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Philippine Daily Inquirer

MANILA, Philippines – The Philippines’ foreign debt burden fell by $1.3 billion in the third quarter to $53.5 billion from $54.8 billion in the previous quarter, as local borrowers reduced their foreign currency exposure in view of the peso’s weakening against the dollar.

The country’s outstanding external debt as of end September was also lower than the $54.4 billion recorded in the same quarter last year, a Bangko Sentral ng Pilipinas report showed.

About 72 percent of the external debt stock represented public sector borrowings while the rest was contracted by the private sector.

External debt refers to all types of borrowings of Philippine residents from non-residents that were approved and/or registered by the Philippine central bank.

“The decline in the external debt stock was accompanied by a continuing improvement in the country’s external debt related ratios,” BSP Governor Amando M. Tetangco Jr. said in a press statement.

The substantial reduction in the debt stock during the third quarter was attributed by the BSP to the overall net principal repayments made by both the public and private sectors that summed up to $1.3 billion. This amount included a $511-million prepayment of debt made by state-owned National Power Corp.

In the last two years, local borrowers took advantage of the peso’s uptrend against the dollar to prepay debts. But even with the local currency losing steam, the data suggested that some would like to cut down their exposure to hedge against the possibility of further peso depreciation.

A weaker peso increases the peso equivalent of debts denominated in dollars. It likewise jacks up the cost of servicing foreign currency-denominated debt.

Classified by currency, dollar-denominated accounts accounted for more than half of the debt stock (53 percent) while Japanese yen-denominated accounts accounted for 26.8 percent. Multi-currency loans from the Asian Development Bank and the World Bank accounted for 9.3 percent, and the rest of the accounts, which were in 18 other currencies, accounted for 10.9 percent.

Year-on-year, the country’s debt stock declined by $945 million, also as a result of net principal repayments, which reached $3.3 billion.

The increase in the debt stock compared to a year ago was tempered by the following:

Upward foreign exchange revaluation ($1.5 billion), mainly reflecting the increase in the dollar equivalent of loans denominated in Japanese yen, which has strengthened vis-a-vis the US dollar.

Increased holdings of Philippine debt papers by non-residents ($442 million).

Upward audit adjustments ($404 million).

Prepayments of external debt accounts during the 12-month period ending September amounted to $1.8 billion. A big portion of the prepayment was accounted for by Napocor and commercial banks for their tier 2 capital issues.

The country’s external debt as a ratio of gross domestic product improved to 31.8 percent at end-September from 40.2 percent a year ago.

“Since 2002, the ratio has followed a downward trend, indicating a sustained improvement in the country’s capacity to service its maturing foreign obligations,” the BSP said.

The external debt service ratio–or the percentage of total principal and interest payments to total exports of goods and receipts from services and income (which include remittances of overseas Filipino workers)–was estimated at 10.1 percent in January to September 2008, lower than the 10.5 percent in the same period last year.

“The country’s debt service ratio has remained well below the 20 to 25 percent international benchmark, indicating that the country has sufficient foreign exchange earnings to service maturing principal and interest payments during the current period,” the BSP said.

The maturity profile of the country’s external debt remained predominantly medium to long term, which accounted for 84.5 percent of the total.

Doris Dumlao
Philippine Daily Inquirer

The exposure of Philippine commercial banks to the real estate sector expanded in the third quarter despite the worsening US property downturn that triggered a global financial turmoil, the central bank reported.

It reached P223.9 billion at end-September, up 5.1 percent from a quarter earlier and 16.4 percent from a year earlier, said the central bank, Bangko Sentral ng Pilipinas (BSP).

The additional exposure came in the form of P7.7 billion worth of new loans and P3.2 billion in investments in securities issued by real estate companies, the BSP report said.

Real estate loans increased 3.7 percent as of end-September from the end-June level. Loans extended for the construction and development of real estate properties for commercial purposes accounted for 71 percent while the remainder was granted for the acquisition, construction and improvement of residential units that will be occupied by the borrowing household.

In terms of asset quality, nonperforming real estate loans rose 5.2 percent to P16 billion from the previous quarter. This brought the ratio of non-performing real estate loans to total real estate loans to 7.4 percent from the previous quarter’s 7.3 percent.

Investments in debt securities issued by and in equity securities of real estate companies amounted to P8.9 billion as of end-September, up from P5.7 billion a quarter ago and P6 billion a year ago.

Earlier this year, the BSP approved a liberalization of regulations on real estate for the first time since the Asian crisis to pump in more money into two of the government’s priority sectors—infrastructure and housing.

The BSP agreed to adopt a single-industry limit of 20 percent on real estate loans as a share of total loans. The 20-percent cap was slapped on the banking sector’s exposure to the volatile property sector by the BSP shortly before the Asian currency crisis erupted, but a leeway to increase the exposure to 30 percent was incorporated, including loans not exceeding P3.5 million to finance the purchase or improvement of residential units.

Under the new rules, the 20 percent cap was kept but the BSP redefined real estate loans to carve out certain items such as those lent for infrastructure. Likewise excluded from the computation of real estate loan exposure was residential lending.

Tonette Orejas
Central Luzon Desk

STA. RITA, Pampanga – A day after Christmas, 86-year-old Benjamin Mariano went to the Rural Bank of Sta. Rita in Barangay San Vicente here, wanting to get a word from the owner whose house sits beside the bank.

Aided by his bamboo cane, Mariano stood at the bank’s façade for two hours starting 9 a.m. on Friday. Coming and waiting have become a sort of a daily rite for this old man since Dec. 19 when the bank declared a holiday.

He said he has memorized the bank’s public announcement, which was printed in English and Kapampangan on a tarpaulin that was almost as big as the door in the building.

Trust

“I trust Turing but what will happen to my money?” said Mariano, a World War II veteran.

He has deposited all his pension funds from the Philippine government and retirement money from the defunct Philippine Constabulary-Integrated National Police in a savings account at the Rural Bank of Sta. Rita.

“All my savings are there. I want to know directly from Turing what’s happening. Are they closing for good or what?” Mariano said.

Turing is Dr. Victoriano de Castro, the bank’s president. The house’s caretaker does not know where De Castro went.

The Inquirer has been trying to contact De Castro since last week to no avail.

Raymund Laki, president of the Federation of Rural Banks in Pampanga, said De Castro has not left the country.

Aurora Dizon, 63, is in the same fix. A savings account in the bank holds her capital for vegetable trading and money lending.

“I hope I could get my money. It’s the only thing I roll,” Dizon said.

On Friday, she went around collecting the debt payments of vendors holding stalls at the temporary site of the town’s public market. She said she was unsure if she could still go on with her business with the way things have turned out at the bank.

Ana Marie Magtangop also dropped in on Friday to check the latest information. That’s an errand she did for her friend Servitas Agcaoili, a nurse in Jeddah, Saudi Arabia. Agcaoili has maintained a time deposit at the bank for her children.

“She’s worried because she plans to use that money for a small business when she returns from work abroad,” Magtangop said.

The Rural Bank of Bacolor, located in the City of San Fernando, is in the same situation.

Its president, Mary Anne Naguit, a daughter of De Castro, could not be reached for comment.

The bank’s announcement, posted also on the establishment’s façade, is the same as that of the Rural Bank of Sta. Rita’s. The Bacolor bank was established in 1963. The Sta. Rita bank is more than 50 years old.

“[On] Dec. 19, 2008, the bank was forced to go on voluntary bank holiday due to the unusual heavy withdrawals it experienced as a result of recent news about several rural banks which were closed by the [Bangko Sentral ng Pilipinas] around the country,” the announcement read.

On the same day, the BSP had placed four more banks under the receivership of the Philippine Deposit Insurance Corp.

In a report posted on its website on Dec. 22, the BSP confirmed that the Nation Bank in Bacolod City, Rural Bank of DARBCI in General Santos City, Bicol Development Bank in Legazpi City, and the Rural Bank of Carmen in Carmen, Cebu, were found to have insufficient assets to cover their liabilities, suffered from severe liquidity problems, and performed unsafe and unsound banking practices.

According to the BSP, the receivership “paved the way for the PDIC to take over the banks’ assets to protect the interest of their depositors and to start processing deposit insurance claims.”

The BSP also put under PDIC receivership the following banks since Dec. 9: Rural Bank of Parañaque, Rural Bank of Bais in Negros Oriental, Pilipino Rural Bank in Cebu, Rural Bank of San Jose in Batangas, Bank of East Asia in Cebu, First Interstate Bank in Tacloban, Philippine Countryside Rural Bank in Cebu, Dynamic Bank (Rural Bank of Calatagan) in Batangas, and San Pablo City Development Bank in Laguna.

The Sta. Rita and Bacolor banks said while they deemed it unfortunate to close during the Christmas season, they have “no choice but to go on holiday to prevent a total depletion of its funds through unabated panic withdrawals.”

Confidence

The two banks also expressed confidence that the assets “shall become the basis” of BSP in determining if they could avail of a loan.

They said they were coordinating with the Monetary Board “to fully safeguard the interest of all its depositors and valued clients.”

The banks did not announce dates when they would resume operations, saying only they would do that “as soon as possible under the supervision of the Bangko Sentral [ng Pilipinas].”

Laki said the two banks have not yet been placed under PDIC receivership. The FRBP has 28 members and “all these are generally stable,” Laki said.

“Their capital is well beyond or within the 10 percent banking requirement,” he said.

Des Ferriols
Philippine Star

The national inflation rate slid back to single-digit levels earlier than expected, dropping to 9.9 percent in November from 11.2 percent in October as prices of basic commodities fell in the wake of weakening oil prices.

“This is a pleasant surprise,” said central bank governor Amando Tetangco, adding that inflation was dropping faster than expected since the Bangko Sentral ng Pilipinas (BSP) had not projected it to drop back to single-digit level until December.

“This gives us greater monetary policy space,” Tetangco said, fanning fresh hopes that the BSP would cut its policy rates when the Monetary Board conducts its last policy-setting meeting this year on Dec. 18.

The BSP has so far resisted pressure to cut its policy rates which the MB last touched when it actually hiked the rates by 25 basis points, raising overnight borrowing or reverse repurchase rate to six percent while the overnight lending or repurchase rate would go up to eight percent.

Faced with the effects of the credit crunch in the US, the BSP has instead made more moves to release liquidity back into the system by reducing the reserve requirements of banks by two percentage points and opening a dollar repurchase facility.

At its most recent policy meeting, the MB decided to leave its policy rates unchanged, indicating that rising core inflation could rule out any rate cut for the remainder of the year.

The November inflation data showed as much, indicating a steady decline in headline inflation but an equally steady build up in core inflation.

The National Statistics Office (NSO) revealed that the national year-on-year headline inflation rate further slowed down to 9.9 percent in November from 11.2 percent in October.

The NSO reported that the deceleration resulted from the continued deceleration in the annual rates of the heavily weighted food, beverages and tobacco (FBT) index together with prices of fuel, light and water (FLW) and services.

Inflation a year ago was 3.2 percent and according to the NSO, the November inflation brought the year-to-date average inflation to 9.4 percent.

However, the NSO report showed that core inflation was still going up, topping at 7.9 percent in November from 7.8 percent in October. The core inflation excluded volatile items such as food and energy prices.

The core inflation is seen as an indicator of domestic demand and despite the decline in the headline inflation, the steady increase in core inflation indicated that there were still upside risks to inflation.

Malacañang attributed the continued decline in the inflation rate to President Arroyo’s management of the economy.

– With Marvin Sy

CNET News

With the calendar winding down, the hours get hardest when Andy Erickson and his wife, Andrea, are forced to take out their checkbook and do the math.

“We see the finish line in December before we have to dive into personal savings,” says the unemployed 39-year-old father of three. “It can turn into a tense talk between us for a couple of hours.”

For the last 15 years, Erickson had steady work as an IT consultant, most recently at Lucrum in Cincinnati, Ohio. But like a lot of people, he became yet another statistic when his company laid him off–on Halloween, no less–because of the slumping economy.

With belt-tightening now the order of the day, the IT industry so far has lost more than 140,000 jobs this year, according to Challenger Gray & Christmas. That’s more than the total for all of 2007–and does not even include the nearly 20,000 people who have received pink slips since the start of the fourth quarter.

Old IT hands who prefer to see the glass as half full can point out that the information technology business has generally fared better than other sectors of the economy. Unlike 2001 and 2002, when the economy was buffeted by the twin blows caused by the September 11 terrorist attacks and the dot-com bust, this time around high tech is not suffering drastic declines–at least not yet.

In fact, Forrester recently revised its 2008 technology spending growth prediction to 5.4 percent, up from 3.4 percent. The slowdown that Forrester expected would kill tech spending in the first half never came. Of course, this is just a snapshot in time. The effects of a mortgage crisis that turned into a financial crisis which, in turn, transmogrified into a global economic crisis are still playing out.

All of that has turned life upside down for families like the Ericksons.

“Most days we try not think about it,” he said, adding that “it can be stressful at times.”

That stress extends across the IT world spectrum, ranging from networking to the telecommunications sector to computer manufacturing. Recent layoffs announced by Sun Microsystems, Applied Materials, Adobe Systems, and National Semiconductor only add to the worry about what waits over the horizon.

Call it an exercise in groupthink or simply a survival mode reflex, but hunkering down certainly appears to be the common theme. While the causes of this recession may be different, IT professionals are no strangers to uncertainty and they remember the drill. In practice, this translates into budget cuts and freezes on travel, hiring, and general spending. It also involves delayed implementation of previously planned projects.

“We’re still in a state of overreaction. It probably will stay that way for another couple months,” said Chad Moore, founder and president of Xonicwave, an IT consultancy in San Diego. He does not expect a thaw until the January-to-March time frame at the earliest. Moore says that his clients are grappling with a big unknown and that everybody’s gotten too scared to make a move.

“Probably a good 25 percent (of our clients) are still not accepting of things,” he said. “Another 50 percent are simply shell-shocked, asking what the hell to do and how to deal with it. The other 25 percent is slowly migrating to the fact that not only do we have to weather the storm, but we have to come out of it with both guns blazing.”

There’s the rub. Until there’s a change in the prevailing psychology, IT unemployment rates will climb. As Moore describes it, the reaction to the recent financial meltdown still interferes with the ability of companies to craft a post-crash IT strategy.

“You have to make payroll, but at the end of the day you have to ask yourselves ‘how are you separating yourselves from the competition?’” he said.

It’s not an academic question either. Pressured by the recession, crisis management is the order of the day. Companies are being forced to re-evaluate how best to evolve into leaner enterprises that are better fit for survival.

“There’s a lot of trepidation about what the future might hold,” says Warren Arbogast, an IT consultant who specializes in working with higher education. “In conversations, the word ‘terrified’ comes up a lot on a personal level.”

“People are trying to avoid (cutting) things that are core to their business and that might directly affect customers or sales,” he said. “They’re also trying not to touch security. Other than that, it’s fair game.”

One bright spot amid the prevailing gloom is that organizations are more open to new ideas and new ways of doing things, according to Arbogast, who runs Boulder Management Group, in Boulder, Colo.

“When times are tight, I’m seeing business actually uptick…with people saying that now might be the right time to have someone come in and help them envision a different future,” he said.

Contract work: Take what you can get?

Until then, even IT professionals with extensive resumes are pressed to find replacement jobs that are commensurate with their old positions. Take Jim Martin, who was laid off by Woven Systems in September.

The 39-year-old network architect and systems engineer had been working on the design of 10-Gigabit Ethernet switching technology for server consolidation and storage networking. The company’s B round of financing started to run low just as the venture capital market dried up. Then Intel and AMD decided not to include 10-Gigabit Ethernet on their next generation of server motherboards. It was a perfect storm and it forced Woven to hand out pink slips.

Martin’s family wants him to return to the East Coast, but he prefers to remain in the San Francisco Bay Area, where he has lived for the last 15 years. He’s giving it a shot, but even a long and accomplished resume is no longer a guarantee of finding a job–not at this point in the business cycle.

“I’ve had a lot of people interested,” he said. “But what I’ve found is that they’re taking me to their companies and it’s, ‘Hey, this is a great person. He should come join us.’ But then their job openings freeze while everybody sort of panics at this stage of the game.”

On the flip side, many companies have budgeted projects that need to get completed. And if full-timers are losing their jobs, that opens the door for part-timers like Martin, who has made do by signing on for contract work.

“It’s not very stimulating work, but money is money when times are tough,” he says. “What worries me is that, while I’m lucky enough to have a pretty strong background, the people who are younger and not quite as experienced won’t have the same opportunity.”

Needless to say, the economic crisis is testing businesses and individuals like no time since the 1930s. Fear feeds on fear because nobody has any idea when the miasma will lift. The pressure cooker atmosphere was punctuated by a Silicon Valley tragedy last month, when an engineer fired by the semiconductor firm Siport returned to the company’s Santa Clara, Calif., offices with a weapon and shot three colleagues to death.

That was the exception. If the can-do history of the IT industry teaches one lesson to people currently getting the short end of the stick, it’s that the bad times never last forever.

“It’s cyclical,” says Andy Erickson. “It’s just a matter of waiting it out. I just don’t have whole lot of faith in our government, but maybe we’ll come out of this stronger as a country.”

In the meantime, Erickson says, he and his family continue to hope for the best as they prepare for the worst.

“The kids know we just can’t go out and buy gum or whatever,” he says, “They’ll just have to suck it up and be part of the team.”

Joel Guinto
INQUIRER.net

MANILA, Philippines — President Gloria Macapagal-Arroyo has unveiled a “payback package” for overseas Filipino workers (OFW) who have been retrenched as a result of the global financial crisis, even as she belittled the layoffs as a “trickle” of the entire OFW population.

On Friday, Arroyo distributed PhilHealth insurance, certificates for skills training, and referral letters for alternative employment to 102 of more than 1,000 recently laid off OFWs from Taiwan, at the Rizal Hall in Malacañang.

“We will implement programs to show our gratitude for our expatriate Filipino workers, who are forced to return home because the country where they are working in is hit by the economic crisis. The DoLE [Department of Labor and Employment] and the OWWA [Overseas Workers Welfare Administration] will lead the government’s payback programs for expatriate Filipinos,” she said.

“Even if it is only a trickle of our workforce that is coming back, the government will not sit idly and do nothing for our modern day heroes in this time of great economic uncertainty. We assure you of full and unequivocal support,” she said.

The “payback package” includes:

• Setting up a P250-million livelihood support fund, which Arroyo had announced in October;
• Cutting red tape so that OFWs could access the P250-million fund easily;
• Identifying business opportunities;
• Identifying employment opportunities here and abroad;
• Skills training to avail of in-demand jobs in other parts of the world;
• Setting up of DoLE and OWWA desks in every province to match OFWs’ skills with available jobs;
• Setting up of an online resource for job vacancies, and;
• Holding a “marketing blitz,” through the OWWA, for OFWs.

Erica Ogg
cnet News

Analysts are readjusting their expectations for the PC industry next year, and it’s not looking good.

On Wednesday, IDC released an updated forecast for the number of PCs expected to be shipped next year. In 2009, PC shipments will rise just 3.8 percent worldwide, according to the report.

That’s a drastic cut from the 13.7 percent growth IDC had predicted for 2009 earlier this year. The hardest hit areas will be the emerging PC markets of Latin America, Central Europe, the Middle East, and Africa due to falling commodity prices and the worldwide credit crunch.

But the U.S. PC market is expected to fare even worse. Next year will bring a decline in shipments of PCs by 3 percent compared to this year. However, IDC says that there will be “low single-digit” increases in the years following.

The key factors affecting PC shipments are the rate of portable PC adoption, falling prices, and the PC upgrade cycle.

“Low-cost mini notebooks will help volume, but pressure margins and revenues,” said Lore Loverde, director of IDC’s Worldwide Quarterly PC Tracker. “Consumer and commercial segments will be much more conservative in their purchases over the coming year or two, and while low prices will remain essential, they will not drive volumes as they did in the past few years.”

Alexander Villafania
INQUIRER.net

MANDALUYONG CITY, Philippines – Philippine-based outsourcing giants are now feeling effects of the US recession with some companies seeing a slowdown in demand for services, particularly on medical transcription and animation, industry executives said.

But some are reporting a surge in demand in contact center services, back office operations, software development and gaming.

Nevertheless, the local outsourcing firms are approaching 2009 with “cautious optimism,” according to Philippine Software Industry Association (PSIA) President Beng Coronel.

Animation Council of the Philippines (ACPI) President Grace Dimaranan said some of their projects, which are mostly animation series, were postponed or on hold amid the US recession.

Similarly, Medical Transcription Industry Association of the Philippines (MTIAPI) President Myla Reyes said some of their services, mostly serving the US market, have slowed down.

The Philippine outsourcing industry is composed of contact center operators, business process outsourcing, animation, game development and transcription.

The Philippine outsourcing industry is expecting a 35 percent overall growth that is worth $12 billion to $13 billion by 2010.

But given the US recession, Business Process Association of the Philippines (BPAP) CEO Oscar Sañez said they might adjust these targets but assured that growth would remain in the double digits.

“We are not distracted by the US recession. Indeed there will be some effects but the recession situation is also an opportunity. With companies trying to streamline their operations outsourcing is a viable and cost effective solution,” Sañez said.

There are, however, concerns on US President-elect Barack Obama’s pronouncement to provide tax cuts for companies who will keep operations in the US.

Still, Philippine outsourcers are not threatened by Obama’s statements, saying there are no details yet as to how these tax cuts will be implemented.

Philippine contact centers, who are servicing mostly US clients, are still optimistic.

Contact Center Association of the Philippines (CCAP) Benedict Hernandez said tax cuts will not deter US companies from outsourcing if the need arises. Some companies would have to look into the viability of keeping operations in the US or having it outsourced to other countries.

“We’re at the forefront of providing the best solutions and we’re not afraid that US policies would affect services here,” Hernandez said.

Another concern of Philippine outsourcers is human resource or the lack of skilled workers ready for hiring. The rate of hiring is still low due to the specific requirements of the outsourcing industries.

The software industry reported that it is in need for 75,000 workers by 2010 but has only 21,000 so far. The transcription industry is in need of 32,000 but it only has 10,000 people hired. Animation, on the other end, is in need of 25,000 people but has 10,000 hired.

The contact center business, the biggest outsourcing industry, has 220,000 employees but is still in need of 350,000 people. The relatively new industry, game development, has about 300 to 500 people but also hopes to grow to 1,000 employees.

MTIAPI’s Reyes said English speaking skills remain a problem among applicants in the outsourcing business. Thus she said that fundamental education should be further developed if human resource demand is to be met.

The PSIA, CCAP and the MTIAPI are now working with the Technical Education and Skills Development Administration (TESDA) and the Commission on Higher Education (CHED) to integrate specific curriculums in colleges and universities.

Meanwhile, the Game Development Association of the Philippines (GDAP) and ACPI has been conducting school tours to promote creative and artistic development among students.

Sañez said that while the US is still the main target of the local outsourcing industry, the potential of providing services in Europe and some Asian countries is enticing some companies to build new clienteles outside the US.

The PSIA is already looking at Japan. GDAP has clients from Australia, Germany and France. MTIAPI is expanding to Canada and New Zealand.

Meanwhile, ACPI has clients in Italy France, the United Kingdom and New Zealand.

Sañez said that the outsourcing industry has to expand its product portfolio and its clientele beyond the US to partly augment the possible effects of the US recession.

“There will be challenges and requirements could be slightly different. This is an industry that is working very hard to achieve its goals,” Sañez said.

William French
Agence France-Presse

GENEVA, Switzerland — Illegal immigration is likely to rise as the economic crisis continues and governments must do more to effectively manage the flow of labor, the International Organization for Migration (IOM) said Tuesday.

“In times of financial crisis, a growth in irregular migration is obviously a significant possibility,” said Ryszard Cholewinski, co-editor of the IOM’s World Migration Report 2008.

By its very nature, illegal immigration is almost impossible to measure but the best estimates are that between 10-15 percent of the world’s roughly 200 million migrants are “irregular,” he told journalists.

Tens of thousands of people are already fleeing poverty in the developing world in the hope of a better life in the West, often risking violence, extortion and even death at the hands of smugglers and traffickers.

For example, the UN refugee agency estimates that more than 38,000 people, often Somalis and Ethiopians, crossed the Gulf of Aden from Somalia to Yemen in the first ten months of 2008, while over 600 people have been reported dead or missing.

The onus is on developed countries to develop an effective immigration policy that matches labor supply and demand while not stoking resentment or xenophobia in the domestic population, said Gervais Appave, a fellow co-editor of the IOM report.

Europe is home to the highest number of migrants of all global regions at 70.6 million people, the IOM report said.

Migrants come to Europe for a variety of reasons including its relative wealth vis-a-vis its southern and eastern neighbors, large numbers of humanitarian refugees who arrived in the 1980s and 1990s, and the emergence of organized trafficking and smuggling networks, the report said.

“The role of growing demand for migrant workers to fill gaps in local labor markets is also widely acknowledged” as demographic trends push the average age of Europe’s population ever higher, the report said.

Some EU member states have recently taken a tough line on immigration and right-wing populist parties focusing on the issue have scored well in recent elections in countries such as Italy and Austria.

Italian Interior Minister Roberto Maroni called last month for a two-year moratorium on accepting foreign workers from outside the EU, saying it would protect current immigrants amid the world economic crisis.

“With the economic crisis, we are concerned about protecting the most fragile people, and therefore people from outside the union who could lose their jobs,” he said.

But Appave warned against such a policy, saying immigration should not be reduced to a matter of states “opening and closing doors.”

“We need to manage mobility effectively… we spend too much time opening doors and closing them. What we should do is to have an open door that is sometimes kept ajar and sometimes open more widely,” he told journalists.

“This should not be a situation where migrants are scapegoated… it should be an opportunity to educate the public about the contribution migrants make to the societies in which they live,” he added.

Rob Lever
Agence France-Presse

WASHINGTON, United States — The United States officially joined the ranks of the recession-hit economies, but debate is still raging on how long and how deep the downturn will be.

The Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), the panel recognized as the official arbiter of business cycles, said it made the determination the recession began in December 2007.

Although a recession is generally defined as two consecutive quarters of declining activity, the panel has its own criteria for determining a downturn, including data on employment, income and industrial output.

Because of the lag time in officially declaring a recession, some analysts say the worst is generally over by the time the news becomes public.

But John Ogg, analyst at 24/7 Wall Street, said it may not be the case this time: “We still think more pain is on the way.”

That message was hammered home with a survey showing the US manufacturing sector sank to its lowest level of activity in November since 1982.

The Institute of Supply Management (ISM) said its manufacturing index slumped 2.7 points to 36.2 percent, far below the 50-percent level that separates expansion and contraction.

Analysts pointed out the overall economy will have trouble escaping deep recession with manufacturing so weak.

“The worsening credit crisis and deepening global slump have pushed the ISM index below the 41 figure that is consistent with past recessions,” said Sal Guatieri, economist at BMO Capital Markets.

“The fact that the index continues to decline points to more than your garden-variety downturn.”

Many analysts have been saying the recession has been raging for months.

“So far in 2008, employers have slashed 1.2 million jobs, and the bad news is expected to continue when we get employment data for November this Friday,” said Michael Fowlkes, analyst at Investor’s Observer.

“Recession fears have now become a reality, and the questions that remain are just how bad and for how long this recession will linger over us.”

Augustine Faucher at Moody’s Economy.com said his firm expects the downturn to last through the first half of 2009 and to be “the worst of the post-World War II era.”

“Even with a substantial stimulus package, unemployment is likely to peak close to 9.0 percent in early 2010,” he said.

According to official government data, the US economy contracted at a 0.2 percent pace in the fourth quarter of 2007 but grew 0.8 percent in the first quarter and 2.8 percent in the second quarter of 2008. It then contracted 0.5 percent in the third quarter, based on a provisional estimate.

But the gross domestic product (GDP) data may have been skewed by tax rebates that stimulated consumer spending, according to analysts.

A major factor in determining recession is employment, which has been declining since last December, the panel said. Other factors include monthly data on income, manufacturing and retail sales.

The NBER makes no forecast on how long a recession will last, but said that in the past they have run from six to 18 months. The panel said it has no definition of the term “depression.”

Federal Reserve chairman Ben Bernanke said meanwhile the current economic situation bears “no comparison” to the much deeper crisis of the 1930s Great Depression.

“I’ve written books about the Depression and been very interested in this since I was in graduate school, there’s no comparison,” Bernanke told an audience in Austin, Texas.

Bernanke said the situation in the 1930s represented “very difficult circumstances,” because “we didn’t have the social safety net that we have today.”

Brian Wesbury at First Trust Portfolios said there are signs the recession may end soon because of how it developed.

“This time around, the recession is not due to tight monetary policy, higher tax rates, or protectionism,” he said.

“It’s due to a sudden and sharp plunge in the velocity of money — what we have been calling ‘risk aversion hysteria’ — where the speed with which money moves its way through the economy slows down as both consumers and businesses decide they want to increase their cash holdings.”

Wesbury said indications that holiday shopping is better than expected “may be an early sign that the bearishness went way too far.”