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Facing New External Challenges

By: Alvin P. Ang, PhD
Last week I sat in a panel on a seminar organized by the Japan Center for Economic Research (JCER) on Asian economies in the midst of the new global environment. Together with research economists from Japan, India, Indonesia and Thailand, we tackled how the Trump Effect and the rise of new nationalism will affect Asia and our individual economies. We have concluded that these new headwinds will not stop Asia, particularly Southeast Asia, to be one of the growth centers of the world. Not because Southeast Asia is better, but because the rest of the world will remain sluggish due to slow global trade. Hence, the America First policy will most likely weaken further world trade. A weaker world trade, in turn, could further slow the economy in China.
Slower world trade will significantly affect economies that are part of the supply chain to China. While the Philippines is part of this supply chain, our exposure is relatively smaller compared to our Asean neighbors. Export of goods has become less significant in the Philippine economy, growing only by 40 percent in 15 years, as against the 150-percent growth of Indonesia and the 400-percent growth of Vietnam in the same period. In a way, since the country is relatively detached to the global trade, this will be a plus factor in another downturn.
The exports of goods-led path taken by our neighbors was not the path we took. Instead, our focus went to service exports and the sustained growth of remittances. In a much shorter period of 10 years, the business-process outsourcing (BPO) revenues grew by about 150 percent, ending 2016 at about $22 billion. Overseas Filipino workers’ remittances, on the other hand, still posted growth of 5 percent in the last three years, contributing $28 billion to the economy. Finally, tourism revenues have started to contribute significantly. We estimate its contribution to be about $5 billion from about 6 million international tourists who visited the country last year. All told, these foreign-exchange sources have strengthened our foreign-exchange reserves position.
Read the full article at http://www.businessmirror.com.ph/facing-new-external-challenges/