The Impact of the Global Financial Meltdown and New Growth Strategies for the Philippines
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Abstract
This paper discusses the impact of the global fnancial meltdown on the Philippines. To cushion future capital flow, exchange rate volatilities and export collapse, new growth strategies for the Philippines should include on the fnancial and capital account fronts: a) controls on short-term capital flows; b) a BBC (basket, band, crawl) system to replace the free floating exchange rate regime; and c) a bigger reliance on domestic debt fnancing and a shift away from external debt fnancing of growth to avoid external debt crises due to external shocks. In developing a vibrant domestic internal demand in order to reduce over-dependence on exports, the following will be vital: a) a strong move to correct income and regional inequalities and disparities, including strong anti-poverty policies; b) an industrial policy to make stronger linkages and productive capacity in the economy; c) fscal reforms (especially tax) in order to generate suffcient funds to fnance much needed infrastructure and human capital, and to address the grave problems of poverty across the country; d) enlightened and independent governance by a pro-poor and democratic state; and e) an end to pro-cyclical fiscal and monetary policies and a strong adoption of counter-cyclical policies.
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