Japan slowdown won’t derail Phl growth

MANILA, Philippines - Japan’s economic slowdown is expected to have a minimal effect on the Philippines, Moody’s Investors Service said in a report.

“Japan is the Philippines’ largest trade partner. Recent data shows that the current recession in Japan has had only a limited effect on the Philippines’ overall growth conditions and export performance,” Moody’s said.

Japan slipped back into a recession during the third quarter, during which economic growth contracted by 1.9 percent despite the aggressive spending by the government and reforms eyed by Japanese Prime Minister Shinzo Abe.

Japan was the primary destination of Philippine exports last year, accounting for 21.16 percent of shipments, government data showed. At the same time, Japan was the Philippines’ third largest source of commodities in 2013, supplying 8.46 percent of the country’s total imports.

Moody’s has tagged the “lackluster growth outlook in Japan” as one of the main external risks to Philippine economic growth.

Citi, in a separate report, warned Japan’s recession may mean slower trade activity and lower investments for the Philippines.

“The direct effect of Japan’s third quarter recession—on buying Philippine goods for its domestic consumption—would be modest compared to indirect effect on global trade and investments which may slow down materially,” Citi said.

However, this should not affect remittances sent home by Filipinos living and working in Japan, Citi said.

“If we use the 2009 GFC (global financial crisis) as extreme yardstick of OFW remittance risk, flows from Japan back them still managed to rise by over 30 percent,” Citi said.

The bank noted remittances from Japan make up an annual average of 4.5 percent in the five years to 2013 of the total funds sent home by overseas Filipinos.