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RP to feel crisis impact next year

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By Joel Guinto, TJ Burgonio, Philippine Daily Inquirer
First Posted 15:19:00 11/01/2008

MANILA, Philippines — (UPDATE) The country will feel the full impact of the global economic crisis next year in the form of a possible slowdown in exports and business activity, but the government is ready to address this, Finance Secretary Margarito Teves said.

“The financial turmoil initially affected the US and Europe. In Asia, it will probably take place next year…There’s a time lag in terms of the impact of a global economic slowdown. The time lag will affect Asia, by next year, more than this year,” Teves said.

“This can be in the form of effects in the real economy such as slowdown in the export sector, slowdown in business and economic activity,” he said in an interview with reporters in Malacañang late Friday after President Macapagal-Arroyo signed into law the Credit Information Systems Act.

Teves said Asian countries historically don’t plunge into a recession, unlike the United States. A recession occurs when an economy suffers two consecutive quarters of negative growth.

Asked how the government would address this, Teves said: “A combination of accelerated implementation of infrastructure programs, making sure this time this infrastructure spending is done in a larger way during the first semester of the year to take advantage of the good weather, continued investment in food, agriculture.”

Teves said the length of the slowdown would depend on how long the United States and European economies recover, and how quickly Asia and the Association of Southeast Asian Nations (ASEAN) implement financial reforms.

Citing forecasts by analysts, Teves said the US and Europe and the rest of the world would recover from the crunch by the second half of next year.

The US and Europe have mounted costly bailouts to save their beleaguered financial systems, but these have failed to ease fears in the global markets. Stocks fell sharply in Europe and Asia last week.

Last week, the Philippine Stock Exchange Index (PSEi) fell 12.3 percent, its biggest single-day decline since 1987 while the peso weakened to a 22-month low of P49.35 to the dollar, as world markets felt the impact of the financial meltdown in the US.

Last month, the ASEAN and its three dialogue partners – China, Japan, and South Korea — agreed to expand the scope of a $84-billion currency swap facility to assist financial institutions that could suffer from liquidity problems.

The President has also endorsed a P100-billion fund to finance the upgrade of the country’s infrastructure, such as roads and bridges, to generate jobs and pump-prime the economy.

During the signing of the law, the President asked senators and congressmen to legislate measures that would strengthen the Philippine Stock Exchange against the “global upheaval.”

She specifically mentioned proposals to extend for another year the documentary stamp exemption for shares traded on the PSE, and to reduce by half the stock transaction tax to make the exchange globally competitive.

“We urge Congress to look closely at their suggestions that require legislation,” Arroyo said in her speech.

Senator Edgardo Angara, chairman of the Senate committee on banks, welcomed the President’s endorsement of the two proposed measures, saying these would “stimulate the stock market.”

“I think these two are good stimuli to perk up the stock market. Maybe we can use this as an additional stimulant. Because there is now slowly a momentum for the rise of the stock market,” he told reporters.

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Written by joelguinto

SatUTC2008-11-01T14:21:41+00:00UTC11bUTCSat, 01 Nov 2008 14:21:41 +0000 22, 2006 at 12:45 pm11

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