ONCOMING TRIPLE WHAMMY

The Philippine Star
12/12/08

We may have to brace ourselves for a series of whammies this coming year. For starters, as the latest export figures would show, we can expect a record trade deficit next year.

Exports shrank almost 15 percent in October from a year earlier, the worst monthly performance in seven years or since the 2001 U.S. recession, which by most accounts, was mild in comparison to the slump that's currently sweeping across the globe.

The contraction in October was way more than most economists expected. Most bets were just a 5 percent drop but the decline proved deeper as overseas sales of electronics continued to take a beating.

The huge drop dragged the 10-month growth down to merely 1.9 percent to $42.83 billion, and economists say that continuing contraction for the rest of the quarter would put this year's growth only at about one percent if not less.

The government's revised estimate for exports growth was 2 to 4 percent. It was 6 percent in 2007.

Exports account for more than 40 percent of the Philippines' gross domestic product. Of that, two thirds are electronics – mobile phone chips, computer parts and other components that make up laptops, music players and other gizmos.

Exports of electronics plunged almost a fifth to $2.34 billion in October from a year earlier, outpacing the 2.4 percent drop in worldwide sales of semiconductors.

Some economists point out, and rightly so, that the Philippines' doesn't have as diverse an export base as some of its neighbors. Many others in the region rely on overseas sales of rice, palm oil and other commodities, which in some instances, though not always, could compensate for the weakness in electronics exports.

Declining domestic demand

At this point, domestic demand is perhaps the best way to counter the blow on exports and its consequent impact to the macro economy. If only it was that easy.

For about three years until 2007 when the country enjoyed growth at the fastest pace in three decades, domestic consumption was as integral a component as overseas sales.

Banks were giving out car and home loans left and right while consumers were excited with every new cellphone model or iPod that would hit the market.

People had more cash than they previously had and many were looking at the bonanza from overseas remittances as one of the key drivers of liquidity.

But with the tragedy that has befallen Bear Stearns, Freddie, Fannie and Lehman, along with these is the loss of hundreds of thousands of jobs attached to the financial sector, the housing market and any industry in the world vulnerable to the dreaded recession.

OFWS at risk

Just take the case of our overseas workers. While many may not be directly affected by the collapse of Wall Street and may not immediately lose jobs, the prospects for most have become clouded because global demand for manpower services has just softened.

The decline in spending from the thousands of jobs lost would affect the demand for luxury cruises where many Filipinos work or for nannies in cosmopolitan cities where bankers thrive.

True that remittance numbers are still healthy, and growth continued to be robust at 17 percent in September. For how long we will continue to experience such growth is another thing.

A battered Peso

Should remittances contract in the coming months, coupled with the steep decline in exports and the slowdown in domestic demand, the Philippines is all cued up for the triple whammy that would undoubtedly weaken the peso.

This month, the peso has rebounded mainly because of remittance flows. But come January, when weak economic prospects are expected to rear its ugly head, traders are already warning that the depreciating trend in the peso would resume.

The peso will probably close the year between 47.50 and 48.20, a lot better than when the currency hit the 50 level last month but still about 15 percent down from 2007. Nonetheless, it will be the peso’s worst performance since 2000 before the EDSA 2 revolt.

By the first quarter, the peso could trek back to the 49 or even 50 level, according to traders.

At the 47.50 level, the peso would be very attractive and should command some demand among companies and even the retail speculators who prefer to hold dollars while the global rout continues.

For those who still have the appetite for risk taking, there are still two more weeks to start buying dollars before the uncertainties of the coming new year once again engulfs the world.

Meanwhile, for most of us, the best recourse would be to hang on to our dwindling savings and keep a frugal mindset. This should be the best way to ride out the triple whammy that would soon hit us.

De La Salle Green Archers – the best among the best

The search for the 2008 Philippine Collegiate Champion conducted by Philippine Collegiate Champions League (PCCL) has come to an exciting end. De La Salle Green Archers, masterfully coached by Franz Pumaren, is the best collegiate team in the country for 2008.

The Green Archers reached the top by knocking out the NCAA three-peat champion, San Beda Red Lions, in the semi-finals and the current UAAP champion and 2007 Philippine Collegiate Champion, Ateneo Blue Eagles, in the Finals.

With this feat, DLSU Green Archers earned the privilege of representing the Philippines in the 2009 Universiade Games to be held at Serbia. Additionally, DLSU will receive scholarship grants in the amount of P500,000.00 from FilOil Flying V and the team members were awarded P400,000.00 worth of prizes courtesy of SBP President M. V. Pangilinan.

The other top three teams, Ateneo (runner-up), Letran Knights (third place) and San Beda (fourth place) got scholarship grants and prize awards in the amount of P400,000.00, P200,000.00 and P100,000.00, respectively.

Special awards were given to J. V. Casio of DLSU (Most Valuable Player), Franz Pumaren (Best Coach), Dennis Barbacena (Best Performing Referee) and the Mythical Team members, J.V. Casio, Rico Maierhoffer (DLSU), Rabeh Al-Hussaini (Ateneo), Nonoy Baclao (Ateneo) and RJ Jazul (Letran)

Congratulations to all those teams that achieved higher goals during this year’s journey to the national title – the nine Regional Champions, the Zonal Qualifiers, and those that made it to the “Sweet 16” Final Challenge. To the others that participated in this year’s search for the best collegiate teams, look forward to the 2009 journey and set higher goals to be achieved.

For more details about the biggest collegiate basketball event for the year presented by SMART, PLDT, FilOil Flying V and KFC, visit the official website, www.CollegiateChampionsLeague.net and www.gameface.ph, internet media partner of PCCL.

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.