The Philippines in the Asian Financial Crisis: How the Sick Man Avoided Pneumonia

The Philippines has long been regarded as the weak sister of Asia, but in the Asian financial crisis it performed relatively well. This is not simply a matter of not being able to fall out of the basement, either—in mid-1997 the Philippines economy was forecasted to grow at more than six percent in 1998, and both the post-crisis forecasts revisions, and the degree of the eventual contraction were less in the Philippines than elsewhere in Asia. Rather, the Philippines crisis experience offers valuable lessons for the Philippines, the rest of Asia, and indeed, emerging markets around the world. The lesson is that policies matter: economic reform, particularly of the financial system, can have a demonstrable impact on a country's ability to weather a crisis, even if the crisis originates elsewhere and is spread by contagion.