Press Release
September 3, 2007

ANGARA: Local economy should be shielded from external shocks

Wary of the possible impact of the recent collapse of the US subprime housing mortgage on the Philippine economy, Senator Edgardo J. Angara today filed a resolution which asks three senate committees to look into the measures that the government has taken "to mitigate and cushion consequential losses to the financial markets and the Philippine economy."

The three committees - committee on banks, committee on trade and industry and committee on economic affairs - should also craft definitive steps to shield the national economy from such meltdowns, given the vulnerability of the local economy to such outside shocks, said Angara.

"Despite assurances that the mortgage crisis will have minimal impact on Asia, it is undeniable that Philippines is very vulnerable to shocks and aberrations in the global markets," said Angara.

Angara said that the peso and share prices in the local bourses took a beating after the panic caused by the housing mortgage meltdown .

Angara said that while the local housing industry does not have a layer called subprime market and local housing loans are not bundled into asset-backed securities , then sold to hedge fund managers looking for high-yielding papers, still the US collapse roiled the local bourses and affected the peso."

Angara likewise wants to know what the Bangko Sentral, Department of Finance, Philippine Stock Exchange and other concerned agencies have done to address the "spillover effect of the crisis."

The US subprime mortgage market which comprises 15-20% of the US mortgage market started feeling the crunch in late 2006 as housing borrowers defaulted on their payments . The default dried money that was supposed to flow into the mortgage banks - the loan originators - and the hedge fund entities that acquired the mortgage loans from the retailers .

The figure worsened this year from 3.5% foreclosures to 5.1% and the number of delinquencies from 11.5% to 13.8%.

"The impact on the US housing sector is undeniable and US economy may be on the brink of a consumer-led recession," Angara said citing a statement from Merrill Lynch economist Davis Rosenberg which identified banks tightening on consumer lending standards, slumping auto sales and key retainers missing their sales and profit targets as warning signals.

"We need to safeguard our economy and make sure that sound macro-economic fundamentals will allow the peso and local stocks to recover as BSP and DOF have claimed ," he said.

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