US President-elect Donald Trump’s plans to bring jobs back home as well as curb immigration are seen impacting on the Philippines’ business process outsourcing (BPO) sector as well as remittances, according to Moody’s Investors Service.
In a report released Thursday titled “Americas and Asia Pacific: Shift in US Policies Could Dampen Trade and Investment, Weaken Growth,” Moody’s said that “while the nature of policies under the next US administration is uncertain, President-elect Donald Trump’s campaign proposals indicate that a shift involving lower US imports and foreign direct investment (FDI), and curbs to immigration is possible.”
“While we expect trade agreements that have already been implemented to remain in place, US policies going forward could incentivize onshoring— the repatriation of jobs at overseas-based suppliers back to the US—and a focus on domestic production and sourcing. The countries that are most reliant on exports of high value-added goods and services, which would offer greatest onshoring potential, are more vulnerable to a potential shift in US trade policies,” the debt watcher said.
In particular, “India and the Philippines could also suffer in the event of policies that disincentivized foreign sourcing of business services,” Moody’s said. These two Asian countries are the biggest BPO destinations in the world. In the Philippines, the BPO sector is among the largest dollar earners, seen to surpass cash remittances from overseas Filipinos in the coming years.
As for Trump’s plan to tighten US immigration rules, Moody’s said it could curb remittances. “A tightening in immigration rules in the US would over time dampen growth in remittances from foreign workers, which are significant for some economies in Latin America and Asia-Pacific,” it said.
“In Asia-Pacific, exposure to remittances is smaller, although they still provide an important source of income for a number of countries. Remittances from the US are largest for the Philippines and Vietnam at 3.3 percent and 3.8 percent of GDP [gross domestic product], and 9.2 percent and 4.1 percent of current account receipts, respectively,” according to Moody’s.
The Philippines and Vietnam are nonetheless expected to withstand any negative impact on remittance flows from the US, Moody’s said.
For one, “the two countries’ current account surpluses and ample foreign exchange reserves would buffer any loss in remittance revenues.”
Citing World Bank data, Moody’s said remittances from the US account for about 34 percent of the total.
Remittance inflows to the Philippines account for 9.7 percent of the GDP, World Bank data showed.