NEDA says PHL exposure to ‘Brexit’ minimal

Posted on June 29, 2016

THE United Kingdom’s referendum result backing exit from the European Union (EU) will have a “neglible” effect on the Philippines because of minimal exposure and strong macroeconomic fundamentals, outgoing Socioeconomic Planning Secretary Emmanuel F. Esguerra said Tuesday.

In an interview with reporters, Mr. Esguerra said that investment and trade with the UK is “relatively small.”

He said that initial numbers also don’t indicate that remittances and inflows from Filipinos residing in that country will be drastically affected.

“In terms of the relative shares of the UK itself, they’re not that significant to affect the Philippines adversely,” Mr. Esguerra said at the sidelines of the Economic Journalists Association of the Philippines’ briefing on the National Economic and Development Authority’s (NEDA) AmBisyon Natin 2040 initiative.

At the same time, he urged caution on the immediate, short-term effects of the unprecedented “Brexit,” as the first withdrawal from the EU has shaken markets worldwide with huge swings in capital flows on the horizon.

“Of course, we should be watchful because I think the immediate effect will be in terms of volatility sa market,” he said. “But I think the Bangko Sentral ng Pilipinas is capable, competent enough to deal with whatever developments.”

A separate statement issued by the NEDA also quoted Mr. Esguerra as saying that “despite this knee-jerk reaction, the economy stands on solid footing given its strong macroeconomic fundamentals.”

Mr. Esguerra in the said statement also warned of “indirect effects” on the EU bloc, and said that “diversification of export markets and products, increasing competitiveness, and strengthening domestic demand would therefore be important.”

The UK economy accounted for 2.4% of world gross domestic product in 2015. Merchandise exports and imports between the UK and the Philippines also accounted for only 0.9% and 0.5% of the total in 2010 to 2015.

In terms of external debt, borrowing from the EU countries of the UK, France and Germany amounted to $6.8 billion, or 8.8% of the total. Because of this, Mr. Esguerra said the depreciation of the euro and the pound is “not expected to have significant positive effects on debt service.”

In terms of investment, the statement noted that net equity placements from the UK accounted for 4.9%, on average, from 2010-2015. “But worth noting is the jump to 20.2% share in 2015,” it said.

Meanwhile, the share of remittances from the UK averaged 5.3% from 2010 to 2015. Annual deployment of overseas workers to the UK only accounted for 0.26% of the total from 2010 to 2014.

Tourist arrivals from the UK accounted for 2.7% in 2010 to 2015, NEDA said. -- Vince Alvic Alexis F. Nonato