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Economic Forecast For 2008

Jan 8, 2008
As we start this year let me share to you my own economic projections for this year.

Let us begin by looking at the events in the world largest economy, the United States of America. It is of public knowledge that the United States is facing a serious economic problem due the sub prime mortgage crises. This problem has resulted to slower jobs growth, shortage of business credit, and a decrease in industrial production among other things. Because of this, the White house has lowered its economic projections for 2008. Economic growth was very slow during the past quarter. If things will turn out for the better, the best thing that could happen to the United States is that it will not face a recession and that the sub-prime mortgage problem will slowly grind to a halt by the first half of 2008 as projected by some economist. The worst case scenario would be that the United States would go into a recession.

In what way will this affect the rest of the world? Some countries whose export industry relies so much in the United States will experience a slow down in exports growth. The positive thing about this is that as long as the Feds keep on cutting interest rates investors will most likely favor putting their investment into economies that will give them a a higher return for their investments. The emerging economies of Asia such such as India and China among others will largely benefit from this. This problem may not have a big impact on Europe as some economist project, however this will temper the region's growth due to slow down in exports.

It is most likely that oil prices will continue to remain high. Several spikes will continue to be experienced throughout the year due to several factors such as speculation, higher demand, lower supply, limited capacity, geopolitical concerns etc. Last year alone, oil prices rose from $50 per barrel at the begining of the year to a almost a $100 last November. This problem will continue to have an effect on our oil dependant economies. The price of oil hit $100 a barrel for the first time in history during the first week of this year. Africa, considered as an emerging oil producer,will benefit from this situation, although continued violence in some parts of the continent may affect oil production. The Middle East will continue to experience economic growth as oil prices will remain high or continue to push upwards.

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.

Most probably, the only factor that will cause a slowdown in this growth is the occasional political bickering and the rising cost of doing business brought about by the rise in oil prices. However I do not see any serious political problems that will happen in 2008. The people are somehow tired of mass actions to call for the resignation of the president. They probably would not also do so considering that we are experiencing growth and will hopefully continue to.
About the Author
Want an economic forecast that guide your investment decisions ? Visit the blog of Zigfred Diaz. He regularly blogs on several topics including investments and gives an economic forecast that could help in making investment decisions.
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