We often hear the word ‘recession’ lately which prompted me to blog about it. Why is it that people fear recession too much? Is recession as bad as how we perceive it to be?

Let’s define recession. Recession may be deemed as significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s gross domestic product (GDP). When there is a severe or prolonged recession, it is referred to as an economic depression. Recessions also comes in different shapes – V, U, L and W. When the economic contraction is quick and followed by a rapid and sustained recovery, economists refer to it as a V shape recession. If there is a prolonged slump in the economy, it is informally termed as a U shape. A much longer decline, like 8+ quarters can be called an L shaped recession. Finally a W shaped recession is a term used when there is a double dip recession.

Nosebleed!

I like to look at the economy as a motor car engine. Any engine, no matter how efficient and durable it is, can’t run at full throttle for an indefinite period. Imagine driving your car at maximum speed continuously for days… at one point your engine will give in and break down. The economy is like that as well. When the economy is in constant growth, it will overheat and it will breakdown. Economic growth brings growth in disposable income; additional disposable income will allow people to increase consumption; increased consumption will drive up prices; increase in prices will result to inflation and so on and so forth. A state of balance is needed, or in economics terms, equilibrium. However, equilibrium can only exists in theory and there will never be an absolute equilibrium. When the car slows down, that’s like the economy going into recession.

The economy goes on cycles, recession is part of a cycle. Since recession is part of a cycle, we should not be in despair as it will come to pass … “We are hard pressed on every side, but not crushed; perplexed, but not in despair; persecuted, but not abandoned; struck down, but not destroyed.” (2 Corinthians 4:8-9, NIV)

Catch part 2, soon!

Jim Rohn wrote a very good article about the Ant Philosophy. When you study the ants, they really are amazing creatures largely because of their characteristics and their characteristics are very applicable to personal finance.

When you look at how the ants go about their business, they are very structured and deliberate. They know the value of hard work and they definitely know the value of having a storehouse. If we can apply the characteristics of ants into they way we go about our life, we definitely are more prepared with the challenges of life, and definitely more prepared for our life events — emotionally and financially!

The way the ants behave is so amazing and long before Jim Rohn thought about the said creatures, the Bible already made reference to those wonderful creatures. God actually wanted us to be like ants — “Go to the ant, you sluggard; consider its ways and be wise!” (Proverbs 6:6, NIV). And for a good reason… “Ants are creatures of little strength, yet they store up their food in the summer.” (Proverbs 30:25, NIV).

You want to achieve financial freedom? Be like the ant!

The Ant Philosophy

by Jim Rohn

Over the years I’ve been teaching children about a simple but powerful concept – the ant philosophy.

I think everybody should study ants. They have an amazing four-part philosophy, and here is the first part: ants never quit. That’s a good philosophy. If they’re headed somewhere and you try to stop them; they’ll look for another way. They’ll climb over, they’ll climb under, they’ll climb around. They keep looking for another way. What a neat philosophy, to never quit looking for a way to get where you’re supposed to go.

Second, ants think winter all summer. That’s an important perspective. You can’t be so naive as to think summer will last forever. So ants are gathering in their winter food in the middle of summer.

An ancient story says, “Don’t build your house on the sand in the summer.” Why do we need that advice? Because it is important to be realistic. In the summer, you’ve got to think storm. You’ve got to think rocks as you enjoy the sand and sun. Think ahead.

The third part of the ant philosophy is that ants think summer all winter. That is so important. During the winter, ants remind themselves, “This won’t last long; we’ll soon be out of here.” And the first warm day, the ants are out. If it turns cold again, they’ll dive back down, but then they come out the first warm day. They can’t wait to get out.

And here’s the last part of the ant philosophy. How much will an ant gather during the summer to prepare for the winter? All that he possibly can. What an incredible philosophy, the “all-that-you-possibly-can” philosophy.

Wow, what a great seminar to attend – the ant seminar.  Never give up, look ahead, stay positive and do all you can.

Just thought of posting some highlights — sorry, a bit ‘nose-bleed’ but this information is quite important to us Pinoys. The information can’t really say we are headed for economic recovery, but it means there are some economic activity that can give us hope. Hope, after all, is eternal right?

A concern is the slower pace of excports especially if you compare it from last year. However, May numbers showed a good improvement from April numbers and let’s hope we can sustain the moderate increase. A global softening of the electronics market has continued to affect our electronincs exports industry especially if you compare it from last year… but it is better in May as compared to April still. I’ll take any form of good news anytime of the day!

Foreign Direct Investments is a good indication of economic activity and reversal of the outflow trend is a much welcome break we all need. Because of the gloabl financial crisis, capital moved out of emerging markets like the Philippines to seek safer havens. A reversal in FDI flow is a good indication that things might be looking a little brighter for us Pinoys.

Fiscal issues continue to besiege us and it will be very difficult to balance the budget because government is trying to spice up the economy; it times when consumer spending is low, government tries to spend more to ‘pump-prime’ the economy. It looks like RP wants to take advantage of the low interest environment to float bonds which we all desperately need. While we can’t avoid borrowing, at least our cost of borrowin is much lower. Just to note that consumer debt (like credit cards) are still something we should avoid, ok? We are not the Republic of the Philippines, haha.

Things are really ambivalent but I am still one who clings to hope… hope that things will look brighter for all of us soon.

Hope is easy when we are connected to the real source of hope — “We have this hope as an anchor for the soul, firm and secure. It enters the inner sanctuary behind the curtain…” — Hebrews 6:19

1. Export falls at slower pace in May

Philippine exports continued to fall in May albeit at a slower pace
NSO disclosed that May exports totaled $3.08 bn, down 27% Yoy
However this is up 10% Mom as exports reached $3 bn per month mark in May versus $2.8 bn in April
YTD exports still down 34.5% to $13.8 bn
Electronics declined 27% yoy to $1.8 bn in May; Compared to last month, elctronics exports were up by 8%

2. Foreign Direct Investments inflows reach $601 mn in April

FDI surged to positive flow of $601 mn in April, reversing the outflow trend in Jan to March of $27 mn
April inflow considered considered an aberation as it featured Kirin Holdings’ investment in San Miguel Brewery
Exclusive of the $1.1 bn inflow from Kirin, FDI wouldve posted a decline of $500 mn for the month
FDI inflow in the first four  months of the year reached $648 million, up 29.1% from a year  earlier.

3. Philippines approved $1 bn bond issue

Philippine central bank approved plans to raise as much as $1 billion through an  international bond issue
Will either be through a global bond or a eurobond proceeds to finance the widening deficit.
Budget deficit target for 2009 raised to P250 bn and can even reach P320 bn or 4% of GDP

“Hope is the companion of power, and mother of success; for who so hopes strongly has within him the gift of miracles.”

— Samuel Smiles

“Expect to have hope rekindled. Expect your prayers to be answered in wondrous ways. The dry seasons in life do not last. The spring rains will come again.” — Sarah Ban Breathnach