The National Economic and Development Authority said Tuesday the United Kingdom’s exit from the European Union will have minimal impact on the Philippines.
Economic Planning Secretary and Neda director-general Emmanuel Esguerra said the country’s strong macroeconomic fundamentals made it adaptable to external volatilities, such as the exit of the UK from the EU, also known as Brexit.
“The direct effect of Brexit does not seem substantial, even as we expect that domestic financial markets will experience volatility and huge swings in capital flows in the short term due to uncertainty. Despite this knee-jerk reaction, the economy stands on solid footing given its strong macroeconomic fundamentals,” Esguerra.
Neda said the UK economy accounted for 2.4 percent of world economy in purchasing power parity terms in 2015, and direct Philippine exposure to the UK economy was minimal.
Merchandise exports and imports between the UK and the Philippines was small, accounting for only 0.9 percent and 0.5 percent of the total in 2010 to 2015, respectively.
“However, the indirect effects via its impact on the EU bloc and the knock-on effects on the rest of the global economy bears watching. Diversification of export markets and products, increasing competitiveness and strengthening domestic demand would therefore be important,” Esguerra said.
He said in terms of external debt, borrowings from EU countries including the United Kingdom, France and Germany amounted to $6.8 billion or only 8.8 percent of the country’s total external debt.
The country’s debt stock remained largely denominated in US dollar (63 percent) and Japanese yen (12.4 percent), according to Neda.
“As such, the depreciation of the euro and UK pound is not expected to have significant positive effects on debt service,” said Esguerra.
Neda said that in terms of investments, net equity placements from the UK accounted for 4.9 percent, on average, from 2010 to 2015. However, it noted a 20.2-percent jump in share in 2015.
Meanwhile, the share of remittances from the UK averaged 5.3 percent from 2010 to 2015 and grew 9.5 percent annually.
Annual deployment of Filipino workers to the UK accounted for only 0.26 percent of the total in 2010 to 2014. New hires to the UK consisted mostly of nurses, at 88 percent in 2014.
Tourist arrivals from the UK accounted for 2.7 percent in 2010 to 2015, growing by 9.3 percent annually.
Tourist arrivals from the UK showed resilience in times of adverse events during the period.
Outgoing Finance Secretary Cesar Purisima said despite the strong macroeconomic fundamentals of the Philippines, it would be subject to volatilities following the exit of UK from EU.
“In light of the United Kingdom voting to leave the European Union, the world has entered uncharted waters. Its immediate repercussions will roil the global financial markets and affect all countries, without exception but with varying degrees,” Purisima said in a statement.
“The improvement in the fundamentals of the Philippine economy will put us in good stead but should not lull us into overconfidence. The Philippines is taking a cautiously vigilant stance on the Brexit’s effects on our shores—gradual and minimal at this stage,” Purisima said.