World Bank: Philippines, East Asia to weather U.S. recession.

This is from the Inquirer. Economic growth will slow in the area however as evidenced by the Philippines decline to 5.9 from 7.3. The slowdown will certainly not help many poorer Philippinos when inflation in food prices such as rice is taken into consideration.



WB: Philippines, East Asia to weather US recession

Region seen growing 8.6% this year

By Michelle Remo
Philippine Daily Inquirer
First Posted 00:41:00 04/02/2008


The Philippines and other developing East Asian countries will manage to post decent growths this year and weather a global slowdown to be caused by a US recession, the World Bank said.

In a paper titled “East Asia: Testing Times Ahead,” which it released Tuesday, the multilateral lending agency said the development of intraregional trade has made member-countries less vulnerable to sharp declines in exports to the United States, one of the world’s biggest markets.

“Although East Asia will undoubtedly be affected, it is reasonably well positioned to navigate this crisis without incurring significant damage to its prospects,” it pointed out.

The World Bank projects developing East Asia to grow by 8.6 percent this year, slower than the 10.2 percent recorded last year. The figures showed a slowdown, but the foreign lender said the growth forecast for the year was still the strongest among other regions in the world.

For the Philippines, the World Bank’s growth forecast was 5.9 percent, marking a slowdown from the 7.3-percent expansion last year.

Vikram Nehru, World Bank chief economist for East Asia and the Pacific, said in a live video conference Tuesday from Tokyo that structural reforms implemented by East Asian governments over the last decade have made member-countries more able to deal with external shocks.

What should require much attention from policymakers in the region is how to deal with an accelerated rise in consumer prices.

“In virtually every East Asian country, inflation is climbing to uncomfortable levels due to these cost-push pressures, while monetary and credit growth is difficult to contain owing to substantial capital inflows,” the World Bank paper said.

The Philippines’ problem about rising prices is much less than its neighbors’ because it is coming from a very low inflation environment last year. But still, increases in consumer prices have shown possible breaching of the full-year target.

The central bank, Bangko Sentral ng Pilipinas (BSP), said Monday that it expected year-on-year inflation to reach 5.3-5.9 percent in March.

Analysts said average inflation for the full year was likely to hit the high end of the BSP’s 3.0-5.0 percent target.

Vera Songwe, senior economist at the World Bank’s Philippine office, said rising commodity and oil prices in the world market would adversely affect domestic prices of goods.

Songwe said the efforts of policymakers in the Philippines should be focused more on implementing programs to temper inflation. The World Bank recommended projects promoting fuel efficiency, boosting agriculture production, and further opening up to world trade.

Songwe said the World Bank was supporting plans by the Philippine government to provide subsidies to poor Filipino families, but cautioned that subsidies should come only as a temporary measure and should not encourage heavy reliance on state support. The government should also be careful that the subsidies are directly granted to the needy sectors.

“Growth in the Philippines had been phenomenal, but there were still [members] of the population that were not benefiting from this,” Songwe said.

Songwe said the government should implement programs such as food subsidies that will directly benefit the sectors of society that do not feel the benefits of a growing economy.



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