Government leaders, business executives and investors have been on the lookout for pockets of opportunities amid additional economic uncertainties brought by renewed geopolitical tensions between Israel and Iran and upcoming presidential elections in the United States — the world’s largest economy -— with Republican former US president Donald Trump being strongly tipped to win.

Security Bank chief economist Angelo Taningco expects the local and global economies to remain resilient as markets’ expectations on inflation and interest rates will continue to normalize.

“The Philippine economy grew by 6 percent in the first half of the year and we think that will be sustained. Based on our discussions with clients, we’ve noticed more interest from foreign investors,” he said in a recent interview on Daily Tribune’s online show Straight Talk.

Taningco said investors have remained financially flexible as US inflation rates continued to be manageable at around 2 percent due to swift monetary policy adjustments by the Federal Reserve and stable global commodity prices.

“We think the US economy next year will still be in a positive shape. The market is expecting a similar growth whether Trump or Harris wins the presidency,” the economist said.

On 5 November, Americans will decide on their new president to replace President Joe Biden from the Democratic Party.

Harris, a Democrat, promotes friendly and inclusive trade and investment relations while Trump is seen as a protectionist, anti-China and anti-immigrant.

Controlled inflation

The Bangko Sentral ng Pilipinas (BSP) reported foreign investments to the Philippines in August surged by 92.1 percent to $1.025 billion from $533.95 million in the same month last year as global inflation rates eased.

Investments mostly came from the US, along with the United Kingdom, Singapore, Luxembourg and Malaysia.

Foreigners’ equity investments in firms listed with the Philippine Stock Exchange (PSEi) amounted to $1.076 billion and accounted for 42.5 percent of gross inflows of foreign investments.

However, a Trump victory, some economists say, might tip economic conditions off-balance as global inflation rates rise due to his extreme policy of high tariffs on all imported goods that are passed to consumers.

Trump promises to impose high tariffs on all goods entering the US at 10 to 20 percent and up to 60 percent on Chinese goods, as he aims to spur more production among US firms and jobs to Americans.

However, Taningco said US and global inflation rates will likely remain stable as global commodity supplies continue to be enough and prices low, even if Trump wins on top of ongoing geopolitical tensions.

“In the case of the Russia and Ukraine war, we think that has been a bit contained. We’ve seen commodity prices back to normal levels,” Taningco said.

“For the Middle East, Israel retaliated against oil-exporting Iran but the markets see it as well targeted. The attacks were confined to military targets, not hitting oil or nuclear facilities. So, the markets think that it will not lead to oil supply shock,” he added.

Taningco shared global oil prices continued to fall to $71 per barrel a few days after Israel fired back against Iran which reportedly attacked the former to avenge the deaths of its militant leaders.

He added China’s economy has yet to grow substantially to drive global oil prices up.

“Back to the fundamentals of supply and demand, China’s demand for oil has been sluggish because the economy of China has been sluggish,” Taningco said.

In the Philippines, inflation in September dropped to 1.9 percent from 3.3 in August due to cheaper utilities, fuels and food.

Food inflation eased after the government reduced the tariff rate on imported rice to 15 percent from 35 percent, and India lifted its rice export ban.

Given manageable inflation risks, Taningco said Filipinos will continue to spend while companies’ profits expand and attract more foreign investments.

“We see the Philippine economy to be resilient to be backed by strong household spending,” he said.

“The fiscal and monetary policies will continue to ensure overall economic growth and manageable inflation,” Taningco continued.

BSP Governor Eli Remolona Jr. said the central bank’s Monetary Board remains vigilant to raise its policy rate if needed to prevent inflation spikes. However, he said a still manageable higher local inflation outlook at 3.3 percent next year and 3.7 percent in 2026 from a possible 3.1 percent this year is “well-anchored on the market expectations.”

Strong labor markets

Taningco said more jobs and business activities can be seen in the US even if Trump wins the next presidency and imposes another radical policy to hugely cut the corporate tax to 15 percent from 21 percent.

“As tax cuts will be deeper, there will be less government revenues. But the high tariffs on imports will compensate for the tax cuts and the tax cuts will invigorate businesses to spend that will generate earnings,” the economist said.

Taningco shared analysts project US economic growth of at least 2 percent this year as more US residents are now working and inflation rates have fallen.

The US Bureau of Labor Statistics reported 7.4 million job vacancies on the last day of September, fewer than the 7.86 million seen in August.

The employment figure was also better than economists’ forecast of 7.9 million.

As US firms expand profits which can be used for wider operations overseas, Taningco said more Filipinos back home will see more job opportunities that will help grow the Philippine economy.

“Most sectors continue to create jobs because of the investments from local and foreign investors. We also have a young and dynamic workforce, so labor participation is very active in the country,” Taningco said.

Due to the possible high tariffs on exports to the US, economists worry that countries’ export incomes will decline.

However, Taningco said US firms will still likely partner with Filipino businesses in the clean energy sector amid growing concerns with climate change, and demand for electronics, the Philippines’ top export, as businesses maximize the use of technologies.

“We see investment pledges increasing that will be realized not immediately but over the medium term,” he said.

“In the long-term, GDP per capita will increase and there will be a more equal distribution of wealth and poverty rate will go down,” Taningco added.

More Filipinos or 49.15 million were employed in August, higher than the 47.70 million in July and 48 million in August last year, according to the Philippine Statistics Authority.

Unemployment rate also improved to 4 percent from 4.7 percent between July and August.

Stronger peso

Due to controlled inflation and geopolitical risks, Taningco said the peso could continue to appreciate against the US dollar next year as demand for the Philippine currency rises.

“It’s unlikely that it will move up further toward 60. We anticipate in the last two months that the peso will have this historical performance of strengthening because of the remittance inflows during the holidays season,” he said.

As Christmas activities raise demand for various goods and services, Taningco said more people will seek the peso including tourists and spur more business for the business process outsourcing industry.

On 30 October, the peso strengthened against the US dollar at P58.23 per dollar from P58.275 per dollar in the previous day, according to the Bankers Association of the Philippines.

However, the dollar is still relatively strong against all other currencies as global investors see the dollar as a safe haven amid uncertainties in the US presidential elections.

“We think it will appreciate once we see more clarity on the US side in terms of what will be the economic policies to be crafted by the new president,” Taningco said.

He added that the peso will unlikely depreciate drastically as the BSP helps secure sustainable economic growth for the Philippines through its management of foreign reserves.

BSP reported record $122 billion in gross international reserves (GIR) as of end-September after it grew income from gold holdings to $10.9 billion from $10.2 billion.

BSP took advantage of higher global gold prices which reached the $2,600 per ounce levels or more than 10 times compared to prices in the past two decades.

The new GIR level surpassed the $107.9 billion recorded in end-August, resulting in more than adequate or eight months’ worth of imports of goods and payments of services and primary income for the country.

BSP also said the September level equals to about 6.3 times the country’s short-term external debt based on original maturity and 4.4 times when based on residual maturity.

“I think the gold sale is positive for boosting the external buffers of the country which is already more than adequate. That’s one reason we think the peso is not susceptible to speculative attacks because the external buffers are hefty,” Taningco said.