By Elijah Joseph C. Tubayan
Reporter
THE PHILIPPINE ECONOMY could end up with a net gain in the trade war between the US and China as the world’s biggest economy seeks other sources of cheaper goods, the National Economic and Development Authority (NEDA) said late Tuesday.
Socioeconomic Planning Secretary Ernesto M. Pernia said that foreign sales of electronic products — the country’s top export — could particularly benefit from the current situation, among a few other goods.
Latest available state data show that foreign sales of electronic products grew 5.4% year-on-year to $21.613 billion as of July even as overall merchandise export sales dipped 2.8% to $38.744 billion in the same comparative seven months.
“Actually, we did an initial simulation analysis of the impact and it’s actually going to result in a net positive effect for the Philippines. That is because our main exports to the US consist of electronic equipment and transport equipment as well as other non-agricultural products, chemical and rubber products and ferrous metals, and mineral products as inputs to their production,” Mr. Pernia told reporters on the sidelines of the Philippine Economic Briefing at the Bangko Sentral ng Pilipinas complex late Tuesday.
“Our estimate is the net effect on our GDP (gross domestic product) is something like $34.7 million in 2018,” he added, adding that this increment can be expected to rise to $42.2 million annually until 2022 or 2023.
He said the amount reflects only potential increased US demand for Philippine products.
“They import from us, but because of the (trade war) they can’t import anymore from China. They will import more from us,” said Mr. Pernia.
“Because of the war between China…the US now needs another source of electronic products, which we produce, including transport equipment so at least it’s not going to be a negative issue,” he explained. “I think we’re competitive. Maybe even if we’re a bit more expensive, but because the source in China is not available so they (US) have to get more from the Philippines.”
Sought for comment, however, Nicholas Antonio T. Mapa, a senior economist at ING in the Philippines, said the country may not automatically benefit from the trade war.
“The export sector is heavily dependent on the electronics sector. Although it’s too early to gauge whether our electronic products — which are usually components for bigger and more sophisticated electronic devices — will benefit or not from the ongoing trade spat between the two largest economies. Unless the US brings in semiconductors and components for smartphones for assembly we may have to find a conduit partner — like Taiwan or South Korea — who would then sell finished products such as tablets and smartphones (with PHL components) to the US,” he said in an e-mail on Wednesday.
Aside from potential higher exports to the US, the Philippines can also benefit from cheaper imports from China.
“On imports, we may benefit from cheaper Chinese goods if the borders do tighten between the US and China as the mainland looks to divert their products here at bargain costs. Once again, might still be too early to substantiate the full impact of the trade war but one thing we might need to expect would be shifts in the global supply chain and we may need to monitor this particular development going,” he said.
Michael L. Ricafort, economist from the Rizal Commercial Banking Corp. said in an e-mail: “Trade war between US and China could benefit the Philippines if the US and China import more from the Philippines (Philippine exporters as alternative suppliers, as both countries reduce imports from each other).”
“China could also export more to the Philippines (instead of selling to the US at higher tariff rates), with the latter benefitting from lower prices amid more supply,” he added.
Finance Secretary Carlos G. Dominguez III, however, had said separately on Tuesday that the escalating trade war may weigh on the peso’s value against the dollar and spur interest rates.
“We are also experiencing the actual trade war, because last year we were only experiencing the threats, now it’s real. When you have a trade war, at lot of uncertainty is introduced into the world economic system, and banks react to that increased uncertainty by increasing interest rates, so that’s happening. So that has further eroded the value of our peso,” said Mr. Dominguez.
Philippine Statistics Authority data show the United States was the Philippines’ top export market in the seven months to July, followed by Hong Kong, Japan and China.
The same period saw China as the Philippines’ top import source, followed by South Korea, Japan, Thailand and the US.

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