, investment havens to park their disposable income.

The lessons from the last global financial crisis will be expected to linger long, almost akin to the kind of frugal mindset that consumers embraced after the end of the Great Depression and the last war. If consumers changed mobile phones yearly, once every two or three years may be the next acceptable behavior.

No one spared

That said, it would be a no-brainer to declare that emerging economies such as China, Russia, India and Brazil are not impervious to the emerging global trends. Home to still many of the world’s poor, these countries rely on developed economies to buy their produce.

As credit continues to be tight, banks choose to hang on to their money and limit risks rather than lend in volatile times. There will be greater reliance on internal cash, something that some emerging and most of developing nations do not have.

Alas, no one will be spared as the world figures out how to emerge alive from the great recession. For sure, the gargantuan stimulus packages started in 2008 will not see any exit strategies, at least for the most part of this year and for many countries.

Simple living

And so, perhaps today, the first working day of 2010, it is time to revisit the joys of simple living, of being happy by earning just enough to feed our family and to send the children to good schools to learn, not so they have to be “competitive” in the global job market.

Why continue buying plastic bottled water when our private concessionaires can now vouch that drinking from the tap will not harm our health? Why buy new clothes when we still have so many that are still serviceable in our closet.

Why use a mobile phone to call a friend when you can leave a message on his e-mail or you can talk to him over a land line when you know he’s just at the office or at home.

In parting, I’d like to share the following from a recent Time magazine issue: “A consumer culture invites us to want more than we can ever have; a culture of thrift invites us to be grateful for whatever we can get. So we pass the time by tending our gardens and patching our safety nets and debating whether, years from now, this season will be remembered for what we lost, or all that we found.”

Let 2010 be mankind’s great awakening.

Champions League winners

We would like to remind all those you joined the just-concluded Philippine Collegiate Champions League contests to visit the website at www.collegiatechampionsleague.net to check the list of winners. Deadline for claiming gift prizes will be on January 18, 2010.

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, SalcedoVillage, 1227 MakatiCity. Or e-mail me at reydgamboa@yahoo.com. For a compilation of previous articles, visit www.BizlinksPhilippines.net.