MANILA, Philippines – Moody’s Investors Service said cash remittances and the income of the business process outsourcing (BPO) sector in the Philippines would be affected by a shift in US policies under the next administration.
In a research note Moody’s said the outcome of the Nov. 8 presidential elections in the US could range from a continuation of the status quo to a gradual retrenchment from trade and investment ties, and curbs on immigration.
The rating agency said remittances to Asia including the Philippines could weaken if US tightens immigration rules.
“Immigration has been another major focus of the US election campaign. A tightening in immigration rules in the US would over time dampen growth in remittances to other countries, which are significant for some Asia-Pacific sovereigns,” Moody’s said.
Moody’s said remittances from the US accounted for 3.3 percent of the country’s gross domestic product (GDP) and 9.2 percent of the current account (CA) surplus last year.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed cash remittances from overseas Filipinos inched up three percent in the first seven months after contracting 5.4 percent in July alone.
Money sent home by Filipinos abroad reached $15.32 billion from January to July, $449 million higher than the $14.87 billion in the same period last year.
During the period, data showed remittances from the Americas declined 2.9 percent to $5.47 billion from $5.64 billion.
Moody’s pointed out the country’s current account surplus as well as the gross international reserves (GIR) would help cushion the potential loss in remittance revenues.
“In addition, given the size of remittances, only a sharp slowdown associated with a severe and broad tightening of US immigration rules, which we consider unlikely, would have a material impact on private consumption,” it said.
Moody’s pointed out Asian economies whose exports to the US are focused on high value-added manufacturing products are more vulnerable to policies that disincentivize foreign sourcing of business services.
It said Malaysia, Taiwan, and Korea would be most vulnerable to efforts to repatriate high value-added manufacturing jobs, while India and the Philippines would be exposed to any policies that discourage US businesses from foreign sourcing of services.
Over a longer period of time, the rating agency said a more insular climate in the US could crimp foreign direct investment flows, as expansion of production facilities refocus on domestic locations.
However, the very small stock of US manufacturing foreign direct investment in Asia Pacific implies negligible exposure in this respect.