MANILA—An economist from the Asian Development Bank (ADB) said the inward-looking statements of United States President Donald Trump have no significant effect yet on the Philippine economy.
“There is quite no hard evidence about changes in policies that will take place. As stance in our forecast, is wait-and-see on how things evolve in the United States,” said ADB Senior Economist Arief Ramayandi in a briefing Thursday.
But, Ramayandi noted that the ADB has considered these protectionist statements as risk to regional and global growth.
In its Asian Development Outlook 2017, ADB identified possible trade and investment protectionism by industrial economies would impact foreign direct investments, business process outsourcing revenues, and remittances in the country.
ADB Country Specialist Joven Balbosa said that investment prospects from the U.S. remained high, noting the statement of Philippine Economic Zone Authority (PEZA) that U.S.-based OS Petro was eyeing for a USD4 -billion (Php 200 billion) onshore and offshore oil and gas facility in the country.
Apart from the protectionist statements of Trump, the impact of positive economic data and the increment of U.S. interest rate will likely to affect the Philippine economy.
“(It) signify upward interest rates in the U.S. as well as major industrialized countries. As the global interest rate goes up, there are risks of substantial capital flow reversals emerging including the Philippines,” Balbosa noted.
“Financial market volatility, weakening the peso, the possible hikes in BSP’s (Bangko Sentral ng Pilipinas) policy rate would temper domestic consumption and investment,” he added.
According to Ramayandi, ADB anticipated three to four interest hikes from the Federal Reserve this year bringing the rate to range from 1.25 to 1.5 percent, with another possible four hikes next year to bring the rate at a range of 2.25 to 2.5 percent.
“The impact on Asian economies of such situation would not be homogeneous. Countries with more controlled exchange rate will tend to lose out in terms of export price competitiveness relative to countries with more flexible exchange rate. But at the same time, countries with more flexible exchange rate, if they have been operating around the economy potential, it will also have bear higher inflation pressures,” Ramayandi said.
Moreover, the slow recovery of industrial economies like Japan and European Union, which are among the Philippines’ major export markets and foreign investment sources, is also a risk to the country’s economic growth.
However, in this risk, ADB Philippine Country Office Economist Aekapol Chongvilaivan noted that the country was more resilient compared to other Southeast Asian economies as the Philippine economy is not export-driven.
“Philippines, I think, is more resilient than other countries in Southeast Asia because the Philippines fundamentally is not export-driven economy. It is driven by domestic factor, especially domestic consumption and investments from private and public sectors,” Chongvilaivan said.
The ADB economists, likewise, stressed that the country’s strong macroeconomic fundamentals have consistently shielded the economy from external risks and vulnerability in the past five years.