Strong pressure to create domestic employment in the US, plus downward pressure on salaries and wages as a result of rising employment could also depress the export and outsourcing markets upon which the Philippine economy is also highly dependent on.
Less known is the Philippine government's exposure to US debt instruments which, according to US Treasury data amounts to USD23.6 billion. All of this is now rated AA+ (down from AAA) by S&P with a "negative outlook".
China which holds more than a trillion dollars of US government debt issued a stern warning, in light of its "displeasure" with the S&P downgrade:
'It must be understood that if the US, Europe and other advanced economies fail to shoulder their responsibilities and continue their incessant messing around over selfish interests, this will seriously impede stable development of the global economy,' said a commentary in the People's Daily newspaper, the mouthpiece of China's ruling Communist party.
The US financial market will open today for the first time since the downgrade and it is anybody's guess what will happen.