MANILA, NOVEMBER 3, 2008 (STAR) By Marvin Sy - The larger impact of the global economic slowdown will be felt by the country next year, according to a senior economic manager of the President.

While it has been acknowledged that the Philippines has not been too hard hit by the global financial crisis, Finance Secretary Margarito Teves said that the impact on the country would be greater in 2009 than it was this year.

Interviewed at Malacañang, Teves explained that there is a time lag in terms of the impact of the global economic slowdown and this would mean that the Philippines and the rest of Asia would feel the fuller effects next year.

“The financial turmoil initially affected the United States and Europe. In Asia, it will probably take place more 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.

According to Teves, the impact of the global crisis on the Philippines would be on the real economy as expectations would be that there will be a slowdown in business and economic activity. He specifically cited the export sector as the one to be affected greatly.

As demand for goods has slowed in the major markets because of their weakening economies, this has affected the manufacturing sector, particularly those in the emerging markets where exports play a significant part in economic growth.

“I used the word slowdown because usually Asia doesn’t suffer a recession,” Teves emphasized.

The technical definition of a recession is two successive quarters of negative growth.

Teves said that the duration of the slowdown would depend on how quickly the US and European economies recover from the financial crisis.

He added that the impact on Asia could also go by faster based on some positive trends that are taking place such as the reduction of interest rates in the US, Europe and China. “For all you know the effects might be faster,” Teves said.

Teves cited forecasts indicating that a recovery could be seen by the second half of 2009 throughout the world.

“How quickly it is depends on the kind of measures that are put and how effective they are in the US and Europe and how quickly we’re able to put in our reforms in Asia and ASEAN,” he said.

On the part of the Philippine government, Teves said that measures are being taken to mitigate the adverse effects of the slowdown on the economy.

“It’s a combination of accelerated implementation of infrastructure programs, making sure this time that infrastructure spending is done more in a larger way during the first semester of the year to take advantage of the good weather,” Teves said.

He added that investments in food and agriculture must also continue and that Congress should pass the remaining economic reform measures.

The government is pushing for the rationalization of fiscal incentives and sin taxes.

Next year, the law reducing the corporate income tax would also take effect so this should also help the businesses in coping with the slowdown.

BSP hails creation of credit bureau By Des Ferriols Monday, November 3, 2008

The Bangko Sentral ng Pilipinas (BSP) said the enactment of the Credit Information System Act (CISA) could not have come at a better time and would give a boost to the credit market during this time of uncertainty and confidence crisis.

The BSP was supposed to be the lead agency that would own the majority of the Central Credit Information Corp. created by the law, but as approved, the corporation would be chaired by the Securities and Exchange Commission (SEC) instead.

The difference in the actual and the proposed ownership structure, however, would not make a difference on the effectiveness on the CCIC, BSP Governor Amando Tetangco Jr. said.

Under the CISA which was signed into law last week, the CCIC will be set up with 60-percent government ownership and chaired by the chairman of the SEC.

“While ownership structure is not as originally crafted, it is believed that the compulsion for data submission would still significantly address the current lack of comprehensiveness and credibility of credit-related information,” Tetangco said.

Under the law, the CIC has the mandate to receive and consolidate basic credit data and to act as a central registry of credit information. It will provide access to reliable standardized information on the credit history and financial condition of borrowers.

With the National Government owing 60 percent of the corporation, the remaining 40 percent is to be owned and held by qualified investors such as industry associations of banks, quasi-banks and other credit-related associations.

The government has made a commitment to provide P75 million from the budget representing its equity share and P50 million would be subscribed and paid up by qualified investors.

After almost four years of sorting through legal impediments to the creation of a separate credit information bureau, CISA was finally enacted, amending secrecy laws in order to compel banks to centralize credit information.

In the beginning banks resisted the initiative until they were assured that there would be little risk that the information exchange would give their competitors access to their client information.

The Bank Secrecy Law has been the major impediment for the creation of the bureau that was intended to function as a central database of borrower information to allow banks to assess the credit-worthiness of borrowers.

Once established, the credit information bureau was supposed to allow banks to determine whether they were dealing with a reliable borrower or a high-risk one.

Chief News Editor: Sol Jose Vanzi

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