Managing Corporate Distress in the Philippines-Some Policy Recommendations

As the regional financial turmoil deepens and economic growth declines, issues concerning the health of the corporate sector in the Philippines need to be addressed. These include the impact on the corporate sector of high domestic interest rates and unhedged external borrowing, and measures to facilitate corporate debt restructuring. In addition, it is important to examine the degree of interlocking of corporations and banks given that distress in the corporate sector would spread to...
More Description

As the regional financial turmoil deepens and economic growth declines, issues concerning the health of the corporate sector in the Philippines need to be addressed. These include the impact on the corporate sector of high domestic interest rates and unhedged external borrowing, and measures to facilitate corporate debt restructuring. In addition, it is important to examine the degree of interlocking of corporations and banks given that distress in the corporate sector would spread to the banking sector. A fragile banking system erodes confidence, impedes new lending to the productive sector, and would exacerbate the contraction already taking place in the real economy.