MANILA, Philippines – The minimal trade and financial linkages between European economies and the Philippines means that the debt crisis in Greece has no direct impact on the local economy, an economist said Thursday, July 2.
Greece became the first developed country to default on the International Monetary Fund (IMF) after missing a €1.5 billion ($1.7 billion) payment on June 30, as efforts to find a compromise with its European Union (EU) lenders came to naught. (READ: Greece seeks new EU loans after IMF debt default)
Economist Romeo Bernardo of GlobalSource Partners, Incorporated said that 5 years ago, tremors from Europe’s troubled periphery countries, originating in Greece, rocked global financial markets.
“While this led to some volatility in local financial markets, the impact was temporary and the magnitude of asset price declines relatively small, reflecting the minimal direct trade and financial linkages between these economies and the Philippines. This is still true today,” Bernardo explained.
He added that the Philippine economy has since fortified its firewalls with ample international reserves and reduced external and public indebtedness, while continuously enjoying current account surpluses, low inflation, and improved economic growth.
“These help to differentiate the Philippines from other emerging markets and limit the spread of a prolonged crisis on the real sector,” Bernardo said.
There was no merchandise trade between Greece and the Philippines in 2014, the data said.
Remittances from Greece account for 1.4% of total remittances to the Philippines. However, these are from Filipino workers who are mostly sea-based. (READ: Filipinos on Greek debt crisis: ‘Slow death’)
But Bernardo warned that in a risk-off environment, the country is not exempted from capital flow reversals and financial market volatility as seen in 2010 and in the past days leading up to Greece’s debt default.
“In fact, there is much uncertainty at this time with respect to a possible ‘Grexit’ and its repercussions on the Euro zone,” Bernardo said.
“A wider European crisis that threatens the still weak recovery of EU economies will have knock-on effects on the Philippines in light of the country’s trade and financial ties to the region,” he added. – Rappler.com