FINANCE Secretary Cesar V. Purisima said on Friday that Greece’s default in debt payment will have minimal effect on the Philippines, unlike other emerging markets which are expected to be at risk of capital-flow reversal.
Purisima noted that the Philippines has no significant exposure to Greece, with exports to Greece constituting only 0.01 percent of total exports, and imports equal only 0.02 percent of the total. Remittances from Greece also only account for 1.38 percent of the total foreign-currency remittances to the Philippines.
“The Philippines is prepared to navigate through challenges from uncertainties brought about by external risks and factors. We continue to develop measures fortifying the economic fundamentals we have built, as well as increasing competitiveness in the country, reaping brighter prospects for higher and more durable growth,” Purisima said.
On June 30 Greece missed its repayment on its debts to the International Monetary Fund (IMF), raising fears that emerging markets could be at risk of capital-flow reversal because of either loss of investor confidence, asset-price shifts, increase in borrowing costs or foreign exchange-rate volatility.
But, Purisima said, both the IMF and the World Bank have forecast that the Philippines’s gross domestic product (GDP) growth will be above 6 percent for the next three years, which will prevent financial and external developments from causing any real economic decline.
“The Philippines has continued to strengthen its macroeconomic fundamentals, with the widening of fiscal space, tamed inflation, robust reserves, and the strong performance of a well-capitalized banking sector, enabling the country to withstand external shocks and other challenges to price and financial stability. According to the IMF, these fundamentals should provide for the necessary cushion to be able to manage the effects and respond adequately due to ample policy space,” he said.
He also noted that the Philippines’s debt-to-GDP ratio has consistently dropped, from 68.1 percent to only 36.4 percent in 2014, suggesting the country’s increased ability to pay its debts and demonstrating the fiscal space that the country has to allow it to spend more on infrastructure and social services.
“The overall decline of the debt burden, strong external position and banking system, stable inflation, well-managed fiscal position and participation in cooperative frameworks sustains market confidence in the country. While the Philippines stands in good stead to navigate the challenges not only from Greece but emerging bouts of uncertainties, it is imperative to stay on the course of reform and maintain vigilance to put the country on the path of sustained, higher and inclusive growth,” Purisima added.
The Philippines also has adequate foreign-exchange reserves that would serve as a buffer for external risks. As of May 2015, reserves by the Bangko Sentral ng Pilipinas stood at $80.4 billion, and can cover about 10 to 11 months’ worth of imports. This figure is also 4.5 times the country’s debts maturing within the short term.
Greeks split on bailout
GREECE is divided right down the middle heading into Sunday’s referendum on European bailout proposals, portending even more upheaval for the stricken nation.
A poll commissioned by Bloomberg News showed 43 percent intend to vote “no” to reject the austerity demanded by creditors in exchange for financial aid; 42.5 percent back a “yes” to accept the conditions, the survey of 1,042 people by the University of Macedonia Research Institute of Applied Social and Economic Studies showed. The margin of error was 3 percent.
The survey suggests that the plebiscite may not resolve anything, as the nation’s economic and political crises deepen. While the poll showed more than four in five Greeks want to stay in the euro, the nation’s crippled banks and Premier Alexis Tsipras’s isolation from other European leaders have thrown into doubt the country’s future in the currency union.
“This referendum had divided Greek society among two groups who have a different understanding of the question at hand,” Nikos Marantzidis, the pollster and a professor of political science at the university, said in an e-mail. There are supporters, “those who really think that the future of the country is outside the euro area and even the European Union, and those who consider the referendum to be a negotiating tactic.”
Tsipras called the snap vote unexpectedly last weekend as talks with creditors broke down. He argues that Greeks can reject their proposals and still remain in the euro, winning better terms for its debt in the process—a claim disputed by almost everyone else.
A win for the “yes” camp, which is backed by the main opposition parties, could lead to the ouster of the Tsipras government while leading to continued aid. Finance Minister Yanis Varoufakis said in a Bloomberg Television interview on Wednesday that he would resign after such an outcome, and that the composition of the government may change “because some of us will not be able to stomach it.”
Support for the “no” side has decreased since last Saturday, when 52 percent of voters said that was their choice, according to the poll. Support for yes rose as the bank holiday that began on Monday began to suffocate commerce, climbing from 26.5 percent.
The poll also showed 81 percent believed remaining in the euro offers the best prospects for the future, a number that has also climbed since last Saturday.
European leaders have been encouraging Greeks to vote “yes.” Speaking in West Africa, French President Francois Hollande said that “if it’s a yes, negotiations can quickly restart” on a fresh bailout. “If it’s a no, we are in unknown territory,” he said.
Greeks go to the polls in an unusually strained atmosphere, even in a country that has endured more than five years of tax increases and spending cuts and seen its economy shrink by a quarter since 2009.
As the sun set over Athens o Thursday, a rally by the Greek Communist Party, which supports the no camp, took over central Syntagma Square and the surrounding area, supporters waving red flags adorned with its hammer-and-sickle emblem.
Greece became the first developed country to default on obligations to the IMF when it missed a $1.7-billion payment on Tuesday. The Washington-based lender estimates that Greece will need at least another $40 billion in international support, as well as easier terms on outstanding debt, to keep its finances manageable.
Varoufakis insists that banks will reopen on Tuesday as planned. The local media has begun to speculate that deposits could be seized after a no vote, though Minister of State Nikos Pappas told Bloomberg Television that the government has no plans for such a “bail-in.”