MANILA, NOVEMBER 19, 2008 (STAR) By Ted P. Torres - Ayala Corp. chairman and chief executive officer Jaime Augusto Zobel de Ayala II sees an economic slowdown next year but says the Philippines has the tools to weather the storm. The Philippines will likely experience an economic slowdown next year, but it has the tools to weather the storm, according to one of the country’s leading industrialists.

Ayala Corp. chairman and chief executive officer Jaime Augusto Zobel de Ayala II said the full impact of the global financial crisis on the Philippine economy would be felt next year.

“The impact on the Philippines will be a little delayed as compared to other Asian countries,” Zobel de Ayala said in a forum sponsored by the Rural Bankers Association of the Philippines (RBAP) at the Manila Hotel yesterday.

He said the strong economic performance last year and the upward flow of remittances from overseas Filipinos will serve as a buffer to the crisis.

“We will definitely have a slowdown which can lead to severe unemployment,” Zobel de Ayala said.

Recently the World Bank projected a lower four to 4.5 percent economic growth for the Philippines in 2008, dropping further to between three to 3.5 percent in 2009. The Asian Development Bank (ADB) also expects 2008 growth at a lower rate of four percent and less than four percent next year. Gross domestic product (GDP) growth stood at a 31-year high of 7.2 percent in 2007.

Zobel de Ayala, however, stressed that the Philippines also has the tools to deal with the global crisis.

He cited the domestic economy has remained stable, coming off a strong performance in 2007, and that it has already established trade relations with a large number of Asian nations.

Zobel de Ayala stressed it was critical that the domestic economy, especially through the private sector, must pick up the slack left by foreign outflows.

The Philippines likewise has learned its lessons from the 1997 Asian financial crisis, he added.

Credit was given to the Bangko Sentral ng Pilipinas (BSP) for creating a healthy investment atmosphere capable of withstanding external shocks, a strong banking and financial system, establishing safeguards, and imposing new policies that are internationally-accepted, including risk-weighting capital.

But Zobel de Ayala gave particular mention to the overseas Filipinos and their contribution to the economy.

Remittances from overseas Filipinos have been steadily growing by over 15 percent annually and it now accounts for over 10 percent of GDP. It is a widely accepted fact that remittance inflows fuel consumption and buoy the property sector.

Remittances flowing through the country’s banking system amounted to $14.45 billion in 2007 and is expected to surpass the $15-billion level this year. It is still expected to grow next year, although lower than 20 percent.

The Philippines is the world’s third largest remittance destination after Mexico and India. However, overseas Mexican are generally concentrated in North America which is expected to enter into a recession in the first quarter of 2009.

“Filipinos are spread out in different parts of the world, and they can be found in different professions,” the Ayala Corp. chief executive pointed out.

Thus, the impact on remittances due to the global crisis will not be as pronounced as in Mexico, India, Indonesia and China, he said.

As of end- September, a little over one million Filipinos were deployed overseas with and a significant number in high-paying jobs such as healthcare, accounting, tourism, business process outsourcing and information technology.

Looking forward, Zobel de Ayala said the private sector must be more involved in the agricultural sector, specifically in rice production.

“We have seen the negative impact of high rice prices in the recent months, not only on the economy but also on the poor and marginalized which make up a significant number of the population,” he said, adding that the Philippines is the largest importer of rice globally.

He challenged the rural banks to extend more loans to agriculture and rice production.

Chief News Editor: Sol Jose Vanzi

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