What sequestration means for the Philippines

front20130302At the very end of 2012, the US media and public was gripped with near-panic over what was then called the “fiscal cliff,” a combination of tax increases and a programmed series of government spending cuts that was to automatically take effect on January 1 of this year. Just as the deadline passed, the US Congress managed to postpone the cuts for two months, but has been unable to use the extra time productively to agree on a new budget plan to avoid painful, drastic measures. And so the budget cuts, now known as “sequestration,” have begun to be implemented across every department and agency of the Federal government.

…Outside the US, however, the prevailing opinion seems to be that sequestration is “an American problem,” and that because the spending reductions are spread out over a period of time, the effects will not be strongly felt. In a statement to reporters this past Tuesday, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco, Jr. was dismissive of the impacts of sequestration, saying that adverse effects on the Philippines’ export position and healthy stock market would be limited. While that is probably an accurate assessment as far as those economic indicators are concerned, there are a number of more direct implications for the Philippines that, had he been aware of them, might have encouraged Governor Tetangco to revise his point of view.

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5 Replies to “What sequestration means for the Philippines”

  1. This will be a more direct cause and effect. With America tightening its economic belt, Fil-Ams that regularly remit part of their earnings to aged parents, nieces and nephews who are in schools, and other relatives will cut down on on these remittances.

    Foreign exchange reserves will be affected this way.

    1. That’s very likely. The problem is, there are so many variables it is difficult to make a reliable forecast of what will happen as far as this country is concerned, e.g., “Dollar may depreciate by X amount, remittances may decrease by X %, equity investment inflows will drop by X amount.” But the direct cuts should be a clue — should be, but the current Administration is full of surprises when it comes to demonstrating their grasp of the implications of things — for the Philippines to plan conservatively.

      1. The Obama administration has already admitted that the sequestration will only reduce by a fraction the money available for government operations. The thing that is troubling is the fact that Obama’s people insist on cutting the funds from essential services and programs including the military, law enforcement and medical care instead of non-essential, redundant government expenditures.

      2. It’s the equivalent in the Philippines of cutting the DND’s budget for our soldiers’ boots and increasing individual congressmen’s discretionary funds. Perhaps its the Obama administration that learned a thing or two from Philippine politics.

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