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    Default SPECIAL REPORT: Bullish economy reminiscent of pre-1997 crisis


    SPECIAL REPORT: Bullish economy reminiscent of pre-1997 crisis

    By Daxim L. Lucas in Manila/Philippine Daily Inquirer | Asia News Network – 22 hours ago

    Manila (Philippine Daily Inquirer/ANN) - Fund managers around the world have dubbed the Philippines the newest "tiger economy" of Asia. And for good reason.

    The latest government data showed the economy roaring ahead at its most vibrant pace in decades.

    In fact, the country's growth-measured by the rise in the gross domestic product (GDP)-is one of the strongest in the region.

    Stocks on the local bourse have been rising to dizzying heights, marking record high after record high and making the Philippine Stock Exchange one of the best-performing equities markets in the world.

    Meanwhile, fuelled by low interest rates and rising confidence, the property market has been booming as well, with condominium and office buildings rising everywhere and construction cranes punctuating the city's skyline.

    The peso stands strong against the dollar and the central bank's foreign exchange reserves are at record high levels, giving the country a buffer against sudden capital outflows.

    Related story: Philippine boom fuels resurgence in luxury hotel market


    But most importantly, the Philippines' credit rating rests only a notch below the coveted "investment grade" bestowed by international debt watchers like Standard & Poor's and Moody's Investor Service-a hair's breadth away from a level that promises to flood the country with more capital and lift more people out of poverty.

    This could very well be the rosy description of the country's economic situation today.

    But this was, in fact, the lay of the land in January 1997, less than six months before the East Asian financial crisis laid waste to the entire region and pushed millions of Filipinos into economic hardship for years to come.

    Differences

    To be sure, a world of difference separates the onset of the Asian crisis in the Philippines in July 11, 1997, from present day conditions.

    "Our economy now is much stronger," said Governor Amando M. Tetangco Jr. of the Bangko Sentral ng Pilipinas.

    "Back then, our dollar reserves were limited so it became difficult very quickly once the capital outflows started. But today, our problem is [having] too much dollars coming in."

    Indeed, the country's economic managers had to face the financial tsunami that swept across the region 15 years ago with only $11 billion in dollar reserves.

    In less than a week in July 1997-in a vain attempt to keep the peso's value from collapsing-the BSP used up almost $2 billion of this precious "ammunition" trying to fend off currency speculators.

    "Today, we have over $84 billion in reserves," Tetangco said, noting that the amount was almost 700-per cent higher than what the country had in 1997 to fight off the crisis.

    This amount can pay for more than a year's worth of imports of goods and services, compared to only three months back then.

    Also read: Philippine govt eyes revival of industry sector

    The chief of the BSP-the agency at the forefront of protecting the economy from sudden shifts in the economic tide-then proceeded to rattle off statistics to illustrate just how far the Philippines had come over the last decade and a half.

    In the five years leading to 1997, the country's inflation rate averaged 7.6 per cent.

    This was relatively low for a country used to double-digit inflation. But in contrast, the prices of goods and services from 2007 to 2012 averaged only 4.7 per cent.

    Back in 1997, BSP's overnight borrowing rate (the interest rate on which banks base their lending rates to the public) averaged 11.2 per cent. This was also low then.

    But in the last five years, the overnight rate was only 4.8 per cent, bringing the rates on bank loans for houses, cars or corporate use to their most affordable level in the country's history.

    In fact, all economic indicators showed that the country is better off now-from average bank lending rates (11.2 per cent then against 7.7 per cent today); money supply growth (20.7 per cent versus 10.7 per cent); peak property prices in Makati (P425,000 a square meter then versus P280,000 now), to the prices of stocks relative to their earning potential (28 times then against 17 times now).

    1997 on his mind

    But surprisingly, despite being interviewed by the Inquirer on short notice, Tetangco came fully armed with graphs, tables and slides that juxtaposed 1997 with the present day.

    His collection of economic data was kept handy in a single file folder for easy reference long before the interview was set.

    The comparison between 1997 and today-whether it yielded similarities on the surface or differences underneath-was clearly on his mind.

    In other news: Philippine govt sees nuclear energy a viable option

    Traditionally, a central banker's job has been defined as one of being the adult in the room in a big party, ever watchful to keep youngsters from becoming too rowdy and hurting themselves.

    And the current party is, though most revelers are still having a blast, is clearly on Tetangco's mind.

    "I think about it," the BSP chief said. "The conditions are different. But we always have to be watchful."

    And he's not the only one who has looked back at 1997 and cast a cautious eye on the present.

    Col Financial Group president Conrado Bate is a grizzled stock market veteran who was in the thick of the previous crisis heading what was then the country's top stock brokerage, Jardine Fleming Securities.

    "People have to temper their expectations a bit," he said in an interview. "Will there be a collapse? No. But are things in the market sustainable? I say, no."

    Source:
    http://ph.news.yahoo.com/special-report-bullish-economy-reminiscent-pre-1997-crisis-033004565.html

  2. #2
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    Maayo unta mapiskan ta ini
    kung tinuod man gani.

    There is still a big disparity
    between the poor and the rich
    here in the Philippines. I wish the poor
    same as the rich could savor also the fruits
    of economic success. The government could
    start with subsidies, I guess.

  3. #3
    maau unta lahutay nani.

  4. #4
    Keep up the good work Pinoys!
    Strive for a better future for our descendants.

  5. #5
    Elite Member boyq's Avatar
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    Quote Originally Posted by Tirong-say View Post
    Maayo unta mapiskan ta ini
    kung tinuod man gani.

    There is still a big disparity
    between the poor and the rich
    here in the Philippines. I wish the poor
    same as the rich could savor also the fruits
    of economic success. The government could
    start with subsidies, I guess.
    OT:
    Isn't RH Bill a sort of subsidy by the government for the poor? But you disagree with it.

  6. #6
    Even though the GDP grew 7.1% last quarter compared with the same quarter last year, it is still a long way for the Philippines to achieve a real and inclusive economic development. The GDP growth of 7.1% is not a reason for the government to be complacent from doing further structural economic reforms for future long-term growth and development.

    The Philippines needs to have a further structural macroeconomic, cultural, and especially political reforms in order to maintain the recent economic stability of our country in a LONG-RUN basis not in a short-run.

    Our current economic growth is unsustainable if we continue to rely too much on OFW remittances instead of encouraging more investments in our domestic economy like more job opportunities for millions of unemployed Filipinos, improving our infrastructure, and strengthening our national defense.

    To encourage more investments in our economy instead of relying on OFW remittances and BPO revenues, we need to amend the 1987 constitution and allow 100% foreign direct investment (FDI) participation at all economic sectors in our domestic economy instead of limiting them to 40% and find a local partner who is rich enough to front the 60% (only few locals can afford to front 60% of a large-scale foreign investments that's the reason most large-scale foreign investment in Southeast Asia goes to Singapore, Thailand, Malaysia, Thailand, Indonesia, and Cambodia where foreign investors can invest 100% from their own capital and can own what they invest).

    To spread our economic gains not just in Metro Manila, we need to decentralize our form of governance like shifting from unitary to federal form of governance where the provinces or regions are the one who will manage the economic, cultural, and political policies of a specific province or region.

    To assure an efficient governance from the top and to fasten the implementation of laws, we need to shift from the current presidential to parliamentary form of government where the Head of State (the President what I mean) should have only the ceremonial position while the real duty of governing the nation should be vested to the Parliament led by a Prime Minister and his/her Ministries as the current system ensures conflict between the executive and the legislative branch.

  7. #7
    i believe that the stars have aligned for the Philippines. According to one stock-market guy- All indicators shows that in the next 3-5 years our country will enter into a decade of progress and profitability that we haven’t experienced yet as a nation. It would not be a smooth or a straight line climb but we are very positive that we will get there in our fearless forecast that the PSEI will reach 10,000 by 2016.

  8. #8
    i cannot feel the economic growth. the prices of basic commodities are still the same

    can you?

  9. #9
    makita man sa mga malls...kada lingi nimu nka touchscreen na ang cellphone...nka Iphone, Ipad...dslr...bisag naa camera case...ipagawas jd...bisag masulod ang phone sa bag or pocket...bit2x jd......wla ka feel ang mga pinoy og crisis...

  10. #10
    C.I.A. Platinum Member æRLO's Avatar
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    Quote Originally Posted by 666satan View Post
    makita man sa mga malls...kada lingi nimu nka touchscreen na ang cellphone...nka Iphone, Ipad...dslr...bisag naa camera case...ipagawas jd...bisag masulod ang phone sa bag or pocket...bit2x jd......wla ka feel ang mga pinoy og crisis...
    ...and that's how we gauge economic crisis.

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