EDITORIAL - Danger zone

As in the Asian financial contagion in 1997, the Philippines has so far escaped the worst of the global financial meltdown. But there are reports of trouble that could worsen the impact in the coming months. The World Bank, in a paper presented to finance ministers of the Group of 20, warned that developing countries are entering a new “danger zone” amid the global slowdown.

Among the problems cited by the World Bank, apart from further tightening of credit, are falling investments and exports — problems that could set back poverty alleviation programs, the bank said. It is a warning that must be addressed decisively by the government.

Already foreign direct investments in the Philippines have plunged by an alarming 56.3 percent in the first eight months of the year, from $2.492 billion in the same period last year to $1.08 billion. The $2.492 billion was already low enough compared to the FDI that went to other countries in the region.

The World Bank also warned that among the most vulnerable to the economic slowdown are countries that are heavily dependent on the remittances of migrant workers. And the Philippines is one of the biggest exporters of its human resources. An economist in investment firm UBS warned recently that the Philippines could lose up to $800 million in remittances next year as a result of the global slowdown.

The global economy cannot stay down forever. This early several countries are working to be among the first on the road to recovery, and to sprint ahead of the rest when better times roll around. The Philippines must do the same, cushioning the impact of the slowdown on its workers even as it moves to stay competitive in exports and in luring investors.

Foreign investors give the government regularly a list of recommendations to make the Philippines more investment-friendly. Most of the recommendations have a recurring message: the government cannot go on with business as usual. This could be one of the reasons why many of the recommendations have not been acted upon. The global financial crisis gives more urgency for the country to improve its competitiveness. There are enough danger signs along the path to recovery. It would be foolish to ignore those signs.