By DERCO ROSAL
Amid concerns about a potential Donald Trump victory and its impact on global trade, President Marcos’ chief economic manager expressed optimism about the Philippines' strong relationship with Washington and projected a surge in investment from US companies.
In a briefing in Washington D.C. on Tuesday, Oct. 22, Finance Secretary Ralph G. Recto said Manila could leverage its “strong” relationship with the US to mitigate any negative effects of geopolitical tensions.
Recto also noted that numerous US companies are keen to invest in the Philippines and cited a tripartite partnership involving the US, Japan, and the Philippines as a catalyst for increased investments
“Well, in the Philippines, we do have a relationship with the U.S. We have a mutual defense treaty. We are hoping to leverage that relationship so that we do not get much affected,” Recto said.
With this arrangement, Recto anticipates an influx of investment into the Philippines.
In the Philippines, the business process outsourcing (BPO) industry alone generates around $35 billion annually, matching remittances, which bolster household consumption and public investment, while the sector is “already adapting” to the challenges posed by AI, Recto reported.
A call to cut borrowing cost
As per Recto’s forecast, while the global inflation rate will decrease next year, it will still be relatively high at around 5.8 percent, leading to persistently elevated interest rates despite a downward trend.
“That is why we are also calling for the World Bank to reduce [the] cost of borrowing. This will be very beneficial to the developing economies.”
A year ago, developed countries were grappling with high inflation and prioritizing interest rate hikes to combat it. “That has changed,” Recto said, noting a shift toward monetary easing by central banks in those regions, which has led to a reduction in interest rates.
Poor countries hope that declining global inflation will lead to lower borrowing rates, as interest rates remain high in developing and wealthy nations.
“In the developing world, rates are still high and that fight against inflation means that the interest rates also will remain high. But as far as the developed world is concerned, lower interest rates translate to more affordability. Nobody wants to borrow. Nobody likes to borrow,” Recto said.
He also said that concessional financing, such as International Development Association (IDA) funding from the World Bank, is crucial for developing nations, which seek larger sums to not only address immediate financial needs but also to foster economic growth.
“Victory therefore or success therefore in the developed world means that they should be able to make more resources available,” Recto said.
‘Global decline to hit Philippines the hardest’
Meanwhile, Recto urged the International Monetary Fund (IMF) and World Bank to be more adaptable and firm, warning that a global economic slowdown could severely impact developing nations, such as the Philippines.
“I continue to emphasize that any slowdown in the global economy because of these uncertainties and new economic realities is bound to hit developing countries the hardest,” Recto said.
“That is why we continue to call for a more agile and resolute IMF and World Bank,” Recto added.
Prior to this call, Recto commended the G-24 for its enduring commitment to multilateralism, noting that despite facing increasingly complex global crises over the past five decades, the group has consistently demonstrated that nations with shared interests can come together to drive global progress.
The IMF and World Bank have evolved alongside global challenges, adapting their mandates, policies, and financial tools to address the rapidly changing global landscape, the finance chief pointed out.
“However, today is an extremely different world. Financial interconnectedness, digital disruption, widening inequality, climate change, and geopolitical tensions are reshaping the global order,” he weighed in.
“Never enough,” Recto said when asked whether or not the development banks and their shareholders are doing enough to effectively address climate change.
These “seismic shifts” are testing multilateral organizations, urging nations to enhance efforts to meet their people's needs.
“We need you to not only keep pace with the changing times but also lead with foresight and innovation,” Recto said.
Additionally, he stressed the need for "heightened development cooperation, scaled-up support, and more responsive solutions to navigate the headwinds and foster peace, stability, and prosperity."
Recto also emphasized four major reforms at the G24 meeting, including creating an IMF liquidity mechanism for developing nations, setting ambitious World Bank goals to combat poverty, reforming sovereign debt resolution for faster relief, and accelerating governance reforms to boost the representation of developing countries.
“Without improvements and bold actions, decades of individual and global efforts to eradicate poverty and inequality, combat climate change, and invest in growth-enhancing projects will be put to a halt, if not reversed,” Recto said.
Calling for unprecedented multilateral cooperation, Recto concluded that global interconnectedness requires collective efforts to reverse economic challenges, restore stability, and secure a better future for all nations.