The Trump China Trade war has created enough consequences.
Already, major economies are forecasting slower growth as a result of lower trade volumes between the US and China due to raised tariffs that hamper free trade. This forces companies, especially those invested in China and the US to rethink their options and cut their own growth forecasts.
Singapore, Taiwan, the European Union all have slower growth prospects due to lower global trade. In a latest announcement by the European Union, the forecast for the European area for 2019 is at 1.2% and for 2020 it is at 1.4%
Will this impact our Overseas Filipino Workers? Perhaps. Lower growth in these countries means less hiring for foreign workers, less money for tips and possibly, less over time pay for the employees. Note that when global economic growth is high, our remittances are also higher. Remittances are seen as direct cash infusion into our economy.
Despite this slowdown, analysts still predict a 6% growth for the country in 2019, on the back of much lower inflation. Security Bank says so in a statement:
Likewise others note accelerated infrastructure spending and investment growth that may catch up after the slower spending resulting from a delayed budget.
What it means for the Philippines is that we will need to boost our local economy by spending while keeping inflation or costs low.
High inflation that catches up with the growth, such as the kind we experienced last year at 5-6%, eats into growth and hinders it, rendering it incapable of supporting. With these lowered down to around 2% in recent onths, and forecasted to about 1.8% by end of the year, we can expect positive growth and an increase in family incomes since expenses will be lower. When this happens, the economy keeps expanding.
A good sign is that last year’s current account deficit has swung into a surplus in the first half of the year and that our gross international reserves have hit the record high 85 Billion dollars. This gives enough confidence to weather coming storms despite, possibly, lower remittances from OFWs.
Likewise, our ability to expand asian trade with China, Japan and Korea is tthe kind that does not cost as much to do and allows a wide range of products to be traded.
Noteworthy is the higher levels of banana exports we have recently seen, and the possibility that other commodities such as young coconut, durian and other fruits may see exports. More on that in the next columns.