Economic Outlook For 2008

As we start this year let me share to you my own economic projections for this year.



We will start off with the happenings in the world largest economy, the United States of America. As we all know the United States of America is facing a serious economic dilemma due to its sub prime mortgage problems. This problem has translated into slower jobs growth, shortage of business credit, and a decrease in industrial production among other things. The problem is so serious problem that even the White house has lowered its economic projections for 2008.



Economic growth was insignificant during the past quarter. The only good thing that could happen to the United States is that it will not face a recession and that the sub-prime mortgage problem will subside by the first half of 2008 as some economist projected. The worst thing that could happen is that the United States would go into a recession if the problems won't subside.



What is the impact of this problem to the rest of the world? Exports by other countries to the United States will slow down because of the economic problems they are facing.



The positive thing about this is that as the Feds continue to cut interest rates, investors will instead pour their investment into economies that will give them a more attractive return. Strong emerging economies like China and India, which are said to continue to lead the growth in the Asian region are most likely to benefit from this. Most economist say that Europe will not be affected so much by the economic problems of the United States however a slow down in Europe's exports will temper its growth.



Most likely, oil prices will continue to remain high and will experience several spikes through the year due to speculation, higher demand, lower supply, limited capacity, geopolitical concerns etc. For 2007 alone, oil rose from $50 per barrel last January to a record high of almost a $100 last November. This will continue to affect the rest of the world as the rising economies of the world are oil dependant. Just last Wednesday (January 3, 2008), the price of oil hit $100 a barrel for the first time in history.



Economic growth is expected in the Middle East due as oil prices continue to soar. The emerging oil producer, Africa will also benefit from this situation. However continued violence in some parts of the continent may affect oil production.



On the local scene, the Philippines will continue to lock in to its previous economic gains and will continue to experience strong growth. The economic boom is continued to be fueled by rising foreign investments, more growth in OFW remittances, more growth in the tourism sector and continued growth in exports mainly due to business process outsourcing.



However this growth will be much slower considering the slowdown in the U.S economy. The worst case scenario for exports is a flat growth. As more dollars are flowing into the country the Peso will continue to strengthen as expected. It will range somewhere between the P 35 to P 39 level within this year. The stock market is expected to hit the 4000+ level by the middle of this year.



The only factor that will dampen this growth is the rising oil prices and the occasional political bickering. The oil problem will cause a slow but steady rise in the cost of doing business translating to the consumers paying more for good and services than they used to.



But I do not see any serious political turmoil that will happen in 2008. People are sick and tired of calls to unseat the president. For why should they? After all we are experiencing growth and will hopefully continue to do so.