Japan disaster seen to cut local exports, financial aid-A A +A
Friday, March 18, 2011
MANILA -- The Philippines will have to brace for lower exports and lesser financial aid for infrastructure projects after last week’s massive earthquake and tsunami in Japan, an analyst said Friday.
“The disaster in Japan will be greatly felt by the Philippines, which failed to develop internal economic strength and is unduly reliant on foreign external factors. It is likely that Japanese investments and official development assistance to us will drop or at least slow as Japan tries to reconstruct itself,” Sonny Africa, research head of militant think-thank Ibon Foundation told Sun.Star.
Last year, Japan contributed 36 percent of the estimated $9.7 billion of foreign aid given to the Philippines as President Benigno Aquino III even announced some $2.85 billion worth of Japanese investment pledges in power, transport, and infrastructure.
Philippine exports to the world’s third largest economy might also suffer, affecting local companies involved in manufacturing construction equipment, auto components, and food.
These sub-sectors comprise the bulk of an estimated $7.8 billion worth of Filipino products and services imported by the Japanese in 2010. The figure represents 15 percent of the $52-billion export receipts last year.
Semi-government Export Development Council had targeted exports to grow by only 13 percent in the next three years due to threats to global economic recovery and an appreciating peso, which makes exports more expensive.
“All these will only be aggravated to the extent that the Japanese crisis disrupts the fragile supposed global recovery — shaken already by weak US economy and Middle East troubles,” Africa noted.
On the positive front, Labor Secretary Rosalinda Baldoz had said the Philippines will stand to gain from the latest calamity that hit Japan because of reconstruction efforts there.
Africa however saw the reverse, saying it remains uncertain how far the country will benefit from Japan’s plan to rebuild itself.
“The demand for overseas Filipino workers may drop as the Japanese economy struggles to recover,” he said.
Some 300,000 Filipinos in Japan sent home $883 million in 2010, nearly five percent of the $18.76 billion total remittances that fuel consumption expenditure in the country.
Philippine shares advance
Stock markets around the world blinked days after the quake including the Philippines, which only recovered Friday after a four-day decline.
The Philippine Stock Exchange index inched up 0.59 percent or 22.5 points to end the week at 3,839.88, while the broader all shares index climbed by 0.75 percent or 21.49 points to close at 2,881.09.
Market breadth was positive with 89 advancers compared to 35 decliners and 37 stocks that remained unchanged. Trading volume totaled P5.58 billion, with over 1.15 billion shares changing hands.
Positive developments in averting a nuclear meltdown also buoyed the Japanese benchmark Nikkei 225 stock average by three percent following a turbulent week of trading.
The Nikkei 225 stock index rose 2.7 percent to 9,206.75, while the yen retreated against the US dollar to 81.71 after the Group of Seven rich nations decided to make interventions to arrest yen’s further appreciation.
The yen hit a post-World War II high of 76.25 yen earlier this week, which was deemed detrimental for the recovery of Japan’s export-oriented economy.
A strong yen would make Japanese products expensive to foreign consumers and strain profits of top companies.
"As we have long stated, excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability," the G7 said in a statement.
The G7 comprises the United States, Japan, Germany, France, the UK, Italy and Canada. The Bank of Japan also infused 38 trillion yen ($470 billion) this week to calm investors.
However, the move is not enough to prevent Japan from slipping into another recession as losses from the earthquake and tsunami are expected to topple the $200-billion mark.
Although it posted a 3.9 percent economic growth last year, this does not stop China, the world's fastest-growing economy, to overtake Japan as the world’s second biggest market.
Without accounting for inflation, Japan’s gross domestic product hit $5.47 trillion while China reported $5.87 trillion. Japan relinquished the position after 42 years of trailing the US, the world's largest economy. (Sunnex)