External challenges, including Britain’s decision to exit the European Union, will prevent the Philippines from attaining the higher-end of its 2016 growth target, an official of the Finance Department said Wednesday.
Finance Undersecretary and chief economist Gil Beltran said the higher-end growth target of 7.8 percent would be difficult to attain following the so-called ‘Brexit,’ which was expected to affect trade with the European Union and the UK.
“The higher end of the targeted growth rate [6.8 percent to 7.8 percent this year] may, however, be difficult to attain because external volatilities will delay the recovery of merchandise exports,” Beltran said.
The economy grew 6.9 percent in the first quarter, representing the low-end of the government’s target.
Beltran said ‘Brexit’ introduced financial and currency volatilities into the global economy, making the sailing a little rough for the Philippines.
“But the country, owing to its good macro-economic fundamentals, is going to sail all right, Brexit headwinds notwithstanding,” Beltran said.
Data showed the UK was an important economic powerhouse. It accounts for about 3.83 percent of the world’s economic output and contributes 16.14 percent to EU’s total output.
Beltran said the UK exiting the EU was expected to have economic and financial consequences that would be felt by the rest of the world, as EU accounted for 23.75 percent of world’s gross domestic product.
He said the immediate effect of the referendum caused more volatility in the financial and currency markets.
“As investors started to be cautious and flee for safety, such as to the American markets, pushing down interest rates, thereby posing a dilemma for the Fed as regards its interest rate hikes,” Beltran said.
He said despite the ‘Brexit,’ the Philippine economy could manage to become one of the most robust in the region on good macro-economic fundamentals supported by robust domestic consumption.
Beltran said the country’s current fiscal position was best described as healthy as the national government debt was largely peso-denominated, minimizing the adverse impact on government and consequently the rest of the economy from exchange rate risks that might ensue due to ‘Brexit.’
“Fiscal discipline has also kept the deficit at low levels. The country is in a fiscal position for a more expansionary fiscal policy, not for stimulating consumption, however, as in the case of advanced economies in the aftermath of the 2008 global financial crisis, but for investment in both physical and human capital,” Beltran said.
The country’s external position is also strong, with robust remittances and outsourcing revenues from the UK representing a minimal portion of the total.
The National Economic and Development Authority said earlier the share of remittances from the UK averaged 5.3 percent from 2010 to 2015 and grew by 9.5 percent annually.
Annual deployment to the UK accounted for only 0.26 percent of the total in 2010 to 2014. In 2014, OFW new hires to the UK consisted mostly of nurses, at 88 percent.
Visitor arrivals from the UK accounted for 2.7 percent in 2010 to 2015 and grew by 9.3 percent.