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US debt crisis feared; all eyes on Congress

Bali—The Aquino administration is concerned that the possible failure of the United States to raise its debt ceiling would result in negative repercussions to global financial markets, including the Philippines. Presidential Communications Development Secretary Ramon Carandang said more than the shutdown of the federal government, all eyes are on the US Congress if it would be able to raise a $16.7 trillion debt ceiling by October 17 to avoid a government debt default. “I am not as concerned about the government shutdown in the United States as I am about the prospects of the failure to raise the debt ceiling. If you’re talking about the potential negative economic impact of what’s happening, we would look beyond the government shutdown and to the prospects of raising the US debt ceiling,” Carandang said. “The failure of the United States government to resolve that issue would have repercussions on international financial markets and we would be concerned about that as well,” he said. Carandang acknowledged that the Philippines has some external debt securities, thus causing concern for a prolonged deadlock in the US Congress. “We are assuming the shutdown will be resolved as soon as possible and it won’t drag on,” he said. International Monetary Fund managing director Christine Lagarde has already warned that a US debt ceiling crisis would be a far worse threat to the global economy than the current shutdown. “We have to do a little hand-holding of the international community. This is going to have ripples throughout the world and we’re just a small part of that, but still we need to prepare,” Carandang said. “We need to do a little hand-holding with the investors. I think the fact that Moody’s finally made us investment grade is going to provide a lot of comfort to international investors. Regardless of what happens overseas, you can see that at least in the Philippines, we have gotten our act together economically. Our fiscal policies are sound, our economic growth remains solid, the fundamentals are in place,” he added. Carandang said aside from attending the Asia Pacific Economic Cooperation CEO Summit here in Indonesia, President Benigno Aquino III will also make an active pitch for fresh investments into the country. “The markets will be able to distinguish about between what’s going on in other parts of the world and the fundamentals in the Philippines...There are always good prospects,” he said. According to a survey conducted by the Pacific Economic Cooperation Council, a regional advisory board that sought more than 500 opinion leaders in the region, uncertainty over economic and budget measures in the US ranked as the fifth biggest risk to the growth of APEC economies. Carandang said Aquino will also speak on inclusive growth before the leaders of the 21 member-economies of APEC. “We are going to be talking about inclusive growth. We are going to be showing the reforms we have undertaken over the last three years have borne a lot of fruit in terms of increased confidence in the Philippine economy and in the management of the economy; and as usual, we will be asking people to come take a look and further invest in the Philippines,” he said.
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