2.3% Drop In Growth For The Philippines
It seems now, perhaps, just maybe the dollar’s value will rise in the Philippines but I wont predict it. For the last couple of months, the dollars has been falling overall. I base that on just glancing at the numbers. I have not recorded them except for the Philippines and the dollar has generally tried to inch downward in the Philippines too, most of the time. There have been a couple of blips in the trend.
These blips have occurred on weekends when most trading is closed. I have researched this but I am still uncertain how this happened. I suspect manipulation but I have been unable to determine the reason for this. The official government rate does not change over the weekends.
There has been a drop of 25% in remittance from the USA to the Philippines in January of this year, however, surging growth in the middle east made up the difference so far. The World Bankwrote on their website:
The latest data do point to a significant weakening of remittances as of the last quarter of 2008. In January, remittances posted zero annual growth in dollar terms. Looking into the details of the January numbers, we see that remittance from the all important USA (accounting for over half of total remittances to the country) were down by 25 percent compared to January 2008 (in dollars). Surging remittances from the Gulf managed to offset the decline from the U.S. Can growth from the Gulf continue at such a pace? To what extent is this surge masking the return of OFWs (bringing with them their total savings and severance packages)? As the Gulf-related surge is expected to slow down, and given global growth prospects in the rest of the world, we have revised our estimate downward for the dollar growth rate of remittances to the Philippines to minus 4 percent. In real Peso terms, given our expectation on exchange rate and inflation, the impact will be more muted. Nonetheless, this means that around 2 in every 10 families who are receiving remittances will be adversely affected, and the fight against poverty with it.
With fewer dollars coming into the country, the demand should be on the rise. Possibly though, the dollar falling through out the world could make other currencies more attractive to currency traders. A 25% drop those is huge. I think the dollar should be rising it. So why isn’t it? It suggest manipulation but I don’t know what is causing it. I am not an investor but when the dollar was around P39 it was making life for me in the Philippines much more difficult.
The Philippines continues to expect positive growth for the year but have dropped their estimate of growth. The International Monetary Fund (IMF) continues to expect flat growth for the year. The Philippines is doing better than most Asian countries because only about 30% of its GNP while Malaysia’s GNP is made up of about 70% exports.
The Wall Street Journal website includes a story about the slowdown in the Philippines that includes this statement:
Gross domestic product in the Philippines shrank by a seasonally-adjusted 2.3% in the first quarter from the last quarter of 2008, leaving the Philippine economy 0.4% larger than it was in the first quarter last year. The depth of the quarterly contraction caught Philippine officials by surprise
One of the more worrisome things about living in a foreign country, especially for one living on a pension, is that our wealth is largely dependent on the exchange rates. I’m torn on what to hope for. The US economy seems to be rebounding and that should increase the supply of dollars and put downward pressure on the value of the dollar.
Some officials in the Philippines are concerned that the degree of the down turn may indicate worse news to come and possibly even recession in the Philippines. I don’t get it, this seems obvious to me that remittances would be in danger. Some in the Philippine government had held earlier in the year that consumption would not change and thus the money would continue to come in. It wont come in if people loose their jobs. One thing helping the Philippine economy is bound to be the explosion in call centers in Cebu Province.
The world bank had this to say about GNP:
The fairly stable 10 percent of GDP sent back home year-in and year-out for the past six years from overseas family members is key to the health of the Philippines economy. Not only does it boost private consumption (from the purchase of basic necessities to big ticket items such as cars and housing – private consumption accounts for over 75 percent of GDP), it also lifts foreign exchange reserves, the current account, and deposits in the banking system.
A stronger dollar would certainly help to spur growth in the Philippines, and that should be motivation enough to push the dollar up despite any ability to manipulate the value of the peso. I don’t claim to be an expert in currencies, I’m trying to learn as I go. I hope you will help educate me. With the Philippines economy showing strain such as this, I will continue to hope the value of the dollar remains high in the Philippines.
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