Moody’s cites possible impact on PHL of post-election developments in US

By , on September 24, 2016

MANILA – Remittances from Filipinos in the US are expected to slow down once the world’s largest economy tightens its immigration policies, which US presidential candidates have vowed to implement.

Moody’s Investors Service, in a report, said the candidates’ campaign promises are geared towards favoring US citizens in terms of job opportunities and point to lesser investment and trade ties.

On both points, the report said the impact would hurt US trading partners in one way or another.

For the Philippines, it would be felt in remittances, as US limits the number of foreign workers, and the business process outsourcing (BPO) sector.

Filipinos in the US are mostly skilled workers who are in the medical profession, among others.

Remittances from the US account for one-third of the total annual inflows to the Philippines.

The report said remittances from the US accounted for about 3.3 percent of the Philippines’ domestic output in 2015, almost at the same level as the 3.8 percent share in Vietnam’s gross domestic product (GDP) during the same period.

“But both countries run current account surpluses that would provide buffers against marked weakening in remittances,” it said.

The Philippines has been posting current account surpluses, which is a component of the balance of payment (BOP) position, for more than a decade now due in part to remittance inflows.

The BOP summarizes a country’s transactions with the rest of the world in a given period.

As of end-June this year, the country’s current account surplus amounted to USD778 million, about 0.5 percent of the GDP.

Similarly, the Philippines’ gross international reserves (GIR) as of end-August this year totaled USD85.9 billion, enough to cover 10.5 months worth of imports of goods and payments of services and income.

This is seen to help counter the impact of a drop in remittances.

“In addition, given the size of remittances, only a sharp slowdown associated with a severe and broad tightening of US immigration rules, which we consider unlikely, would have a material impact on private consumption,” the report said.

On the BPO sector, where the Philippines has made its mark in terms of being number one in voice service in the world, revenues are seen to be affected, along with India, due to possible increase in tariff or tightened policies on outsourcing.

This is because revenues of these countries’ BPO sectors “are more concentrated in information technology and telecommunications, some of which could, in principle be sourced from the US.”