Impact on PH of US protectionist stance seen minimal

Republican presidential candidate Donald Trump arrives to a fundraising event at a golf course in the Bronx borough of New York, Monday, July 6, 2015. (AP Photo/Seth Wenig)

The robust domestic demand that makes the economy less reliant on foreign trade will shield the Philippines from the negative impact of U.S. President-Elect Donald Trump’s plan to adopt protectionist policies, according to Washington-based Institute of International Finance (IIF).

“The economic policies of the Trump administration could negatively impact emerging Asia through both the trade and finance channels, although there are robust buffers. Trump’s anti-trade rhetoric has so far focused on China and Mexico along with possible punitive tariffs on US companies shifting production and jobs abroad. The resulting uncertainty could hurt global supply chains and trade,” Bejoy Das Gupta, IIF chief economist for Asia-Pacific, said in a Dec. 8 report titled “Emerging Asia: Navigating Testing Times.”

“In emerging Asia, Malaysia and Thailand are the most exposed, followed by (South) Korea, with exports having a large share of GDP (gross domestic product) and the US directly accounting for a sizeable part. India, Indonesia and the Philippines, being less trade dependent, are less exposed. Overall, the downside should be limited, as emerging Asia is relying more on domestic demand and intra-regional trade to bolster growth,” the report read.

As for the finance channel, the IIF noted that the Asia-Pacific region “benefits from current accounts in surplus or small deficits, and, therefore, is less exposed to an export slump sharply raising the external financing requirement.”

“However, non-residents have sizeable holdings in regional securities markets, which are also quite liquid. In anticipation of US fiscal stimulus and monetary tightening, there has already been a foreign sell-off of the region’s equities and bonds in November,” the IIF said.

Moving forward, the IFF said a “changed US policy mix raises the possibility of periodic volatility in the region’s financial markets, with countries with greater foreign portfolio holdings more at risk.”

The IIF nonetheless said “positive growth, relatively attractive valuation and yield differentials would suggest that the region should continue to attract substantial non-resident capital inflows, especially for countries with supportive reforms and politics.”

Separately, the Department of Finance quoted National Treasurer Roberto B. Tan as saying “it would be better to await the policies that [Trump] would announce and implement starting next year.”

“The Trump presidency and how the US Federal Reserve will act on the rate increase would determine market prospects in 2017, although on the part of the Fed, many analysts believe that it will be very dovish in its statement on what the expectations will be for next year,” Tan said in a statement.

Markets are betting on a US Fed rate hike during its meeting next week.

In general, the bond issuances during the first five months of the Duterte administration were described by Tan as “generally successful” even as markets were jittery due to the anticipated Fed rate hike as well as the UK’s so-called “Brexit” vote to leave the European Union last June.

Besides the usual monthly T-bill and T-bond offerings, the Bureau of the Treasury also issued P100 billion in 10-year retail treasury bonds (RTBs) to small investors in September.

The 18th RTB sale of the Philippine government, which was more than triple the minimum offering of P30 billion, was the first issuance under the Duterte administration, aimed at augmenting funds for programs part of the 10-point socioeconomic agenda, especially infrastructure projects.