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January December 1998 The year 1998 was a year of increasing interest rates It was only by the end of the year that there was a noticeable plunge in interest rates During most of the beginning of the year interest rates were moving up more than they were going down due to many economic pressures such as the Asian financial crisis which triggered a rapid slow down in economic growth The Philippines was very much affected by this Almost all Asian currencies experienced attacks and were subjected to monetary depreciation This included the Philippine Peso In 1998 the Philippine economya mixture of agriculture light industry and supporting servicesdeteriorated as a result of spillover from the Asian financial crisis and poor weather conditions Growth fell to about -05 in 1998 from 5 in 1997 httpwwwasiaondemandcommoneyeconomics philippineshtm What had caused the Asian economic crisis in the first place The problem began with financial intermediaries - institutions whose liabilities were perceived as having an implicit government guarantee but were essentially unregulated and therefore subject to harsh ethical risk problems The excessive risky lending of these institutions created inflation asset prices The overpricing of assets was sustained in part by a sort of circular process in which the abundance of risky lending drove up the prices of risky assets making the financial condition of the intermediaries seem safer than it was The mechanism of crisis might have involved that same circular process in reverse falling asset prices made the insolvency of intermediaries visible forcing them to cease operations leading to further asset deflation httpwebmitedukrugmanwww DISINTERhtml Although these are not the only causes of the crisis it is a good way to picture how things came from bad to worse and affected many countries Because of the weak Philippine currency interest rates were forced to move up Because of the peso depreciation the Banko Sentral ng Pilipinas has had to raise interest rates to
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