ANY IMPACT on the Philippines of the United Kingdom’s impending exit from the European Union (EU) will likely be indirect, economists said late last week, even as they cautioned that this could add to factors weighing on efforts to improve Philippine trade with that bloc.
Thierry Apoteker, chairman and chief economist of France-based TAC Economics, told reporters at the Bank of the Philippine Islands 2020 Economic and Financial Markets Outlook in Makati City on Thursday that Brexit could cut the UK’s and EU’s gross domestic product growth and that this event would have a “transmission to the Philippines” through trade, noting the “poorest performance” of the bloc among major Philippine trade partners.
Latest available Philippine Statistics Authority data show the EU as the fourth-biggest market for Philippine goods among economic blocs last year, accounting for 13.074% with $8.824 million, down 8.153% from 2017. It trailed East Asia (48.547% at $32.763 billion, down 5.601%), the United States (15.622% at $10.543 billion, up 9.131%) and the Association of Southeast Asian Nations, or ASEAN (15.961% at $10.771 billion, up 6.355%).
In terms of merchandise imports, the EU was the third-biggest source with $8.359 billion last year, 7.674% of the Philippines total import bill and 25.809% more than in 2017. East Asia was the biggest source of Philippine imports among economic blocs, accounting for 47.375% with $51.604 billion, up 15.511% from 2017, followed by ASEAN with a 24.998% share of $27.229 billion that was 7.741% more than the preceding year.
‘VERY DIFFICULT’ ON TRADE FRONT
“So if Europe continues to shrink, [it will be] very difficult to have better trade performance and there is some sort of transmission [to the Philippines],”Mr. Apoteker said.
Philippine-EU relations have been tenuous during the administration of President Rodrigo R. Duterte, who has railed against the bloc for its criticisms of his hardline stand against illegal drugs.
But for ING NV-Manila Senior Economist Nicholas Antonio T. Mapa, “[t]hat being said, on the trading side, the UK is not one of our major trading partners and the flows between the UK and the EU may not be affected by the former’s exit from the union.”
“The Philippines may continue these trade relations on a bilateral basis, with the real impact likely centered on trading and financial market stress,” he explained in an e-mail.
Union Bank of the Philippines Inc. Chief Economist Ruben Carlo O. Asuncion noted separately that “[a]lthough there were efforts to come to the table in the past [for a free trade agreement], the relationship of the Duterte administration and the EU have become complicated due to human rights issues.
“A free trade agreement between the two economies may actually take some time considering all the complications so far,” Mr. Asuncion said in an e-mail.
At the same time, he added that, “[h]opefully, progress in the Brexit dead end may bring more clarity to the economic state of affairs of the EU and improvement in the general sentiment within its economy and among member-states.”
“This may carry on with its dealings with particularly the Philippines as it tries to consequently improve and increase trade links and ties. These connections will definitely help and increase economic opportunities moving forward.”
Sought also for comment, Security Bank Corp. Chief Economist Robert Dan J. Roces said in an e-mail: “The direct effect of Brexit on the country may not be substantial, but we do need to watch out for knee-jerk reactions that may bring some volatility in both the financial markets and capital flows in the short term.”
Any positive impact, Mr. Asuncion said, may be seen in the peso’s subsequent performance. “Indeed, the apparent deal going down and being approved can and will initially impact foreign exchange rates,” he said. “For the case of the peso, it will bode well and contribute to the local currency’s strength.
The UK and the EU sealed a new Brexit deal on Thursday, but it failed to bag parliamentary approval on Saturday.
Reuters reported last weekend that UK Prime Minister Boris Johnson sent an unsigned letter to the EU requesting a delay to Britain’s exit from the bloc to Jan. 31 next year, beyond the Oct. 31 deadline. — Luz Wendy T. Noble