THE US government shutdown is “nothing new,” and can result in some disruption to the Philippine economy, analysts said.
“A US government shutdown could mildly impact the (Philippine) economy depending on its duration,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, told BusinessWorld via Viber.
The Federal government shut down at the start of the month after the US Senate failed to pass a continuing resolution that would have funded government operations for a few more weeks. One of the sticking points is the Democrat insistence on continuing the subsidies to the Affordable Care Act, which are set to expire. Democrats are also calling for the restoration of cuts to Medicaid.
A shutdown means some government services will be temporarily unavailable and no US economic data, including employment and payrolls, will be released.
US President Donald J. Trump has also threatened to sack thousands of federal workers and began freezing funding for Democrat-held cities and states.
If the shutdown continues, Mr. Rivera said remittances from overseas Filipino workers (OFWs) and Philippine businesses reliant on US markets could take a slight hit.
“Remittances may dip slightly if some US-based OFWs are affected, and Philippine businesses tied to US demand, such as exporters (and) business process outsourcing, could see temporary disruptions,” he added.
OFW remittances amounted to $3.179 billion in July. OFW in the US are usually the top source of remittances.
Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort, called the shutdown’s impact on remittances “negligible” if Filipino federal workers are eventually paid.
“US government shutdowns are nothing really new… lasting for a few days or weeks,” he said via Viber.
The main result overall might be the impact on investor confidence, analysts said.
“Market volatility could increase, with investor confidence momentarily shaken,” Mr. Rivera said.
In terms of currency impact, “This may cause confidence in the dollar to fall, potentially causing peso appreciation in the short term,” according to Reinielle Matt M. Erece, economist at Oikonomia Advisory & Research, Inc., speaking via Viber.
Meanwhile, RCBC’s Mr. Ricafort said the delayed release of US economic data could affect the Federal Reserve’s monetary policy decisions and potentially that of the Bangko Sentral ng Pilipinas (BSP) as well.
“Delayed release of some US economic data, especially the latest US employment data, could delay processing or assessment and future Fed rate decisions that, in turn, could affect future BSP rate decisions,” he said.
Mr. Rivera also noted that the shutdown may cause the Fed to take a less aggressive stance on easing, “giving the BSP more flexibility.”
“However, prolonged uncertainty may influence the BSP to act cautiously if the peso comes under pressure,” he added.
Last month, the Fed delivered its first 25-basis point (bp) cut since December 2024, bringing its policy rate to the 4%-4.25% range.
Fed Chairman Jerome H. Powell signaled a gradual easing cycle in response to growing labor market concerns.
On Aug. 28, the BSP cut its benchmark interest rate by 25 bps to 5%. It has so far lowered borrowing costs by a total of 150 bps since it began its easing cycle in August last year.
The Monetary Board will meet again on Thursday before its last meeting this year on Dec. 11. — Katherine K. Chan
