Brexit seen to impact on PH exports
The United Kingdom’s decision to leave the European Union is seen taking a toll on global trade such that Philippine exports would find it difficult to recover and drag economic growth this year, the Department of Finance’s chief economist warned Wednesday.
“Brexit has introduced financial and currency volatilities into the global economy, making the sailing a little rough for the Philippines. But the country, owing to its good macroeconomic fundamentals, is going to sail all right, Brexit headwinds notwithstanding,” Finance Undersecretary Gil S. Beltran said in an economic bulletin.
However, Beltran said the higher end of the 6.8-7-8 percent gross domestic product (GDP) growth target range earlier set by the outgoing Aquino administration might be difficult to attain because external volatilities would delay the recovery of merchandise exports.
Even ahead of the Brexit vote, a fragile global economy has been dragging the country’s merchandise exports.
Shipments of Philippine-made goods declined for the 13th consecutive month last April, bringing end-April exports down 7.3 percent year-on-year to $17.4 billion.
But National Economic and Development Authority (Neda) data nonetheless showed that merchandise exports and imports made up just 0.9 percent and 0.5 percent, respectively, of total two-way trade between the Philippines and the United Kingdom from 2010 to 2015.
Economic managers of the incoming Duterte administration, meanwhile, had said that economic growth this year might settle at 6.5 percent, below the outgoing administration’s target range.
As a whole, the Philippines would weather the jitters to be brought by Brexit’s aftermath, Beltran said.
“The longer-term horizon is of greater importance for the Philippines. The World Bank, for example, has stated early this year that the Philippine economy is among the most robust in the region despite weakening global trade and a slowing down Chinese economy. This assessment is still true in the face of Brexit because of the country’s good macroeconomic fundamentals supported by robust domestic consumption,” Beltran pointed out.
Also, Beltran noted that the country’s fiscal position remained healthy, citing that since the national government debt was largely peso-denominated, the adverse impact from exchange rate risks as a result of Brexit would be minimal.
“Fiscal discipline has also kept the deficit at low levels. The country is in a fiscal position for a more expansionary fiscal policy, not for stimulating consumption, however, as in the case of advanced economies in the aftermath of the 2008-2009 global financial crisis, but for investment in both physical and human capital,” Beltran added.
“The country’s external position is also strong, with robust overseas Filipino workers’ remittances and business process outsourcing revenues, only a minimal portion of which originates from UK,” according to Beltran.
Cash sent home by Filipinos living or working in the UK accounted for just 5.3 percent on the average between 2010 and 2015 period, although inflows had been growing by 9.5 percent, Neda data showed.
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