Contagion effects of the Asian crisis, policy responses and their social implications

Contagion effects of the Asian crisis, policy responses and their social implications

The Philippino experience of the Asian financial crisis

This paper looks at the contagion effects of the 1997 Asian crisis on the Philippine economy, the policy responses, and their social implications.

In discussing the impact of the Asian crisis on the Philippines, three key points are made:

  • The impact of the Asian crisis on the Philippine economy and financial sector has been quite moderate, especially when compared to the crisis economies of Thailand, Indonesia and South Korea
  • The social impact has also been deemed as less severe
  • The Philippines was a laggard in the region both in terms of economic growth performance and human development. Thus, even a slight deterioration in economic and social conditions will have severe implications, especially on the poor

Furthermore, while the impact of the Asian crisis may have been fairly moderate, the disruption that it caused in the Philippines’ growth and adjustment process could prove to be more significant and costly.

The anti poverty program launched by President Estrada 2 years after the crisis broke out was too narrowly focussed and simplistic and its design and implementation was not efficient.

The program did not address the key issues involving poverty in the Philippines which are structural and cannot be solved by periodic dole outs e.g. there has been no significant shift of resources to the social sector in the national budget.

The paper concludes that:

  • The social safety nets in place when the crisis broke out were generally inadequate both quantitatively and qualitatively.
  • The economic problems are not necessarily of resources per se, rather, a problem of targeting and efficiency – a situation worsened by the fact that the governments fiscal position took a turn for the worse as a result of the crisis.
  • Fiscal adjustments toward greater efficiency in the use of public resources should cut across the different departments and types of expenditures. If they cannot be done simultaneously, then inefficiencies elsewhere should first be dealt with before the inefficiencies in the social safety net and social expenditure programs.
  • Investment in human capital would probably have a lasting positive impact on the poor and poverty alleviation.
  • The government must nurture the private sector and give decent incentives to improve the business environment and as part of this the government must deal with such basic functions as maintaining peace and order, and the administration of justice.
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