A key member of the Duterte administration’s economic team batted for what he said were sustained reforms to shield the Philippine economy from the impact of the collision between the world’s two biggest economies, US and China.
At a press briefing, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said while the effects of protracted trade war between the US and China on the Philippines would be minimal, key reforms were needed if the Philippines was to remain insulated from global market uncertainties.
Diokno on Thursday (Feb. 27) made a fresh pitch for a sustained push in the infrastructure sector and a host of other policy recommendations in the administration’s economic program.
“Amid uncertain external environment, it is imperative for the government to sustain the reforms that form the backbone of long-term sustainable development,” he said at his press briefing.
Diokno said that experts’ assessment indicated that the Philippines will not be as adversely affected as other countries, since its export exposure to products targeted directly by US tariff against China is less than 1 percent of gross domestic product.
In addition, the country has low participation in the global trade and in the global value chain compared with other Asean countries.
He said, however, that reforms are crucial to shield the local economy from unexpected international developments.
Among these reforms, he said, were investing heavily in high quality infrastructure, developing human capital, improving productivity, creating favorable business environment and an integrated trade and investment policy.
He said the “full implementation” of the Philippines’ export strategy and policies in the Philippine Development Plan and Philippine Export Development Plan “should be relentlessly pursued.”
Diokno said the January 2020 phase one deal between the US and China has dampened fears of further trade conflict escalation and related short-run negative consequences to global growth.
“The deal could have far-reaching implications on the future of the global trading system,” the BSP chief said. “It could potentially distort the flows of global trade and investment and consequently, weaken global growth in the long run. Tariffs remain elevated,” Diokno said.
“With the ongoing restructuring of China’s economy, it could possibly cut back its demand from the rest of the world to fulfill its import commitment to the US,” he said. “The potential trade diversion would disrupt global supply chains,” he added.
But even in the context of retaliatory tariff increases between the US and China, the Philippines’ exports have remained broadly stable.
Diokno said that, based on Philippine Statistics Authority data, electronics exports, which are linked to global productive networks and make up 50-60 percent of the Philippines’ total goods exports, continue to register decent performance.
Based on latest data, exports of goods in December 2019 grew robustly at 21.4 percent on the back of strong electronics outbound shipments.