THE BANGKO SENTRAL ng Pilipinas (BSP) is looking to limit its foreign exchange intervention on markets by finalizing a new framework this year, its chief said on Thursday.

In his first public event this year at the Rotary Club’s weekly meeting, BSP Governor Eli M. Remolona, Jr. said the central bank aims to make the peso more competitive and reduce restrictions in the foreign exchange market.

“We’re developing a framework for intervention… We think intervention should only happen during times of stress. It’s meant to contain stress,” he said.

Mr. Remolona told reporters that BSP Senior Assistant Governor Edna C. Villa will head the central bank’s Financial Markets department, replacing retired Ma. Ramona Gertrudes D.T. Santiago. 

The foreign exchange framework will also be implemented this year, he said.

The BSP chief has instructed Ms. Villa to identify the Philippines’ peers in the region when it comes to movements against the dollar.

“We want to do things in the right way. We want to do things based on fundamentals and also based on what we know is going on in the markets,” he said.

Meanwhile, Mr. Remolona noted that October 2022 was a stressful episode for the central bank and the foreign exchange market. 

“Those are the events in which we want to intervene,” he said. “I think we’ve been intervening a bit too much. If it’s about containing stress, that also means intervention should be infrequent.”

In October 2022, the peso reached its record low of P59 against the dollar. This also caused the peso to add to inflationary pressures during that time, which prompted the BSP to intervene in the foreign exchange market and raise interest rates. 

The peso has since rebounded to the P55 level, closing at P55.50 against the dollar on Thursday.

To tame inflation, the Monetary Board hiked borrowing costs by 450 basis points (bps) from May 2022 to October 2023. This has brought the key interest rate to 6.5%, its highest in 16 years.

Mr. Remolona said the current 6.5% policy rate is still appropriate to ensure growth and tame inflation at the same time. 

“People say we’ve been tightening too much… that’s a very difficult challenge because we want to make sure that we don’t tighten unnecessarily,” he said.

However, the BSP chief said there are still upside risks to inflation, but he is hoping that inflation will settle within the 2-4% target range for most of 2024.

BSP sees inflation settling at an average of 6% in 2023, before easing to 3.7% in 2024 and 3.2% in 2025.

A BusinessWorld poll last week yielded a median estimate of 4% for December headline inflation, within the BSP’s 3.6-4.4% forecast for the month. This is slightly slower than 4.1% in November but significantly below 8.1% in December 2022.

If realized, December could mark the first time that inflation met the central bank’s 2-4% target after 20 straight months. It would also be the slowest since the 3% print in February 2022.

This would bring the 2023 inflation average to 6%, matching the BSP’s baseline forecast.

The Philippine Statistics Authority will release December consumer price index data on Friday.

SALARY INCREASES are expected to be higher in the Philippines this year, amid growing demand for professionals and elevated inflation, according to global professional services firm Mercer.

In its Total Remuneration Survey conducted last year, Mercer said Philippine-based organizations projected a median salary hike of 6.2% in 2024, slightly higher than the actual 6% salary increase last year. 

It is also above the projected average median salary increase of 5.2% in Asia for 2024.

“The projected hike in median salary increment can be attributed to factors such as the rising demand for skilled professionals, the need to attract and retain top talent in a fiercely competitive job market, and persistent inflationary pressures,” Mercer said in a statement.

The expected median salary increase in the Philippines is the fourth highest in the region, just behind India (9.3%), Vietnam (7%), and Indonesia (6.5%).

The country surpassed the projected median salary increments in Mainland China (5.2%), Malaysia (5.1%), Thailand (4.7%), South Korea (4.4%), and Singapore (4.2%).

Meanwhile, Hong Kong SAR (2.6%), Taiwan (3.8%) and Japan (3.9%) reported the lowest projected median salary increments in the region.

Floriza I. Molon, business leader at Mercer Philippines, said that most industries are seen to ramp up hiring as businesses expand this year.

“The Philippines is poised for economic growth despite some global headwinds. Some industries will continue to hire as businesses, particularly in shared services and outsourcing industry, retail and consumer sectors expand,” Ms. Molon said.

Mercer said salary increases will likely be consistent in most industries this year, as firms seek to retain talent.

The energy sector is seen to raise salaries by 7% this year, the highest among industries in the Philippines, data from Mercer showed. This is the same as the 7% hike implemented in 2023.

The high-technology industry is expected to hike salaries by 6.8%, a tad higher than the actual 6.5% increase last year.

Firms in retail and wholesale will increase wages by 6.7%, slightly higher than last year’s 6.5%.

Consumer goods firms will hike wages by 6.5%, faster than the 6% implemented last year.

“Besides compensation, companies would need to reassess their total rewards programs focusing on the employee benefits and work experience,” Ms. Molon said.

Citing Mercer Global Talent Trends 2023 report, Ms. Molon said that employees prefer to stay with organizations that offer job security, work flexibility and high pay.

“Employees are also expecting benefits and career opportunities within their organizations. The ability to provide these creates a more holistic and strategic management on talent in the workplace,” she added.

China Banking Corp. Chief Economist Domini S. Velasquez said businesses will likely provide higher salary increases as inflation remains elevated.

The Bangko Sentral ng Pilipinas (BSP) expected inflation to have averaged 6% in 2023. It sees inflation averaging 3.7% in 2024.

“The rise in inflation could prompt businesses to provide higher compensation to offset the increased cost of living for Filipinos,” Ms. Velasquez said in a Viber message.

“Moreover, the approved minimum wage hikes in 2023 would further contribute to the upward trend in average wages for individuals earning above the minimum wage,” she added.

Ms. Velasquez said the wage increases should not “exacerbate” inflation and be balanced out by improving worker productivity.

“One key factor in achieving this balance is the improvement of worker productivity. As businesses recover from the impact of the pandemic and economic activities gradually increase, it is anticipated that Filipino workers will demonstrate higher productivity levels,” she said.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that implementing salary increases will not only allow businesses to be competitive but also allow the Philippines to catch up with its regional peers in terms of per capita income.

“Given the fact that the Philippines is still among the fastest-growing economies in Asia, it still has relatively lower per capita incomes and is yet to catch up with other neighboring countries,” he said.

“Essentially the demand-supply balance of talent is a major determinant for wage growth in view of local or overseas employment choices for local talents,” he added. — Justine Irish D. Tabile

THE MAHARLIKA Investment Corp. (MIC), which is tasked to oversee the Philippines’ first sovereign wealth fund, is looking at potential investments in key sectors such as infrastructure, energy and transportation.

The MIC held its first board meeting on Wednesday, as it seeks to fully operationalize the Maharlika Investment Fund (MIF), according to a statement from the Department of Finance (DoF).

MIC President and Chief Executive Officer (CEO) Rafael Jose D. Consing, Jr. said that the wealth fund could potentially invest in the power, agroforestry industrial urbanization, mineral processing, tourism, transportation, and aviation sectors.

The MIC, which was established under Republic Act (RA) No. 11954, is responsible for mobilizing and utilizing the country’s first sovereign wealth fund for investments in transactions that would generate optimal returns.

“I look forward to your cooperation and support as we work together in mobilizing greater investments in the country’s growth-enhancing sectors, while upholding the highest standards of accountability, fiscal responsibility, and good governance,” Finance Secretary Benjamin E. Diokno told the MIC board during the meeting. He sits as the board’s chairperson in an ex-officio capacity.

“The enactment of the Maharlika Investment Fund complements recent policy initiatives, such as the new public-private partnership policy framework, the approval of 197 high-impact infrastructure flagship projects, and liberalization policies that have further opened the Philippines to foreign investments in key sectors,” Mr. Diokno added.

During the meeting, the board approved the presented MIC’s capitalization scheme amounting to P125 billion.

Under the law, state banks Land Bank of the Philippines (LANDBANK) and Development Bank of the Philippines (DBP) are required to contribute P50 billion and P25 billion, respectively, to the initial capital of the fund.

The National Government is also being counted on to contribute P50 billion. The MIC has an authorized capital stock of P500 billion.

President Ferdinand R. Marcos, Jr. signed the Maharlika fund bill into law in July despite concerns raised by economists, including questions on the possible negative impact on the operations of state banks.

Mr. Marcos had said last year that the fund would be fully operational by the end of 2023.

“Usually, a day or two does not really matter. However, given the enormous opportunity cost of this fund, every second counts,” Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila University, said in a Facebook Messenger chat.

“So, the three to four days of delay is already weighing heavily on people,” he added.

During the meeting, Mr. Consing was quoted by a Palace statement as saying the investment body will operate with “utmost” openness and “rigorous” accountability.

Mr. Lanzona said these statements are “not enough to convince people about the need” of the wealth fund.

“For one thing, there has been no accounting done as to the negative effects of this fund on the operations of the LANDBANK and DBP,” he added, noting that the fund has significant effects on farmers and small-scale entrepreneurs who rely on the two state banks.

Last year the two banks sought regulatory relief from the Bangko Sentral ng Pilipinas for their contributions to the Maharlika fund.

Also during the meeting, Mr. Consing updated the board on the MIC’s startup activities such as staffing and recruitment and the hiring of its management team.

Aside from Mr. Diokno and Mr. Consing, the MIC board members include LANDBANK President and CEO Ma. Lynette V. Ortiz, DBP President and CEO Michael O. de Jesus, and MIC directors Vicky Castillo L. Tan, Andrew Jerome T. Gan, German Q. Lichauco II, and Roman Felipe S. Reyes.

The board also appointed the Bureau of the Treasury as the interim fund manager of the MIC. 

“I am confident that we have a formidable team to steer the fund effectively towards transformative investments for the Philippine economy,” Mr. Diokno said.

The MIC’s next board meeting is scheduled in the fourth week of January. — Keisha B. Ta-asan and Kyle Aristophere T. Atienza

PROJECTS BENEFITING from incentives under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law have reached P1.02 trillion in investment capital as of October, the Department of Finance (DoF) said. 

In a social media post, the DoF said this reflects the efforts of the Marcos administration to promote the Philippines as a good investment destination. 

“This landmark milestone also gained P572.98 billion worth of foreign direct investment (FDI) pledges, with 910 CREATE-approved projects varying across priority sectors listed in the Strategic Investment Priority Plan,” it said.

Of the 910 CREATE-approved projects, around 49 big-ticket tax incentive applications with a total investment capital of P817 billion were approved by the Fiscal Incentives Review Board.

The remaining 861 projects — with a combined investment capital of P203 billion — were from investment promotion agencies (IPAs).

“These projects are expected to accumulate a committed employment count of around 99,400 jobs within its incentivized period, with the labor-intensive manufacturing sector having the highest number of approved projects among the priority sectors,” the DoF said.

“This underscores the employability of the country’s workforce in high-quality jobs that will contribute to long-term economic growth,” it added.

CREATE was signed into law in 2021 to aid enterprises that have yet to recover from the coronavirus pandemic. It reduced corporate income tax rates, provided tax relief measures, and rationalized fiscal incentives.

“As CREATE establishes a performance-based, time-bound, targeted, and transparent tax incentives regime in the country, incentivized projects or activities under the key structural tax reform are to achieve performance metrics to ensure that the grant of fiscal support to registered business enterprises leads to higher economic returns,” the DoF said. 

In August, Albay Rep. Jose Ma. Clemente S. Salceda filed the CREATE to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) bill, which seeks to reconcile disparities between the CREATE Act and its implementing rules, primarily on value-added tax (VAT)-related transactions. 

Under CREATE MORE, local and export companies, even those inside ecozones and freeports, would continue to enjoy duty exemptions, VAT exemption on importation, and the VAT zero-rating of local purchases as provided in their respective IPA registrations.

Registered export enterprises would also enjoy non-income tax incentives, VAT exemption on importation and VAT zero-rating on local purchases, as long as the registered firm maintains 70% of the total annual production as export sale and continues to be registered in good standing with the IPA.

The measure also proposes to lower corporate income tax to 20% for those under the enhanced deduction regime from 20-25%.

The bill is currently being taken up in the House of Representatives. — Keisha B. Ta-asan

THE PESO rose further against the dollar on Thursday as Philippine inflation likely eased last month.

The local unit closed at P55.50 per dollar on Thursday, strengthening by seven centavos from its P55.57 finish on Wednesday, based on Bankers Association of the Philippines data.

The peso opened Thursday’s session steady at P55.75 against the dollar. Its intraday best was at P55.465, while it dropped to as low as P55.78 versus the greenback during the session.

Dollars exchanged dropped to $1.72 billion on Thursday from $1.88 billion on Wednesday.

The peso gained against the dollar on market expectations that headline inflation eased further in December, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Philippine Statistics Authority will release December consumer price index data on Friday.

A BusinessWorld poll conducted last week yielded a median estimate of 4% for December headline inflation, within the central bank’s 3.6-4.4% forecast and slower than 4.1% in November and 8.1% in December 2022.

If realized, December would be the first time that inflation was within the central bank’s 2-4% target and the slowest since the 3% print in February 2022.

This would bring the 2023 inflation average to 6%, matching the Bangko Sentral ng Pilipinas’ (BSP) baseline forecast.

The continued easing of inflation could prompt the BSP to cut rates within this year, Mr. Ricafort added.

BSP Governor Eli M. Remolona, Jr. said last month that the central bank will likely keep rates elevated until inflation is comfortably within its 2-4% goal.

The Monetary Board has raised borrowing costs by a cumulative 450 basis points (bps) from May 2022 to October 2023, bringing the policy rate to a 16-year high of 6.5%.

For Friday, Mr. Ricafort expects the peso to range from P56.40 to P55.60 per dollar. — AMCS

PHILIPPINE SHARES rebounded on Thursday amid expectations of better inflation data for December.

The Philippine Stock Exchange index (PSEi) gained 103.64 points or 1.59% to end at 6,602.52 on Thursday, while the broader all shares index rose 35.52 points or 1.02% to close at 3,485.76.

“This Thursday, the local market rose by 103.64 points to 6,602.52 on the back of hopes that headline inflation in the Philippines had further declined last December. Supporting the said hopes is the midpoint of the Bangko Sentral ng Pilipinas’ (BSP) 3.6-4.4% range forecast which is below the preceding month’s 4.1%,” Philstocks Financial, Inc. Research and Engagement Officer Mikhail Philippe Q. Plopenio said in a Viber message.

The Philippine Statistics Authority will release December consumer price index data on Friday.

A BusinessWorld poll last week yielded a median estimate of 4% for December headline inflation, within the BSP’s 3.6-4.4% forecast for the month. This is slightly slower than the 4.1% in November but significantly below the 8.1% in December 2022.

If realized, December could mark the first time that inflation met the central bank’s 2-4% target after 20 straight months. It would also be the slowest since the 3% print in February 2022.

This would bring the 2023 inflation average to 6%, matching the BSP’s baseline forecast.

“The index surged above the 6,600 level and reached its highest close in more than five months as investors positioned ahead of the release of the Philippine December inflation print on Friday,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet likewise said in a Viber message.

“The PSEi bucked the fall of most Asian markets as traders bought up local stocks on expectations that domestic headline inflation last month cooled to 4%, which is within the BSP’s target inflation range,” Mr. Colet added.

Asian shares fell on Thursday as traders dialed back bets of steep and early rate cuts this year, with the minutes of the US Federal Reserve’s last meeting providing few clues on when US cuts might start, Reuters reported.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.17% and was headed for the third straight day of losses.

Back home, almost all sectoral indices ended higher on Thursday. Property increased by 78.36 points or 2.77% to 2,907.31; financials climbed by 30.76 points or 1.78% to 1,754.47; services rose by 25.86 points or 1.59% to 1,651.63; holding firms went up by 71.46 points or 1.13% to 6,360.48; and industrials added 33.14 points or 0.36% to end at 9,137.63. 

Meanwhile, mining and oil dropped by 77.40 points or 0.78% to 9,777.89. 

Value turnover climbed to P5.18 billion on Thursday with 461.64 million issues changing hands from the P3.11 billion with 182.7 million shares seen on Wednesday.

Advancers outnumbered decliners, 110 to 85, while 46 issues ended unchanged. 

Net foreign buying stood at P768.3 million on Thursday versus the P260.5 million in net selling seen the prior day. — R.M.D. Ochave with Reuters

THE Energy Regulatory Commission (ERC) said the Panay power outage has been referred to an interim grid management committee for investigation, adding that appropriate penalties will be imposed after the panel delivers its findings.

“After the investigation, if penalties are called for, then we will commence proper proceedings to allow the relevant parties to answer and, if answers are not acceptable, impose penalties,” ERC Chairperson Monalisa C. Dimalanta said in a Viber message.

The National Grid Corp. of the Philippines (NGCP) reported on Tuesday that multiple power plants tripped, including units of Panay Energy Development Corp. and Palm Concepcion Power Corp. (PCPC).

Due to the plant outages, some 452 megawatts (MW) became unavailable, causing the NGCP to raise a yellow alert on the Visayas grid.

The yellow alert was lifted at 9:01 p.m. on Tuesday.

According to an NGCP update on Thursday, some 244.6 MW of electricity is currently being generated by Panay power plants.

The Visayas grid will need about 300 MW to stabilize, and is awaiting the return of a 135-MW PCPC facility.

The plant is targeted to be synchronized with the grid between 10 p.m. and 12 midnight on Jan. 4.

Citing an initial report, Ms. Dimalanta said equipment failure at PCPC caused the plant to trip. Operators are waiting for the unit to cool down before it can be restarted.

MORE Electric and Power Corp., the sole electric distribution utility in Iloilo City, has been affected by the power disruption, as well as seven electric cooperatives on the island.

As of 2:30 p.m. on Thursday, almost 50% of MORE’s customers were still not receiving power, it said. The company has imposed rotational outages every three hours due to the insufficient power supply.

“We need to investigate this further because it is impossible that all plants just decided to go offline all at the same time, or that they all failed on their own at the same time,” Ms. Dimalanta said.

“There must be something that led to those serial consequences among the generation plants,” she added.

Ms. Dimalanta said there should have been systems in place to prevent such occurrences.

She said that NGCP can direct distribution utilities to drop load to reduce demand to the level of available supply, thereby stabilizing the system.

“The system operator also controls the dispatch of plants so it could have initiated measures also on that end,” she said.

“We are reviewing whether these measures were undertaken and whether they were enough, or if anything else can be improved,” she added.

The NGCP has said that load restoration will be done “conservatively, by matching loads to restored generation, to prevent repeated voltage failure.”

“The people must understand that we can only transmit power, we do not generate power,” it said in a statement on Wednesday.

Legislators have called on the NGCP and the Department of Energy (DoE) to look into the Western Visayas outages.

“The DoE and the NGCP must understand the gravity of this situation and act decisively to resolve it,” Senate President Juan Miguel F. Zubiri said in a statement. “They should get their acts together immediately.”

He said constant power interruptions hamper the livelihoods and the delivery of basic services to the region’s citizens.

Mr. Zubiri called on the DoE and NGCP to be transparent in implementing measures to address the outages.

Party-list Rep. France L. Castro called on the NGCP to take accountability for the blackouts that have left some parts of Panay without electricity since Jan. 2.

In a statement, she also called on MORE Electric and Power Corp., which supplies power to Iloilo City, to improve its coordination with the electric system grid operators.

“Does (MORE Power) even have a system to help protect the grid from collapsing, like a load dropping mechanism?” Ms. Castro said.

Senate Majority Floor Leader Joel J. Villanueva said the government needs a short-term and long-term strategy for dealing with power disruptions, include ensuring that power plants are properly maintained.

“We also need to continue exploring other sources of renewable energy such as wind and solar to keep up with the DoE’s goal of a power generation mix target of 35% by 2030,” he said in a statement.

Citing DoE data, Mr. Villanueva said about half of the power plants in the Philippines are at least 20 years old.

“The situation is no longer tolerable, and the DoE and the NGCP must urgently address this issue before irreparable damage is done to our communities,” Mr. Zubiri said. — Sheldeen Joy Talavera and John Victor D. Ordoñez

THE PHILIPPINES imported 3.48 million metric tons (MT) of rice in 2023 as of late December, according to the Bureau of Plant Industry (BPI).

Rice imports in December up to the 28^th of the month totaled 387.21 thousand MT, up 29.19% from a year earlier.

The Department of Agriculture (DA) said for the entirety of 2023, imports are expected to total 3.65 million MT, or below the 3.8 million MT projected by the US Department of Agriculture.

The DA has said that about 500,000 MT of rice are expected to arrive in December and January as the government seeks to build reserves for the peak of El Niño.

El Niño is expected to intensify between January and May, affecting about 63 provinces with droughts and dry spells, according to the government weather service, known as PAGASA (Philippine Atmospheric, Geophysical and Astronomical Services Administration).

The BPI reported that Vietnam remained the Philippines’ top supplier of rice with 84.27% of total imports. Shipments from Vietnam are expected to hit 2.94 million MT.

Thailand supplied 297.2 thousand MT and Myanmar 143.92 thousand MT.

The DA said that 75 thousand MT of rice was set to arrive from India by early January, part of a 295,00 MT rice allocation India granted the Philippines in October.

The Indian government issued the quota for non-basmati white rice to the Philippines. It had earlier banned all exports of non-basmati white rice to stabilize its domestic supply.

Arrivals from India have amounted to 13,758 MT, as of Dec. 28.

Meanwhile, the BPI has issued 824 sanitary and phytosanitary import clearances (SPSICs) for December covering the import of about 660.01 thousand MT of rice.

Agriculture Secretary Francisco Tiu Laurel, Jr. said he has instructed traders to use up their SPSICs for an additional 1 million MT of rice. The DA has imposed a 30-day deadline for traders to use their permits. — Adrian H. Halili

AGRICULTURAL EXPORT growth will continue to be constrained by limited output and funding to develop the high-value crop sector, farmers said.

“Our problem with exports goes back to our problems in producing high-quality and competitively priced products on a consistent and sustainable basis, and in a way that is profitable for our farmers and market players,” Federation of Free Farmers National Manager Raul Q. Montemayor said in a Viber message.

Former Agriculture Undersecretary Fermin D. Adriano blamed the lack of funds allocated for high-value crops, as against the attention paid to rice production.

The Department of Agriculture (DA) has set aside about P31 billion in 2024 to improve rice production.

“For as long as research and development and extension services receive a pittance, and the DA does not properly play its role of training our agri-exporters on (sanitary and phytosanitary) standards of the various rich importing countries, export growth potential will be constrained,” Mr. Adriano said in a Viber message.

The DA has announced the preparation of a Philippine Agricultural Export Development Plan to increase exports of agriculture and fisheries products.

“Despite all the supposed concessions we gained from trade negotiations, our agricultural trade deficit has continued to increase, especially since our competitors are racing far ahead of us,” Mr. Montemayor added.

Agricultural exports declined 13.3% to $1.61 billion during the third quarter, accounting for 8.2% of total exports, according to the Philippine Statistics Authority.

The leading exports were edible fruit and nuts as well as peel of citrus fruit and melons, valued at $492.09 million, or 30.5% of the total.

He said that the DA needs to identify products to focus on for export while setting up a support system covering the process from production to domestic and international markets.

“Malaking trabaho (It’s a big job) but there are many success stories, which we just need to promote and expand,” Mr. Montemayor added.

Meanwhile, Roy S. Kempis, a retired Pampanga State Agricultural University professor, said that agriculture products like mango, avocado, and durian are on demand in global markets but can benefit from further support.

“Philippine mango is preferred for its sweetness, texture and appropriate amount of fiber both in the export and domestic markets,” Mr. Kempis said in a Viber message, citing the potential for expanding the crop.

He added that the government could increase farmland dedicated to avocado and durian.

Mr. Kempis said technical and management training is needed by producers and exporters.

He said increasing the planting area, improving pest management and irrigation systems, and building community processing areas, will support the growth of such exportable crops, as will more access to credit.

“Exporting and financial literacy are two other areas that agriculture and food producers and exporters could be trained in,” he added.

THE Philippine Chamber of Commerce and Industry (PCCI) said that 2024 could be a better year for business as the government and private sector seek to address ease of doing business (EoDB), power, and upskilling issues.

“With all these efforts… and all those good individuals who were recently appointed to help us address the issues (of) EoDB, power and upskilling and reskilling of our labor, we are optimistic that 2024 will be a better year,” said PCCI President Enunina Mangio in a television interview.

She said foreign business organizations’ own forecasts are signaling that the Philippines could be the fastest growing economy in Southeast Asia.

“PCCI assumes that this growth will be driven by resilient domestic consumption, increased government spending, infrastructure projects and a gradual recovery in some sectors. We see the economy gradually and moderately growing,” she added.

She cited the need to strengthen its foreign relations and work on achieving remittance targets from overseas Filipino workers.

The reliance on remittances “is why reskilling of our laborers is very important,” she added.

Ms. Mangio said that the PCCI recognizes that the business sector has the responsibility to help the government in reviving the economy.

“That is why we are taking a more proactive role in helping the national and local governments champion initiatives that will make our enterprises more competitive and our important sectors more attractive to local and foreign investors,” she said. — Justine Irish D. Tabile

THE NATIONAL Government’s (NG) total outstanding debt hit a fresh high of P14.51 trillion as of end-November, the Bureau of the Treasury (BTr) said on Wednesday.   

The outstanding debt inched up by 0.2% from P14.48 trillion as of end-October, data from the BTr showed.

“NG’s debt stock increased by P27.92 billion or 0.2% month over month, primarily due to the net issuance of domestic securities,” the BTr said in a press release.

Year on year, the debt stock rose by 6.3% from P13.64 trillion.

Outstanding debt went up by 8.1% from P13.42 trillion as of end-December 2022.

More than two-thirds or 69.1% of total outstanding debt as of end-November came from domestic sources.

As of end-November, domestic debt increased by 1.2% to P10.02 trillion from P9.9 trillion a month earlier due to the net issuance of government securities.

Domestic debt also rose by 6.3% from P9.43 trillion in the same period a year prior.

“New domestic debt issued during the month totaled P171.091 billion while principal redemption amounted to P45.14 billion, underlying a net issuance of P125.95 billion,” the BTr said.

“The increase was partially offset by the P3.87-billion effect of peso appreciation on foreign currency-denominated domestic securities,” it added.

Data from the Treasury department showed the peso closed at P55.451 against the dollar as of end-November, strengthening by P1.357 or 2.4% from P56.808 as of end-October.

Meanwhile, external debt, which accounted for 31% of the total, slipped by 2.1% to P4.48 trillion as of end-November from P4.58 trillion as of end-October.

However, external debt rose by 6.4% from P4.22 trillion a year ago.

“For November, the lower level of external debt was due to the net repayment of foreign loans amounting to P1.08 billion and favorable foreign exchange movements, wherein the P109.37 billion reduction attributed to peso appreciation against the US dollar far exceeded the upward adjustment linked to third-currency appreciation of P16.3 billion,” the BTr said.

Broken down, external borrowings consisted of P2.06 trillion in loans and P2.42 trillion in global bonds.

As of end November, the NG’s overall guaranteed obligations slid by 12.2% to P353.14 billion from P361 billion as of end-October.

Year on year, guaranteed debt declined by 8.9% from P388 billion.

“The decline in the level of guaranteed debt was attributed to the net repayment of both domestic and external guarantees amounting to P1.21 billion and P3.5 billion, respectively,” the BTr said.

“In addition, the peso appreciation against the US dollar further trimmed P4.07 billion (from guaranteed debt). These more than offset the P0.92-billion effect of third currency appreciation on similarly denominated guarantees,” it added.

China Banking Corp. Chief Economist Domini S. Velasquez said the government incurred more debt to support budget financing.

“The increase in government debt was likely driven by the financing needs of government projects and programs. However, this growth was likely limited by lower market interest rates and the appreciation of the peso during the month,” she said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the record high NG debt was due to new borrowings to fund the budget deficit.

For 2023, the government has set a budget deficit ceiling of P1.499 trillion, equivalent to 6.1% of the gross domestic product (GDP).

“Looking ahead to 2024, we expect the government to increase its borrowings to fund the 2024 budget which is 9.5% higher than that of last year,” Ms. Velasquez said.

“On a positive note, the expected downtrend in market yields and further strengthening of the peso will help moderate debt growth. However, we think that the proposed tax reforms are crucial to ensure that the budget deficit and government debt remain at manageable levels,” she added.

Mr. Ricafort said the government’s outstanding debt could still increase in the coming months due to the maiden issuance of Sukuk bonds worth $1 billion last December.

“Continued budget deficits, though narrower from year ago levels, could still lead to additional borrowings/debt by the national government,” he said.

For 2023, the government plans to borrow P2.207 trillion, consisting of P1.654 trillion from domestic sources and P553.5 billion from foreign sources.

THE PHILIPPINE ECONOMY may grow by 5.6% this year as easing inflation could help boost consumption, MUFG Global Markets Research said.

In a report, MUFG Global Markets said the Philippine gross domestic product (GDP) is forecast to expand by 5.6% this year, picking up from the likely 4.8% GDP growth in 2023.

However, the growth forecast is below the Philippine government’s 6.5% to 7.5% growth target for 2024.

“We think that headwinds to domestic demand from elevated food and energy prices should gradually fade over time, but the growth rebound will probably be more evident from the second half of 2024 onwards, assuming no further food supply shocks,” it said.

Philippine GDP growth accelerated to 5.9% in the third quarter, mainly driven by faster government spending, while private consumption slowed. This brought the nine-month GDP growth average to 5.5%, still below the government’s 6-7% full-year target.

“The more stable external environment, coupled with stable USDPHP (US dollar-Philippine peso exchange rate), should also help Bangko Sentral ng Pilipinas (BSP) keep rates on hold through the next few months, and to start the rate-cutting cycle from the second half of 2024, as such helping investment and private consumption activity,” the research firm said.

MUFG Global Markets Research expects the BSP to cut interest rates by 50 basis points (bps) this year. This would bring the benchmark rate to 6% by end-2024, from the current 16-year high of 6.5%.

The Monetary Board has raised borrowing costs by a cumulative 450 basis points (bps) from May 2022 to October 2023 to tame inflation.

“We think the Philippine central bank will remain cautious for now, even as it looks more likely now that the Fed will start its rate-cutting cycle in 2024, together with the recent progress in bringing inflation down. This is also because upside risks to inflation are still present,” the research firm said.

Markets are anticipating the US Federal Reserve will begin cutting rates this year as inflation eases. At its December meeting, the Fed had forecast 75 bps in rate cuts for 2024.

“We think the Philippines’ central bank would prefer to take its lead from the Fed and wait for the US rate-cutting cycle to be clearly underway, before commencing its rate cuts,” it said.

For this year, MUFG Global Markets Research said Philippine inflation is seen to slowly return to the upper end of the BSP’s 2-4% target band if there are no more supply shocks.

“We expect the Philippines’ CPI (consumer price index) to fall into the central bank’s upper half of the inflation target by the first quarter 2024, and to stay around that range through the course of 2024… There are nonetheless still upside risks to inflation stemming from food supply shocks, possible transport fare hikes, and minimum wage increases,” it added.

BSP Governor Eli M. Remolona, Jr. said last month the central bank will likely keep benchmark interest rates higher for longer until inflation settles at around 3%.

MUFG Global Markets Research said the Philippine peso will likely underperform in 2024, as the current account deficit is seen at -3% of GDP and the central bank beefs up its foreign exchange reserves.

It expects the peso to end at P55.40 per dollar by the first quarter of 2024, and by P55 per dollar by yearend.

“Our forecasts imply some underperformance in PHP against other Asian FX (foreign exchange), but to a lesser extent than before, with lower global oil prices and fading of domestic food supply shocks helping to contain both inflation pressures and the current account deficit,” it said. — AMCS

THE PRICE AND SUPPLY of electricity in the Philippines are seen to be challenged this year due to warm weather but may be offset by the power capacity expansion from renewables.

Jose M. Layug, Jr., president of Developers of Renewable Energy Advancement, Inc., said he is anticipating supply challenges, especially during the summer months.

“No matter how we tried to maintain all these coal-fired plants, the point is they are already old so you should expect these power plants to break down very often and that’s why we need new capacities,” he said in a virtual interview.

“Otherwise, we will have an issue on supply, and we will be placing yellow alerts,” he added, referring to the warning when reserves fall below a designated safety margin.

In 2023, the Philippines was placed under yellow and red alerts several times due to sudden plant outages. The Department of Energy (DoE) had expected 12 yellow alerts last year. Red alerts are raised when the supply-demand balance deteriorates further, signaling the possibility of rotational brownouts.

For 2024, the DoE has so far not projected any potential yellow and red alerts as it banks on new solar power plants that will be coming in, which it said will be “favorable” under an El Niño scenario.

Latest data from the state weather bureau Philippine Atmospheric, Geophysical and Astronomical Services Administration showed that a moderate El Niño would continue to persist and intensify in the coming months.

Energy Secretary Raphael P.M. Lotilla is expecting a favorable status in electricity supply this year as he anticipates the completion of power transmission projects.

“We did manage to contain the weakness in 2023, and 2024 promises to be better. But of course, from the supply side, and we hope that by 2024, we shall also finish a number of major transmission connections, but of course, there remain threats,” he told reporters in an interview last month.

Privately owned National Grid Corp. of the Philippines (NGCP) holds the sole and exclusive concession and franchise for the operation of the country’s power transmission network, which links power generators and distribution utilities to deliver electricity nationwide.

NGCP has already energized some of its transmission projects such as the P10.2-billion Hermosa-San Jose 500-kilovolt transmission line. It is currently working on the full completion of the Mindanao-Visayas Interconnection Project (MVIP).

Majah-Leah V. Ravago, an energy economist from the Ateneo de Manila University, said increasing power generation means investing in transmission projects.

“You cannot address the problem that you’re just looking at generation because the consumption of electricity is a whole system in itself,” she said in a virtual interview.

“You cannot look at increasing generation without accompanying investment in transmission and distribution. We have many cases like that,” she added.

Two decades after the Electric Power Industry Reform Act was passed, electricity rates in the Philippines are still one of the highest in the region as there are still a lot of inefficiencies in the system.

The Philippines’ per capita consumption of electricity is low relative to its neighbors due to high power prices brought on by inefficiency and reliability issues, according to Ms. Ravago.

Citing data from the World Bank and the United Nations, she said that the country’s per capita consumption was at 975.61 per kilowatt-hour (kWh) in 2022.

This is relatively lower compared with the country’s peers in the Association of Southeast Asian Nations (ASEAN) such as Singapore (9,168.82 per kWh), Malaysia (5,318.78 per kWh), Indonesia (2,662.31 per kWh), and Thailand (1,210.67 per kWh).

Electricity consumption in the country is expected to grow by nearly four times the 2018 level by 2040, Ms. Ravago said.

“If we are to meet that growth by 2040, it means that electricity consumption has to grow. It means demand is growing, it has to be met by supply. Otherwise, we would have electricity price increases,” she said.

To meet the demand, she said that the government should address regulatory bottlenecks both for generation and transmission.

Since power generation is privately led in the Philippines — which attracts investments — the government should instead focus on facilitating these capital inflows, easing regulatory burdens, and expanding transmission, Ms. Ravago said.

“We just need to make sure that the other related infrastructure, transmission lines, and ports are also upgraded in time of these projects going online,” Mr. Layug said.

Data from the DoE showed that wind, natural gas, and solar dominated most of the indicative projects, or those currently in the pre-development stage, as of August 2023 with a capacity of 34,080.50 megawatts (MW), 7,987.60 MW, and 7,811.86 MW, respectively.

‘THE WAY TO GO’
Renewables are seen to be able to offset a rise in electricity prices and mitigate the high prices of oil and coal.

“This year… the private sector is happy about how the government, particularly the DoE, has convinced and has signaled to the private sector that renewables are the way to go,” Mr. Layug said.

As of end-2022, the share of renewable energy (RE) in the country’s power generation mix was about 22%. The government has set a target of increasing this to 35% by 2030, then 50% by 2040.

“We all know that the cost of RE is now more optimal, more affordable especially for the consumers, so we’re happy with that and we hope the government continues its forward-looking planning of the energy sector in the Philippines by continuously pushing for renewable as part of the energy mix,” Mr. Layug said.

Within RE technologies, solar and wind energy are seen to drive the growth of renewables.

“In the next three years, I still see solar onshore and onshore wind to dominate. With, hopefully, waste-to-energy [projects] catching up a little bit,” Mr. Layug said. “We hope to see floating solar and offshore wind to dominate.”

As of October, the DoE has awarded around 1,300 RE contracts, promising a total potential capacity of about 130,000 MW.

Of the total, 225 wind energy contracts have been awarded with the highest combined capacity of 83,079.3 MW. This was followed by 356 solar energy projects with 27,889 MW and 430 hydropower projects with a capacity of 18,924.4 MW.

“We are in a good position to implement reforms necessary to energy transition,” Ms. Ravago said, citing the moratorium on new greenfield coal power plants and the liberalization of the RE sector.

Budget Secretary Amenah F. Pangandaman last week issued the National Budget Call in a memorandum, asking government agencies to begin preparing their budget proposals for 2025.

The proposed 2025 national budget is set at P6.12 trillion, according to the Development Budget Coordination Committee. This is 6.1% higher than the P5.768-trillion national budget for 2024.

“The Fiscal Year 2025 budget aims to continuously address the socioeconomic issues our country has been facing, e.g., high food prices, increasing fuel prices, and the scars that the pandemic has left, among others,” the DBM said.

The government is targeting 6.5-7.5% gross domestic product (GDP) growth this year, but the outlook is clouded by risks to inflation, tight borrowing costs, and a global slowdown.

To tame inflation, the Bangko Sentral ng Pilipinas (BSP) has tightened interest rates by 450 basis points from May 2022 to October 2023, bringing the key rate to a 16-year high of 6.5%.

Aside from addressing economic issues, the 2025 spending plan will also support infrastructure investments, with emphasis on flagship infrastructure projects approved by the National Economic and Development Authority.

“However, increased infrastructure spending will not, in any way, detract from the full support provided to the poorest, lagging, climate change and disaster risk vulnerable areas nor the social sector, and basic public services,” the DBM said.

The government also seeks to adopt emerging global trends on digital transformation to boost and foster efficiency, effectiveness, and transparency of service delivery.

The 2025 budget will also include funds for capacity-building programs for local government units (LGUs) such as competency-enhancing interventions, resource generation, public financial management, leadership and development planning, among others.

This is aimed at helping LGUs in assuming the devolved functions and services from the National Government, as mandated by the Supreme Court’s Mandanas-Garcia ruling.

The DBM said the proposed 2025 budget and its priorities will be anchored on the government’s commitment to achieve the 2030 Agenda for Sustainable Development.

“With six years remaining until the 2030 Agenda, there is a need to accelerate the progress or reverse the negative trends to achieve the global goals of establishing a transformative vision towards economic, social, and environmental sustainability,” it said.

The 2025 budget proposals should include the priorities and policy directions of the Marcos administration, citing the government’s medium-term fiscal framework, the eight-point socioeconomic agenda and the Philippine Development Plan for 2023-2028.

However, due to the impact of the country’s debt burden and competing demands from government agencies, the budget allocation for 2025 will be optimized.

“As part of the evaluation process, the government will consider how the agencies utilized their previous year budget and the implementation progress of their mandated programs and projects to ensure that only those agency proposals, which are implementation-ready, are included in the budget,” the DBM said.

The DBM said agencies should provide the necessary supporting documents such as concrete program plans and designs that outline procurement and implementation milestones.

The budget should also ensure regional plans are in line with national priorities “to achieve equitable regional investment opportunities and growth,” it added.

“In particular, the National Government’s 2025 budget shall provide funds for agencies’ regional programs which are responsive to the needs of the poorest, disadvantaged and lagging LGUs,” the Budget department added.

According to the DBM memorandum, government agencies should submit their signed hard copies of the 2025 budget proposals between March 25 and April 22.

The proposed 2025 national budget will be submitted to Congress on July 22. — Keisha B. Ta-asan

THE PESO appreciated against the dollar on Wednesday on dovish expectations from the minutes of the US Federal Reserve’s December meeting to be released overnight.

The local unit closed at P55.57 per dollar on Wednesday, strengthening by 10 centavos from the P55.67 finish on Tuesday, based on Bankers Association of the Philippines data.

The peso opened Wednesday’s session weaker at P55.70 against the dollar. Its intraday best was its close of P55.57, while its worst showing was at P55.815 versus the greenback.

Dollars exchanged rose to $1.88 billion on Wednesday from $1.26 billion on Tuesday.

“The peso appreciated amid dovish expectations prior to the release of Fed minutes overnight,” a trader said in an e-mail.

Fed officials in December predicted 75 basis points (bps) of rate cuts in 2024, driving money market bets for around double that amount of cuts that prompted a cross-market year-end rally, Reuters reported.

Futures markets still see a 70% chance of the Fed starting to lower US borrowing costs from their current 22-year high from March.

The US central bank last month kept the fed funds rate unchanged at 5.25-5.5% for the third straight time after it hiked borrowing costs by a cumulative 525 basis points from March 2022 to July 2023.

The Federal Open Market Committee will hold its first policy meeting for the year on Jan. 25-26.

Dovish Fed bets caused the dollar to drop slightly on Wednesday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The dollar eased slightly on Wednesday though it stayed near a two-week high, underpinned by a confluence of factors including elevated US Treasury yields and a cautious turn in risk sentiment that weighed on Wall Street, Reuters reported.

Trading was thinned in Asia with Japan out on a holiday, with the greenback paring some of the morning gains over the course of the trading day in the region.

Still, against a basket of currencies, the greenback stood not too far from a two-week top of 102.25 hit on Tuesday, and was last at 102.13.

For Thursday, the trader said the peso could strengthen further as the market expects a slower Philippine inflation print for December. The data will be released on Friday.

The trader sees the peso moving between P55.40 and P55.65 per dollar on Thursday, while Mr. Ricafort expects it to range from P55.50 to P55.70. — AMCS with Reuters

STOCKS dropped on Wednesday amid data showing slower Philippine manufacturing activity growth, profit taking after Tuesday’s rally and amid a trading halt that was lifted before noon.

The Philippine Stock Exchange index (PSEi) declined by 55.16 points or 0.84% to end at 6,498.88 on Wednesday, while the broader all shares index fell by 15.73 points or 0.45% to close at 3,450.24.

Market sentiment soured following the slowdown in the S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) in December, Philstocks Financial, Inc. Research Analyst Claire T. Alviar said in a Viber message. 

The S&P Global Philippines Manufacturing PMI stood at 51.5 in December, lower than the nine-month high of 52.7 in November. A PMI reading above 50 denotes better operating conditions than in the preceding month, while a reading below 50 shows a deterioration.

The December figure was the weakest in three months or since the 50.6 reading in September.

“Trading in the market was halted by the exchange in the morning, then it resumed before the market recess and continued in the afternoon,” Ms. Alviar added. 

The PSE halted trading on Wednesday morning. Trading resumed at 11:56 am.

“The Philippine Stock Exchange, Inc. encountered a technical issue that prompted it to halt trading at 9:32 a.m. on Jan. 3, 2024, Wednesday… PSE and its third-party front-end system provider continue to investigate the matter to identify the root cause,” the bourse operator said in a statement.

While the trading break did not necessarily cause Philippine shares to drop, activity was still disrupted, China Bank Capital Corp. Managing Director Juan Paolo E. Colet said.

“A market glitch for more than two hours is a terrible way to greet the new year. If we aim to boost trading volumes in the local stock market, then we need to ensure the reliability of the PSE’s infrastructure,” Mr. Colet said.

Profit taking after Tuesday’s climb caused the PSEi to drop on Wednesday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

All sectoral indices finished lower on Wednesday. Financials declined by 22.90 points or 1.31% to 1,723.71; services went down by 16.67 points or 1.01% to 1,625.77; industrials retreated by 57.13 points or 0.62% to 9,104.49; holding firms dropped by 34.35 points or 0.54% to 6,289.02; mining and oil decreased by 30.64 points or 0.31% to 9,855.29; and property inched down by 6.66 points or 0.23% to 2,828.95. 

Value turnover went down to P3.11 billion on Wednesday with 182.7 million shares changing hands, from P3.66 billion with 379.8 million issues the previous day.

Advancers edged out decliners, 74 against 71, while 49 names ended unchanged.

Net foreign selling stood at P260.5 million on Wednesday versus the P443.11 million in net buying seen the previous session.

Mr. Ricafort put the PSEi’s immediate support at 6,320-6,410. — RMDO

THE National Grid Corp. of the Philippines (NGCP) has called for improved energy resource planning following the outages on Tuesday at multiple power plants on Panay Island.

“The unscheduled maintenance shutdowns of the largest power plants in Panay Island were the primary cause of the power interruption. We emphasize the need for improved planning to ensure sufficient generation per island, with a well-balanced mix of fuels and technology,” NGCP said in a statement on Wednesday.

On Tuesday, the NGCP issued a yellow alert for the Visayas grid after multiple power plants tripped, including units of Panay Energy Development Corp. and Palm Concepcion Power Corp. (PCPC).

Due to the plant outages, some 452 megawatts (MW) were unavailable to the grid.

As of 5 p.m. on Wednesday, about 203 MW of power is being produced on Panay, augmented by 24.6 MW from “sources elsewhere in the Visayas.”

“We reiterate that load restoration will be done conservatively, by matching loads to restored generation, to prevent repeated voltage failure. NGCP is ready to transmit power once it is available,” the grid operator said.

The Visayas grid needs about 300 MW to stabilize and is awaiting a PCPC facility, which has a 135-MW capacity, to synchronize back onto the grid.

In a statement, the Department of Energy (DoE) reminded the NGCP to “adhere to its responsibilities as system operator in ensuring supply security and reliability of the grid.”

“NGCP is in a position to anticipate system disturbance such as what happened yesterday, which unfortunately resulted in the isolation of Panay from the rest of the Visayas grid due to the simultaneous tripping of power plants that caused multiple power interruption affecting other power plants and distribution utilities (DUs),” Energy Undersecretary Rowena Cristina L. Guevara said.

Meanwhile, the Energy Regulatory Commission (ERC) said it requested additional data from the NGCP and the generation companies to assist in its review of the incidents.

“The ERC understands the inconvenience this situation has caused to the consumers of Panay, and we assure the public that every effort is being made to restore power as quickly as possible,” ERC Chairman Monalisa C. Dimalanta said.

Overall, the plant outage has affected a distribution utility and seven electric cooperatives, according to the NGCP.

These are MORE Electric and Power Corp., Guimaras Electric Cooperative, Inc., Iloilo Electric Cooperative, Inc. (ILECO I), ILECO II, ILECO III, Capiz Electric Cooperative, Inc., Antique Electric Cooperative, Inc., Aklan Electric Cooperative, Inc., and Guimaras Electric Cooperative, Inc. — Sheldeen Joy Talavera

THE pilot stage of the market for reserve power has been launched, with full commercial operations targeted for later in the month, the Independent Electricity Market Operator of the Philippines (IEMOP) said.

In a statement on Wednesday, the IEMOP said pilot operations began on Dec. 26, 2023.

The pilot stage will allow the optimization of the market operator and system operator interfaces and automated real-time dispatch of committed ancillary services (AS). AS contracts are entered into in order to ensure that the grid will have sufficient power should supply be disrupted unexpectedly.

The pilot stage will trial central scheduling and dispatch of contracted ancillary services using enhanced systems of the market operator and system operator, or the National Grid Corp. of the Philippines.

IEMOP operates the Wholesale Electricity Spot Market (WESM), the trading floor for electricity.

With the set integration of the reserve market for AS power into the WESM on Jan. 26, the system operator will be able to procure reserves from the spot market to meet the reserve requirements of the system.

The IEMOP said that the reserve market provides a venue for generators to offer reserve capacities competitively. “These reserve offers are co-optimized with energy offers to determine the best mix of energy and reserve supply that will result in the most competitive prices for electricity.”

“Ultimately, the co-optimization of the scheduling of reserves and energy has the objective of reducing the overall cost of both energy and reserves,” the IEMOP said.

“The operation of the Reserve Market in the Philippine WESM is a testament to our shared commitment to the growth of the Philippine Energy Sector; a growth that ensures reliability, embraces innovation, and promotes competition, all leading to transparency and reasonableness of our power rates,” Energy Regulatory Commission (ERC) Chairperson Monalisa C. Dimalanta said.

Asked to comment, Bienvenido S. Oplas, Jr., president of Minimal Government Thinkers said that the reserve market will expand power supply by encouraging generation companies (gencos) to build more power plants.

“Most of new generation capacity will be contracted by DUs (distribution utilities), RES (retail electricity suppliers) and ECs (electric cooperatives). But some generation capacity will be for reserves by the system operator or embedded with DUs themselves,” Mr. Oplas said in a Viber message.

“The market for new capacity has expanded so more gencos will be encouraged to put up more new power plants,” he added.

In an advisory last week, the Department of Energy said that the WESM Governance Arm has yet to issue a certification on the completeness of the preparations.

The software certification by the independent auditor is still pending while the ERC is still reviewing the simulation results for additional constraints submitted by the IEMOP for the approval of the price determination methodology. 

Meanwhile, the Philippine Electricity Market Corp. (PEMC) said in a statement that it will assess and monitor the co-optimized market once fully operational to ensure the delivery of its commitment and intent of the enhanced WESM design.

“Our commitment to fulfill PEMC’s responsibility to facilitate the readiness certification for the full commercial operations of the co-optimized Energy and Reserve Market have remained steadfast,” PEMC President Elvin Hayes E. Nidea said. — Sheldeen Joy Talavera

THE Department of Agriculture (DA) said it is seeking to expand agricultural and fisheries exports and has set into motion the drafting of the Philippine Agricultural Export Development Plan (PAEDP).

According to a special order signed by Agriculture Secretary Francisco Tiu Laurel, Jr., the DA will create a national steering committee and technical working group to prepare the plan.

The DA said the national steering committee will set the policy direction that the plan will then flesh out.

It added that a technical working group will help create the mechanisms to facilitate exports and ensure that activities and programs are aligned with the Philippine Export Development Plan (2023-2028).

“Member agencies shall create their respective core group that will (assist in) the creation of the PAEDP and provide technical assistance on matters related to export development,” the DA said.

The DA added that the technical working group will seek to identify priority commodities with the strongest export potential.

The steering committee will be headed by Mr. Laurel with all DA undersecretaries as members, while Assistant Secretary for Policy Research and Development Noel A. Padre will head the technical working group.

Agricultural exports declined 13.3% to $1.61 billion during the third quarter of 2023, accounting for 8.2% of total exports, according to the Philippine Statistics Authority.

Leading exports were edible fruit and nuts as well as peel of citrus fruit melons, valued at $492.09 million or 30.5% of the total.

Among the top five exported commodities were animal and vegetable fats; preparations of vegetables, fruit, nuts or other parts of plants; tobacco and manufactured substitutes; and preparations of meat of fish, crustacean, mollusks and other aquatic invertebrates.

President Ferdinand R. Marcos, Jr. has said that the government is focusing on increasing exports of agricultural products to make the economy more competitive. — Adrian H. Halili

THE Anti-Red Tape Authority (ARTA) said only 19 local government units (LGUs) out of 1,637 are fully compliant with the electronic business one-stop shop (eBOSS) requirement of the Ease of Doing Business (EODB) law.

“Out of 1,637 LGUs, 630 have reported that they are now (implementing the law). But validation by the ARTA Compliance Monitoring and Evaluation Office showed that only 19 LGUs are fully compliant, which means that they are fully automated, while 611 LGUs are only partially automated,” ARTA Secretary Ernesto Perez said in an interview with government network PTV.

“We are continuously doing our compliance audit together with the Department of Interior and Local Government (DILG) and Department of Information and Communications Technology (DICT),” he added.

eBOSS is one of the flagship programs of ARTA. It aims to streamline procedures for applications and issuance of local business licenses and permits via a single digital portal accessible on demand.

Mr. Perez said the President has tasked ARTA and other government agencies to implement a nationwide rollout of the eBOSS platform to help non-compliant LGUs.

“President Marcos himself ordered us together with the Presidential Management Staff, DILG and DICT to hold a nationwide rollout tentatively in the last week of January,” he said.

Mr. Perez said that ARTA will be helping the LGUs by donating hardware and providing technical assistance.

“This is so our LGUs will not have any reason to not comply with the requirements,” he added.

Aside from eBOSS, ARTA also wants to hasten the issuance of permits and licenses for telecommunications towers.

“Through this, more than 36,000 permits have been issued just for one year of implementation,” Mr. Perez said.

ARTA, through its Compliance Monitoring and Evaluation Office, is also implementing Report Card Surveys which evaluate the compliance of covered agencies and LGUs with the requirements of the EoDB law.

“Based on our report, 94.72% of the covered agencies have submitted their updated citizen’s charter,” he said. — Justine Irish D. Tabile

FACTORY ACTIVITY in the Philippines expanded at a slower pace in December, reflecting modest growth in new orders and output across the sector, S&P Global said on Tuesday.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) stood at 51.5 in December, lower than the nine-month high of 52.7 in November.

S&P Global said the headline index showed only a modest improvement in operating conditions. At 51.5, the December figure was the weakest in three months or since the 50.6 reading in September.

A PMI reading above 50 denotes better operating conditions than in the preceding month, while a reading below 50 shows a deterioration.

“The year concluded with yet another expansion across the Filipino manufacturing sector. Output and new orders continued to rise, albeit at softer rates,” Maryam Baluch, an economist at S&P Global Market Intelligence, said in a report released on Tuesday.

The headline PMI measures manufacturing conditions through the weighted average of five indices: new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%) and stocks of purchases (10%).

S&P Global said the easing manufacturing growth in December was mainly due to a “notable softening” in new orders, which grew at the slowest pace in four months.   

“Moreover, total sales growth was focused domestically as the demand picture across international export markets deteriorated, with manufacturers reporting a fresh and solid fall in new export sales in December,” it said.

Manufacturing output also grew at the weakest pace in three months, S&P Global said. Despite this, output growth remained robust amid a steady rise in new orders.

“Firms also noted growing supply-side challenges with average lead times lengthening again in December. Congestion and longer delivery times for imports were blamed for delays. Moreover, vendor performance deteriorated at the greatest extent in five months,” it said.

S&P Global noted that manufacturing firms slashed jobs in December, as employment dropped for the second straight month.

“The main concern in the sector remains the further curtailment of workforce numbers. Evidence of spare capacity and a cooldown in new order growth prompted redundancies,” Ms. Baluch said.

S&P Global said Philippine manufacturers also reported increased inflationary pressures as prices of fuel, materials, and shipping rose. This prompted firms to hike selling prices.

Headline inflation may have eased to 4% in December, based on a median estimate in a BusinessWorld poll last week. If realized, December inflation would be a tad slower than 4.1% in November and significantly lower than 8.1% in December 2022.

The local statistics agency will release the December inflation data on Jan. 5.

“Sluggish demand from overseas markets and tight borrowing conditions across the country will act as headwinds as we move into 2024. That said, inflationary pressures are expected to pose less of a threat than seen at the start of 2023, despite gaining pace during December,” Ms. Baluch added. 

Still, Filipino manufacturers remained optimistic for the new year as business confidence rose to a four-month high, according to S&P Global.

“Hopes of improving demand conditions and plans for increased marketing campaigns boosted optimism,” it said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said factory activity expanded in December, due to the seasonal increase in importation, manufacturing, and other production activities since the third quarter of 2023.

However, elevated inflation and borrowing costs may have weighed on investments, including those in the manufacturing sector, Mr. Ricafort said.

“Furthermore, softer manufacturing and services PMI data for many developed countries around the world… partly reduced the demand for exports and somewhat dragged on some local manufacturing activities,” he said.

SECOND FASTEST IN ASIA
The Philippines recorded the second-highest PMI reading among six Southeast Asian countries in December, just behind Indonesia (52.2).

Manufacturing activity in Vietnam (48.9), Malaysia (47.9), Thailand (45.1) and Myanmar (42.9) contracted in December.

On average, the Association of Southeast Asian Nations (ASEAN) headline PMI dropped to 49.7 in December, easing from 50 in November.

S&P Global said the ASEAN headline PMI contracted for the third time in four months.

“Central to the deterioration in operating conditions was a quicker fall in new orders. Inflows of new work fell for the fourth month running in December, which in turn weighed on production growth,” it said.

Security Bank Corp. Chief Economist Robert Dan J. Roces said the slower growth in December may be attributed to difficulties in supply chain management, possible shifts in consumer demand, fluctuations in prices of raw materials, and changes in overall economic conditions.

“(The Philippines) still outperformed ASEAN’s 49.7 though. We calculated that the Philippines’ average monthly PMI was at 52.2 in the fourth quarter, the highest in three quarters,” he said.

He also noted that a recovery in the manufacturing sector may contribute to the Philippines’ faster gross domestic product (GDP) growth, adding that GDP expansion could average 5.8% in the fourth quarter of 2023.

China Banking Corp. Chief Economist Domini S. Velasquez said global economic headwinds continued to weigh on the manufacturing sector.

“Data from China and the rest of Asia pointed to softer activities towards the end of the year. Bellwether manufacturing countries, especially with regard to semiconductors, such as Taiwan and South Korea posted contractions in December,” she said.

For this year, the Philippine manufacturing sector is expected to grow modestly amid easing inflation.

“The easing of inflationary pressures is expected to support domestic demand, while a recovery in the semiconductor industry is likely to boost external demand in 2024. These factors should contribute to a gradual improvement in the manufacturing sector’s performance,” Ms. Velasquez added.

LILY G. TERRENIO was 19 years old when she became a factory worker at Amertron, Inc. inside the Clark Freeport Zone north of the Philippine capital in 1988.

The high school graduate worked for the Taiwan-owned semiconductor company until 2000, before leaving for Dubai to work as a chambermaid.

“I would have wanted to join a different manufacturer after I left the company to broaden my experience, but options were limited,” she said in an interview.

Ms. Terrenio came back to the Philippines after two decades, when the manufacturing sector contracted by 9.8% from a year earlier amid a coronavirus pandemic.

The government must rescue the manufacturing sector from issues that have stalled growth including the lack of skilled workers, governance problems and an impending energy crisis that could paralyze the economy, analysts said.

“Philippine manufacturing has been on a retreat since the 1980s,” national scientist Raul V. Fabella, a professor emeritus at the University of the Philippines School of Economics said in an e-mail. “The share of manufacturing in Philippine gross domestic product has been losing out to services.”

He called the phenomenon “development progeria,” which happens in low-income economies when the share of industry sectors including manufacturing falls while services flourish. “The dynamics will continue into the near future because its roots are structural.”

Manufacturing activity in the Philippines continued to expand in December, albeit at a slower pace, S&P Global said on Tuesday. The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) slipped to 51.5 in December, from a nine-month high of 52.7 in November.

The Philippines had the second-highest PMI reading among Southeast Asian countries with available data, after Indonesia (52.2). Vietnam, Malaysia, Thailand and Myanmar all contracted in December.

It was a significant development for a sector that has been lagging its regional peers for decades.

In 2022, the largest share of exported commodity goods from the Philippines were electronic products, particularly semiconductors and electronic data processing products such as hard drives, making it the biggest contributor to the country’s export sales, according to Statista.

Aside from electronics, the Philippines has a large food manufacturing industry, which generated a gross value added of about P1.8 trillion ($32.5 billion) in 2022. Among the country’s leading food exports were animal or vegetable fats and oils and processed foods such as bread, cereals and dairy products.

Food manufacturers in the country also produce flour and sugar for domestic consumption and export. The Philippines also exports chemicals and chemical products such as fertilizers, petrochemicals and plastic products.

FOREIGN OWNERSHIP
Manufacturing sector growth relies on foreign direct investments (FDI), which amounted to only $9.2 billion in 2022, behind Thailand ($10 billion), Malaysia ($15.1 billion), Vietnam ($17.9 billion), Indonesia ($21.7 billion) and Singapore ($140.8 billion).

This was despite the passage of laws liberalizing the Philippine economy, including the Corporate Recovery and Tax Incentives for Enterprises Act, which cut the corporate income tax for domestic and foreign corporations to 25% from 30%.

In 2021, the Philippines passed a law that amended the country’s 85-year-old Public Service Act, allowing full foreign ownership in domestic shipping, telecommunications, shipping, railways and subways, airlines, expressways and tollways, and airports.

Global investment banker Stephen Anthony T. CuUnjieng said foreign investors “want to make money first” and changing the laws “would not necessarily make them make money.”

“If the country or the sector is unattractive or less profitable than other countries, changing the law will not change that,” he told One News channel in December, amid a renewed push to amend economic provisions of the 1987 Philippine Constitution.

“If the sector is attractive and you make foreign ownership and doing business easier, then yes, more FDIs will come in,” Mr. CuUnjieng said. “Allowing more foreign ownership will work. But if you’re not attractive to begin with, opening it up to 100% ownership and giving subsidies won’t change it if the return on investment will be lower.”

He said investors in the manufacturing sector are largely looking at labor productivity and lower electricity costs, which can be anywhere from 20% to 60% of their production costs.

“If a manufacturer in the Philippines is 20% to 40% more expensive than another in Indonesia, Thailand or Vietnam, you’re starting out already with a deficit of as much as 30% versus other countries, why would you come here for manufacturing?” he asked.

President Ferdinand R. Marcos, Jr. last year extended by another 15 years the contract for the Malampaya gas field, which supplies 20% of the Philippines’ total electricity requirements, allowing the operator to drill new wells.

Amid the declining output of the gas field, which is expected to run dry by 2027, Mr. Marcos expressed willingness to resume joint energy exploration activities in the South China Sea.

“Our power cost is the highest in ASEAN (Association of Southeast Asian Nations) for large establishments,” Mr. Fabella said, noting that the state should lower manufacturers’ electricity costs by exempting them from missionary, universal and stranded cost charges.

The possible decline in the quality of the Philippine labor force also threatens the country’s manufacturing ambitions, according to Mr. CuUnjieng.

Filipino students were still among the world’s weakest in math, reading and science, according to the 2022 Program for International Student Assessment (PISA), with the Philippines ranking 77^th out of 81 countries and performing worse than the global average in all categories.

Terry L. Ridon, convenor of InfraWatch PH, said decades-long governance issues such as corruption and red tape would continue to hound the manufacturing sector.

Investors seeking to establish hubs in emerging economies would look for countries that have “very streamlined processes for permits and licenses and have low to zero perception of government corruption, he said in an e-mail.

“Our government does not live by contracts it signed and stands ready to change provisions depending on populist sentiment,” Mr. Fabella said. “Long-term investors do not invest where expropriation noise is rampant.”

The stability of politics and ease of doing business in Vietnam have been cited as key factors behind its rise as the top choice for global manufacturers diversifying away from China, which has been in a years-long trade war with the United States.

There are fewer occurrences of policy reversals in Vietnam because of its political structure, “thus increasing certainty, which is good for the investment climate,” George N. Manzano, who teaches trade at the University of Asia and the Pacific, said in an e-mail.

Vietnam has a one-stop shop for investors, Mr. CuUnjieng said. “You go to one government agency, and they take care of everything. In the Philippines, you often have one shop at every stop.”

Vietnam had FDIs worth $112 billion from 2010 to 2019, compared with $57 billion for the Philippines. Its merchandise exports in 2019 hit $300 million, compared with $70 million for the Philippines.

“The heady foreign direct investments that Vietnam attracted in the past years may have increased its attractiveness,” Mr. Manzano said. “Investments beget other investments, particularly if an investment of a sizeable manufacturing concern will attract its supplier industries to locate as well.”

He noted that as more foreign investments cluster at one hub, the production costs usually fall, leading to so-called “economies of agglomeration.”

“At the same time, there will be more flow of ideas prompting innovation,” he said. “The clustering of industries in Vietnam’s special economic zones can lead to economies of agglomeration.”

The Philippine Economic Zone Authority said it wants to benefit from the relocation of big foreign companies, especially those in the technology sector, from China.

The country anticipates increased investments in metal fabrication or skilled manufacturing, especially in the electronic vehicle (EV) sector, PEZA Director-General Tereso O. Panga said in a Viber call. He added that EV players from China, the US, Indonesia, South Korea and Japan are expected to set up production sites in the country this year.

“It’s not just multinational companies that are relocating from China, but also mainland Chinese manufacturing businesses so they can avail themselves of GSP+ privileges for their exports,” he said.

The European Parliament and European Council have agreed to extend GSP+ arrangements for four more years while they negotiate reforms to the trade deal, where the Philippines enjoys zero duties on more than 6,000 exports.

As the Philippines steps up efforts to save its export-oriented manufacturing sector, the country must also look at its volatile exchange rate, which hurts exporters and is deadly to smaller ones, Mr. Manzano said.

“We should provide a more stable exchange rate regime geared to level the playing field between nontradable and tradable goods.”

The Philippine trade deficit has been widening in the past years, as the country imports more than it exports.

Analysts said tensions with China don’t bode well for the country’s export-oriented manufacturing sector.

China remains the largest source of technologies that the Philippines needs to make its exports competitive, such as electronics and machinery, Mr. Manzano said.

“The Philippines needs electronic parts and components from China in order to export,” he said. “If the imports of parts and components are sourced from more expensive suppliers, the competitiveness of Philippine exports, particularly electronics, would be undermined.”

“The protection and development of our export-focused manufacturing is critical to propping up our dollar reserves in light of our massive import requirements in infrastructure and agriculture,” Mr. Ridon said. “This has not been enough to ensure a positive balance of trade for almost a decade.”

PHILIPPINE BANKS failed to meet the mandated quota for small business loans in the first nine months of 2023, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Loans extended by the banking industry to micro-, small-, and medium-sized enterprises (MSMEs) amounted to P552.404 billion as of end-September, which made up only 4.63% of their total loan portfolio of P11.9 trillion.

This was 21.6% higher than P454.303 billion in loans extended to the MSME sector in the January-to-September period in 2022.

Under Republic Act No. 6977 or the Magna Carta for MSMEs, banks are required to allocate 10% of their total loan portfolio for small businesses to boost the sector — 8% for micro and small enterprises and 2% for medium-sized enterprises.

However, banks have long opted to incur penalties for noncompliance instead of taking on the risks associated with lending to small businesses.

BSP data showed loans for micro and small enterprises amounted to P214.748 billion as of end-September, comprising just 1.8% of their total loan portfolio and well below the 8% quota.

On the other hand, lending to medium-sized enterprises stood at P337.656 billion in the period. This is equivalent to 2.83% of the banks’ credit book and above the 2% minimum ratio required under the law.

Based on the type of bank, BSP data showed universal and commercial banks disbursed P153.105 billion in credit to micro and small enterprises as of end-September, equivalent to only 1.44% of their P11.13-trillion loan portfolio.

Big banks’ loans to medium-sized enterprises stood at P291.452 billion or 2.62% of their loan book.

At the same time, thrift banks were also unable to meet the quota as their loans to micro and small enterprises reached P29.228 billion or 3.81% of their P591.821-billion loan portfolio.

Still, thrift lenders went beyond the credit quota for medium enterprises as their loans to the sector hit P27.903 billion or 4.75% of their loan book.

Meanwhile, rural and cooperative banks extended loans worth P32.346 billion to micro and small enterprises. This is equivalent to 16.39% of their P197.401-billion credit book, and well above the minimum amount required by law. Their loans to medium enterprises hit P18.3 billion or 9.27% of their loan portfolio.

The BSP also recorded the loans granted by digital banks to the MSME sector. Digital banks disbursed P70 million in credit to micro and small enterprises in the first nine months of 2023, representing 0.4% of their P17.25-billion loan portfolio.

Digital banks did not extend loans to medium enterprises.

During the pandemic, the BSP allowed banks to count MSME loans as alternative reserve compliance with the reserve requirements to help prop up the sector. This relief measure expired on June 30, 2023.

However, the relief measure was extended to thrift banks as well as rural and cooperative banks until Dec. 31, 2025.

Based on separate central bank data, small banks allocated a total of P8-billion and P6.5-million loans to MSMEs and large enterprises, respectively, for the week ending Oct. 19.

The unwinding of the pandemic relief measure coincided with the reduction in banks’ reserve requirement ratios on June 30, 2023.

In April 2023, the central bank launched the Credit Risk Database Scoring Model, which is expected to serve as an additional tool that lenders can use to analyze the creditworthiness of MSMEs, especially those without credit history or enough collateral. — Keisha B. Ta-asan

THE PHILIPPINES has yet to fulfill several action plans more than two years since it was placed under the “gray list” of the Financial Action Task Force (FATF), the country’s dirty money watchdog said.

But the Anti-Money Laundering Council (AMLC) is still hoping the Philippines will be able to exit the FATF’s gray list this year, and to avoid a possible inclusion in the blacklist.

At a Palace briefing, AMLC Executive Director Matthew M. David said the Philippines still has to address eight out of the 18 action plan items it had committed to comply with to be removed from the gray list.

“The most challenging action item is regarding terrorism financing prosecution. We need to file more terrorism financing cases and the one in charge of complying with this action item are the law enforcement agencies, including the AMLC,” he said.

Other remaining action plans include the effective risk-based supervision of nonfinancial businesses and professionals, mitigating risk associated with casino junkets, and streamlining access to beneficial ownership information, Mr. David said.

The Philippines has been in the global financial crime watchdog’s gray list of jurisdictions under increased monitoring for dirty money risks since June 2021.

Since the Philippines had failed to meet the FATF’s January 2023 deadline to comply with the action plans, Mr. David said the government has a self-imposed goal of exiting the gray list this month.

“The longer we are on the gray list, the bigger the possibility or the higher the risk that we will enter the blacklist,” he said.

Only three countries are currently in the FATF’s blacklist — North Korea, Iran and Myanmar.

President Ferdinand R. Marcos, Jr. on Tuesday presided over the  sectoral meeting on the status of the Philippines in FATF gray list.

“The President also directed the agencies of government to continue with their actions and to continuously sustain good coordination among themselves, between the law enforcement and other government agencies,” Mr. David said.

Enrico P. Villanueva, who teaches banking at the University of the Philippines Los Baños, said banks have done a lot of work and investments in order to manage risks related to money laundering and terrorism financing. Nonbank entities need to do more to catch up, he noted.

“For banks, improvement can still be made on drilling down customer accounts to the ultimate beneficial owners,” he said, noting that beneficial ownership information should be digitized and accessible to regulators and law enforcement agencies.

For nonbank entities, Mr. Villanueva said the regulator should impose penalties such as monetary fines or suspension of business licenses “to communicate seriousness in enforcement.”

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the Philippines needs to lift the Bank Secrecy Law to make banking regulations at par with those of its Southeast Asian neighbors.

“It will also help in facilitating the integration of the country’s capital markets into the region,” he said via Messenger chat.

Should the Philippines be blacklisted by FATF,  Mr. Ricafort said investments and other fund flows into the Philippines would be affected.

Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila University, called on the government to reverse its policy on offshore gambling.

“A first order of business should be the elimination of offshore gambling which is susceptible to money laundering schemes,” he said. “But of course, this should involve a whole-of-government approach which apparently this government has not done.”

In March 2020, then-senator Franklin M. Drilon flagged that millions of dollars brought into the Philippines between December 2019 and February 2020 might have been laundered through Philippine Offshore Gaming Operators (POGOs), which refer to Chinese gambling companies that offer online gambling services to markets outside the Philippines.

The Marcos administration began a crackdown on many POGOs after a spate of kidnappings that targeted their Chinese workers.

“The President has reiterated the government’s high-level political commitment and directed all government agencies concerned to swiftly address the remaining deficiencies in relation to the gray-listing of the Philippines,” Mr. David said at the Tuesday briefing.

He said investor confidence and even the country’s credit rating may be affected if the Philippines remains on the gray list.

“It may also affect foreign direct investments in the Philippines because if you don’t exit the gray list, they may think that our anti-money laundering, combating terrorism financing system is not adequate enough, or sufficient enough or strong enough,” he added.

Rommel C. Banlaoi, chairman of the Philippine Institute for Peace, Violence, and Terrorism Research, recognized the passage of The Terrorism Financing Prevention and Suppression Act of 2012, which was complemented by a 2020 law that amended the country’s Anti-Terrorism Act of 2001.

The two laws as well as the decline of terrorist threats would be enough for the Philippines to exit from the FATF’s gray list.

The country’s anti-terrorism financing measures should consider the emerging global financial landscape, Chester B. Cabalza, founder of Manila-based International Development and Security Cooperation, said via Messenger chat.

Mr. Cabalza cited the introduction of bitcoins, online transactions, and virtual wallets.

Mr. Villanueva said the action plan items needed to get out of the gray list may be challenging but not impossible.

“They just require bureaucratic or political will. For societies or governments that tolerate wrongdoings, political will may be wanting,” he said. — Kyle Aristophere T. Atienza

PHILIPPINE SHARES closed higher on the first trading day of 2024 as investor sentiment was lifted by expectations of slower inflation in December.

The benchmark Philippine Stock Exchange index (PSEi) jumped by 104 points or 1.61% to end at 6,554.04 on Tuesday, while the broader all shares index rose by 41.38 points or 1.2% to close at 3,465.97. 

“We welcome 2024 with hopes of a better performance for the stock market. We are also optimistic that our regulator will continue to support the initiatives we will introduce to boost participation and liquidity in the market,” PSE President and CEO Ramon S. Monzon said in a statement.

Shares rose on Tuesday as inflation likely slowed further last month, Philstocks Financial, Inc. Research Analyst Claire T. Alviar said in a Viber message.

“The possibility that inflation rate would settle within the 2-4% target of the government in December lifted market sentiment. Investors were also waiting for some economic data set to be released this week,” Ms. Alviar added. 

Headline inflation likely eased to 4% in December, according to the median estimate of a BusinessWorld poll conducted last week. This is within the 3.6-4.4% forecast of the Bangko Sentral ng Pilipinas (BSP) for the month.

If realized, December would mark the first time that inflation met the BSP’s 2-4% target and the slowest since the 3% print in February 2022.

At 4%, December inflation would be a tad slower than 4.1% in November and significantly lower than 8.1% in December 2022.

This would bring the 2023 inflation average to 6%, matching the BSP’s baseline forecast.

The Philippine Statistics Authority will release December inflation data on Friday.

“The market’s rally is due to the seasonally strong period of New Year’s optimism and growing interest rate cut bets in 2024,” First Metro Investment Corp. Head of Research Cristina S. Ulang added in a Viber message.

The majority of sectoral indices climbed on Tuesday. Holding firms rose by 217.37 points or 3.56% to 6,323.37; services increased by 37.45 points or 2.33% to 1,642.44; industrials went up by 85.71 points or 0.94% to 9,161.62; and financials added 7.73 points or 0.44% to end at 1,746.61.

On the other hand, mining and oil fell by 114.50 points or 1.14% to 9,885.93, and property dropped by 19.33 points or 0.67% to 2,835.61. 

“The mining sector was at the bottom, down by 1.14%, weighed by the performance of Nickel Asia Corp., which declined by 3.83%,” Ms. Alviar said. 

Value turnover dropped to P3.66 billion on Tuesday with 379.80 million issues switching hands from the P4.88 billion with 1.12 billion shares seen on Friday.

Advancers outnumbered decliners, 100 to 77, while 47 names closed unchanged. 

Net foreign buying rose to P443.11 million on Tuesday from P208.97 million on Friday. — R.M.D. Ochave

THE PESO dropped on the first trading day of 2024 as remittance flows eased after the holidays and as the dollar gained versus major currencies.

The local unit closed at P55.67 per dollar on Tuesday, weakening by 30 centavos from P55.37 on Friday, based on Bankers Association of the Philippines data.

The market was closed on Monday for New Year’s Day.

The peso opened Tuesday’s session weaker at P55.45 against the dollar. Its intraday best was at P55.44, while its worst showing was its close of P55.67 versus the greenback.

Dollars exchanged went down to $1.26 billion on Tuesday from $1.32 billion on Friday.  

The peso dropped against the dollar after remittances slowed as the holiday season ended, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The peso was also dragged down by a stronger dollar following a rise in global crude oil prices amid escalating tensions in the Red Sea, Mr. Ricafort added.

The dollar crept higher on the first trading day of the year as attention turned to economic data this week that may provide clues on the US Federal Reserve’s next moves, Reuters reported.

The dollar index, which measures the US currency against six rivals, fell 2% in 2023, snapping two years of gains. It was last at 101.44, up 0.059%, as investors weighed the prospect of the Fed cutting rates this year.

The dollar’s ascent weighed on the Japanese yen the most, with the Asian currency down by 0.35% at 141.36 per dollar, having slid 7% in 2023.

Markets are now pricing in an 86% chance of interest rate cuts from the Fed to start from March, according to CME FedWatch tool, with over 150 basis points of easing anticipated in the year.

Meanwhile, oil prices jumped on Tuesday, with Brent crude futures and US West Texas Intermediate crude futures each rising roughly 2%, due to potential supply disruptions in the Middle East after a naval clash in the Red Sea, among other things.

Brent gained $1.56 to $78.59 a barrel, while US crude rose $1.28 to $72.93.

“The peso depreciated on bargain hunting ahead of a likely uptick in the US manufacturing PMI (purchasing managers’ index) for December 2023,” a trader said in an e-mail.

For Wednesday, the trader said the peso could weaken further ahead of the release of US jobs data this week.

The trader sees the peso moving between P55.55 and P55.80 per dollar on Wednesday, while Mr. Ricafort expects it to range from P55.55 to P55.75. — A.M.C. Sy with Reuters

THE PHILIPPINES logged 5.45 million international visitors in 2023, beating the 4.8 million target, the Department of Tourism (DoT) said on Tuesday.

“From Jan. 1 to Dec. 31, 2023… 91.8% or the bulk of international arrivals recorded at 5,003,475 were foreigners. The remaining 8.2% or 447,082 are overseas Filipinos,” the DoT said in a statement.

The 2023 total more than doubled the 2.6 million reported a year prior.

South Korea remained the top source of foreign arrivals during the year, accounting for 1.44 million tourists or 26.41% of the total.

Also in the top five were the US with 903,299 tourists (16.57%), Japan 305,580 (5.61%), Australia 266,551 (4.89%), and China 263,836 (4.84 %).

“Other foreigners who visited the country from other top source markets after China were from Canada, Taiwan, the UK, Singapore, and Malaysia,” it added.

The DoT said that total international tourism receipts for the year amounted to P482.54 billion. This was more than double the P214.58 billion from a year earlier.

It added that the Philippines was at about 66% of the pre-pandemic arrivals record posted in 2019.

International arrivals in 2019 amounted to 8.26 million, generating P482.15 billion in receipts, according to the DoT.

“We have set our goals for the industry not only in terms of international visitor arrivals but most importantly, the number of Filipinos, including their families, who will benefit from the opportunities generated by our efforts to make the industry prosper,” Tourism Secretary Maria Esperanza Christina G. Frasco said.

“We are poised for a thriving tourism landscape, evident in surpassing our targets in international and domestic arrivals and receipts, fostering economic prosperity and further job creation for our people,” she said.

The DoT is targeting 7.7 million international visitors for 2024. — Adrian H. Halili

THE Department of Energy (DoE) said registration for the lifeline rate program has been hindered by the practice of several households sharing power meters, making consumption by eligible users difficult to track.

Luningning G. Baltazar, director of the DoE’s Electric Power Industry Management Bureau, said users who would otherwise qualify for the lifeline rate cannot register because their homes did not have a dedicated meter.

“We will look into how we can address this issue,” Ms. Baltazar told government television network on Tuesday.

She added that registering as a group of households would bring many poor users above the lifeline consumption threshold, making them ineligible for subsidized power rates.

“We still encourage them to register since we are still studying the question of what would be the appropriate threshold,” she said.

The lifeline rate applies to users with a monthly power consumption of 100 kilowatt-hours or less. Under the revised rules, customers living in condominiums, subdivisions, and those with net-metering services do not qualify for the lifeline rate even if their consumption falls below the threshold.

Also, eligible for lifeline rates are beneficiaries of the Pantawid Pamilyang Pilipino Program (4Ps) and qualified marginalized end-user applicants who are not 4Ps beneficiaries but belong to a household of at least five members in which the combined monthly income is no more than P12,030.

Citing ERC data, Ms. Baltazar said that about 191,399 4Ps members were registered for the program as of Dec. 15. However, she said that the full list of 4Ps members is about 4.2 million, according to the Department of Social Welfare and Development.

The ERC said in an advisory last week that the full implementation of the program starts on Jan. 1.

“We will continue to do the lifeline caravan, information campaign so that many will be aware of the program,” Ms. Baltazar said. — Sheldeen Joy Talavera

THE Board of Investments (BoI) said on Tuesday that it will support a biofertilizer company in its capacity expansion by helping to promote the expanded use of its products and encouraging investment to develop the industry.

“Encouraging potential technology adaptors to invest in this industry, the BoI and other stakeholders aim to strengthen the information dissemination and education campaign for farmers to facilitate the shift from traditional fertilizer to biofertilizer,” the BoI said in a statement.

The BoI added that it will support the commercialization of the Bio-N fertilizer product which promises to raise crop yields by 11%.

The BoI said the campaign will be undertaken in collaboration with Laguna-based AgriSpecialist, Inc. (ASI), a Laguna company.

“Both BoI and AgriSpecialist agreed (on the importance of) having an industrialization partner from the beginning of the research and development process,” it added.

ASI President Mario Labadan, Jr. said farmers should be made aware of the advantages of using biofertilizer, which will be a domestically produced product.

According to the BoI, about five to six 200-gram sachets of the biofertilizer product can replace two 50-kilogram bags of urea per hectare planted to rice. The product has the potential to save producers about P10,000 per hectare.

ASI said that it aims to become the first commercial-scale manufacturer of biofertilizer.

Expansion plans for its Laguna plant will result in sufficient capacity to supply “100% of the country’s biofertilizer requirement for the lands planted to rice and corn.” — Adrian H. Halili

INCREASING the coconut content of the biodiesel blend will have a minimal impact on price but may also improve vehicle mileage, producing net savings, a coco biodiesel producer said.

“More significant will the mileage improvement expected with B3. Because mileage can improve by 5-15% the net savings can be rather significant in peso terms,” Jun Lao, president of Chemrez Technologies, Inc., told BusinessWorld in a Viber message. B3 refers to biofuel with 3% coconut content.

On its website, Chemrez — a subsidiary of publicly listed D&L Industries, Inc. — operates the country’s first continuous-process biodiesel plant.

In a draft circular, the Department of Energy is proposing to implement an increase in the coconut methyl ester (CME) blend to 3% (B3) starting July 1, from the current B2.

It also proposed to raise the biodiesel blend to 4%, effective July 1, 2025, and to 5% on July 1, 2026.

The Biofuels Act of 2006 requires that all liquid fuels contain domestically sourced biofuel components.

“If the price of CME is lower than diesel, the blend will make the pump price lower. Depending on the prevailing prices prior to the effectivity of B3, it can also go the other way.  Either way the price difference of B2 and B3 will be minimal,” Mr. Lao said.

A combustion engine operating at a given efficiency and fuel quality can produce incomplete combustion, he said, with inefficient engines producing black smoke from the exhaust system.

“You can improve combustion by overhauling the engine and using better quality fuel. CME does the latter,” Mr. Lao said.

“CME improves the fuel quality, so it burns more completely. There is more power and less black smoke. That means the car engine will perform better by delivering better mileage,” he added.

He said a car performing at 10 kilometers per liter (kms/liter) will soon achieve 11 kms/liter when B3 takes effect, effectively bringing down the cost of fuel by 10%, Mr. Lao said.

“So I expect the cost of transport to drop with B3 implementation. Along with that is the cleaner emission from cars. Then a massive reduction in CO2 (carbon dioxide) from land transport,” he said. — Sheldeen Joy Talavera