ON June 24, 2016, the world was shocked and a bloodbath at the global stock market occurred when the Britons, after intense campaigning waged by both the leavers and those who wish to remain, voted to get out of the European Union (EU).
The EU is composed of 28-member European states, like the United Kingdom, France, Germany and Italy, among others. It was created as a tool for unity, and one of its original objectives was to deter and prevent conflicts among aforementioned states. Through the years, it has effectively evolved into a group that seeks to advance the economic interests of each member-state while ensuring peace and amity in the region.
But what started the UK’s jitters about being in the EU? Basically, large segments of the UK population felt that it was grossly unfair for the country to contribute more to the EU budget, because it was faring better than the others. Why should they suffer for the nonperformance of their neighbors? Another big issue, and an extremely emotional one, was the growing number of immigrants admitted to the UK, particularly from Eastern Europe, now competing for health, educational and other social services with local Britons.
Crowded hospitals, jam-packed train stations, parks with numerous homeless foreigners and the increasing threat of terrorism have somehow created dissatisfaction among the populace about the disadvantages of EU membership. Some of the notable UK political leaders grabbed the chance to leverage on this sentiment to bolt out of the EU. And then June 24 happened.
Soon after the referendum, financial, political and social analysts jumped on the matter and provided different perspectives, some even going to the extent of making doomsday scenarios, courageous predictions about the “end of the world” for certain jurisdictions that will directly get hit by a UK that is no longer hard-core European.
The immediate effect of the Brexit vote was felt in the Philippines, when local stocks fell 1.29 percent, and about $2 trillion in value lost in the global stock markets. The peso was impacted as it depreciated to about 49.90 against the dollar during that fateful day. Local equities also heavily suffered.
Why worry about Brexit?
The first concern is the domino effect of a full Brexit implementation to the international financial markets. If the latter plunges, the Philippine market may suffer, too. The second point is trading. Our exports to the UK have not been top heavy for the past two years. Brexit can make our export situation even worst. Third, and the most important of all, is related to our immigrants and overseas Filipino workers (OFWs) in the UK. We have about 200,000 Filipinos who are living there and remittances from our overseas Filipino workers in UK amount to close to 6 percent of the total OFW remittances in 2015. The backlash of anti-immigration sentiments will also affect our nurses, caregivers and professionals who earn well in that part of the world.
Reality on the ground
But all these possible adverse effects may only be transitory. The Philippines’s strong economic fundamentals, fiscal discipline and consistently increasing domestic consumption can help it withstand Brexit.
Our economy is still considered by the international financial community as one of the most resilient and rock-steady ones in Asia. According to economists and our Central Bank, higher spending on infrastructure, greater disposable incomes and regular OFW remittances would keep our competitive growth rate, despite Brexit.
In fact, Budget Secretary Benjamin E. Diokno opined that our problems are largely domestic—the usual issues with infrastructure, doing business, agricultural productivity, and other related challenges should be the ultimate focus and not Brexit.
The anti-immigration flavor of the Brexit initiative and Trump’s America for Americans are now being linked together. Again, this smells like trouble for some international observers.
Will these events affect the Philippines in the long run? Vigilance and awareness is key. The world is, indeed, getting smaller every day. Trump or Brexit, our country must be prepared—for dire consequences or for opportunities.
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