Potentially tighter immigration rules in the US under President-elect Donald Trump could prove disruptive for emerging markets (EMs) like the Philippines and erode the gains the country has, thus far, achieved in terms of its credit standing.
On Monday the international credit watcher Moody’s Investor Service said the credit implications of the US election outcome will rest in part on future US trade, immigration and security policies.
Donald Trump has advocated for tighter immigration rules and a review of trade relations with other countries that sparked apprehension among economies closely linked with the US in terms of labor and trade, such as the Philippines.
“A policy shift that would disrupt immigration into the US would be credit negative for countries more highly dependent on remittance flows, including El Salvador, the Philippines and Vietnam,” Moody’s said.
So-called credit negatives are events or influences resulting to a deterioration or downgrade of a country’s credit standing. At present, Moody’s rates the Philippines a “Baa2” economy with a stable outlook.
The foreign-currency earnings of Filipino migrant workers have long financed consumption activities in the country, equal to more than $20 billion worth of funds that helped push the
economy forward for decades.
Latest data from the Bangko Sentral ng Pilipinas (BSP) show cash remittances totaling $2.3 billion in August alone this year, 16.3 percent more than last year’s $1.99 billion.
Total remittances in the first eight months hit $17.64 billion.
Remittances account for some 10 percent of the country’s local output or the GDP.
Moody’s also warned of trade complications resulting from a possible policy shift in the US affecting its close trade partners.
“A policy shift that would materially diminish US trade would have negative credit implications for its closest trading partners, particularly Mexico, among other Central American states,” Moody’s said.
The US is one of the country’s largest trading partners.
Bank of the Philippine Islands (BPI) associate economist Nicholas Antonio Mapa said that, while the Philippines could be affected by the shape of Trump’s economic agenda, the $292-billion southeast Asian economy has enough resilience and buffers to weather the storm.
“The Philippines is connected to the world economy and the repercussions of an America for America would find its way to our shores. Trade, of course, is the most obvious link, as the US is our second-largest trading partner. Remittances, an integral part of our growth engine, may also be vulnerable. But, I suspect, remittances will continue to find their way back home, as they always do,” Mapa said.
“[The Philippines] is still set to weather the storm better than most of its peers, given robust consumption and investment momentum, fiscal space and government spending and a still low inflation and interest-rate environment,” he quickly added.