Harvard economist warns PH: Don't get overconfident
MANILA, Philippines - A well-known US economist says while the Philippines is a standout in a sluggishly recovering global economy, it should not get complacent or overconfident.
Carmen Reinhart, the Harvard economist behind the New York Times best-seller "This Time is Different," said when businesses or consumers get overconfident, usually by expanding too fast or borrowing and lending too much, the probability of a crisis rises.
"In effect, a lot of the work that I've done, 'The This Time is Different' syndrome, is often well, all these wonderful things are happening, so the old rules of the game no longer apply to us. And part of throwing caution to the wind involves projecting out very high growth for extended periods of time and thinking that one can take on debt, and the private sector can handle all this debt and that leads also to slackening in standards in lending and all the kinds of things we typically see in the run-up to a crisis," she told ANC.
"My message today here today is that (Philippines) is strongly poised to hit the choppy waters hitting emerging markets, but this is not a time for complacency."
Her book "This Time is Different, talks about eight centuries of financial foolishness.
Reinhart also said Southeast Asian countries should focus their integration on trade and investment and be careful with the financial integration that could lead to excessive borrowing.
She said easy borrowing within Europe helped some EU members pile up the debt they've needed bailouts for.