Philippines should brace for next global recession | Editorials
Soaring world oil prices are threatening to trigger a global recession, and the Philippines should move now to pre-empt any problems it might cause Filipinos. The International Energy Agency (IEA), according to various news reports, warned that the cost of oil imports for leading economies could reach $1.5 trillion, which might be large enough to send the world back into recession. So far this year, world crude prices have risen 15 percent, and there seems to be no relief in sight.
In a Financial Times report, IEA chief economist Fatih Birol was quoted as saying, “The current price levels are on average higher than the awful year of 2008 [when oil hit a record high of $147 a barrel], and as such have the capacity to tip the global economy back into recession.” CNN reported the same story, in which the economist added that the global recessions in past decades have each been preceded by a spike in world oil prices, similar to what is being seen now.
The Philippines, of course, is no stranger to high oil prices. Debates about the taxes imposed on oil and regulating pump prices are raging, even as transport groups and others threaten mass action against the lack of government initiatives to address the issue. So far, the Aquino government has resisted pressure to lift or suspend taxes imposed on fuels despite mounting public pressure.
The government, however, has yet to announce concrete alternative measures that will blunt the worsening impact of sky-high oil prices on the general public. The Department of Energy (DOE) and other public officials have already confessed to their impotence in reining in fuel prices and surrendered completely to market forces. Hopefully, economic managers and other policymakers will not give up so easily if skyrocketing oil prices plunge the world into another recession.
More attention on the economy
Like the rest of the world, the Philippines is heavily dependent on oil, an imported commodity. In 2010, the country’s oil imports were valued at about $9.6 billion. That amount is expected to reach nearly $12.5 billion this year and is forecast to breach $14 billion in 2013. More money spent on oil could mean less money for consumption and investments – both of which are critical to grow the economy.
As it is, the Philippines should be increasing public investments, particularly in basic services and poverty-alleviation programs. Even the World Bank has urged the Aquino government to pay more attention to the economy. But rising fuel costs may compete for funds with so many other government priorities needed to expand the economy.
Besides the problems with costlier pump prices, the Philippines will face several other issues if the IEA prediction materializes. For one, trade and investments will likely slow down if the world plunges into another recession. If the wealthiest countries, including Japan and the US, are having more economic problems, where else should the Philippine look to for foreign direct investments and for buyers of its exports?
Also, the Philippines may not be able to isolate itself from the economic fallout from the developed countries. The most dangerous consequences are those that affect the remittances of overseas Filipino workers (OFWs). The monies that they send home to their families have kept the Philippine economy afloat – so far. But a new global recession might dampen the demand for OFWs. Some might even face layoffs. And those who retain their jobs might find it increasingly difficult to sustain the amounts that they regularly remit, if the economies in the countries where they work also suffer.
We hope that a global crisis will be averted somehow. But hope alone does not make for good public policy. Philippine leaders should start planning for all the likely scenarios. Preparedness may not allow the Philippines to escape the effects of a global recession, but anticipating the likely problems might help the country cope better with a crisis, if it happens.
Philippines should brace for next global recession
Originally Posted by muchacha00
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