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Further US sanctions would be ‘declaration of economic war’: Medvedev

Moscow, Russia — Russia warned Friday that if the US followed through with threats to impose further harsh economic sanctions it would be seen as a “declaration of economic war”.
The warning by Prime Minister Dmitry Medvedev came after Washington unveiled a raft of new sanctions against Russia over its alleged use of the Novichok nerve agent against a former double agent which Britain has blamed on Moscow.
The incident, which took place in a city in southern England in March, triggered a major diplomatic crisis despite Russia’s denial of any role.
The announcement of the sanctions prompted Russian stocks and the ruble to tumble on Thursday.
“While I don’t want to comment on the talk about future sanctions, I can say that if we end up with something like a ban on banking activities or the use of certain currencies, we can clearly call this a declaration of economic war,” Medvedev was quoted as saying by the Interfax news agency.
“And we must absolutely respond to this war. By economic means, by political means and if necessary by other means,” he added.
“Our American friends must understand this.”
Announced late on Wednesday, the first set of sanctions, which will take effect in just under two weeks, impose a ban on the export to Russia of “national security sensitive” US technologies.
Until now such exports had been previously allowed on a case-by-case basis, with a senior State Department official saying the move could cut off hundreds of millions of dollars worth of exports to Russia.
Further sanctions loom?
A second round of sanctions that could go into effect 90 days later would cut far deeper, including blocking all American bank loans to Russian entities, an outright ban on US exports to Russia, and suspension of diplomatic relations.
The State Department said the sanctions were aimed at punishing Moscow for having “used chemical or biological weapons in violation of international law”, mandated under the Chemical and Biological Weapons and Warfare Elimination Act of 1991.
However the sanctions announcement could bolster US President Donald Trump’s claim that his administration is taking a tough stance on Moscow, even as he continues to denounce as a “witch hunt” an independent probe whether his election campaign colluded with Russia.
According to the 1991 Act, the president shall tighten the penalties within 90 days — unless the party in question provides “reliable assurances” that it no longer engages in such activities, and allows on-site inspections by United Nations observers.
Russia had on Thursday responded furiously to the sanctions, denouncing them as “categorically unacceptable” as the markets tumbled and the ruble fell to its lowest level in almost two years.
On Wednesday, Russia’s Kommersant daily published excerpts from another piece of draft US legislation which proposes a ban on US citizens purchasing Russian sovereign debt as well as steps against the country’s biggest banks as well as its oil and gas sector, a key driver of the economy.
The sanctions follow the US Treasury’s imposition of sanctions in March against 19 Russian citizens and five entities for interfering in the 2016 US election — the toughest steps against Moscow since Trump took office.
Also in March, Washington ordered the expulsion of 60 Russian diplomats, and the closure of Russia’s consulate general in Seattle over the Novichok incident.
The Russian economy has only recently started to recover from international sanctions imposed on Moscow in 2014 over its actions in Ukraine and a crash in oil prices the same year. — AFP

Smart taps Ericsson for 5G roll out in 2019

PLDT, Inc.’s wireless subsidiary Smart Communications, Inc. said its roll out of fifth generation (5G) technology is booked for the first half of 2019 as it ties up with Ericsson.
In a statement on Friday, Aug. 10, the telco company said it has signed a Memorandum of Understanding (MoU) with Ericsson, which outlines that the 5G network will kick off its deployment in Luzon.
“The 3GPP (3rd Generation Partnership Project) compliant 5G Trial System that will be deployed in Smart includes Ericsson 5G RAN, Core and Transport solutions. The 5G pilot deployment will allow Smart to explore industry partnership engagements, collaborate with schools and universities, and further develop competence in 5G,” it said.
PLDT Chairman Manuel V. Pangilinan said in a press briefing on Thursday, Aug. 9, the company has conducted a pilot test with Ericsson for its 5G network on Wednesday.
In June, the Pangilinan-led company said it has opened a 5G Technolab, a dedicated facility for research and development, standardization and testing of the technology.
Smart has so far prepared more than 2,000 of its sites for compatibility with the 5G network.
Rival Globe Telecom, Inc. announced in June it will also be bringing the 5G technology to the country by second half of 2019. Partnering also with Huawei, its 5G network is expected to reach speeds from 50 megabits per second (Mbps) to 100 Mbps.
Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Denise A. Valdez

Qatar set to be outstripped as world’s richest place by Macau

Qatar is on track to lose its status as the richest place in the world to the Chinese gambling enclave of Macau.
The global casino hub’s economy will reach the equivalent of about $143,116 per person by 2020, according to projections from the International Monetary Fund. That will put Macau ahead of the current No. 1 Qatar, which will reach $139,151 in the same time frame.
A former Portuguese outpost on the southern tip of China, Macau has become a gambling mecca since returning to Chinese control almost two decades ago. It’s the only place in China where casinos are legal, turning it into a magnet for high-rollers from the mainland. Macau’s gross domestic product has more than tripled from about $34,500 per capita in 2001, the IMF data shows.
The wealth gap between the two places is also expected to widen beyond 2020, with Macau’s GDP per capita set to reach about $172,681 by 2023, according to data compiled from the April edition of the IMF’s Global Economic Outlook database. Qatar’s, meanwhile, will grow to just $158,117.
Elsewhere, financial hub Singapore’s GDP per capita is expected to top six digits by next year and is on track to grow to about $117,535 by 2023, while Hong Kong — across the water from Macau — will touch almost $80,000 by that time, the IMF projections show.
Three European countries — Luxembourg, Ireland, and Norway — made the top 10 places expected to be the world’s wealthiest by 2020, while the U.S. came in at No. 12. — Bloomberg

Oil set for sixth weekly loss as trade war stokes demand fears

A bruising week for oil has set prices on course for the longest weekly losing streak in three years as a trade war between the world’s two biggest economies stokes fears it could sap energy demand.
Futures were headed for a 3.3 percent loss this week. The U.S. and China are threatening to slap additional tariffs on imports from each other in a matter of weeks, with the tit-for-tat protectionist measures set to expand. The trade conflict overshadowed a decline in American crude inventories and potential supply losses from Iran.
Oil is trading near a seven-week low on fears the intensifying trade tension will crimp global economic growth and increase financial vulnerability. Meanwhile, some Iranian crude buyers have started looking elsewhere for supplies as renewed U.S. sanctions aimed at curbing oil exports from the OPEC nation are set to take effect in November.
“Overall, there seems to be a bigger downward force on oil with China’s retaliatory tariffs against the U.S.,” Min Byungkyu, a Seoul-based global market strategist at Yuanta Securities Co., said by phone. “There are still concerns over a possible decline in U.S. oil sales to China as it could disrupt America’s supply balance by increasing its stockpiles and even end up creating a glut.”
West Texas Intermediate crude for September delivery traded at $66.26 a barrel on the New York Mercantile Exchange, down 55 cents, at 8:54 a.m. in London. The contract slipped 13 cents to $66.81 on Thursday. Prices are headed for a sixth weekly decline, the longest such streak since August 2015. Total volume traded was about 15 percent below the 100-day average.
Brent for October settlement fell 54 cents to $71.53 on the London-based ICE Futures Europe exchange. Prices fell 21 cents to $72.07 on Thursday, and are headed for a 2.3 percent drop this week. The global benchmark crude traded at a $5.95 premium to WTI for the same month.
Futures for September delivery fell 1.2 percent to 512.9 yuan a barrel on the Shanghai International Energy Exchange, after losing 0.8 percent on Thursday.
China will apply 25 percent duties on American diesel, gasoline, propane and other petroleum products from Aug. 23, according to the nation’s commerce ministry. The latest levies against an additional $16 billion worth of imports from the U.S. match America’s plan to add 25 percent tariffs on the same value of Chinese goods. Washington is also reviewing 10 percent duties on a further $200 billion in Chinese products.
In the latest list, U.S. crude was spared in a sign that America has become too big to ignore in the oil market. As recently as June, China was the top foreign buyer of American crude, importing a record 15 million barrels that month. The Asian nation may impose duties later if President Donald Trump doesn’t back down, according to Li Li, a research director at ICIS-China.
In the U.S., nationwide crude stockpiles declined by 1.35 million barrels last week, according to the Energy Information Administration, while supplies stored in the key hub of Cushing, Oklahoma, fell for a twelfth straight week. Gasoline inventories expanded for the first time in six weeks, the data showed. — Bloomberg

Asia markets sink at end of upbeat week, lira battered

Hong Kong — Asian markets fell on Friday after a broadly positive week as traders await the latest developments in the China-US trade row, while the Turkish lira briefly dived 12% to fresh record lows buffeted by a diplomatic row with Washington.
After last week’s turmoil, the past five days have seen investors a little more positive as they took in stride tit-for-tat threats of tariffs from the world’s top two economies, though the fears of an all-out trade war are keeping everyone on their toes.
However, on Friday Hong Kong fell one percent after a four-day win streak.
Tokyo shed 1.3% despite data showing the Japanese economy grew more than expected in the second quarter. The outlook was dimmed by concerns about a trade war with the United States.
Sydney was down 0.3 percent, Singapore shed 1.3% and Seoul dropped 0.9 percent. Taipei, Mumbai, Manila and Bangkok also lost ground. However, Shanghai ended the day marginally higher.
The losses followed a broadly negative lead from Wall Street.
With few major catalysts in the trade stand-off, focus is now on the release later in the day of US consumer price index data for July, which will give an idea about price pressures across the country and help guide the Federal Reserve in its interest rate plans.
The central bank is tipped to lift borrowing costs twice more this year, having already hiked two times so far as Donald Trump’s massive tax cuts kick in and the economy continues to hum along.
Expectations for further hikes have sent the dollar rallying and the unit maintained its strength Friday after a top Fed official usually considered dovish indicated he would back more increases.
“If the US consumer prices data for July confirms a steady rise in inflation, it will support the dollar on the back of speculation that the Federal Reserve will hike interest rates again in September,” said Kengo Suzuki, forex strategist at Mizuho Securities.
‘Doves are hawkish’
Chicago Fed President Charles Evans backed “somewhat restrictive” rate levels to offset the fiscal stimulus, citing the possibility of inflation hitting 2.2 percent. Evans had previously voted against hikes on concerns that inflation would not hit the Fed’s two percent target.
“When doves are hawkish we have to take a little notice,” said Greg McKenna, chief market strategist at AxiTrader.
While the dollar was struggling against the safe-haven yen owing to the trade uncertainty, it was up against most other units sitting at a more than one-year high against the pound. The euro tumbled on concerns a crisis in Turkey could spill over into Europe.
The Turkish lira plunged 12% to a record low at one point on tensions between Ankara and Washington over the detention of a US pastor. The losses extended Thursday’s drop as high-level talks seeking to slacken tensions with the US produced no apparent breakthrough.
The lira recovered slightly but has lost about 50% since the turn of the year.
At the same time, the Turkish economy under President Recep Tayyip Erdogan is showing signs of overheating, with the country running a large current account deficit that makes it heavily dependent on foreign capital inflows.
“The backdrop to endemic lira weakness is of course the familiar one of an economy suffering rising inflation and a burgeoning balance of payments crisis alongside a central bank that has in effect been stripped of much of its independence since Erdogan was re-elected… in June,” Ray Attrill, head of forex strategy at National Australia Bank, said in a note.
The South Korean won and Australian dollar were down about one percent against the dollar while Indonesia’s rupiah and the Mexican peso were also well off.
The Russian ruble tumbled again and is now five percent down since the US on Wednesday hit Russia with new sanctions over its alleged involvement in a nerve agent attack in Britain.
In early trade, London fell 0.4%, Paris shed 0.9 percent and Frankfurt was down 0.8%. — AFP

UnionBank readies stock rights offering

Union Bank of the Philippines (UnionBank) will proceed with its planned stock rights offer next month, as the lender works to raise fresh capital to support expansion.
In a disclosure on Friday, Aug. 10, the bank said they will offer up to 200 million common shares via a stock rights offering in September, two months later than the original plan.
Back in May, UnionBank chief financial officer and treasurer Jose Emmanuel U. Hilado said that the lender plans to issue P10 billion worth of additional shares by July of this year, after securing approval from the bank’s board of directors.
The Aboitiz-led lender told the Philippine Stock Exchange this week that they will be offering the additional shares to all stockholders on record as of Sept. 3.
The offer period will start on Sept. 10 and end Sept.21. The offer price is yet to be determined.
The additional capital will boost the lender’s common equity Tier 1 and total capital adequacy ratio of the bank.
“The proceeds from the stock rights offer will be used to allow for continued growth of assets of the bank,” UnionBank told the local bourse. — Melissa Luz T. Lopez

Wilcon Depot earnings up 20% in first half

Earnings of Wilcon Depot, Inc. went up by a fifth in the first six months of 2018, fueled by higher sales from existing stores alongside its expansion to new markets.
The listed firm said in a statement on Friday that net income jumped to P914 million in the first half, versus P763 million in the same period a year ago. Net sales logged an 18% increase to P10 billion.
The company attributed the increase to strong comparable sales, the development of new stores, and improving margins following its product mix strategy.
“Wilcon is looking at maintaining its 2018 net sales target growth rate of mid to high teens. While we have achieved our target for the first half, we have to continue to work hard in the second half to sustain our momentum,” Wilcon Chief Financial Officer Mark Andrew Belo was quoted as saying in a statement. — Arra B. Francia

Alliance Global’s first-half profit rises 17%

Alliance Global Group, Inc. grew its attributable profit by 17% in the first half of 2018, driven by the double-digit growth across its property, liquor, and fast food businesses, alongside the recovery in its gaming unit.
In a statement issued Friday, the holding firm of tycoon Andrew L. Tan reported a net income attributable to equity holders of the parent of P7.9 billion, versus the P6.9 billion it realized in the same period a year ago.
This was supported by a nine percent increase in revenues to P73.2 billion for the first semester.
“All the group’s major subsidiaries delivered strong topline and bottomline results, reflecting the improving outlook in their respective business segment,” AGI Chief Executive Officer Kevin Andrew L. Tan said in a statement. — Arra B. Francia

Central bank fires off third rate hike

By Melissa Luz T. Lopez
Senior Reporter
THE Bangko Sentral ng Pilipinas (BSP) raised rates anew yesterday in a more aggressive move as expected, to temper inflation amid signals that prices could remain elevated until next year.
The Monetary Board raised policy rates by 50 basis points (bp) on Thursday, marking the third consecutive tightening move this year as policy makers wanted to rein in price expectations.
This is also the central bank’s strongest response in a decade. The last time the BSP raised rates by 50bp in one go was in July 2008, which saw inflation surge to a 17-year high at 12.2% against a 3-5% target that year.
Rates now stand at 4.5% for the overnight lending rate, 4% for the overnight reverse repurchase rate, and 3.5% for the overnight deposit rate.
“In deciding to raise the BSP’s policy rate anew, the Monetary Board noted that latest baseline forecasts have shifted higher over the policy horizon, indicating some risk of inflation exceeding the target in 2019,” BSP Governor Nestor A. Espenilla, Jr. said in a media briefing yesterday.
The BSP tightened rates by 25bp each during its May and June meetings, at a time when monthly inflation started to log beyond four percent.
Inflation expectations — which play a huge part in terms of price movements — remain “elevated” as of now. The stronger adjustment is likewise seen to “prevent sustained supply-side price pressures,” even after previous tightening moves.
Prices of widely used goods surged to 5.7% in July, beating market expectations which brought the seven-month average to 4.5%, well above the 2-4% target range.
All 14 economists polled by BusinessWorld last week were sure that the central bank will raise interest rates this week, but were torn as to whether it will involve a typical 25bp increase or stronger. More analysts bet on a 50bp hike following the release of July inflation data on Tuesday.
“The Monetary Board believed that the series of policy rate adjustments thus far in 2018 will help reduce further the risks to inflation…,” Mr. Espenilla added. “Favorable conditions arising from sustained domestic growth also suggest that the economy can accommodate a further tightening of monetary policy settings.”
Thursday’s move is also in keeping with Mr. Espenilla’s hints of a “strong policy response,” versus a “measured” approach previously.
Meanwhile, the BSP chief said he has let go of plans to reduce bank reserves, saying that the 200bps cut introduced this year is sufficient for now. Mr. Espenilla has said the central bank will introduce fresh reserve cuts by next year, or when inflation returns to within target.
FASTER INFLATION
The central bank also expects further price spikes over the coming months.
BSP Deputy Governor Diwa C. Guinigundo said inflation is seen averaging 4.9% this year, versus a 4.5% estimate during its June meeting. The pickup is due to the P1 provisional increase in jeepney fares, higher water rates, the scheduled increase in tobacco excise tax, and higher Dubai oil prices.
By 2019, inflation will ease to 3.7%, although faster than the previous 3.3% forecast. Inflation is also seen to average 3.2% by 2020, against a 2-4% target range.
The BSP also noted the need for other government agencies to implement “non-monetary measures” to soften future price increases. The latest estimates do not factor in the passage of the rice tariffication bill, which the central bank said could bring down inflation by 0.2% if implemented during the fourth quarter.
The measure can also trim inflation down by 0.6% for 2019 once cheaper rice is imported to augment dwindling supply of the staple. Rice accounts for nearly a tenth of the consumer basket used in measuring inflation.
Mr. Espenilla said that while inflation is currently “on the high side,” authorities are carefully watching developments and is ready to take necessary actions “as needed.”
GROWTH INTACT
Central bank officials are confident the tightening moves — which cumulatively raised rates by 100bps so far this year — will not stunt overall economic growth.
“Certainly we are concerned about the country’s growth prospects. We also say that 6% GDP (gross domestic product) growth, while below our own estimates, is not a low number. It’s pretty decent growth by an economy, especially during this time of uncertainty,” Mr. Espenilla said, while stressing that price control is the BSP’s main mandate.
“We also argue that focusing on inflation right now is not necessarily anti-growth. One can argue it will sustain growth over the medium term.”
The Philippine economy expanded by six percent during the second quarter, well below market expectations and the state’s 7-8% goal. Still, Mr. Espenilla said the Philippine economy “continues to be strong” and can weather higher borrowing rates.
The BSP chief noted there are signs that lending rates “have started rising” to mirror upward adjustments in the benchmark rate, although pointed out that money supply remains “adequate.”
Still, bank analysts said this might not be the last tightening move from the BSP.
“We welcome BSP’s 50bps hike and its readiness to act further,” ING Bank N.V. Manila senior economist Jose Mario I. Cuyegkeng said.”We believe that this is not the end of BSP’s tightening as the immediate objective to anchor inflation expectations would need further action since inflation is yet to peak and would remain elevated for the rest of the year and early 2019.”

Going for the goal and taking risks

goal 1
By Michelle Anne P. Soliman
Reporter

Malou Treñas-Del Castillo, who was then 27-years-old when she worked as a brand manager for multi-national company, came home early from work one evening due to a bad headache. She recalled receiving a phone call from a friend when she suddenly passed out leaving the other person hanging on the line. She regained consciousness unaware of what had happened.
Her sister visited that evening and asked to use her bathroom. While she was out of the room, Ms. Del Castillo received another phone call from another friend. “After a while, he [was still] talking and I realized I couldn’t speak. I was trying to say, ‘I can’t find the words to answer you,’” she recalled. However, she just kept stuttering, then she passed out for a second time.
Ms. Del Castillo was rushed to the hospital where the doctors found a growth from a bacterial infection on the Broca’s area of the brain — located at the lower left frontal lobe which controls speech and language comprehension. “It was a one in a hundred thousand case. It went to the brain, and because it was unchecked, it grew. And I didn’t know,” she recalled.
The operation to correct the condition carried the risk of her losing the ability to speak. Still, it was a success.
After the operation, she and her family struggled to pay the hospital bills, but surprisingly received help from a distant relative.
“Two days before I was discharged, a distant relative found out that I was in the hospital and sent somebody and paid the balance, without us asking [for it],” she said. “I felt so undeserving because it could have gone wrong in so many ways, but it didn’t.”
Ms. Del Castillo slowly recovered her speech and returned to work after taking a month off.
STARTING ANEW AND GIVING BACK
After this ordeal, Ms. Del Castillo realized the desire of wanting to give back. “There was something I was supposed to do to help other people, but I didn’t know what it [was],” Ms. Del Castillo said during an interview and lunch with the media in the Ortigas Center last week.
She then consulted a career counselor, took examinations and found out that she was suited to helping people “to find balance in their life” and managing their careers.
goal 2
Despite her success as a brand manager, she decided to leave the corporate world after 14 years to do freelance work as a career consultant, a career columnist for a lifestyle magazine, and to pursue a master’s degree in psychology and become a registered psychologist.
“I realized I knew the answers to these questions,” she said, referring to setting goals and managing one’s career. “I feel like there was a purpose in being able to speak again.”
Encapsulating everything she knows in a book was appropriate for her since this way she would be able to share her knowledge with more people.
Ms. Del Castillo began writing what would become The Career Roadmap: Your Personal Guide to Corporate Career Success in February of 2017 and self-published it in June the same year.
The 140-page guide contains four chapters: on setting one’s goals, going after them, managing one’s career, and exiting and seeking other opportunities. It also includes exercises and worksheets which the reader can use to plot goals and list their areas of focus.
She wrote the book “because in my workshops and one-on-one career consulting sessions with various employees, whether fresh grads, millennials or middle-aged persons, I realized there was a gap in information for our Filipino corporate workers. I became aware that most employees, whether fresh graduates or long-time workers, feel very nervous, unprepared and unsure of how to discern their job objective, make their resume, prepare for interviews, or even manage their careers once hired or working in a corporate job,” Ms. Del Castillo was quoted as saying in a press release.
TAKE IT FROM THE COUNSELOR
Ms. Del Castillo took the time to answer a number of career questions from members of the press.
Why do some people feel unsettled at the beginning of their careers?
“It can happen for many reasons. There are certain skills that we’re happy to use. We’re good at it and we love it. We’re good at it but we don’t enjoy doing it and we end up doing so much of it. Ideally, most of our time should be spent doing the stuff [you] like and [you’re] good at to put you in the zone,” she explained.
goal 3
Why do people feel restless at work?
“Sometimes, there is a dissonance in values between the employer, employee or the workplace. ‘I like to feel creative but I’m being stifled. I like to feel the sense of stability and security, but you don’t have a full-time job. I like having friends in the workplace that I can talk to, but there is no team since you work individually at home.’ There’s a whole series of values and the key is knowing what those and seeing are most of those present in the workplace,” she noted.
Why is there a tendency among some people to job hop?
These people have to “[figure out] what are the things you really want and enjoy doing,” she said.
“What are the most important values? Sometimes [they job hop] when nobody takes the time to figure that out. Something will seem attractive in the other place and then you go. Then another thing is attractive then you go. Figure that out first before you jump from the frying pan into the fire. What are your top 10 values? What are the top 10 things you want to work on that make you happy and rank it. Be clear on what’s important. [You] can’t say [you’re going to] get all of it but maybe there’s a place that can give you 80 to 90% of it and to what degree, that’s the place you go to, not just because one [job] seems better than the other on one thing.”
What is your advice to those who are affected by social media posts?
“What you see on social media is the tip of the iceberg,” she pointed out. “Don’t be so affected by what’s going on [with] other people’s lives. Get to know what’s going on in your life and what’s important to you. It’s not a competition. I know it’s easier said than done, but the competition is with yourself.”
What is your advice to fresh graduates?
“Things don’t have to be perfect or beautiful. What’s important is finding what you’re good at and what you want to learn more [about], and which [job] will give you the best experience to further those goals. It’s best to be with a group of people who do similar things to what you want to do.”
Is there a time when one can say, ‘I made it!’ or just continue doing better?
“I think that we set our goals and then when we get to them, man always wants to constantly improve… If all circumstances are fine and we’ve attained a certain amount of our goals, there’s a sense of wanting to set new goals. I would say, you’ve arrived when you’ve reached those goals. But it can happen that when you reach that, then you say, ‘I feel like I should be doing something more,’” she pointed out.
“For me, I guess, I attained my goals — what I set out when I became a marketer. And then I said, ‘what’s more?’ and that itch was there since the operation. And I finally needed to scratch it. It took a while, but I guess you can arrive and say, ‘Let’s start again.’”
 
The Career Roadmap: Your Personal Guide to Corporate Career Success is available at National Bookstore and Powerbooks for P350. Send e-mail to Ms. Del Castillo at malou.delcastillo@thecareerroadmap.net.

Q2 GDP growth slowdown threatens full-year target

THE Philippine economy grew to its slowest pace in three years in the second quarter, leading some analysts to downgrade their forecasts despite the country remaining as one of Asia’s fastest-growing economies.
Gross domestic product (GDP) — the total amount of final goods and services produced within the country — grew 6% in the three months to June, lower than the revised 6.6% growth recorded in the same period in 2017, according to data released by the Philippine Statistics Authority yesterday.
The second quarter result was also below the revised 6.6% in the first quarter and the 6.8% median estimate in a BusinessWorld poll last week.
Gross domestic product quarterly performance (Q2 2018)
This is the slowest pace since the second quarter of 2015 when it recorded a 5.6% growth.
Year-to-date, GDP in the first half grew by 6.3%, which is also below the government’s 7-8% target band for 2018.
Gross national income — the sum of the nation’s GDP and net income received from overseas — recorded a growth of 5.8% in the second quarter, down from 6.6% previously.
In Thursday’s news briefing, Socioeconomic Planning Secretary Ernesto M. Pernia said the economy would have to grow “by at least 7.7%” in the second half to reach the low-end of the government’s growth target for this year.
“Although this growth still puts the Philippines as one of the best-performing economies in Asia, just after Vietnam at 6.8% growth and China at 6.7% growth, and ahead of Indonesia’s 5.3%, this growth rate is less than what we had hoped for,” Mr. Pernia said.
Mr. Pernia cited “policy decisions” in contributing partly to the economic slowdown such as the temporary closure of Boracay Island, and regulations affecting the mining industry such as excise tax on metallic and non-metallic minerals.
Services — the country’s mainstay that accounted for almost half of GDP — led growth among major sectors at 6.6%, faster than the 6.4% recorded in the same period last year.
Meanwhile, industry posted a 6.3% growth, slower than the 7.1% print in 2017.
Manufacturing remained the top contributor to industry growth even as it slowed down to 5.6% from the 7.6% growth in the first quarter and 8% in the second quarter of 2017, chipping in 3.7 percentage points to the 6.3% industry growth.
The construction sector grew by 13.5% in the second quarter compared to last year’s 4.3% and 8.8% in the first quarter.
Mining and quarrying, meanwhile, went the other direction as it declined by 10.9% versus the 6.9% expansion seen in the first quarter and the 19.2% growth in the second quarter of 2017.
Agriculture also grew albeit marginally at 0.2% versus the 6.3% growth posted a year ago.
Mr. Pernia noted the “dismal” harvests in palay (paddy rice), corn, sugarcane, and mango as well as the weak output in coconut including copra, livestock, and poultry.
“[T]his supports our premise that the main reason behind the high inflation is the gross deficiency in the domestic production of food, which was not augmented by imported goods, especially rice,” said the Cabinet official, reiterating the need to lift the quantitative restrictions on rice imports and impose a 35% tariff on the staple food item to help ease food inflation.
“[D]espite the price pressures, domestic demand remained buoyant at 10.1% [growth] — driven by household consumption and investments,” he said.
On the expenditure side, household spending — which made up roughly 56% of second-quarter GDP — was up 5.6% in the second quarter, slower than the 6% growth logged in the second quarter of 2017.
Exports of goods and services expanded at a slower pace of 13% compared to 2017’s 21.4%. Imports, meanwhile, grew 19.7% from 18.6%.
On the other hand, government spending went up by 11.9%, slower than the 13.6% in the first quarter, but faster than the 7.6% in the second quarter of 2017.
Capital formation, which is a measure of private investment, posted faster growth at 20.7% compared to 12.4% in the first quarter and 7.6% last year.
OUTLOOK
Market players now expect a slower full-year expansion for the country this year following the second-quarter growth turnout, noting that times have turned more “challenging” for the economy amid rising prices.
In separate commentaries, bank economists said they now see full-year GDP growth to be slower than their initial forecasts, leaving slimmer chances to hit the government’s 7-8% goal and could even settle below the 6.7% pace logged in 2017.
ANZ Research has scaled down its forecast to 6.6% from 6.8% following the first semester print, amid concerns on the trend for domestic demand as well as net exports.
ING Bank N.V. Manila senior economist Jose Mario I. Cuyegkeng was likewise of the same sentiment: “Downward revisions of 2018 GDP forecast are necessary not only as a result of the downside surprise of 2Q and the downward revision of 1Q GDP growth,” he said.
Previously, ING expects full-year growth at 6.8%.
Mr. Cuyegkeng also pointed out that the weaker peso — which has traded above P53 versus the dollar since June — has “not encouraged” significant investments in the export sector. It has likewise failed to lift outbound shipments of goods despite bigger valuations during the first half of the year.
A widening trade imbalance and soft farm output have dragged overall economic activity, aggravated by high inflation which “could have dampened household spending,” the ING analyst added.
Prices of widely used goods trended above four percent since April and even hit 5.2% in June. Year-to-date, inflation has averaged 4.5% as of end-July to surpass the 2-4% target range.
Nomura economists Euben Paracuelles and Charnon Boonnuch also flagged a possible scaling down of their 6.9% growth estimate for 2018 given dismal turnout for agriculture, mining, manufacturing and services.
“Still, we expect an acceleration of growth in H2, led by investment spending as the government makes more progress in implementing infrastructure projects, which should crowd-in private sector spending,” Nomura said.
Rajiv Biswas, chief economist at IHS Markit, said the easing growth momentum meant the central bank and the state economic managers “face a more challenging economic outlook.”
“Looking ahead, we expect the slowdown in GDP growth to continue over the second half of this year as tighter monetary policy and higher inflation weighed on consumer spending,” said Capital Economics Senior Asia economist Gareth Leather in a note.
“The economy is likely to expand at a decent pace over the next year, although growth will fall well short of the government’s target of 7-8% target. On the plus side, demand should be supported by a big increase in infrastructure spending,” he added.
Angelo B. Taningco, economist at Security Bank Corp., likewise revised the GDP growth forecast for 2018 downwards by 0.3 percentage points to 6.5% from 6.8% previously, adding that a 7% full-year growth is unlikely as inflation is expected to remain elevated for the rest of the year.
Economists cited key risks to growth such as further increases in world crude prices, and the escalating US-China trade war which could affect Philippine export products. — Carmina Angelica V. Olano and Melissa Luz T. Lopez

Gross domestic product quarterly performance (Q2 2018)

THE Philippine economy grew to its slowest pace in three years in the second quarter, leading some analysts to downgrade their forecasts despite the country remaining as one of Asia’s fastest-growing economies. Read the full story.
Gross domestic product quarterly performance (Q2 2018)

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