Philippine finance minister warns US policies threaten global growth

The Philippine finance minister has said that uncertainty in US economic policy was “making people nervous everywhere” and could harm global growth, in remarks that underscore how turmoil in Washington is reverberating across the world.

 Carlos Dominguez III, a close friend and top economic adviser to President Rodrigo Duterte, told the Financial Times that US president Donald Trump has created anxiety and contributed to the recent global plunge in stock prices.

 “The uncertainties that have been injected into US economic policies have roiled international markets,” Mr Dominguez said in an interview. “Going after interest rates, not getting the budget approved — you know, quite frankly, I think it’s unnecessary.”

 Mr Trump was reported by Bloomberg last month to have discussed firing Jay Powell, the Federal Reserve chairman, after the central bank increased interest rates. Steven Mnuchin, the Treasury secretary, denied that the president ever suggested firing Mr Powell. However, Mr Trump has hectored the Fed chief and the central bank’s rates policy in remarks that contributed to the stock price fall.

 “When banks see uncertainty going up or risk going up, what they do is raise interest rates, and that will mitigate against economic growth,” said Mr Dominguez.

 He was, however, upbeat on the performance of the Philippine economy, saying that inflation, which last year rose to its highest level in nine years, was “over the hump” and had begun to reduce “drastically”.

 The Philippine economy grew 6.3 per cent in 2018 as more people in the country of 105m entered the middle class and an ambitious $120bn infrastructure investment plan by the Duterte administration has begun to translate into projects.

 However, inflation calculated on a monthly basis rose to 6.7 per cent in September and October, the fastest rate since 2009, because of higher food and fuel prices. The latter jump was caused partly by higher global oil prices, and also by the government’s decision to increase of fuel excise tax last year under the first phase of a tax reform programme.

 “We believe that the inflation rate peaked in October and has gone down very drastically in November and December, and we think we are over the hump there,” said Mr Dominguez.

 He described the drop in inflation as the quickest the Philippines had had in the past 15 years, adding: “I think the wind is in our sails now.” Recommended FT Confidential Research Duterte’s Chinese investment promise rings hollow

Increased imports, meanwhile, caused a widening of the current account deficit from 0.4 per cent in 2016, the year Mr Duterte took office, to 1.9 per cent last year.

 Mr Dominguez said the widening gap in the balance of payments was “typical of a country that is growing very fast”, and owed to imports of cement, steel and other goods needed for the “Build Build Build” programme, under which the Philippines is building or upgrading roads, bridges, airports and other infrastructure meant to improve links and accelerate growth in the archipelago nation.

 “They are not fripperies; we are not buying Birkin bags and Prada shoes,” said Mr Dominguez. “The bulk of our imports are coming in as capital goods.”