Global debt watcher Moody’s Investors Service said Thursday the Philippines is among the countries that may be adversely affected by the economic and immigration policies of US President Donald Trump.
Moody’s, in a report titled Sovereign Monitor”•Focus on the Pacific Rim, noted that the business process outsourcing sector is one of the Philippines’ major sources of inflows every year.
“Costa Rica and Mexico”•as the countries most reliant on exports of high-value-added goods and services which would offer greatest onshoring potential”•would be most vulnerable in such a scenario,” Moody’s said.
“Meanwhile, India and the Philippines could also suffer in the event of policies that disincentivized foreign sourcing of business services,” it said.
Moody’s said since the global financial crisis, global trade has remained notably muted. It said a shift in the international orientation of the world’s largest economy “would exacerbate this situation, challenging output growth and potentially constraining policy space for trade-reliant and FDI-supported countries.”
Moody’s said a tightening of immigration rules in the US”•as proposed by Trump during the election campaign”•would over time dampen growth in remittances from foreign workers, which were significant for some economies in Latin America and Asia Pacific.
Moody’s said worker remittances also provide a stable source of foreign-currency earnings that support current accounts and underpin consumption and domestic economic activity.
“For sovereigns with wider current account deficits and thinner foreign reserves, or where growth is subdued, a slowdown in remittances would exacerbate such challenges,” Moody’s said.
BPO together with remittances churned in approximately $50 billion annually for the Philippines. Last year, remittances from overseas Filipinos hit a record $25.767 billion and accounted for around 10 percent of GDP that year.
Japanese global financial firm Nomura reduced its growth forecast for the Philippines next year to 6.1 percent from the previous estimate of 6.3 percent because of the potential negative impact to the domestic economy of the policies of Trump.
Nomura said the Philippines was one of the most highly exposed economies to US trade.
“In addition, if US immigration policies are tightened and outsourcing activities are reduced during Trump’s drive to bring jobs back, this could hurt both the Philippines’ current account surplus and domestic demand via lower overseas worker remittances and lower FX revenues/employment from the BPO sector, which mostly cater to US corporates,” Nomura said.
Nomura said around 30 percent of remittances from overseas Filipino workers come from the US.