MANILA, Philippines – The decision of President Duterte to sever military and economic ties with the US as it veers toward China elicited mixed reaction.
Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said the country’s strong macroeconomic fundamentals would help fend off uncertainties caused by the pronouncements made by Duterte.
“I think it is also important to note that one, our macroeconomic fundamentals continue to be a great support to any of the uncertainties in the market,” he said.
The economy grew by seven percent in the second quarter from 6.8 percent in the first quarter due to election-related spending.
On the other hand, inflation averaged 1.6 percent in the first nine months, below the two to four percent target set by the central bank.
“It’s too early and too premature to really see the impact of the pronouncements. It’s also important that we take note of our strong fundamentals and increasing diversification of our economy and the greater flexibility of our economy,” he said.
In a dramatic foreign policy shift, President Duterte announced in Beijing that he is cutting military and economic ties with the US.
“We don’t have the benefit of the policy translation of those pronouncements of the President in China. Those are pronouncements he made, how it’s going to be translated into policies is something else. I think we should wait until the President comes back, meets the cabinet and comes down to translating those pronouncements into actual policy,” he said.
Until such time, Guinigundo pointed out it is difficult to ascertain on how this is going to play out and impact on both the economic and military ties between the Philippines and the US.
“Of course, the US and the Philippines have a long history of economic and military ties. Now how the pronouncements of the President will impact on this long history of US and Philippines’ economic ties will have to wait until the government is able to provide us with greater detail on how this going to be done in terms of policies,” he said.
Guinigundo said the Philippines has successfully diversified in terms of external trade by entering into several free trade agreements (FTAs) by itself or in partnership with the Association of Southeast Asian Nations.
For its part, BMI Research – a unit of Fitch Group – said President Duterte’s visit to China marks a dramatic reversal in the Philippines’ foreign policy stance from one that is US-centric, to one that is pivoted toward China.
“We highlight that this will not only undermine Washington’s geopolitical influence in the region but will also create numerous opportunities on the economic, investment, and trade fronts between China and the Philippines. Japan and Russia will likely see few changes in their bilateral engagement with the Philippines for now,” it said in its latest political risk analysis.
BMI said the meeting between Duterte and Chinese President Xi Jinping would considerably undermine Washington’s geopolitical influence in Asia at a time when tensions between Beijing and its neighbors are rising
“As a result, the US will likely have to increasingly cultivate Vietnam as a regional security partner to partially offset the withdrawal of the Philippines from an informal US-led bloc of Asian nations aimed at counter-balancing China’s rise,” BMI said.