Crises of Japan, MidEast, N.Africa to impact Philippines in H2

By Cai U. Ordinario, Business Mirror

Posted at Mar 15 2011 04:58 AM | Updated as of Mar 16 2011 11:17 AM

MANILA, Philippines - With the crises in the Middle East and North Africa (Mena) spreading and Japan struggling to get back on its feet after the earthquake and tsunami, the National Economic and Development Authority (Neda) expects the two crises will likely be felt in the country by the second half of the year.

Neda Director General Cayetano W. Paderanga Jr. said this is because the impact of the events in the Middle East is not yet fully known since they continue to develop, but determining the full impact of the crisis in Japan appears possible after another quarter.

Among the areas of adverse impacts are on Filipino workers’ remittances and the rates of inflation. Areas that may be felt particularly from the Japan tragedy would be on trade, official development assistance (ODA), and human resources under the Japan-Philippine Economic Partnership Agreement.

“We of course understand that there will be some resources that [Japan] will need for these things [but] we hope that cooperation going both ways and assistance will still continue. There will probably be adjustments and that the normal relationship on several levels including trade, assistance, as well as resource flows like labor will continue. Things may be adjusted temporarily but long-term relationships we hope will continue and continue to improve,” he said.

He added that Tokyo has also not yet intimated to Manila any plans to suspend its yen loans to the country or any disruption in its ODA to the Philippines.

“It’s only the first quarter and it may start coming in the second quarter but we can watch it on a month-to-month basis. The remittances are figured every month [while] the prices are also checked on a month-to-month basis,” said Paderanga on Monday.

Based on the latest data from the National Statistics Office, which are in April to September 2009, around 21.6% or one in five OFWs in April to September 2009 worked in Saudi Arabia. OFWs who worked in theUnited Arab Emirates comprised 15.4%, while some 6.1% worked in Qatar.

“Government agencies are looking into how we can divert at least some of the people who were displaced to alternative areas. There is a lag but the work is continuing. On remittances, lets look at what happens as the year goes through. It depends on how long the crises lasts. It’s very difficult to predict,” said Paderanga.

The Neda said the country’s total ODA loans amounted to $9.61 billion as of December 2010, lower than the $9.7 billion for the same period of the previous year. Of the total, ODA from Japan through the Japan International Cooperation Agency accounted for 36%.

Earlier, some economists expect that the tsunami will cause a decrease in oil prices as well as lower ODA from Japan to developing countries like the Philippines.

First Metro Investment Corp. and University of Asia and the Pacific Capital Markets Research Center executive director Dr. Victor Abola said the decline in oil prices was already evident as prices fell on the news of the disaster in Japan.

Abola added that since Japan is a net importer of food, the effect on inflation in the Philippines will also be minimal. This will likely keep inflation in the coming months still within the Bangko Sentral ng Pilipinas expectation of 3.5% to 5.5%.