What a relief that 2016 is gone, a turbulent year for the Philippines in terms of politics and the economy.
2016 was an election year that brought drastic shifts in the political landscape as well as in domestic and foreign policies.
On the economic front, the point men of the Duterte administration were working to introduce reforms in the tax system unseen in 30 years and raise the money for an ambitious 24/7 infrastructure development program against the backdrop of global economic headwinds that sliced share prices on the Philippine Stock Exchange and brought tears rolling down the cheeks of many local investors while the peso sank to day-long lows against the dollar – a nasty blow on the psyche of financial markets and the public in general.
Then the American-business-mogul-turned-politician Donald Trump came into the picture with his nationalist pro-US announcements that boil down to protectionist policies encapsulated in the dictum of America first vs. the rest of the world. This added to the discomfort of markets worldwide on top of the mighty dollar as a safe haven while the Federal Reserve cranks up interest rates in the world’s largest economy that make dollar assets stronger.
Bets are on that with Mr. Trump in the White House come January 20 the tailwind of his election will fire up more upheavals in international politics and the global economy.
“On the other hand, many Asian countries are taking a cautious view on Donald Trump’s emphasis on securing domestic jobs and his focus on protectionism,” Japan’s Mizuho Research Institute penciled in its January 1 brief “2017 Economic Outlook.”
“If [Trump] keeps his pledge to impose high tariffs on Chinese products, exports to China will likely be affected, and if he restrains the immigration of foreign workers, it will particularly affect countries like the Philippines, which is heavily dependent on the remittances of its nationals working overseas,” according to Mizuho Research.
In other words, the lash from the tail of President-elect Donald Trump could spur a trade war this year and cut the rosy revenue projections of the Philippine outsourcing industry. The backlash on the export industry, which has been in the doldrums due to lackluster global demand, is worth a serious look from the Department of Trade and Industry, which however we cannot fault for making pep-up forecasts and statements on how exports would make a comeback in 2017 as demand from non-traditional markets picks up.
That is why BMI Research, a subsidiary of debt watcher Fitch Ratings, has flagged developments affecting commerce with China and Japan as key risks to the Philippine economy.
“Growth slowdowns in both China and Japan, to which the Philippines is heavily exposed in both investment and trade terms, could undermine the country’s strong domestic growth story,” BMI Research noted in its country risk report.
“The potential for a deeper-than-expected depreciation of the Chinese yuan by the People’s Bank of China would likely weigh on the Philippine peso. A weaker yuan could see the Bangko Sentral ng Pilipinas (BSP) allow for a further weakening of the peso in order to maintain the competitiveness of Philippine exports relative to Chinese exports,” it said.
The appearance of a silver lining in our economy hinges on how the so-called economic managers of the Duterte administration would stop mismanaging the economy and begin really doing something in the face of headwinds and tailwinds barreling over the horizon.
According to the World Bank, the primary growth engine remains the growth in capital investment. It expects the BSP to keep monetary policy in line with a growing economy.
“The implementation of large infrastructure investments is projected to lead to significant spillover effects into consumption growth. Accompanied by robust credit growth to households and healthy remittances, this is expected to fuel consumption,” the multilateral lender noted.
What this means is that it’s time for the economic managers to roll up their sleeves and start producing results. After six months, the non-honeymoon period of doing nothing is long over.