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By Melissa Luz T. Lopez
Senior Reporter

PHL ‘most vulnerable’ to Trump policies

Posted on November 08, 2016

THE PHILIPPINES has the “most to lose” among Asian countries should Donald J. Trump win the US presidency this week, an analyst at Capital Economics said, as worker remittances and business process outsourcing (BPO) -- two key growth pillars of the economy -- could take a beating from Mr. Trump’s perceived protectionist streak.

In a Nov. 7 report released yesterday, titled “What Would a Trump Victory mean for Asia?,” Capital Economics said the Philippines would likely suffer the biggest blow should the Republican candidate emerge victorious from the Nov. 8 presidential elections.

“The Philippines would be the biggest loser if Trump followed through on his threat to punish American companies that outsource jobs abroad,” senior Asia economist Gareth Leather said in the report.

“The Philippines has a thriving business process outsourcing sector, which last year brought in revenues equivalent to around 10% of GDP (gross domestic product).”

The BPO sector currently employs roughly 1.15 million Filipinos and has helped offset the sustained slump in merchandise exports.

In public speeches during the campaign, Mr. Trump has stressed an “America first” agenda that include barring immigrants from coming to the US, driving away Muslims and building a wall along the border with Mexico.

“The Philippines would also lose out if Trump pushed ahead on plans to ban immigrants from ‘areas of the world where there is a proven history of terrorism against the US or our allies’,” Mr. Leather added.

“Remittances from Filipino workers in the US are the equivalent to around 3% of the Philippines’ GDP.”

Personal remittances, which include both cash and in-kind transfers of overseas workers to the Philippines, were equivalent to nearly a tenth of the country’s GDP in 2015, bigger than the 8.5% share seen in 2014.

Mr. Trump is running against Democrat Hillary R. Clinton, endorsed by incumbent President Barack H. Obama who steps down after two terms.

A Trump presidency in the US is likely to drive “short-term volatility” across emerging Asian economies given policy uncertainty, Capital Economics said, but is unlikely to end with a “sustained sell-off” across Asian markets.

The peso returned to a seven-year low yesterday to close at P48.585 versus the dollar, while the bellwether Philippine Stock Exchange index similarly dropped 0.42% to 7,197.19 in Monday’s trading. Analysts have pointed to heightened market jitters over the much-anticipated US elections that take place Tuesday (Wednesday in the Philippines).

However, Mr. Leather said foreign investors are taking a “fairly sanguine view” of the Trump effect in Asia so far, with regional currencies remaining broadly stable.

Emerging Asian economies have also grown “less vulnerable” to external events, the analyst noted in the report.

“In any case, we think the most likely scenario is that Trump would use the threat of tariffs as leverage in negotiations,” Capital Economics said, referring to his proposal of a 45% tariff on all US imports from China, alongside his “hard-line stance” towards international trade deals like Mr. Obama’s Trans-Pacific Partnership and the Korea-US free trade agreement.

Also seen as a big risk is Mr. Trump’s suggestion for South Korea and Japan to make their own nuclear weapons -- a development that could trigger a “dangerous proliferation” of such armament across the region.

His proposed pull out of American troops from Asia could also shake up the region’s geopolitical equation.

“If the US takes a backward step, it could embolden China to take a more aggressive stance on its territorial disputes in the South China Sea and possibly Taiwan. Even if a conflict is avoided, a rise in tensions could drag on sentiment, hurting consumption and investment,” the report said.

“The impact of a Trump victory on Asia would clearly depend on whether he followed through on his more radical campaign promises.”

The report cited Taiwan and South Korea as two other economies perceived to be most affected by a shift in policies with Mr. Trump’s rise to power.

In contrast, Indonesia and Pakistan -- “with few direct ties to the US” -- are expected to be unscathed from policies under a Trump presidency.