PHL to weather ‘Brexit’ headwinds, but impact on target growth noted

THE Philippines will be able to “sail all right” despite the headwinds brought on by the so-called “Brexit,” although its effects on the global market will make attaining the higher end of targeted growth difficult, the Department of Finance’s chief economist said.

Undersecretary Gil S. Beltran in his economic bulletin on Wednesday said the country can weather the impact of the United Kingdom’s impending departure from the European Union, owing to its “good macroeconomic fundamentals.”

Although a narrow win for “Brexit” in the UK’s June 23 referendum caused uncertainty and led to financial and currency volatilities in the global economy, Mr. Beltran said “the longer- term horizon is of greater importance for the Philippines.”

He noted the country’s current fiscal position is “best described as healthy,” as the national government debt is largely peso-denominated. This minimized the impact of exchange rate risks due to the “Brexit.”

He also noted that fiscal discipline kept the deficit at low levels, and described the country’s fiscal position as geared for a “more expansionary fiscal policy... for investment in both physical and human capital.”

At the same time, Mr. Beltran noted the strength of the country’s external position, as “only a minimal portion” of remittances and business process outsourcing ( BPO) revenues originate from the UK.

He noted, however, that “Brexit” impact on the global market would make it harder to bank on merchandise exports to pull the economy’s growth to the top end of its targeted growth band.

“The higher end of the targeted growth rate (6.8% to 7.8% this year) may... be difficult to attain because external volatilities will delay the recovery of merchandise exports,” Mr. Beltran said.

This was despite the National Economic and Development Authority’s Tuesday statement saying merchandise exports and imports only accounted for 0.9% and 0.5% of the total in 2010 to 2015.

The Dof is among several government agencies that stepped in to calm local nerves. As soon as the result became clear on June 24, outgoing Finance Secretary Cesar V. Purisima said there will be “immediate sentimentdriven herd reactions in the near term,” but expressed confidence in the country’s macroeconomic fundamentals.

The NEDA in its Tuesday statement said the country’s exposure to the UK is “minimal.” —