Top businessmen see recession in 2009 (Layoffs, tight credit predicted)

Daxim Lucas
Philippine Daily Inquirer

MANILA, Philippines—From “bad” to “really bad.”

This is the emerging sentiment among the country’s most influential businessmen and CEOs regarding the economic environment next year, results of a survey released Tuesday by the Makati Business Club (MBC) showed.

A big majority of businessmen expect a recession in 2009, a more difficult credit environment, and a reduction in jobs—views that coincide with earlier warnings made by government economic managers about the “challenging” road ahead.

The survey was conducted by the MBC—the umbrella group of the country’s largest corporations—among CEOs and senior executives of its member-firms from Oct. 24 to Nov. 7.

Recession occurs when the gross domestic product (GDP), the value of goods produced and services rendered, contracts for two consecutive quarters.

But the International Monetary Fund already considers economic growth worldwide slowing to 3 percent or less this year and the next a global recession.

Increase in layoffs

The most alarming concern, it seems, is the expected increase in layoffs, which may happen toward the end of the first quarter of 2009, according to results of the survey. This coincides with the end of the school year when fresh graduates pour into the employment market.

“Unemployment will rise, definitely,” MBC executive director Alberto Lim said in an interview. “We graduate about a million [students] into the workforce each year. Where will that million go now?”

He said, however, that MBC member-firms had expressed desire to either implement a freeze on hiring or reduce working hours first before moving to more drastic cost reduction measures, like job cuts.

Order cancellations

“Some manufacturers are already receiving [order] cancellations,” he said. “They can afford to reduce the work time for those they pay on an hourly or daily basis.”

The country’s unemployment rate stood at 7.4 percent as of July this year, according to government statistics. This figure traditionally rises in April of each year as fresh graduates join the workforce.

As a result of their bleak reading of the economic environment, around 62 percent of the MBC respondents said their “company’s workforce will contract” in the coming year.

Eighty-seven percent of the respondents agreed that the Philippine economy would likely slip into recession next year.

Lumped together in this category of businessmen with bearish views on the economy are those who “somewhat agree” (70.1 percent) and those who “completely agree” (15.9 percent).

Deepening global recession

Early last month, Socioeconomic Planning Secretary Ralph Recto said that the government was looking at 4.1 to 5.1 percent growth next year. Revised targets will be announced Wednesday.

A number of industrialized countries are already in recession. The United States, reeling from a financial crisis considered the worst since the 1930s, is widely believed to be already in recession.

US bank Morgan Stanley said Tuesday that Asia was staring at a much sharper economic slowdown next year than earlier anticipated because of a deepening global recession.

Mild downturn

The MBC expects the country’s GDP to post a “mild downturn” toward the first quarter of 2009, Lim said.

At the same time, 76 percent of MBC members agreed that “obtaining bank loans for [their] company will be more difficult,” and 75 percent said “access to trade credits will be more difficult.”

Another 55 percent expect their capital expenditures to drop in the same period, even if some 35 percent plan to increase new investments within the next six months.

The respondents also anticipate other major economic factors to weaken, with 87 percent saying they expect the peso-dollar rate to depreciate.

Bright spot

The only bright spot is the inflation picture—the rate of increase in the prices of goods and services—with 59 percent of the business executives seeing the inflation rate slowing in 2009.

Nonetheless, Lim said the Philippine situation still compared favorably with the economic upheaval that the United States was experiencing.

“If you read it in the proper context, we’re still optimistic vis-à-vis the United States,” he said, noting that a “mild” economic downturn is already underway.

“What we will have [next year] is a moderate downturn,” Lim said.