East Asian Crisis - Philippines

. Massive outflow of foreign investments 1. Foreign over borrowing aggravated by the presence of government guarantees 3.Weak Link Over Valued currency 2.

b. Exports : Declined due to overvalued peso Exchange Rates: July 1997 26.5 billion 1997 ( reduced gross reserves from $11 billion to $ 6 billion) Surplus: $1.4 Jan 1998 42. 2. a.35 billion 1998 .7 Government intervention to maintain the exchange rate Uses $2 billion reserves (unsuccessful) Increase the interest rates to cushion the peso s depreciation Balance of payment: Deficit: $3. 3.1.

Inflation peaked at 11.Government Imports b.4 % in 1998 5. Revenues decreased due to reduction in tax revenues b. Initially inflation under control .6 billion surplus 1998: P 50 billion deficit .. Inflation: a. Government Sector impact: a.Impact Continued . Budget deficit: 1997: P1.Existing inventories . 4.

7% in 1997 10. El Nino effect on agricultural. Increase in unemployment: 8.. fishery and forestry sectors 2.Impact Continued . Cautious lending by banks . 7.1% in 1998 Reasons: 1.

2 per cent in 1996.5 per cent in 1998. the difficulty of borrowing from the banking sector and low domestic demand took a toll on investment during the crisis . GDP growth rate of 5. 2. and finally. the growth rate declined to 5. a negative growth of -0.The Final impact 1. The lack of confidence in the overall economic environment.1 per cent in 1997.

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