Economist: Shutdown will affect Philippines if it lasts long

CEBU, Philippines - The US government shutdown will have a significant impact on the Philippine economy if it will go on for a long time. This is according to Cebuano economist and The Freeman columnist Fidel Abalos.

Local business leaders, however, think otherwise, saying the country does not depend on the US alone, but trades with other markets, as well.

Abalos said the economy will be greatly affected if Americans, who are part of the Philippines’ export market, will no longer receive their salaries and will no longer have the purchasing power to pay for goods and services from Filipinos.

Government offices across the US were ordered closed yesterday following the failure of the Republican-led House of Representatives to earn the spending bill approval of the Democrat-controlled Senate.

About a million US workers will be put into unpaid leaves as a number of government agencies will be closed due to the ordered shutdown.

“If they don’t have the money to buy goods coming from us, exports, especially the consumer goods, will be very much affected, not to mention bananas, agricultural products, furniture, electronics and semi-conductor materials,” Abalos said.

The US is considered to be a major trading partner and investor of the Philippines. As of July 2013, the US accounted for a 12.6 percent share of the total merchandise exports of the Philippines, which is equal to $610.84-million worth of earnings.

According to US Department of Agriculture - Foreign Agricultural Service (USDA-FAS) agricultural counselor Philip Shull, the Philippines exports a huge supply of agricultural products to the United States such as coconut, coconut oil, snack goods and dried mangoes.

The US also recently opened its market for Philippine bananas while the latter started to trade in US potatoes.

Abalos, however, emphasized that the impact on the Philippine economy would only be significant if the crisis in the US will last long.

He believes that the US will not let the worries on the shutdown and debt ceiling be extended, saying that the US will exert all efforts to come up with a resolution to urgently end the crisis.

“If the US was able to avert the fiscal cliff that happened in the beginning of the year, I am sure they will also have a compromise with the situation at present. I still believe it won’t last long. Maybe one week is long enough,” he told The FREEMAN.

Last January 2, the fiscal cliff bill passed on a bipartisan 257-167 vote in the US Congress to avoid a national fiscal cliff of middle-class tax increases and government spending cuts which had been scheduled to take effect with the new year.

Abalos also recalled that the same federal government shutdown happened in 1995 and 1996 due to the conflict between Democrat President Bill Clinton and the Republican- controlled Congress over funding for education, environment and public health services in the 1996 federal budget.

Clinton vetoed the spending bill that was sent by the Republican-controlled Congress, which led to a government shutdown, putting government employees to unpaid leaves and suspending non-essential services for 28 days.

“It already happened to them before. I believe they don’t want to see that happen again at all,” Abalos said. He also advised Philippine exporters to capitalize on other markets if the matter worsens.

Meanwhile, Filipino-Cebuano Business Club Inc. (FCBI) president Rey Calooy said Filipino businesses need not worry much about the US government shutdown since the country has a diversified global market.

“It is something that we have to be concerned about but the United States is not the sole market that we are relying for trade and exports,” he said, adding that the Philippines is currently developing the market in China and other Asian countries for exports.

He is optimistic that the US will exert all efforts to cope with the challenge it is faced with and will easily recover from the government shutdown. 

Mandaue Chamber of Commerce and Industry president Philip Tan echoed Calooy’s statement, saying that the Philippines has a demand-driven economy that is not exclusively dependent on the US market.

He added that the Philippines should learn to continuously adopt a self-reliant business model that does not rely on a single market.

“The global market is very big. Although the demand for exports to the US will slow down, Philippine companies can still look into other countries as potential and existing markets. When one fails, others will still be there,” he said.   — /QSB (FREEMAN)