International credit raters edgy over Trump

MANILA, Philippines - Debt watchers Fitch Ratings and Moody’s Investors Service said the victory of Republican Donald Trump raises global uncertainties affecting trading partners including the Philippines.

In a report titled “ Trump’s election raises global uncertainties; trade, foreign policy switches could have a sizeable impact,” Fitch said the shocking victory of Trump over Democrat candidate Hillary Clinton would have global ramifications.

“The US is the world’s largest economy and its pre-eminent diplomatic and military power. Uncertainty over future US policy automatically creates uncertainty for many Fitch-rated sovereigns, to varying degrees,” it added.

Trump’s campaign rhetoric includes greater protectionism and a more unilateral foreign policy.

Fitch pointed out a sharp trade policy shift would be a key risk as Trump’s plans to rebuild the American economy by fighting for free trade reflect his dissatisfaction with some existing free trade deals including the North American Free Trade Agreement (NAFTA).

Fitch said a major shift toward trade protectionism in the US could have a significant impact on Asian economies despite the fact that Asian exporters have become less directly dependent on the US over the last two decades.

China is now the largest trading partner of Asian economies, but the US is the largest market for China.

“Disruption to trade between China and the US would have ramifications for the region. Countries including Korea, Singapore, the Philippines and Thailand are significant suppliers of intermediate goods — such as electronic and automotive components — to China,” Fitch warned.

It explained the continued strengthening of the dollar and rising concerns about Trump’s anti-globalization sentiments have seen some sovereign bond yields of emerging markets including the Philippine rise sharply while the currencies continued to weaken.

“If sustained, this would be negative for those emerging markets with significant foreign currency debt burdens: it could weigh on commodity prices over time,” Fitch said.

It added immigration policy could impact other sovereigns via remittances.

For its part, Moody’s said the Philippines would be among the hardest-hit economies should the US adopt protectionist trade policies.

The debt watcher pointed out the protectionist policy of Trump could dampen the prospects of the country’s business process outsourcing (BPO) sector.

“India and the Philippines could also suffer in the event policies that disincentivized foreign sourcing of business services,” Moody’s said in the report dated Nov. 16.