The financial crisis that first erupted with the U.S. sub prime mortgage collapse in August last year has deepened sharply and entered a tumultuous new phase last September. Its impact has been felt across the global financial system, including the emerging markets to an increasing extent.  According to the International Monetary Fund,” the economic cycle in emerging Asia started to turn early this year and more weakness is expected ahead in response to slowing demand from advanced economies and growing strains in regional financial markets”.

While importing industrial machinery, fuel and even basic staples, the Philippines now exports electronic components, apparel and cash crops as well as hundreds of thousands of domestic servants, skilled workers and professionals who provide cheap labor in countries around the world. However, all the country's major markets are either in recession or are slowing rapidly. The United States, which accounts for 17 percent of Philippine exports, is now in recession, as are Japan, Germany, Hong Kong and Singapore —all among the top 10 Philippine markets.

Philippine exports were falling before the world economy began to sharply turn down. They sank to a year-on-year growth rate of 1.2 percent in September—down from 6.6 percent in August. Electronics, which comprise 58 percent of all exports, fell by 2.7 percent in September on top of a contraction of 2.8 percent in August. The second-ranked export industry—apparel and clothing accessories—declined 11.6 percent in the first half of this year.

The Philippine electronic industry, the country’s largest export sector, warned that the industry would likely see a decline in 2009 due to the worldwide financial crisis. Consumers are cutting back on purchases of non-essentials and are focusing on basic goods. The tremendous drop in the demand for consumer electronics has caused manufacturing companies to layoff workers and shut down their operations. This decline in major Philippine exports will adversely affect the local cargo industry in 2009. Some airlines operating out of the Philippines have reduced their flight frequencies because of low cargo load. Competition for the diminished market has resulted in a price war.

The industry can only hope that exporters will expand their marketing efforts to other countries that have been immune to the global financial crisis to at least partially offset lost business from the recession-hit countries. It can also hope that the government will aggressively promote the country’s food exports to make up for the fall in electronics and apparel.

Source: Philippine Daily Inquirer