Macro targets intact despite Brexit

MANILA, Philippines – Macroeconomic assumptions are unlikely to be affected by the UK’s historic vote to leave the European Union (EU) once outgoing and incoming economic managers meet beginning this week.

For the Aquino administration, Budget Secretary Florencio Abad said the meeting on Wednesday will finalize the proposed P3.35-trillion national budget for next year.

“We will discuss the proposed 2017 budget...It may likely be to officially submit the (proposal) to the new administration,” Abad said in a text message last Friday.

His successor, Benjamin Diokno, said the inter-agency Development Budget Coordination Committee (DBCC) of the Duterte administration will meet on its first week in power.

Asked if the so-called “Brexit” will impact on the review of assumptions, Diokno said “in terms of trade, investment and remittances, UK does not rank high from Philippine perspective.”

Meanwhile, incoming finance secretary Carlos Dominguez agreed with another comment from Diokno, saying in an e-mail “we should remain focused on our program.”

DBCC groups the departments of Budget, Finance, Trade and Industry, the National Economic and Development Authority, the central bank and Office of the President.

It is tasked to formulate economic targets, which Diokno earlier said will be reviewed once president-elect Rodrigo Duterte takes over. 

In particular, he earlier said this year’s growth goal of 6.8 to 7.8 percent may be lowered, while the budget deficit cap may be widened to three from two percent.

The meetings come after the UK concluded a referendum that may see it formally leave the 28-member EU. More than $2 trillion was wiped out from global stocks after the vote. 

In the short term, Diokno said the peso may depreciate further against the dollar after last Friday’s plunge of 41.5 centavos to close at 46.95.

“But that, in itself, should not be a cause of concern. Our trade relations with the UK and the rest of Europe will not change,” he said.

“There will be initial shocks (from Brexit) in the short term,and hopefully, it will be short,” Diokno said.

According to separate official data, the UK accounted for 0.9 percent of total exports, 5.4 percent of cash remittances and 1.14 percent of equity foreign direct investments (FDI).

The central bank forecasts remittances to rise four percent this year and they are at 3.1 percent as of April. Exports were down 7.3 percent during the same period, far from its five-percent growth target for 2016.

FDI net inflow –  which indicates more investments entered than left – was at $1.293 billion as of the first quarter against a $6.3-billion outlook for the year.

“There are a lot of things to be done domestically,” Diokno said.

“So while the rest of the world are preoccupied with Brexit, we should focus on making the Philippine economy stronger, more competitive and nimbler,” he added.