US credit downgrade has minor effect on Philippines – economic managers

MANILA, Philippines – The country’s economic managers belittled on Monday the downgrade of the US credit rating by Standard and Poor, saying it would have a “relatively minor” effect on the gross domestic product (GDP).

“The impact on GDP is relatively minor–minus point 1 percent although the impact on sectors is more like minus half a percent,” said National Economic and Development Authority Director General Cayetano Paderanga Jr.,  at a hearing of the Senate finance committee.

“However, we would like to say that markets really tend to overshoot, and it would take a while for markets to really be able to absorb it in a more rational basis,” Paderanga said.

Bangko Sentral ng Pilipinas Governor Amando Tetangco likewise downplayed the effects of the  US downgrade by Standard and Poor, saying there would be, at most, “a knee jerk reaction in terms of interest rates.”

He revealed that based on a Bangko Sentral survey conducted over the weekend, “the dominant thinking was that this kind of knee-jerk reaction would not persist, or last for a long time.”

“This type of reaction is not going to last and markets will really be looking at the more fundamental conditions in the advanced economies particularly the US and Europe,” he said.

“In our case, we may be affected by that reaction in the markets but I think eventually, the interest rate will be influenced by two factors—one, the stand of the monetary policy and second, the fiscal performance of the national government,” he added.