Philippine Seven income drops 41% in 1st quarter

May 10, 2019 | 6:57 pm

THE local licensee of 7-Eleven convenience stores reported a 41% profit decline in the first quarter of the year, as it used a new accounting rule that changes the recognition of leased properties.

Philippine Seven Corp. (PSC) said in a statement Friday that net income stood at P112.2 million, lower than the P190.5 million it posted in the same period a year ago. Systemwide sales meanwhile went up 18% to P12.54 billion.

The company noted that the International Financial Reporting Standards on Leases (IFRS 16), which took effect at the start of the year, pulled down profitability since most of its stores are under long-term lease agreements.

“IFRS 16 requires lessees to recognize an asset on the right to use the leased property (the right-of-use asset) and a liability, for the obligation to make lease payments…Unlike, the previous accounting policy, rental payments are recognized as expense evenly or on a straight-line basis over the life of the lease,” the company explained.

Without IFRS 16, net income would have grown 48.3% to P282.6 million.

PSC was supported by a 6.8% same store sales growth and higher number of operating stores. The company ended the quarter with 2,593 7-Eleven stores, following the addition of 56 branches and closure of 13. — Arra B. Francia

Peso strengthens after BSP rate cut

May 10, 2019 | 6:56 pm

THE PESO strengthened against the greenback on Friday after the central bank cut policy rates amid easing inflation expectations.

The local currency strengthened by 18 centavos to close at P52.12 against the dollar on Friday from P52.30 a day before.

The peso was stronger the entire session, opening slightly higher at P52.225 versus the dollar. It slipped to as low as P52.27 intraday, while its best showing was at P52.085 against the greenback.

Trading volume declined to $1.002 billion from the $1.038 billion that exchanged hands the previous day.

Michael L. Ricafort, economist at the Rizal Commercial Banking Corp. (RCBC), said in a text message that the peso strengthened “after the latest monetary easing by way of a 25 basis points cut in policy rates amid sustained easing trend in inflation.”

The BSP’s policy-setting Monetary Board reduced key rates by 25 basis points on Thursday on the back of a “manageable” inflation outlook. Officials said a possible cut in big banks’ reserve requirements will be discussed in the policy-setting body’s meeting next week.

Likely faster economic growth following the 2019 budget’s passage, as well as the continuing trade talks between US and China, resulted in improved risk appetite that supported the peso, Mr. Ricafort added.

The successful euro bond sale of the government, through which it raised €750 million via eight-year global bonds, well above its initial offer of €500 million due to oversubscription, also improved sentiment, he added.

Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc., also attributed the peso’s strengthening to the Bangko Sentral ng Pilipinas’ move to loosen its policy.

“Generally, the BSP cut is a sign that the economy has potential to go higher than it has,” Mr. Asuncion said. — R.J.N. Ignacio

Pag-IBIG Fund books higher income in Q1

May 10, 2019 | 6:56 pm

THE HOME Development Mutual Fund (Pag-IBIG Fund) booked a higher net income in first quarter on improved loan demand and collections.

In a statement, Pag-IBIG said its net income reached P8.96 billion in the first three months of 2019, climbing 10.5% year-on-year.

Gross income, on the other hand, also rose 7.3% to P12.05 billion in the quarter from the year-ago level.

“While the first three months of the year are usually slow for most companies, we have once again bucked the trend as we continue to achieve double digit growth. The demand for our home loan and cash loan programs exceeded our projections by a considerable margin and marked increases from the same period last year,” Pag-IBIG Fund Chief Executive Officer Acmad Rizaldy P. Moti was quoted as saying in the statement.

In the January to March period, Pag-IBIG’s home loans releases went up 22% year-on-year to P17.21 billion while the number of borrowers increased 13% to 19,696.

Meanwhile, short-term loans (STL) or cash loan releases rose 8% year-on-year to P12.05 billion in the quarter as the number of borrowers grew to 593,269, also higher by 12% from the previous year’s total.

On the other hand, collections stood at P40.24 billion in the period, up 13% from the comparable year-ago period.

Collected members’ monthly savings went up 16% to P11.15 billion. Payments for home loans grew 15% to P15.25 billion, while STL payments went up 8% to P13.67 billion in the first quarter.

Pag-IBIG Fund’s total assets reached P552 billion as of March, 12% higher versus the previous year’s level.

“Our Q1 financials prove once again how robust the workers’ fund really is. We achieved our best year yet in 2018. If the upward trend continues in the next three quarters, we may well be on the way to achieve another best year in 2019,” Mr. Moti said. — GMC

Shares decline further as US-China trade woes deepen

May 10, 2019 | 6:54 pm

SHARES slipped on Friday as investors focused on the US’ tariff hike on $200-billion worth of Chinese goods.

The bellwether Philippine Stock Exchange index (PSEi) shed 0.17% or 13.42 points to close at 7,742.20, continuing the bloodbath seen in the previous session after a disappointing Philippine first-quarter gross domestic product (GDP) reading.

The broader all shares index likewise dropped 0.34% or 16.59 points to 4,791.26.

“Philippine shares whipsawed between gains and losses today before settling the red with the trade tension at the center,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a mobile phone message on Friday.

The United Sates increased tariffs to 25% from 10% on $200 billion worth of Chinese goods at 12:01AM ET on Friday amid ongoing trade negotiations in Washington. Beijing was reported to say that it “deeply regrets” the implementation of the tariff hikes, adding that it will take countermeasures.

Philstocks Financial, Inc. also attributed the PSEi’s decline to the tariff hike, saying in a market note on Friday: “US-China trade war escalation and dismal Q1 2019 GDP sent local stocks lower today.”

The country’s first quarter GDP growth was recorded at 5.6%, lower than the previous quarter’s 6.3% and the 6.5% recorded in the same period a year ago.

Despite the tariff hike, Chinese indices soared on Friday as investors went bargain hunting after several sessions in the red. The Shanghai Composite index jumped 3.1% or 88.26 points to 2,949.21 while the Shenzhen Component firmed up 4.03% or 358.08 points to 9,235.39.

The Hang Seng index also edged higher by 0.84% or 239.17 points to 28,550.24, while other Asian indices finished lower.

Wall Street indices meanwhile incurred losses overnight, as the Dow Jones Industrial Average retreated 0.54% or 138.97 points to 25,828.36. The S&P 500 index went down 0.3% or 8.70 points to 2,870.72, while the Nasdaq Composite index tumbled 0.41% or 32.73 points to 7,910.59.

Back home, four sectoral indices stayed in negative territory, including mining and oil which plunged 1.88% or 140.80 points to 7,325.28. Holding firms fell 0.92% or 68.36 points to 7,345.91; services slumped 0.66% or 10.75 points to 1,595.57, while property dipped 0.01% or 0.74 point to 4,118.

In contrast, financials jumped 1.17% or 20.27 points to 1,738.83 and industrials rose 0.2% or 23.92 points to 11,528.32.

Some 817.38 million issues switched hands valued at P7.55 billion, lower than Thursday’s P9.1-billion turnover.

Decliners outpaced advancers, 101 to 78, while 64 names were unchanged.

Foreign investors remained in net selling mode at P688.25 million, although lower than the previous session’s P1.63-billion net outflow. — Arra B. Francia

E-payment solution GCash breaches 50,000 partner merchant mark

May 10, 2019 | 3:39 pm

Local e-payment solution, GCash, just hit a major milestone. Product operator Mynt (Globe Fintech Innovations, Inc.) announced that the first quarter of 2019 saw their flagship payment solution pass the 50,000 QR merchant mark.

The use of QR for mobile digital payments is very popular in various emerging and developed economies. In China, for example, mobile digital payments account for over half of the country’s total transaction volumes.

This tech is still in its nascent stages here in the Philippines, but is quickly picking up speed with Mynt’s aggressive partnership strategy.

“QR payments provide security and convenience to both merchants and their customers, said JM Aujero, vice president for merchant solutions. “Our thrust as a mobile wallet is to acquire as many merchant partners as possible, even micro-entrepreneurs such as taho vendors, to future-proof us from the expected boom in usage.”

“We want to be as pervasive as our partner Ant Financial in China. QR is the future of payments, and we are committed to lead in this arena here in the Philippines,” he said.

Mynt — a partnership between Globe Telecom, the Ayala Corporation, and Ant Financial — launched GCash in 2017, as part of its thrust towards providing innovative fintech solutions to consumers, merchants, and organizations.

The QR technology of GCash is far reaching, spanning from Luzon to Visayas and down to Mindanao, including popular tourist destination Boracay.

According to Mynt, QR payments are empowering micro, small, and medium enterprises (MSMEs), helping oft-overlooked entrepreneurs transition into the digital arena.

Aside from giving them access to millions of customers, the QR payments solution of GCash allows merchants to enjoy auto-sweeping of their daily transactions into their account, the firm said. It likewise provides a better performance evaluation of the business, as the system provides for QR transaction reports, which allows enterprises to study and analyze their transactions, in real time. Cash handling issues are also addressed through the QR payments system.

“Merchants and social sellers can leverage on the ubiquity of GCash in the Philippines, as well as benefit from this simple, cost-effective, and secure alternative to cash,” JM Aujero said. “Our aggressive stance in fighting for more QR-enabled merchants stems from the fact that everyday, more and more GCash users onboard the platform. Use cases for QR payments also continue to sprout.”

The GCash QR payments solution, he explained, is supportive of the Bangko Sentral ng Pilipinas’ goal of reducing cash payments and increasing the share of non-cash transactions to 20 percent of the total volume by 2020.

“GCash is embarking on a battle against cash to capture more users this year, and the need to increase the number of merchants in the GCash platform only continues to be more pronounced,” he said.

A Mother’s Day history

May 10, 2019 | 9:10 am

On May 12, many different countries around the world, including the Philippines, will celebrate Mother’s Day, an annual occasion honoring one of the most important persons in anyone’s life.

Typically, on that that day, mothers are presented with all manner of gifts, from flowers to chocolates to cards containing messages of love and gratitude. Others are treated to a fancy dinner or a relaxing massage at a spa. There are those who are given a break from the tasks of cooking, cleaning and other household chores.

The origins of the celebration of mothers and motherhood can be traced back to the ancient times. For instance, the people of Phrygia, who lived in classical antiquity in what is now Turkey, worshipped the mother goddess Cybele and organized a festival in honor of her.

But the Web site of the cable channel History notes that the modern precedent for what we now know today as Mother’s Day is “Mothering Sunday.”

“Once a major tradition in the United Kingdom and parts of Europe, this celebration fell on the fourth Sunday in Lent and was originally seen as a time when the faithful would return to their ‘mother church’ — the main church in the vicinity of their home — for a special service,” History explains.

This practice became secular, with children giving their mothers flowers and other tokens of appreciation, and less popular, before it merged with the American Mother’s Day in the 1930s and 1940s, the History site says.

In the United States, before the Civil War, a social activist named Ann Reeves Jarvis helped launch “Mothers’ Day Work Clubs” that had the goal of teaching women how to properly care for their children. She also organized “Mothers’ Friendship Day” in 1868, during which mothers and former Union and Confederate soldiers came together to promote reconciliation.

Several years later, another social activist, Julia Ward Howe, who was also an author and a suffragist, penned the “Mother’s Day Proclamation,” an appeal to women to unite to promote peace. She also campaigned for a “Mother’s Peace Day” to be celebrated every second of June.

Ms. Jarvis died in 1905, and after her passing, her daughter, Anna Jarvis, conceived of Mother’s Day as a way of honoring the sacrifices mothers made for their children, the History site says. In May of 1908, at a Methodist church in West Virginia, Anna Jarvis held the first official Mother’s Day celebration.

“Following the success of her first Mother’s Day, Jarvis — who remained unmarried and childless her whole life — resolved to see her holiday added to the national calendar. Arguing that American holidays were biased toward male achievements, she started a massive letter writing campaign to newspapers and prominent politicians urging the adoption of a special day honoring motherhood,” History says.

Her efforts bore fruit. There were many states, towns and churches in the United States that adopted Mother’s Day as an annual holiday by 1912. And in 1914, President Woodrow Wilson officially made Mother’s Day a national holiday that is celebrated every second Sunday of May.

According to Encyclopedia Britannica, Anna Jarvis promoted the practice of wearing white carnation as a tribute to one’s mother. The custom evolved to include a pink carnation to represent a living mother. The white carnation became a tribute to a deceased mother instead. “Over time the [Mother’s Day] was expanded to include others, such as grandmothers and aunts, who played mothering roles,” an article on the Britannica Web site says.

Ms. Jarvis, however, grew “disgusted” by the commercialization of Mother’s Day, and went so far as to openly condemn the holiday’s transformation and dissuaded people from buying Mother’s Day-related items, such as flowers, cards and candies.

“Jarvis eventually resorted to an open campaign against Mother’s Day profiteers, speaking out against confectioners, florists and even charities. She also launched countless lawsuits against groups that had used the name ‘Mother’s Day,’ eventually spending most of her personal wealth in legal fees. By the time of her death in 1948 Jarvis had disowned the holiday altogether, and even actively lobbied the government to see it removed from the American calendar,” the History site says.

Despite this sad turn of events, people around the world continue to celebrate Mother’s Day. And however they celebrate it, their intention is the same: make mothers feel special and loved.

Five business ideas for the stay-at-home mothers

May 10, 2019 | 9:05 am

Starting a family, especially a new one, can be a full-time job on its own. Ideally, the responsibilities of raising a child should fall to both parents, but in many families, it is simply impossible to stay at home and still earn a comfortable income.

Many mothers choose the option to stay at home to take care of their families’ needs while their partners are off at work, but this does not necessarily mean that they need to give up the idea of earning an income. This is especially true in the digital age, where there are almost limitless options for stay-at-home moms to earn an income. We’ve highlighted some ideas below.

Retail/E-commerce

Perhaps the most common and most popular option is retail. With the boom of e-commerce, the idea of starting and owning your own business has been changed forever. Never has it been easier to find products to buy and sell online, or even find fast and reliable logistics providers to carry out deliveries for you — all without leaving the comfort of your own home. Thanks to today’s wired world, you can even start your own food business at home by offering home-cooked meals through delivery.

Professional services/Freelancing

The Internet has also allowed many professionals to own their time and start their own professional services business through freelancing. Whether you specialize in web design, graphic design, writing, programming, or accounting, there is work to be found online. Through websites like Fiverr and Upwork, freelancers can find jobs that require their expertise and be paid for their time.

Teaching or tutoring

A more traditional option could be in teaching. Stay-at-home moms can choose to accept students in their homes to teach willing students in a variety of subjects, from mathematics to language. If you have the equipment and the skills for it, you can also offer to teach students to play musical instruments like the piano or the violin. Don’t have a suitable place to conduct lessons at home? Hold your lessons online through video chat.

Arts and crafts

If you have a creative streak and do not want to do random odd jobs from clients through freelancing, you can also consider selling your work online. The popularity of online storefronts like eBay and Etsy have made it easier for artists to sell their designs and artwork online. Sites like Redbubble have also flourished as a marketplace for print-on-demand products based on user-submitted artwork, meaning, you can sell your art as shirts, stickers, phone cases, and even pillows.

Blogging/Livestreaming

With the explosive growth of the Internet through social media platforms like Facebook and Twitter, personal blogs have mostly fallen out of vogue and are not as profitable as they used to be. That does not mean that it’s not a viable option for those willing to put in the work, however. Having a Web site, particularly one that regularly posts content about a particular topic or hobby, can still pull in a reasonable income through ad revenue. If you’re more interested in sharing personal stories and finding communities online, you could also try vlogging through sites like YouTube or Twitch. If you’re charismatic enough, you might even become an online celebrity. — Bjorn Biel M. Beltran

Ideal gifts for moms

May 10, 2019 | 9:00 am

Mothers have been pouring out their time, effort, and love to their family ever since. For this, they deserve to be greatly rewarded and treated. As we honor our mothers on their special day, we can uniquely show our appreciation through gifts that they will surely cherish.

As a leader and manager of the house, mothers usually make sure that the house is in good shape. They even find ways to improve their surroundings. They will appreciate it, therefore, to have things that will freshen up the looks of the house. Perhaps, there are some items that have been worn out and so deserve to be replaced. A new set of curtains or a table lamp, for instance, can make the house more vibrant.

One could also opt for room diffusers that bring a pleasant scent that mothers will approve. A set of fancy scented candles are another good choice.

Mothers who love plants might like having a set of succulents to add color either indoors or outdoors.

Most mothers are not only heroes at home; particularly, they are heroes in the kitchen, cooking meals that the family enjoys so much. It will be a great treat, then, to grant the “master chef” some kitchen essentials.

Upgrade her cookware with a brand new immersion blender, a luxury Dutch oven, a new stainless steel kettle, or a sous vide precision cooker.

Mothers will also appreciate a new plate set, which she can use for special occasions and even for regular use.

Update other kitchen items as well, such as a customized kitchen towel or an efficient set of food organizers and jars.

Nevertheless, mothers will appreciate receiving personal gifts the most.

For the mother who works hard the whole day, it is fitting to give pampering gifts. Fresh bath items, such as a set of scented bar soaps or bath bombs, will surely be a refreshing treat. A plush bathrobe can be a fine addition.

Mothers are also worth giving a good night’s sleep through a fresh set of bed sheets or a soothing weighted blanket, coupled with a silk pillowcase and a comfy pair of pajamas.

Another pampering gift is treating her with a relaxing session at a spa.

Moreover, there might be something worth adding to her wardrobe. Look for a dress or blouse that will suit her, then pair it with a comfortable pair of footwear.

Also, a beautiful piece of jewelry — from a pair of pearl hoops to a pendant necklace — is another fitting gift for the cherished mother.

The bag-loving mother won’t refuse another bag that suits her preferences. A spacious tote bag or a crossbody bag will fit on-the-go mothers, while a glittered leather clutch might suit stylish mothers.

For traveling mothers, a new luggage set will be a nice replacement to an old, worn out case. That can be coupled with a set of travel organizers to make help her pack with less hassle.

Beauty essentials are also an indispensable gift idea. From a minimalist to a sophisticated type, the makeup kit is the basic beauty gift mothers can receive. That can be added with a fresh set of brushes or other individual items such as lipstick, lip tints, travel mirror, etc.

Consider as well a skin care set or a pack of face masks for their glowing skin. Mothers will also love a stress-free hair routine with a one-step hair dryer and styler.

Among these grand gifts, nonetheless, mothers still appreciate a fresh bouquet of flowers whenever they receive one. That can be finely complemented with a beautiful glass vase. — Adrian Paul B. Conoza

MB cuts rates, adjusts inflation forecasts

May 10, 2019 | 12:32 am

THE CENTRAL BANK’s Monetary Board (MB) on Thursday cut benchmark interest rates by 25 basis points (bps) in its third policy review for the year, hours after the Philippine Statistics Authority (PSA) reported that the economy grew at the slowest clip in four years last quarter and two days after the PSA said inflation eased to the slowest pace in 16 months in April.

“At its meeting on monetary policy today, the Monetary Board decided to reduce the interest rate on the BSP’s overnight reverse repurchase (RRP) facility by 25 basis points to 4.5% effective on Friday, May 10… The interest rates on the overnight lending and deposit facilities were reduced accordingly,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said in a press conference late in the afternoon at the central bank headquarters in Manila.

Mr. Diokno — who has described banks’ already reduced (by a total of 2 percentage points last year) reserve requirement ratio (RRR) as “really high” — also said that while there was “no decision yet” on this issue, it will be “on the agenda next week” of MB’s weekly meeting.

The MB’s move yesterday took the overnight deposit rate to four percent from 4.25% and the overnight lending rate to five percent from 5.25%, partially dialling back a cumulative 175-bp hike fired off through five meetings last year as the BSP scrambled to put a lid on inflation which increased for nine straight months to a nine-year-high 6.7% in September and October. Headline inflation has since slowed for six months to a 16-month-low three percent.

“The Monetary Board’s decision is based on its assessment that the inflation outlook continues to be manageable, with easing price pressures owing to the decline in food prices amid improved supply conditions,” the BSP said in a statement read by Mr. Diokno.

“In deciding on the stance of monetary policy, the Monetary Board noted impact of budget delays on near-term economic activity, but took the view that prospects for domestic demand remain firm, to be supported by a projected recovery in household spending and continued implementation of the government’s infrastructure program,” it added.

“In addition, the Monetary Board observed that the global growth momentum has slowed in 2019.”

In a separate briefing before lunch, Socioeconomic Planning Secretary Ernesto M. Pernia said Mr. Diokno had called him that morning to ask about first-quarter gross domestic product growth, which turned out to have slowed to a four-year-low 5.6% against a 6.1% median in BusinessWorld’s poll last week of 20 economists.

INFLATION FORECASTS CHANGE
In the same afternoon central bank briefing, BSP Deputy Governor Diwa C. Guinigundo said the MB decided to cut to 2.9% the already reduced three-percent inflation forecast for this year that was adopted in its March 21 policy review, but increased next year’s forecast to 3.1% from three percent previously.

The BSP’s inflation target range this year and next remains 2-4%.

“… [T]he Monetary Board also noted that the risks to the inflation outlook remain broadly balanced for 2019 amid risks of a prolonged El Niño episode [which the Philippine Atmospheric, Geophysical and Astronomical Services Administration now expects to last till August] and higher-than-expected increases in global oil prices,” the BSP statement read.

Asked later on by reporters on prospects for future adjustments in policy interest rates, Mr. Guinigundo noted “[t]here was some flexibility exercised by the Monetary Board by way of normalizing the 175 bps… It is not a full normalization, of course, because monetary policy cannot be done in one sweep, in one go.”

“We have to be data dependent, evidence-based so that every move that we do, we know the consequences or the complications of the measures.”

Sought for comment, Ruben Carlo O. Asuncion, chief economist of the Union Bank of the Philippines, Inc., replied in a mobile phone message that the Monetary Board’s latest move would be “generally good for banks and it will help ease tight lending and/or credit” and “will help the economy expand and grow.”

In an e-mail, Security Bank Chief Economist Robert Dan J. Roces said: “We think that an RRR cut is more positive for economic growth as domestic liquidity and aggregate demand could be better augmented by this policy action, especially in light of the sub-6% GDP growth rate and low money supply growth.”

The central bank has estimated that reducing banks’ RRR by 100 bps would inject about P90 billion into the financial system. — Reicelene Joy N. Ignacio

Gross domestic product quarterly performance (Q1 2019)

May 10, 2019 | 12:31 am

PHILIPPINE gross domestic product (GDP) grew by 5.6% in the first quarter, its worst performance in four years, the Philippine Statistics Authority reported on Thursday. Read the full story.

Q1 GDP growth slowest in 4 years

May 10, 2019 | 12:31 am

PHILIPPINE gross domestic product (GDP) grew by 5.6% in the first quarter, its worst performance in four years, the Philippine Statistics Authority reported on Thursday.

The first-quarter outcome was lower than the 6.3% in the preceding quarter and 6.5% in the first quarter of 2018.

This was likewise lower than the 6.1% median estimate in BusinessWorld’s poll of 20 economists last week and the downward revised 6-7% target set by the government for 2019.

Socioeconomic Planning Secretary Ernesto M. Pernia said in a news briefing yesterday this was the slowest growth rate recorded in 16 quarters, or since the 5.1% logged in the first quarter of 2015.

The first-quarter turnout also snapped the economy’s growth streak of 16 quarters when it registered at least six percent growth.

In a joint statement, the Department of Finance, the National Economic and Development Authority (NEDA) and the Department of Budget and Management said that in order “[t]o reach the [floor of the] full-year growth target of 6-7%, the economy will need to expand by an average of 6.1% over the next three quarters.”

“This target is still within reach, should the private sector sustain its current performance and government be able to jumpstart and speed up the implementation of its new programs and projects.”

On the supply side, services led the way with seven percent expansion, faster than the 6.7% recorded a year ago.

Industry grew by 4.4%, slower than last year’s 7.7%.

Growth in agriculture, hunting, forestry and fishing slowed to 0.8% versus the year-ago 1.1%.

Mr. Pernia, who is NEDA’s director-general, further noted in the briefing that the agriculture slowdown is an effect of the current El Niño episode that is expected to last until August.

On the demand side, government spending grew 7.4% in the first three months of 2019, albeit slower than the 13.6% growth in the first quarter of 2018.

“As we have forewarned repeatedly, the re-enacted budget would sharply slow the pace of our economic growth,” Mr. Pernia said.

“We estimate that we should have grown by as much as 6.6% this first quarter, if we were operating under the 2019 fiscal program.”

The government operated on a re-enacted 2018 budget from the start of the year until April 15, when President Rodrigo R. Duterte signed the latest general appropriations into law, but vetoed P95.3 billion in appropriations that he said were not in accordance with his administration’s priorities, slashing this year’s national budget to about P3.662 trillion.

In a research note, HSBC Global Research economists Noelan Arbis and Joseph Incalcaterra noted that the 2019 budget’s nearly four-month delay has “likely curtailed government spending growth,” adding that higher bank lending rates and low domestic market liquidity “likely caused the slowdown in fixed investment.”

“Indeed, government consumption growth registered its slowest pace in two years and fixed investment growth declined to its lowest in five years, implying a drastic shift in economic activity from recent quarters,” they said.

BROAD-BASED WEAKNESS
In an e-mail to reporters, Standard Chartered Bank economist Chidu Narayanan cited “broad-based weakness” in the economy, noting that “… the details of the [first-quarter] GDP print… suggests that the budget impasse was not the only reason for the slowdown…”

“Household consumption was the only source of strength,” Mr. Narayanan said.

“Government expenditure, capex (capital expenditures) and net exports all slowed in the quarter.”

Growth of private investment, represented in the data as capital formation, slowed to 6.8% last quarter from 10.3% previously. Investments in fixed capital — which includes construction and durable equipment among others — grew 5.73% in the first quarter, the slowest pace since 5.67% in 2014’s second quarter.

A bright spot in the GDP report was household spending, which accounts for about 70% of GDP and which grew 6.3% last quarter, accelerating from 5.3% in the fourth quarter of 2018 and 5.6% in the first quarter of 2018.

Robert Dan J. Roces, chief economist at Security Bank Corp., blamed persistent weakness in trade also for the economic growth slowdown.

“Market analysts and forecasters have long anticipated that the delayed budget was already factored in, and thus government spending ‘still existed’ despite a reenacted budget in [the first quarter]. What was unexpected was the broader drag from the tepid trade component of the GDP, thus a lower than the anticipated growth rate,” Mr. Roces said in a note to reporters.

HSBC’s Messrs. Arbis and Incalcaterra likewise noted a “significant drag on the net export front.”

“Total export volumes expanded only 5.8% year on year, the slowest pace since 2015. Meanwhile, import volumes slowed more moderately, expanding at 8.3%. As a result, the net export deficit rose to 7.8% of GDP, the highest on record.”

Gross national income — the sum of GDP and net income from abroad — grew 4.9% last quarter compared to 5.7% the preceding quarter and 6.3% in the 2018’s first three months.

In a separate statement, Finance Secretary Carlos G. Dominguez III said that the first quarter’s 5.6% GDP growth is still a “decent expansion” despite the budget delay that caused the government to miss spending P1 billion a day in the first four months.

“The Duterte administration aims to offset the lower spending at the outset of 2019 resulting from the budget delay and the construction ban during the election season,” Mr. Dominguez said.

“Henceforth, we expect growth to pick up on higher state spending in continuance of last year’s upward momentum.”

According to the Bureau of the Treasury, state disbursements missed targets by 11%, totaling P777.99 billion in the first quarter, although spending overall was up one percent from a year earlier.

Meanwhile, first-quarter fiscal deficit shrank 41% year-on-year to P90.245 billion, missing the program by 52%. In March alone, the fiscal deficit shrank by 47% annually to P58.409 billion, falling 51% short of program.

For Emilio S. Neri, Jr., lead economist at Bank of the Philippine Islands, the details of the GDP report “actually paint an encouraging picture for the Philippine economy” despite the disappointing turnout in the first quarter.

“The recovery of household consumption and the stable growth of private construction suggest that private spending remains strong, with support coming from low inflation and election spending. Meanwhile, weak government expenditure is just temporary as the national budget was already approved, which allows the government to catch up later this year in terms of its infrastructure program,” Mr. Neri said in a note.

“Hence, the economy can still grow by at least six percent in 2019. We note that GDP growth was only 5.1% in [the first quarter of] 2015, and yet the economy still expanded by 6.1% in [full year] 2015.” — Marissa Mae M. Ramos with inputs from Reicelene Joy N. Ignacio

ERC moves to ease power demand amid thin reserves

May 10, 2019 | 12:30 am

THE ENERGY REGULATORY COMMISSION (ERC) has issued a resolution that adds other circumstances that will prompt distribution utilities, including the country’s biggest — Manila Electric Co. (Meralco), to activate their interruptible load program (ILP) and ease energy demand in the system.

“We saw the urgency to clarify the Amended ILP Rules that we issued, particularly as to what is contemplated by the phrase ‘such other minimum threshold’ that would constitute as a condition to activate the ILP. Therefore, we would like to clarify that the phrase, ‘such other minimum threshold’ refers to the emergency state of the grid as defined in the Philippine Grid Code (PGC) 2016 Edition,” said Agnes VST Devanadera, ERC chairperson and chief executive officer, said in a statement on Thursday.

Under the amended ILP rules, distribution utilities may also activate the scheme during other grid conditions, including “emergency state” as defined under the PGC. The amendment comes years after the program was adopted by the ERC in 2010.

ILP seeks to lower the peak demand, thus reducing the stress to the grid.

Meralco and other distribution utilities resorted to the program, which calls on customers to voluntarily de-load or disconnect from the power grid for a limited period whenever the power supply is constricted.

Previously, ILP is activated only when system operator National Grid Corporation of the Philippines (NGCP) declares that the grid is on red alert, or when its dispatchable and contingency reserves have been wiped.

Both reserves are equivalent to the biggest operating plant online — the two identical units of the power plant in Sual, Pangasinan each with a capacity of 647 megawatts (MW).

Under Section GO (grid operations) 6.2.2.3 of the PGC 2016 Edition, the grid is considered to be in emergency state when either a single or multiple outages occur without resulting in total system blackout, but any one of the following conditions exists: there is a generation deficiency or operating margin is zero; the grid transmission voltage is outside the limits of 0.90 per unit and 1.10 per unit of the nominal value; or the loading level of any transmission line or substation equipment is above 11% of its operational thermal limit capacity.

Ms. Devanadera said in view of the clarification, the NGCP is directed to call on distribution utility-ILP administrators to implement their respective ILPs, particularly during situations of red alert and emergency state, as specified in the grid code.

The ERC clarification comes a few days before the mid-term elections on Monday, for which Meralco and NGCP have issued separate advisories on Thursday about their contingency measures for May 13.

Meralco said more than 150 generator sets are on standby on election day, to be carried by roving crews.

“These generator sets intend to provide basic lighting to polling and canvassing places in case of unexpected power interruptions. Around 300 floodlights will also be ready for deployment and use in case of emergencies, but Meralco also advises polling centers to bring backup lights as well as extra precautionary measure,” it said. “On May 13, Meralco will have on duty 300 responding crews, who will be working 24/7 to ensure that Meralco is prepared to respond to any eventualities.” — VVS

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