Publication: Philippines Quarterly Update, June 2010: The Recovery Continues Despite Global Financial Turbulence
Date
2010-06
ISSN
Published
2010-06
Author(s)
World Bank
Abstract
The Philippines economy posted robust
growth in early 2010, in part due to large one-off factors.
As did many countries in the region, the Philippines
benefited from a strong rebound in global trade.
Manufacturing and investment activity expanded briskly as a
result. Private consumption continued to expand, as consumer
confidence improved. Growth also benefited from
election-related spending. Expansionary (and now
pro-cyclical) fiscal policy continued to support growth.
Despite a withdrawal of liquidity-enhancing measures and a
stronger peso, a closing output gap meant that monetary
policy remained accommodative. A World Bank study of
Philippines migration pattern during the global recession
reveals that deployment of overseas foreign workers (OFWs)
actually accelerated during the crisis. Partly this
reflected the fact that the top OFW destinations were not as
affected as the rest of the world. The most affected OFWs
were males, production workers (especially construction
workers) and new hires. By contrast, females, services
workers, seafarers and rehires proved resilient to the
crisis or even benefited from it. Globally, less tolerance
towards weak public finances is expected, raising the need
to introduce a credible medium-term fiscal consolidation
plan for the Philippines. Running a pro-cyclical fiscal
policy with relatively high debt and limited fiscal space-as
undertaken in the first-half of 2010-raises risks and should
be reverted. Credibility towards such a goal could be
achieved, for example, by designing a comprehensive
multi-year reform package. As the output gap closes, the
accommodative monetary policy introduced in 2008 would need
to be gradually unwound, starting by reaching a broadly
neutral stance in 2010. An increase in policy rates
currently negative or slightly positive could achieve such a goal.
Citation
“World Bank. 2010. Philippines Quarterly Update, June 2010 : The Recovery Continues Despite Global Financial Turbulence. © Washington, DC. http://openknowledge.worldbank.org/handle/10986/27763 License: CC BY 3.0 IGO.”