MANILA – Philippine business leaders warned yesterday there was little the country could do to ward off the effects of a possible US recession, except to prepare itself for greater challenges ahead.

Bangko Sentral ng Pilipinas governor Amando Tetangco said he hoped the US Federal Reserve's emergency cut in interest rates of 75 basis points would calm local markets.

"We will be monitoring how markets digest the Fed's surprise move. Overnight we saw some correction in the equities market in the US .

"This should benefit our own domestic markets as volatility would be reduced," Tetangco said in a statement.

But Tetangco did not give any hints that Philippine policymakers will follow the Fed's lead.

The United States is the largest buyer of Philippine exports and is also home to hundreds of thousands of Filipino workers whose remittances back home help support the domestic economy.

"We are projecting only flat growth this year for the reason that the United States might slip into recession," said Ernie Santiago, president of the business group Semiconductor Electronics Industries Philippines Inc.

"We hope it will not be worse than 2001, that it will be a soft recession," he said, recalling that in 2001, Philippine electronic exports slipped by almost 20 percent.

Electronics make up about 60 percent of total Philippine exports and Santiago said he estimates that electronic exports rose by only about three percent in 2007.

The industry has few options in the face of a US recession, he warned, saying that such an event would affect the electronics industry worldwide.

"If the US market will fall, it will be the same throughout the world," he said.

The Philippine Stock Exchange, which fell 5.5 percent on Tuesday, when markets throughout the world tumbled, recovered by 2.7 percent on Wednesday, partly due to bargain-hunting and partly due to the Federal Reserve rate cut.

Francis Lim, president of the Philippine Stock Exchange, said in a statement the market's recent downturn was "not necessarily because of internal weaknesses but because of adverse developments overseas."

He expressed hope that recent reforms in the market would "serve their purpose as shock absorbers and help temper the global market turbulence."

"While the underlying reason for our market's fall is beyond our control, the slump should serve as fresh reminder for the government and for the private sector to take necessary steps that will help us adjust to the challenges ahead," he said.

"With the US weakening, most regional economies will almost certainly feel the impact and may see their own economies contract, reducing earnings and consequently, price valuations," said Francisco Liboro, president of PCCI Securities.*AFP

back to top