ECCP at Work

ECCP@Work Featured Articles | October 3, 2023

October 03, 2023

ECCP Online

ECCP at Work

Aviation leaders optimistic 

At the aviation summit hosted by the European Chamber of Commerce of the Philippines (ECCP) recently, Yuli Thompson, area manager for Southeast Asia of International Air Transport Association, said passenger traffic trends for international flights in the Philippines were logged at 75 percent of 2019 levels as of June 2023. Lei Apostol, Cebu Pacific vice president for customer service operations, said the airline encourages travel by ensuring positive customer experience which it aims to optimize across its operations. In her keynote speech, Senator Grace Poe urged stakeholders to support necessary infrastructure investments, especially after the air system glitch incident earlier this year. In his closing remarks, Department of Transportation (DOTr) Secretary Jaime Bautista stressed the agency’s goal to rehabilitate the Ninoy Aquino International Airport through a public-private partnership agreement which will present a “landmark opportunity for economic growth, improved infrastructure, and a world-class travel experience.”

PRC Chairman Gordon sees Subic as Asia’s cargo or humanitarian hub

Gordon elaborated that the Philippines can be the cargo or humanitarian hub for Asia to meet the logistical needs of a disaster response, including transporting aid workers. Gordon welcomed the aviation industry’s interest in learning how it can have a stronger role in humanitarian response as he shared that at the height of the Covid-19 pandemic, the PRC had to use chartered planes to have the Covid-19 testing equipment and reagents shipped to the Philippines from China.

PHL nears international arrivals goal of 4.8M–DOT 

Of the total international arrivals this year, some 3.67 million (91.6 percent) were foreign nationals, while the rest at 337,426 were overseas Filipinos. The DOT’s main goal is to transform the Philippines into a “tourism powerhouse of Asia” by diversifying its tourism portfolio, and at the same time, expanding its niche markets such as sun and beach tourism, golf, dive, and MICE (meetings incentives conventions exhibitions), as well as film and heritage tourism.

BSP: Hot money posts $153M inflow in August

The data showed transactions on foreign investments registered with the BSP, through authorized agent banks (AABs) or hot money, recorded net inflows of $153 million in August 2023. This exceeded the $86.29 million-worth of outflows posted in August 2022. However, the data for August 2023 was smaller compared to the net inflows worth $962 million in July 2023. BSP said hot money gross outflows reached $1.3 billion in August, 109.5 percent or $673 million higher than the $614 million posted in July 2023. “The US remains the top destination of outflows, receiving $762 million or 59.2 percent of total outward remittances,” BSP said.

PH debt rises to ₱14.35T on weakening peso

The Philippines’ outstanding debt went up again in August as the peso continued to depreciate against the dollar, the Bureau of the Treasury said Monday. In a statement, the agency said debt stock reached ₱14.35 trillion as of August, up by 0.7% or ₱105.28 billion from the prior month. “[It] was primarily due to the peso depreciating from 54.834 to 56.651 against the US dollar over the reference period,” the treasury said. Year-on-year, the debt ballooned by more than ₱1.32 trillion.

Slight inflation uptick seen in Sept.

A poll of 17 analysts yielded a median estimate of 5.4% for September inflation, at the low end of the 5.3-6.1% forecast of the Bangko Sentral ng Pilipinas (BSP). If realized, September inflation would be  slightly faster than the 5.3% print in August, but lower than 6.9% in the same month in 2022. It would also be the highest print in four months or since 6.1% in June. The Philippine Statistics Authority (PSA) is scheduled to release the latest consumer price index (CPI) data on Oct. 5 (Thursday). “Higher prices of fuel, electricity, and key agricultural commodities, as well as the peso depreciation are the primary sources of upward price pressures in September,” the BSP said.

Inflation pressures highlight need for productive spending

“Government spending must be direct — infrastructure, health, education, social services. Spending is necessary but prudence must be exercised especially in a time where poverty is persistent,” John Paolo R. Rivera, president and chief economist at Oikonomia Advisory & Research, Inc., said in a Viber message. ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa called government spending this year  “so far… disappointing, highlighted by the contraction recorded in Q2.” Mr. Mapa said that government expenditure can be a key source of growth when spent on projects that improve or increase productivity. 

Trade deficit revised to $27.98 billion in first half

The revised trade deficit was $27.979 billion, up from the $27.955 billion initially posted in August. The deficit is narrower than the $28.403-billion deficit from a year earlier. “Imports and exports both eased to three-month lows recently amid higher inflation that weighed on spending worldwide, higher interest rates that increased financing costs that slowed down investments and global trade,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in an e-mail. “Membership in the Regional Comprehensive Economic Partnership (RCEP), which is the world’s biggest free trade agreement, would help attract more foreign direct investment to locate in the Philippines as a production or marketing base, as well as an access point to bigger export markets,” Mr. Ricafort said.

CEB confident aviation will sustain growth

Cebu Pacific (CEB) is optimistic about the continued post-pandemic growth of the local aviation sector despite the current global supply chain and operational challenges facing the industry. Michael Szucs, CEB chief executive officer, pointed out the factors that put the country in a strategic position to serve more domestic and international passengers. “The Philippines has a moment here with this young middle class, increasing the wealth of the nation but also wanting to travel. We are strategically placed within the Asean region to be a hub, allowing more connectivity between all the people in this region,” Szucs said at the recent European Chamber of Commerce of the Philippines (ECCP) aviation summit.

ADB earmarks $4B for PHL lending program for 2024

ADB Country Director for the Philippines Pavit Ramachandran said the multilateral lender is looking to earmark between $3.5 billion and $4 billion for the lending program in 2024. The ADB is currently working on its CPS 2024-2029 for the Philippines. The current partnership strategy for 2018-2023 focuses on “policy reforms, institutional capacity development, and financing investments that promote high and inclusive growth.” He said the ADB is supporting the Philippines’ transition to upper middle-income country by investing in health, education and social protection projects. “We’re really trying to ramp up private sector engagement, both PPPs (public-private partnerships) which are very much part of the government’s agenda as well, in terms of delivery of infrastructure programs, but also dedicated private sector investment in green energy, digital development, and affordable housing,” Mr. Ramachandran said.

DTI seeks more funding for creatives to maintain PHL lead within ASEAN

“We hope to get a bigger share of the budget because considering all these huge programs that we’re planning to implement,” Trade Undersecretary Rafaelita M. Aldaba told reporters on Thursday. “We are already number one in ASEAN in terms of creative services exports, but we really need to be able to sustain this position. And we can only do that if we can if we continue to provide all the necessary support to allow our creatives to compete abroad,” she added. The budget will be going to programs that will promote creative industries at the city and municipality level, capacity-building, market intelligence reports, and a creative venture fund. 

Rice tariff cuts not yet completely out

Finance Secretary Benjamin E. Diokno disclosed that the reduction of rice tariffs has been “ruled out” for now after Marcos rejected the proposal last week. However, this does not mean that the ball has stopped rolling as finance officials revealed that the administration’s economic team is set to meet soon to review the implementation of EO 10. Finance Undersecretary Zeno Ronald R. Abenoja said the review process for the EO 10 “will continue,” with the President getting inputs “from everyone,” which includes results of any pertinent consultative processes. Under Marcos’s EO 10, the lowered rates on rice, corn and pork shall automatically revert to their regular levels after December 31, 2023.

WB approves $.6-B loan for PHL digitalization initiative

The Philippines secured a new Development Policy Loan (DPL) from the Washington-based World Bank Group to finance the government’s efforts to increase digitalization and help transform the country into a cashless society. In a statement, the World Bank said its Board of Executive Directors approved US$600 million for the Philippines’ First Digital Transformation DPL. The DPL aims to promote the digital transformation of government and digital infrastructure policies, expand financial inclusion through digital finance, and stimulate the growth of digital services.

PH Sept inflation pegged at 5.3%

The BSP said on Friday that it expects the latest monthly readout to be within the range of 5.3 percent to 6.1 percent. The midpoint of this range, 5.7 percent, suggests that the central bank expects the rate of growth in prices of goods and services that the average Filipino household commonly buys to have gone up for the second month in a row. Goldman Sachs is also looking at a 5.7-percent print for September, mainly due to higher vegetable prices as well as higher electricity rates and domestic oil prices.

World Bank expects Philippine growth to be fastest in SE Asia

In its East Asia and the Pacific Economic Update released on Monday, the World Bank cut its GDP growth forecast for the Philippines to 5.6%, from the 6% projection given in June. Aaditya Mattoo, World Bank Chief Economist for East Asia and the Pacific, said the global economic slowdown is a major concern for countries like the Philippines. World Bank Senior Economist for East Asia and the Pacific Ergys Islamaj said Philippine economic growth this year will moderate from the 7.6% GDP expansion in 2022 due to elevated inflation, tighter financial conditions, and a weak external environment. Despite the lower growth projection, the World Bank expects the Philippines to post the fastest expansion among Southeast Asian countries this year. At 5.6%, this is also above the 5% GDP growth average for East Asia and the Pacific.

ASEAN financial integration to boost Philippine growth

In a September 2023 working paper, the IMF Asia and Pacific Department economists said boosting trade and financial integration among ASEAN-5 members may enhance the region’s resilience against global headwinds. “While all countries have potential gains from financial integration, Indonesia, and the Philippines, which have the lowest level of financial development, would gain more with an average growth impact of about 3.5 ppts,” it said. To further strengthen the gains from financial integration, the IMF recommended trade liberalization in the region, improving regulatory and institutional quality, as well as reducing restrictions on capital flows.

Investor confidence in PHL‘solid’ despite FDI’s H1 dip

Investor confidence remains “solid” in the Philippines with high reinvested earnings and rising foreign investment approvals despite the decline in the country’s foreign direct investment (FDI) inflows in the first half of the year, according to Trade and Industry Secretary Alfredo E. Pascual. “Factors such as inflation rates and investment rates substantially influence FDI decisions. Stable inflation and competitive interest rates generally attract FDI, whereas high inflation and unfavorable rates can repel foreign investors,” Pascual noted. As for investment approvals by the Board of Investments (BOI), and other IPAs attached to DTI, Pascual noted a “consistent increase” since 2022. As of August 2023, the BOI said it already approved P720 billion worth of investment projects.

Weaker peso pushes up PHL debt to P14.35T

The Treasury said the national government’s outstanding debt rose by P105.28 billion from last month’s P14.244 trillion “primarily” due to peso depreciation. The Treasury pointed out that the local currency weakened to P56.651 in August from P54.834 in July against the US dollar. “Of the total debt stock, 31.8 percent are from external sources while 68.2 percent are from domestic borrowings,” the Treasury said on Monday. The country’s latest debt figure is already 98.09 percent of the national government’s anticipated P14.63-trillion outstanding debt by the end of the year.

PH likely to import more sugar

In a report, the USDA’s Foreign Agricultural Service (FAS) estimated that the country’s raw sugar production for marketing year 2024 that began in September would reach 1.8 million metric tons (MT), slightly higher than the sugar output of 1.79 million MT recorded by the agency for marketing year 2023. The Philippines, however, is not anticipated to export sugar as the SRA allocated the entire sugar output to the domestic market to stabilize supply. Last month, SRA Administrator Pablo Luis Azcona said the agency was soliciting inputs from stakeholders to assess if the industry can finally export sugar to the United States this time. For this crop year, the SRA will continue periodic assessment to adjust percentage allocation and distribution, as needed.

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