THE Philippines will weather global headwinds such as the specter of recession in Europe as the country will rely on its own people and industries, according to the National Economic and Development Authority (Neda) and local economists.

Over the weekend, think tank Oxford Economics said soaring energy prices across the Eurozone and the United Kingdom would likely lead to business closures and slow down economic growth in Europe.

Based on the Philippine Statistics Authority (PSA), some 7.7 percent of the country’s Overseas Filipino Workers are located in Europe. The latest Bangko Sentral ng Pilipinas (BSP) data showed remittances from Europe reached $1.79 billion in the first semester of 2022.

“As in the past decade and last year, the performance of the Philippine economy is unlikely to depend much on the growth performance of Europe, the United Kingdom, or even North America or headwinds in the global economy in general. I made this point at the recent ECCP (European Chamber of Commerce of the Philippines), MAP (Management Association of the Philippines), and FEF (Foundation for Economic Freedom) forums,” Socioeconomic Planning Secretary Arsenio M. Balisacan, however, told BusinessMirror over the weekend.

In his previous statements, Balisacan said the economic team remained optimistic about the country’s GDP prospects. He said the overall goal from 2023 to 2028 would increase job creation and improve poverty reduction by steering the economy back to its high-growth path.

This will be done, the Neda Chief said, with the help of private sector investments that will lead to high-quality job creation and increase the share of wage and salaried workers to a range of 53 percent to 55 percent by 2028, from 48 percent in 2021.

With the creation of more, better, and more resilient jobs, poverty incidence is seen to be reduced from 18.1 percent in 2021 to a single-digit level of 9 percent in 2028.

“We intend to achieve these targets while adhering to prudent macroeconomic management to ensure that we do not compromise our economy’s fiscal health in the medium and long term. We seek to maintain infrastructure spending at a relatively high level of about 5 percent to 6 percent of our national output until 2028,” Balisacan earlier said.

University of the Philippines School of Economics (UPSE) Director for Research Renato E. Reside Jr. also said the impact on OFWs living in Europe will depend on whether they were employed in sectors that would be affected by the slowdown.

Reside noted that remittances have been resilient in the face of recessions, including the Global Financial Crisis of 2009. This means, he said, should a recession in Europe occur, remittances would be able to weather these challenges.

“The remittance risks are also tempered by favorable developments for Middle Eastern economies and the appreciation in the US Dollar, the denomination of much of remittances to the Philippines,” Reside said. “The risks to Philippine consumption moving forward will come from the extent of inflation as well as the strength of the general economy.”

Recent devts

For his part, former UPSE Dean Ramon L. Clarete said the analysis of Oxford Economics on the state of the economy of the Eurozone and the UK may have not factored in recent developments such as the impeachment call in the Kremlin.

Clarete said this division in Russian leadership could lead to the victory of Ukraine in the war and the political demise of Russian President Vladimir Putin. “Ukraine victory is now happening. There’s an impeachment call in the Kremlin. Division in leadership and lack of resources because of sanctions prevent Russia from recovering lost territory.”

If the war ends, Clarete said energy prices will decline and greater mobility of trade will occur. He added that investments needed to reconstruct Ukraine will also help in recovery efforts.

Clarete said investments in military goods could also fuel an economic boom in Europe and North America. Under a new leadership, should Putin be impeached, it would also make Russia more keen on selling its natural gas to Western countries.

“(This will) please Western Countries (and enable Russia) to recover immediately from its recession due to sanctions and defeat.  EU (European Union may also) expand with Ukraine as the latest member,” Clarete said.

Oxford Economics, in its brief, said global GDP is now expected to slow to 1.7 percent in 2023 from 2.8 percent in 2022. The forecast for 2023 is 0.6 percentage points lower than their forecast a month ago.

Energy costs

With the higher energy costs, Oxford Economics said it was prompted to raise inflation forecast for the Eurozone for next year by 2.2 percentage points to 4.3 percent.

“Higher costs could trigger a wave of business closures, exacerbating the hit to the economy. In addition, more aggressive rate hikes by both the ECB and Bank of England now seem likely, as concerns about sustained high inflation are mounting,” Oxford Economics said.

“A deeper downturn is possible if gas prices continue to rise or energy rationing is required. But more substantial government support to limit the near-term pain and reduce uncertainty about prices and supply in the long term could trigger upside surprises,” it also said.

Last month, the BSP reported that personal remittances from Overseas Filipinos (OFs) grew by 4.4 percent year-on-year to reach $3.1 billion in June 2022, from $2.9 billion recorded in the same month last year.

This resulted in the growth of the cumulative personal remittances by 2.8 percent to $17.1 billion in the first half of 2022, from $16.6 billion recorded in the comparable period in 2021.