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Over the weekend, I arrived from a quick trip from San Francisco. As mentioned in my previous column, I have seen their situation in America.
First, the worst is yet to come. On 2009, a lot of Americans and possibly even Filipino-Americans will lose their jobs. This will affect us, as the remittances to our country will still somehow slow down because they also have to conserve for their own needs. While BPOs and call centers will continue to relocate in the Philippines because of our low cost structure, weaker peso and a much stronger dollar, many of these companies may go bankrupt and close down.
Second, consumer spending will go on a standstill, as it already has. In 2009, the situation will be much worse, as Americans are looking at this crisis with no savings in their pocket, high credit card dues and debt mortgages. On the other hand, the Japanese are back in their state of recession that started 15 years ago. Prior to their recession, they started with a much higher savings rate, which is close to 10 percent. It became quite low due to the 15-year bear market. Americans have no room to move. The worse thing is that most of the retirees have their 401K, losing almost half of their value. The end-result is that the Americans have no savings, with maxed out credit cards. Housing values are down, and even retirement funds are down. They are even facing the possibility of no jobs or no salary increase for so many years. This means, countries that export a lot to America will be greatly affected. Alternative markets must be looked into for those exporting.
With this, we expect interest rates all over the world to continue to go down in order to prevent a deep recession, or even a depression. We could see America at zero percent by the first quarter of next year. As for the Philippines, we will maintain the rates to prevent the peso from deteriorating and maybe reduce the rates once the dollar starts to weaken. We can probably see America printing a lot of dollars to save the financial community. Just two days ago, they have partially bailed out Citibank. Now, they also printed $800 billion to save the consumer credit.
This is not the end. I believe a huge stimulus package that may come close to $1 trillion maybe presented during the inauguration of President Obama. There will be billions to save the car industry. In the end, America is still lucky because the world’s currency is the dollar. They don’t have reserves, but their reserves are somehow “limitless”.
They just need more printing machines to print dollars. However, we know that this approach will have a long term consequence, such as an inflationary environment and the dollar losing so much of its value. We could see gold rising to levels never seen before, as the amount of dollars printed do not match the amount of gold of the Americans. All these can happen towards the end of 2009, after the dust settles.
For how long will this crisis last? No one really knows. The general feeling is that things will improve towards end of 2009 or 2010. Refinancing dollar obligations during the period of 2009 will be challenging, especially for local companies in the Philippines. I do not want to scare a lot of entrepreneurs out there, but this is a time when we should be careful. Maybe we should even wait how things turn out in the first six months of 2009 before making any major moves. Try to deleverage and move towards more long term loans, rather than short term. Let’s all hope that people who are trying to convince PGMA to stay beyond 2010 will drop that stupid idea. At a time like this, when the world’s greatest financial crisis is at hand, it is not a time to fool around with our democracy.
While I have been in favor for a review of the constitution in my past columns, which I entitled 2010.2016, I basically called for a review after 2010 and a proper implementation only in 2016 for political changes in government structure. I know PGMA will not stay on. The president has also been a great supporter in the works of Go Negosyo, together with Sec. Cerge Remonde.
Thailand is also presently facing their problems. The protesters’ riots are causing panic and creating a negative result for their country’s tourism. In fact, hundreds of protesters recently stormed through the Bangkok International airport, as they are seeking to overthrow their country’s prime minister. This can be seen as an opportunity for neighboring countries. Tourists might opt to go to other countries instead, like the Philippines.
This is the time when we should push for growth as a nation and take advantage of the problems of the world. Let us find opportunities that will bring more negosyos and create more jobs. We need to be in the radar screen of investors. Despite the recessionary environment in the world, the Philippines still stands out. This is our chance. Yes, the Filipino Can!
[For feedback, email me at email@example.com or thru SMS at 09175591245. For free business advice, visit www.gonegosyo.net. Watch the Go Negosyo Bigtime Show in its new home, QTV, every Saturday and Sunday 8 to 8:30 a,m,, with replays in NBN every Sunday 9:15 to 10 p.m.]