Harris presidency more beneficial to PHL economy

A Kamala Harris presidency would be more beneficial to the Philippine economy, analysts said, noting the potential impact on monetary policy, trade and other economic indicators.

“The implications of a Trump or Harris presidency on the Philippines can vary significantly, particularly in terms of interest rates, foreign exchange, and the overall economy,” Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said.

Republican candidate Donald J. Trump faces Vice-President and Democratic nominee Ms. Harris in the US presidential elections on Nov. 5.

More than 75 million Americans have already cast their ballots, according to the Election Lab at the University of Florida, Reuters reported.

Mr. Ravelas noted the impact of the US elections on the US Federal Reserve and possibly the Philippines’ own monetary policy.

“A Harris presidency is expected to maintain a more stable economic policy, similar to the current administration. This could lead to a more predictable interest rate environment, with the US Federal Reserve potentially continuing its rate-cutting cycle,” he said.

The Bangko Sentral ng Pilipinas (BSP) kicked off its easing cycle in August, delivering a total of 50 basis points (bps) worth of rate cuts since then. BSP chief Eli M. Remolona, Jr. has also signaled further easing moving forward.

The Fed likewise began cutting interest rates in September, its first time reducing rates in four years. It delivered a larger-than-expected half-percentage-point cut, bringing the Fed funds rate to the 4.75%-5% range.

Markets are anticipating further rate cuts from the US central bank, but at a more modest pace of 25 bps.

On the other hand, Mr. Ravelas said a Trump win could “lead to higher interest rates in the US due to potential inflationary pressures from increased fiscal spending and tariffs.”

The former US President plans to implement stringent trade restrictions including a 10-20% universal tariff on all imports as well as a tariff of 60% or higher on Chinese goods.

On the other hand, Ms. Harris has opposed the concept of a universal tariff, instead favoring “strategic tariffs to help workers or punish trade adversaries,” Reuters reported.

The Philippine economy is seen to more likely thrive under a Harris presidency amid her less restrictive trade policies, analysts said.

“The Philippine economy could benefit from policy continuity under Harris. Her administration is likely to focus on strengthening economic ties and maintaining stable trade relations, which could support Philippine exports and the business process outsourcing (BPO) sector,” Mr. Ravelas said.

“A Trump presidency could introduce more economic uncertainty and potential challenges for the Philippines, while a Harris presidency might offer more stability and continuity in economic policies.”

ANZ Research said that while both candidates’ platforms are restrictive on trade with China, each have different approaches.

“Trump’s stance tends to be ‘American only,’ while Harris will likely extend Biden’s ‘friend shoring,’” it said in a report.

Data from ANZ showed that during the Trump and Biden terms, the United States imported less from mainland China and more from the rest of Asia. However, a second Trump term would “likely target Asia more broadly.”

“Biden’s administration has maintained the tariffs imposed under Trump. He also strengthened export controls,” it said.

“This policy mix has changed global and Asian trade patterns. Between June 2018 and September 2024, US goods imports from mainland China slumped by 20%. The share of US total imports from mainland China fell 8% to 14%.”

ANZ noted that Ms. Harris is likely to favor the Indo-Pacific Framework proposed by Mr. Biden, while Mr. Trump is not in support of multilateral agreements, citing his withdrawal from the Trans-Pacific partnership.

“Trump’s current campaign proposals are more severe than the actual trade policies he implemented as president. If his current proposal of a 60% tariff on all Chinese imports and a 10-20% universal baseline tariff become a reality, the average US tariff would rise to 17.7%, a level not seen since 1934,” ANZ said.

This would have consequences such as higher prices for US consumers; margin compression for Chinese exporters and US importers; as well as a negative effect on the rest of Asia despite a supply-chain diversion from China, it added.

Mr. Ravelas noted that Mr. Trump’s protectionist policies “could hurt the Philippine economy by reducing exports to the US and affecting remittances from Filipino workers in the US.”

The United States remains the top destination of Philippine-made goods. In August, it accounted for close to 20% of exports during the month.

The world’s most powerful economy also typically accounts for nearly half of overall monthly remittances to the Philippines.

Meanwhile, the peso is also seen to be under less pressure if Ms. Harris assumes the presidency.

“The Philippine peso might experience less volatility under a Harris presidency. A stable US economic policy could lead to a more predictable exchange rate environment, benefiting the Philippine peso,” Mr. Ravelas said.

Under a Trump administration, the local currency could depreciate against the dollar if US interest rates rise.

“Investors might prefer the higher returns in the US, as well as the impact of tariffs could lead to competitive devaluation.”

The peso closed at P58.10 per dollar on Thursday, rising by 13 centavos from its P58.23 finish on Wednesday. Peso trading was closed on Friday due to the All Saints’ and Souls’ Day weekend.

The peso has returned to the P58-per-dollar level since August.

Source: Business World

PHL’s economic freedom improves

The Philippines’ ranking jumped nine spots in a global index on economic freedom due to higher scores in trade freedom and property rights, according to the Canada-based think tank Fraser Institute.

The country placed 59th out of 165 economies in the conservative think tank’s Economic Freedom of the World index which uses 2022 data. Its ranking improved from 68th place in the previous index which used 2021 data.

This was the Philippines’ highest placement since it ranked 57th in 2016.

The country received a score of 7.01 out of 10, a tad higher than the revised 6.93 in 2021. Its latest score was higher than the global average of 6.56.

Among Asia-Pacific jurisdictions, the Philippines lagged behind Hong Kong (8.58), Singapore (8.55), New Zealand (8.39), Australia (7.98), Japan (7.90), Taiwan (7.71), Malaysia (7.56), and South Korea (7.52).

However, the Philippines was ahead of Brunei Darussalam (6.99), Indonesia (6.96), Thailand (6.94), Mongolia (6.86), Cambodia (6.85), Vietnam (6.23), China (6.14), Papua New Guinea (6.02), Fiji (5.99), Laos (5.86), Timor-Leste (5.77), and Myanmar (4.54).

The Philippines had its highest score in the sound money category with 9.04, ranking 11th out of the 164 other countries. But it was down from 9.51 in 2021.

The country — yet again — performed worst in legal system and property rights with a score of 4.51, slightly higher than 2021’s 4.49.

The Philippine score in size of government declined to 7.83 from 7.91 in 2021. Among subcategories, it scored 8.83 in government investment and 6.91 in government consumption.

“The lesson from this is clear: a small fiscal size of government is insufficient to ensure prosperity,” Fraser Institute said. “The other areas of economic freedom — the rule of law and property rights, sound money, trade openness, and limited regulations — are also required.”

Manila’s score in the freedom to trade internationally category rose to 7.14 from 6.53 in 2021.

Its score in regulation slipped to 6.51 from 6.62 in 2021. Among sub-categories, the Philippines had its lowest score at 4.59 in business regulation and the highest score at 8.27 in credit market.

Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University, said fiscal consolidation remains a key problem for the government’s economic policy.

It leads to “too much intervention in the markets,” he said in a Facebook Messenger chat.

Finance Secretary Ralph G. Recto in September said the Marcos government was on track with its medium-term fiscal consolidation program even as its debt remained at a record high due to pandemic-related loans.

“There is limited participation from the private sector as much of the economic growth is due to government spending,” Mr. Lanzona said. “Instead of the government spending directly, they should create the environment that allows greater public sector participation.”

Hong Kong topped the economic freedom index, followed by Singapore, Switzerland, New Zealand, the United States, Denmark, Ireland, Canada, Australia, and Luxembourg.

At the bottom of the list was Venezuela, followed by Zimbabwe, Sudan, Syria, Algeria, Myanmar, Argentina, Iran, Libya and Yemen.

The think tank said Ukraine (-0.94) and Moldova (-0.63) — the two nations that have either been invaded (Ukraine) or threatened militarily — saw the largest declines in ratings between 2021 and 2022.

The rating for Russia was also down (-0.30). “It may be obvious to point out, but war is very bad for economic freedom,” the think tank said.

Another important development in the index was the declining condition of Hong Kong, whose rating fell “precipitously” to 8.58 in 2022 from 9.05 in 2018.

“This is nearly half a standard deviation decline in just four years,” it said. “Thus, we continue to sound the alarm bell about signs of declining economic — and other — freedoms in Hong Kong.”

Sonny A. Africa, executive director of IBON Foundation, said the conservative index’s metrics “come from a narrow prioritization” of market freedoms and property rights, which “don’t align with a broader and more inclusive understanding of economic well-being and development.”

“This is why the so-called economic freedom scores are so inconsistent with the economic realities faced by the majority of Filipinos who remain poor and marginalized,” he said via Messenger chat.

Mr. Africa said the government’s fiscal consolidation was “evident in the distribution of the country’s declining score in size of government.”

“The relatively high score in government investment reflects the persistent emphasis on corporate-friendly infrastructure and pork barrel hard projects, while the lower government consumption reflects insufficient social services and safety nets,” he said.

“The increase in the score in the freedom to trade internationally category merely reflects continued liberalization that has worked so much against domestic agricultural and industrial development for decades,” he added.

Mr. Africa said the country’s nine-notch improvement in the index was “inconsistent” with important social indicators on a trajectory of decline.

The number of self-rated poor Filipino families has increased to 16.3 million or 59% of total families in September, while the number of households without savings rose to 19.2 million or 71% of total households in the third quarter, Mr. Africa explained, citing data from the Social Weather Stations and the central bank.

While the Philippines was ahead of Indonesia, Thailand, Vietnam, Laos, and Myanmar in the index, it has “much worse food insecurity than all these,” he said.

Mr. Africa cited a United Nations Food and Agriculture Organization report indicating that the Philippines has 44.1% of its total population suffering moderate or severe food insecurity, “which is more than the food insecurity of Indonesia (4.9%), Thailand (7.2%), Vietnam (10.8%), Laos (36.3%), and Myanmar (32%).”

“The Fraser Institute’s index focuses narrowly on market-oriented indicators such as trade freedom, property rights, and business regulation which are presumed to improve the economy,” Mr. Africa said. “In practice, these measures favor a deregulated economy that benefits large corporations and wealthy individuals at the expense of broader social development outcomes.”

In the report, the Fraser Institute noted that high-income industrial economies generally rank quite high for legal system and property rights, sound money, and freedom to trade internationally.

Their ratings were lower, however, for the size of government and regulation.

Source: Business World

August unemployment rate drops to 4%

An influx of women workers led to a drop in the jobless rate in August, the chief of the Philippine Statistics Authority (PSA) said.

Unemployment fell to 4.0 percent from 4.7 percent and 4.4 percent, respectively, a month and year earlier, the PSA reported on Tuesday.

This was equivalent to 2.07 million Filipinos without jobs, 310,000 less than July's 2.38 million and August 2023's 2.22 million.

"One major factor was that a lot of women entered the labor force ... and a substantial number of them were absorbed," National Statistician Claire Dennis Mapa said.

"We have more female workers joining the labor force," he noted.

Mapa said that about 1.04 million female workers joined the labor force and about 1.03 million had found jobs.

The underemployment rate, which counts those looking for more work or an extra job, also improved to 11.2 percent in August from July's 12.1 percent. It was also lower than the year-earlier 11.7 percent.

The number of the underemployed was estimated to be 5.48 million.

The labor force participation rate (LFPR) — a measure of the number of working-age Filipinos who are actively engaged in the labor market — improved to 64.8 percent from 63.5 percent in July and August 2023's 64.7 percent.

This was equivalent to 50.29 million individuals ages15 years old and over who were in the labor force.

Employment rose to 96.0 percent, higher than the 95.3 percent recorded in the previous month and the year-earlier 95.6 percent.

The number of individuals with jobs reached 49.15 million, up from July's 47.70 million and August 2023's 48.07 million.

The services sector continued to account for the bulk of employment with a share of 63.3 percent, followed by agriculture and industry with 19.3 percent and 17.4 percent, respectively.

Wage and salary workers comprised 62.4 percent of the employed, followed by the self-employed (28.3 percent), unpaid family workers (6.9 percent) and those in family-operated farms or businesses (2.5 percent).

The private sector was said to account for 76.4 percent of wage and salary workers, or 47.7 percent of all Filipinos with jobs, while state-owned firms employed 16.2 percent of wage and salary workers, or 10.1 percent of the total employed.

The youth LFPR fell to 33.2 percent from 34.9 percent in August and 34.2 percent a year ago, but youth employment rose to 88.0 percent from 87.7 percent and 85.2 percent a month and a year earlier, the PSA said.

Socioeconomic Planning Secretary Arsenio Balisacan welcomed the latest job market data and said that these were an indication of "a more vibrant holiday season."

He noted the need for adequate investments in human capital and priority sectors, and also pointed to the expected finalization of the Trabaho Para Sa Bayan (Jobs for the Nation) plan by the end of the year.

Balisacan also called for the swift passage of the Konektadong Pinoy (Connected Filipino) bill, highlighting its potential to improve the information and communications technology, education, health and agriculture sectors.

Fast-tracking key infrastructure projects in energy, logistics and connectivity will also help boost job-creating investments, he added.

"With the government's continued focus on attracting strategic investments and the timely passage of key reforms, the Philippines is well-positioned to translate its promising macroeconomic fundamentals into long-term prosperity for its workforce and economy," Balisacan claimed.

Source: Manila Times