Nathan Andrada’s Blog

Many Filipinos from abroad are coming home this December not because of the holidays but because they have been laid off from their work. Just recently, dozens of Filipino overseas workers were forced to pack their bags and left for home from Taiwan and Macau. In the previous month I was told by my mother that many people from our rural town came back home from China because the call center that they worked for there went out of business.

The ongoing economic and financial crisis has affected Filipino workers all over the world and this could mean peril for our economy. Their remittance dollars, which has been the lifeline of not only our overall economic health but also of our foreign reserve security, is seen to dramatically fall in the months to come. Technically, this will affect the strength of our currency which could trickle down to the competitiveness of our exported products and the national government’s ability to finance its external debt.

The effects on the lives of Filipino middle-class families, however, is much magnified. Income from our overseas workers are used to build homes and pay for children’s education, just to mention a few. When this dries up, it would be least to say catastrophic. Many of these workers are still ridden with debt brought by the high processing fees of their previous stint abroad. The lack of decent-paying work opportunities here in the Philippines is another reason why these workers dread the idea of even coming back home.

Foreign countries, where our OFWs (Overseas Filipino Workers) have been working, have their own problems dealing with the crisis and usually their initial response is protectionism. With this economic climate, their government and private sector are being pressed hard by their own constituents to prioritize locals over international workers like Filipinos in terms of jobs.

Our government, through the agencies that handle the welfare of our overseas workers, has to be ready for more reverse exodus of OFWs by allotting enough funds aimed at providing financial assistance to them.

It was the perfect weekend. Most Filipino families grabbed the opportunity to spend during the long weekend leading to Bonifacio Day. Although I do not think the government is tracking sales made by major retail stores in any given period of time, it was obvious by the volume of people who flocked the malls in the weekend, that it was a huge day for the Philippine retail industry.

Retail giants like SM, Robinsons, and Landmark made a big killing out of people’s high disposable income in the weekend since the latest payout coincided with the mandated 13th month pay. My wife and I, like many others, stormed the malls to buy items from shoes to tickets to the movie Twighlight. It was like the Filipino version of the Black Friday shopping spree in the US during weekend Thanksgiving weekend.

For the retail industry, it is a good opportunity to bolster their bottom line since the ongoing economic crisis is definitely going to change people’s spending patterns for a while. Because as the crisis grips the economy further, they may have to get used to giving more than 20 percent off the tag just to get people to shop.

As I rode the bus along Ayala Avenue, I read the headline on the ticker tape screen in Insular Life Building saying the country’s property sector will endure the economic crisis. I tried to search on the Internet to see the full details of this news but I never found anything. Or maybe I am just not that good at searching.

But you see, I can not help but notice how many of the new high-rise residential condominiums built here in Manila especially in these last couple of years, are still unoccupied. Cement prices have also significantly dropped recently indicating slowdown in construction projects. Although the commercial space sector still continues to enjoy positive growth because of the foreign outsourcing companies, the residential property sector is becoming a huge question mark.

The property boom in the Philippines in the last few years saw property prices jump in astronomical levels. Buoyed up by speculative and foreign buying, property prices went up so high that many Filipino middle class families could no longer afford to own a home in the greater urban areas. Then the global financial and economic crisis struck out of nowhere, affecting most property sectors in most economies in Europe, the Middle East, and the Asia-Pacific region.

Now, the paradigm has shifted and property owners are forced to significantly lower price valuations in order to attract buyers. In many cases, these developers, which made their projects through loans from banks, will find themselves in a bind since they will be unable to meet their projected sales. The economic crisis has caused a decline in appetite for home purchases and for those who are willing, the credit crunch has made it difficult for people to obtain loans to finance their mortgages.

I am not sure how the property sector will survive the crisis without falling hard and eventually deal with consolidation. With tremendous supply of space and demand quickly drying up, the property sector here in the Philippines is going to need a massive shot in the arm in order to avoid an impending collapse.

Surely, the Philippine economy did beat analysts’ expectations but other than that, nothing is worth rejoicing about a 4.6 percent GDP growth. I am still very much amazed of how this administration continues to allay public concern about the risks of global economic meltdown. Even the Press Secretary still regards this figure as ‘positive.’ Clearly, our leaders in Malacanang and Congress have been behind the curve all this time since the crisis began.

One thing is for sure is that we are currently in an economic slowdown and it is disconcerting that the government has not openly discussed the solutions nor prepared us of what to expect next year. When our neighbors are already talking about stimulus plans to cushion the possible hard fall that is expected because of the economic and financial turmoil, our leaders in Congress are busy killing an impeachment complaint against the President and preoccupied with their investigations of the ‘Euro generals’ scam and former Agriculture undersecretary. Nothing wrong with these actions but their priorities are clearly skewed.

The jury is still out whether National Economic Planning Secretary Ralph Recto, who is a clear political appointee to the post, can steer the economy through an expected tumultuous 2009. The President’s economic team, are definitely going to have their hands full next year. Secretary Tevez of the Finance Department commands great respect from both the administration and the opposition in Congress and his experience is a huge plus. I am deeply concerned, however, with the liberal-minded Budget Secretary Rolando Andaya because of his inclination for high spending. For some reason, our filibuster-proof House of Representatives was more than willing to make sure government is paced for another record-breaking spending next year.

I surfed through CNBC and Bloomberg last night and Treasury Secretary Hank Paulson was once again talking to the press. I do not have the luxury to watch these channels lately unlike in the previous weeks since my wife’s work schedule has now changed back to regular day shift. In other words, she gets absolute control of prime time television.

Nevertheless, the morning news reported what the press conference was all about. Surprise, surprise? Not quite. The Federal government has unveiled another multi-billion bailout package amounting to US$800 billion this time. If you recall, Congress approved last month a US$700 billion rescue plan that was supposed to ease the credit markets for businesses and consumers to gain access to credit. However, half of that amount has already been allocated to the financial sector  but the credit markets has yet to fully thaw leading Federal authorities to realize that their plan did not materialize the way they were hoping for.

This new stimulus plan, on the other hand, claims to directly benefit consumers and businesses. Unlike in the first stimulus plan where the government infused funds directly into ailing banking institutions, the new package will buy troubled assets of institutions that are involved in providing student loans, credit cards, and auto loans. Likewise, it will also infuse massive amounts of money to improve liquidity of mortgage lenders Fannie Mae, Freddie Mac, and Ginnie Mae so that they will be able to service Americans who are planning to own a home but could not gain access to financing because of the credit crunch.

Government wants to make sure that struggling homeowners, who have seen their home equity dropped dramatically since the housing bubble burst, will have a better chance to sell their homes because potential buyers now have access to financing. This is also a welcome news to automakers who are hoping that the stimulus would make it easier for consumers to get car loans, something that they have been desperately wanting since this crisis began as flagging sales has threatened to put them out of business.