Finance Secretary Margarito Teves reiterated during an economic briefing Thursday that the financial turmoil in the United States will affect the Philippines on three fronts: lower exports, remittances and investments in the country.
Teves told the House Committee of the Whole that despite the $700 billion bailout for the US financial systemm he is hoping that the impact will be an "economic slowdown" instead of a "recession."
A slowdown means the US economy will still post a positive growth, even if less than a fraction of a percent, while a recession technically means two consecutive quarters of negative growth.
How the US economy will fare will determine the pace of the decrease of the Philippine exports in the coming years. Already, Philippine exports have declined in the past quarters as American consumers, the biggest consumer group in the world, reduced their spending.
As far as remittances from Filipinos working in North America are concerned, Teves likewise expects that the amount of money workers send home will decline "even if they have 2 or 3 jobs."
Nonetheless, total remittances from OFWs have been growing at historical highs. Officials said this is because the economies of other regions, like the Middle East, where bulk of OFWs are working, continue to be robust and unaffected by the situation in the US.
Lastly, Teves said the flow of funds from investors to developed countries will be curtailed as a result of the financial crisis. He said this will be the US crisis' immediate impact on emerging economies.
"They are increasingly becoming cautious, many of them wanting to invest in safer instruments in other countries outside emerging economies," Teves said.
The reduction of investments could affect expansion and job opportunities in the medium and long term, Teves added.
This, however, is not the case with portfolio investments. Earlier, players in the local stock market said they are optimistic with the increasing inflow of portfolio funds, or the money invested by investors in the capital markets. Days after the $700 billion rescue package in the US went through rough waters in the US Congress, foreign investments in the local stock market increased. -- with Willard Cheng, ABS-CBN News