Impact of ME crisis, Japan quake on Phl downplayed

MANILA, Philippines – New York-based think-tank Global Source Partners has downplayed the impact of the ongoing tensions in Middle East and North African (MENA) nations as well as the magnitude 8.9 earthquake and that devastating tsunami in Japan on the Philippine economy.

In a report, Global Source said that the geopolitical tensions in MENA states and the disaster in Japan are not enough to warrant a downward adjustments in the country’s economic growth prospects.

“So far, the repercussions of the negative external events do not seem dire enough for us to slash our growth forecasts for the Philippines,” the think-tank said.

Global source expects the growth in the country’s gross domestic product (GDP) to ease to 5.4 percent this year after posting a 7.3 percent growth rate last year.

“The Philippine economy has already proven to be quite resilient In the face of varied external shocks in the past, especially bolstered by a strong external position and capable monetary management. This time should not be much different,” it said.

Although 30 percent of the eight million overseas Filipino workers (OFWs) are found in MENA states, Global Source said countries experiencing geopolitical tensions in MENA states account for only about one percent of the total remittances. MENA states accounted for 16 percent of the $18.76 billion OFW remittances last year.

“We should not see a severe disruption in remittance flows unless fears that political instability will spread to gulf economies materialize and global outlook suffers considerably,” the think-tank said.

It explained that the country’s sufficiantly large remittance flows would enable its current account surplus to survive even if the price of oil hits $130 per barrel.

However, Global Source raised its inflation forecast to 5.2 percent from 4.3 percent this year or still within the three percent to five percent target set by the BSP for 2011 to 2014. A 10 percent rise in oil price would raise inflation by 0.24 percentage points.

“Yet despite volatilities in oil markets, we do not foresee a scenario where inflation could rise to double-digit levels. Crude prices are unlikely to remain abnormally high for long, while some peso appreciation might help mute price increases,” it said.

According to the study, key economies such as Saudi Arabia seem fully capable of quelling an uprising by moving quickly and firmly to prevent unmanageable crowds while an earthquake-induced slowdown in Japan appears to be temporary amid a massive reconstruction effort.

Economic and monetary authorities under the Aquino government are now reviewing the country’s macroeconomic and monetary targets in light of the impact of the devastating magnitude 8.9 earthquake and tsunami in Japan last March 11.

Bangko Sentral Governor Amando M. Tetangco Jr. earlier said the disaster would have an impact on the country’s trade, amount of money sent home by Filipinos abroad, and availment of official development assistance (ODA) funds.

“These are the areas but what extent the potential effect would depend on (several factors). Once the complete assessment has been made we will know better,” Tetangco stressed. –Lawrence Agcaoili (The Philippine Star)