US aid review, tariff policy to indirectly impact PH - NEDA

Metro Manila, Philippines - The Trump administration’s foreign aid review and tariff policy will have an indirect impact on the country, the National Economic and Development Authority (NEDA) said Monday, Jan. 27.

READ: US issues broad freeze on foreign aid after Trump orders review 

Socioeconomic Planning Secretary Arsenio Balisacan said foreign funding for projects does not mainly come from the US.

“The US (is the) number one source of grants, and that’s where the impact could be, but that’s [a] small part of the economy,” Balisacan said.

“It’s … a bit significant not in a bigger scheme of things, in terms of the total amount of a dollar revenues we get from outside, that’s quite small,” he said.

The Cabinet official further said the “impact could be more indirect.”

“For example, the major shareholder of the multilateral institutions is the US. World Bank, ADB (Asian Development Bank), those, the lending facility, especially for the official development assistance (ODA) in those institutions is affected, then it can also be affected in the medium-term,” Balisacan explained.

ODA is aid from developed to developing countries. It can be in the form of a loan or a loan and grant for social and economic development projects.

Balisacan said many current infrastructure flagship projects in the Philippines are “funded by Japan, Korea, ADB, and World Bank.”

The Department of Foreign Affairs (DFA) has been monitoring updates on Trump’s order to assess how it will affect the country since Saturday. 

“The department understands that the US Department of State as well as other relevant US government agencies involved in the aid program are studying the executive order and how it will impact on US partnerships,” the DFA said in a statement Monday.

“The department will continue to engage the US government on this matter,” the agency said. “In their recent phone conversation, (Foreign Affairs) Secretary (Enrique) Manalo and (US State) Secretary Rubio underscored the importance of [the] PH-US alliance and committed to work towards strengthening security, economic and regional cooperation.”

Following the developments on US foreign assistance, Senate Minority Leader Koko Pimentel said, “We should learn to live with this decision.”

“(The Philippines) should not be dependent on foreign aid, although we should be welcoming of all aid without string(s) and conditions which are extended to us,” Pimentel said.

Balisacan previously said as the country has a “good chance” of attaining upper middle-income status this year, it would imply that some ODA privileges may be dropped. 

As of 2023, the NEDA said the active ODA portfolio amounted to $37.29 billion or around P2.1 trillion. The portfolio consisted of 113 loans which stood at $35.07 billion or around P2 trillion, and 325 grants worth $2.22 billion or around P129 billion.

Japan was the top source of ODA for the Philippines, followed by the ADB and World Bank.

Possible higher US tariff to impact global economy

In terms of US tariff, Balisacan said a higher levy in the US “will spark retaliation from, by other countries.”

“Obviously, that would impact the global economy and … our economy is integrated with the global economy so our supply chain will, of course, be affected,” the NEDA chief said.

Balisacan said the economy’s performance “has been also most affected by the external sector lately.”

“But the most important immediate reply or response that we can make is to intensify our efforts to diversify our economy, diversify our trade and ensure that we continue to be aggressive in bilateral and regional trading arrangements so that we can buffer the economy from these disturbances,” Balisacan said. 

Trump has issued tariff threats to Canada and Mexico after taking office on Jan. 20.

Colombia was on the brink of a trade war with the US over immigration issues. The duty order was put on hold after reaching a deal accepting deported Colombian illegal migrants on board US military aircraft.