US Financial Crisis Could Lead to Job Losses in RP

Published on October 4, 2008

Economic impact on the Philippines

Quintos explained that the Philippines is particularly vulnerable to the effects of the US financial crisis because of its neocolonial ties to the US. “Neoliberal policies of liberalization of trade, investment and finance; deregulation, privatization, and others have exacerbated the country’s vulnerability to the crisis of the global capitalist system,” he said.

Quintos noted that since August 2007, P2 trillion ($42.52 billion at the Oct. 3 exchange rate of $1:P47.04) in stock values have been wiped out from the Philippine Stock Exchange (PSE). He also cited a 12.3-percent drop in the peso’s strength against the dollar, and said that the exchange rate is likely to once more reach $1:P50. He said the crisis could lead to tighter conditions for loans, with higher costs of borrowing and interest rates, and lower capital inflows to the Philippines.

He also said the crisis could lead to a slump in the export of goods. He noted that around 18 percent of the country’s exports go directly to the US, while up to 70 percent are indirectly dependent on the US, as well as the European Union or EU markets, through the export of intermediate goods to TNC (transnational corporation) subcontractors in China, Taiwan, Korea, the ASEAN (Association of Southeast Asian Nations), and others for assembly into final goods.

It is not only the export of goods that could suffer, he said, but also the export of services. He noted that 90 percent of business process outsourcing (BPO) revenues comes from the US market.

He also warned of a possible decline in remittances, considering that 51 percent of remittances from overseas Filipinos are from the US.

Quintos also said the crisis could lead to further increases in the prices of food and petroleum products as speculative investments look for “safe havens” such as commodity futures markets.

The spike in prices of oil, rice, and wheat in the world market during the first half of the year is being attributed to speculation.

“With every 10-percent increase in food prices, 2.3 million Filipinos slide below the poverty line, while with every 10-percent increase in petroleum prices, 160,000 Filipinos slide below the poverty line,” he said.

“All these mean lower external and internal demand leading to higher unemployment, lower incomes, lower social spending, and higher taxes in the immediate future,” Quintos said.

He noted that 1/3 of all manufacturing employment in the country is in export processing zones, which he said would particularly suffer the consequences of the US financial crisis. He cited the layoffs of 125,000 workers in the manufacturing sector from July 2007 to July 2008.

Other areas he cited as likely to be affected by the crisis are small- and medium-scale enterprises (SMEs), construction, wholesale and retail trade, transportation, agriculture, and BPO firms.

Quintos said the Arroyo administration is accountable for how the US financial crisis would be affecting the Philippines because of its “subservience to the US and other foreign monopoly capitalists in exchange for their continued support to the regime through development and military aid,” as well as for its “aggressive implementation of neoliberal policies for the interest of foreign capital.” Bulatlat

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