By Lawrence Agcaoili (The Philippine Star), November 14, 2016
MANILA, Philippines – Nomura said the shocking victory of Republican presidential candidate Donald Trump last week may slash the projected economic growth of countries in the Asia Pacific region including the Philippines by as much as 50 percentage points next year.
In its Asia economic monthly report titled “Timing is everything,” Nomura said major changes in US policy under president-elect Trump would add downside risks to Asia’s growth.
Preliminary estimates of the impact of a Trump presidency on Asian gross domestic product (GDP) growth showed the expansion of the Philippines would be reduced by 0.2 percent to 6.1 percent instead of 6.3 percent next year.
Nomura said markets are pricing in a risk premium that Trump follows through his pledges to increase US trade protectionism, tighten immigration, force America’s allies to meet the full cost of the security guarantees provided by the US, and implement a zealous fiscal expansion.
“In the short run, the huge uncertainty over the future direction of the world’s largest economy will be a major blow to business confidence, not only in Asia but globally, and the financial market sell-off will feed negative second-round wealth, confidence and credit effects,” it said.
The Philippines is one of the most highly exposed economies as its share of the US as a destination of merchandise exports is the highest in the region at 15.3 percent. It runs a trade surplus of 0.7 percent of GDP with the US.
Nomura pointed out tighter US immigration policies and reduced outsourcing activities could hurt the country’s current account surplus and domestic demand via lower overseas worker remittances and lower foreign exchange revenues.
It estimates that 30 percent of cash remittances from overseas Filipinos comes from the US.
It added the anti-US rhetoric by President Duterte could also raise the risk of weaker relations with the US.
The investment bank identified mitigating factors such as the planned increase in the budget deficit ceiling to three percent of GDP instead of two percent of GDP as well as the stronger economic relations with China.
Based on the report, Korea is expected to experience the biggest reduction with 0.5 percent followed by Singapore and Hong Kong with 0.4 percent, as well as Taiwan and Malaysia with 0.3 percent.
The impact on Indonesia’s GDP growth is seen at 0.2 percent while that China, India, and Thailand is estimated at 0.1 percent.
Nomura warned rising US protectionism and heightened regional geopolitical risks would likely cause trade disruptions, less foreign direct investment and more cost pressures over time.
In the worst case, it explained trade wars could intersect with geopolitical tensions, hindering regional policy coordination and leading to major slumps in Asian exports and investment.
For his part, Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said it is “too premature” to comment on a Trump presidency especially after the president-elect made a disconnect from his campaign pledges during his acceptance speech.
Guinigundo said Trump’s campaign pledges could impact on the country’s remittances as well as exports and business process outsourcing (BPO) sectors.
“So I think it’s important to first continue to observe what the US president will announce, especially during his inauguration,” he added.
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