Home Blog Page 1355

South Korea says nat’l pension fund will run dry by 2056 without reforms

BLOOMBERG

SOUTH KOREA’S national pension fund, one of the world’s biggest, will run out by 2056 if urgent reforms including boosting contributions aren’t introduced, the government said.

“The fund will reach its peak in 2041, then could be fully drained in 2056 according to our financial estimates,” South Korea’s First Vice Health Minister, Lee Ki-il, told a briefing on Wednesday. “If there are no reforms, the drainage would be faster.”

The government’s previous estimate had been for 2055. The one-year delay is due to the growth in funds of the National Pension Service, which managed 1,147 trillion won (more than $860 billion) as of the end of June.

While the new estimate is a slight improvement over the previous forecast, the fund’s risk of depletion underscores a dire situation unfolding for retirees in South Korea, which is facing a rapidly aging population and the world’s lowest birthrate.

The government proposed pension reforms earlier this month, including a gradual increase in the contribution rate to 13% of income from the current 9%. If approved by parliament, they’d be the first changes since 1998.

“This is the best and most optimal time to do the pension reform,” Mr. Lee said, warning that any delay would increase the burden on the next generation.

South Korean President Yoon Suk Yeol has also mooted a tiered system in which obligations would be increased for older workers at a higher rate, with increases implemented more gradually for younger workers.

The fund posted a 9.71% return in the first half of 2024, helped by gains in US tech stocks. It allocated 34.1% of its assets in overseas stocks, followed by domestic bonds, alternative investments and onshore stocks, according to the latest data.

To generate more returns, the government wants the fund to increase its exposure to overseas assets and alternative investments including real estate, infrastructure and private equity funds. — Bloomberg

Activists protest US support for Israel as risks of wider Middle East war rise

Demonstrators hold Lebanese and Palestinian flags as they protest Israel’s attacks on Hezbollah targets in Lebanon and take to the streets of Los Angeles in support of the Lebanese people, in Los Angeles, California, U.S., Sept. 24, 2024. — REUTERS

WASHINGTON — Protesters in some US cities demonstrated on Tuesday against American military support for Israel as risks have risen of a full-fledged conflict in the Middle East, with anti-war activists demanding an arms embargo against the US ally.

Dozens of protesters gathered in Herald Square in New York City on Tuesday evening and carried banners that read “Hands off Lebanon now” and “no US-Israeli war on Lebanon,” according to the ANSWER coalition group, which stands for “Act Now to Stop War and End Racism.”

Protesters chanted “Hands off the Middle East,” “Free Palestine” and “Biden, Harris, Trump and Bibi; none are welcome in our city,” referring to US President Joseph R. Biden, Vice-President Kamala Harris, former President Donald Trump and Israeli Prime Minister Benjamin Netanyahu.

A smaller protest with similar slogans and banners was also seen near the White House in Washington on a rainy Tuesday evening.

“Israel’s attacks in Lebanon and the ongoing siege and genocide in Gaza are made possible by the huge amount of bombs, missiles and warplanes provided by the US government,” the ANSWER coalition group said in a statement. It said protests were also being organized on Tuesday in other cities like San Francisco, Seattle, San Antonio and Phoenix, among others.

Israel says its actions are an act of self-defense against militant groups like Hamas and Hezbollah that it considers hostile. The United States has maintained support for its ally during this war despite domestic and international criticism.

In May, Mr. Biden said US support for Israel was “ironclad,” while also calling for an immediate ceasefire. “What’s happening in Gaza is not genocide. We reject that,” Mr. Biden said at a Jewish American Heritage Month event at the White House.

The United States has seen months of protests over Israel’s war in Gaza that has killed over 41,000, according to the local health ministry, caused a hunger crisis, displaced the entire 2.3 million population of the enclave and led to genocide allegations at the World Court that Israeli denies.

Israel’s military assault on Hamas-governed Gaza followed a deadly attack by the Palestinian Islamist group on Oct. 7 that killed around 1,200 people and in which about 250 were taken as hostages, according to Israeli tallies.

Israel’s offensive in Lebanon since Monday morning has killed over 560 people, including 50 children, and wounded 1,800. Israel says it has struck targets of Lebanese Hezbollah militants who are supported by Iran while Hezbollah has also said it fired rockets at Israeli military posts.

The situation has raised concerns of a widened regional war that could destabilize the Middle East. Leaders of different United Nations member states met this week in the United States with the situation in the Middle East being top of the agenda. — Reuters

CrowdStrike executive apologizes before US Congress for software glitch behind July global outage

BW FILE PHOTO

WASHINGTON — A senior executive at cybersecurity firm CrowdStrike apologized at an appearance before a US House of Representatives subcommittee on Tuesday for a faulty software update that caused a global IT outage in July.

Adam Meyers, senior vice-president for counter adversary operations at CrowdStrike, told the House Homeland Security Cybersecurity and Infrastructure Protection subcommittee that CrowdStrike released a content configuration update for its Falcon Sensor security software that resulted in system crashes worldwide.

“We are deeply sorry this happened and we are determined to prevent this from happening again,” Mr. Meyers said. “We have undertaken a full review of our systems and begun implementing plans to bolster our content update procedures so that we emerge from this experience as a stronger company.”

He said the issues was not the result of a cyberattack or prompted by AI.

The July 19 incident led to worldwide flight cancellations and impacted industries around the globe including banks, health care, media companies and hotel chains. The outage disrupted internet services, affecting 8.5 million Microsoft Windows devices.

“We cannot allow a mistake of this magnitude to happen again,” said Representative Mark Green, who chairs the House Homeland Security Committee calling the events “a catastrophe that we would expect to see in a movie.”

Mr. Meyers said that on July 19 new threat detection configurations were validated and sent to sensors running on Microsoft Windows devices but the “configurations were not understood by the Falcon sensor’s rules engine, leading affected sensors to malfunction until the problematic configurations were replaced.”

Delta Air Lines has vowed to take legal action, saying the outage forced it to cancel 7,000 flights, impacting 1.3 million passengers over five days, and cost it $500 million. CrowdStrike rejected Delta’s contention that it should be blamed for massive flight disruptions.

Last month, CrowdStrike cut its revenue and profit forecasts in the aftermath of the faulty software update, and said the environment would remain challenging for about a year. — Reuters

Thailand kicks off first phase of $14 bln “digital wallet” stimulus scheme

PIXABAY

 – Thailand’s government on Wednesday launched the first phase of its flagship $14 billion stimulus handout scheme, which will eventually see an estimated 45 million people receive 10,000 baht each, saying it would spark economic activity.

The initial phase will see 10,000 baht distributed in cash to 14.5 million welfare card holders and disabled people, and is expected to be complete by the end of the month.

“Cash will be put into the hands of Thais and create a tornado of spending,” Prime Minister Paetongtarn Shinawatra said at an event to mark the program’s start.

The “digital wallet” scheme was initially structured to distribute the funds through a smartphone app, with the money to be spent in local communities within six months.

“There will be more stimulus measures and we will move forward with the digital wallet policy,” said Mr. Paetongtarn.

The scheme has been criticized by economists, including two former central bank governors, as fiscally irresponsible. The government rejects that, but has struggled to find sources of funding.

Southeast Asia’s second-largest economy is expected to grow 2.6% this year after an expansion of 1.9%, behind regional peers. – Reuters

Climate change doubles chance of floods like those in Central Europe, report says

STOCK PHOTO | Image by Andi Graf from Pixabay

 – Climate change has made downpours like the one that caused devastating floods in central Europe this month twice as likely to occur, a report said on Wednesday, as its scientific authors urged policymakers to act to stop global warming.

The worst flooding to hit central Europe in at least two decades has left 24 people dead, with towns strewn with mud and debris, buildings damaged, bridges collapsed and authorities left with a bill for repairs that runs into billions of dollars.

The report from World Weather Attribution, an international group of scientists that studies the effects of climate change on extreme weather events, found that the four days of rainfall brought by Storm Boris were the heaviest ever recorded in central Europe.

It said that climate change had made such downpours at least twice as likely and 7% heavier.

“Yet again, these floods highlight the devastating results of fossil fuel-driven warming,” Joyce Kimutai, a researcher at Imperial College London’s Grantham Institute and co-author of the study, said in a statement.

“Until oil, gas and coal are replaced with renewable energy, storms like Boris will unleash even heavier rainfall, driving economy-crippling floods.”

The report said that while the combination of weather patterns that caused the storm – including cold air moving over the Alps and very warm air over the Mediterranean and the Black Seas – was unusual, climate change made such storms more intense and more likely.

According to the report, such a storm is expected to occur on average about once every 100 to 300 years in today’s climate with 1.3 degrees Celsius of warming from pre-industrial levels.

However, it said that such storms will result in at least 5% more rain and occur about 50% more frequently than now if warming from pre-industrial levels reaches 2 C, which is expected to happen in the 2050s. – Reuters

World leaders call for investment in clean energy, developing nations seek help

 – World leaders on Tuesday called for far more investment in renewable energy to tackle climate change, with developing nations saying they need financial support to make the transition.

Speaking at a Global Renewables Summit, Kenyan President William Ruto made the case for investing in renewables in Africa as part of the global pledge made at last year’s COP28 summit to triple clean energy capacity by 2030.

“Africa receives less than 50% of global investment in renewable energy despite being home to 60% of the world’s best solar opportunities,” Mr. Ruto told the summit, which is being held on the sidelines of the U.N. General Assembly

The continent is rich in resources needed for development, he said, but can’t always access those resources due to the current mix of “unreliable or expensive energy.”

Barbados Prime Minister Mia Mottley said that fossil fuel subsidies outnumber renewable energy subsidies, which makes it more expensive for small states to develop clean energy projects.

“Small states face the reality that the cost of renewable energy … will probably be higher than traditionally fossil fuels,” she said.

Recent reports, including one by the International Energy Agency, suggest that tripling the world’s renewable capacity is feasible within this decade. But the effort will require robust regulation including strong rules for issuing project permits as well as investments in building out transmission and battery storage.

Azerbaijan, which is hosting this year’s COP29 climate summit in November, said it was planning to rally governments to make a new global pledge to increase electricity storage sixfold.

Earlier in the day, a coalition of some of the world’s biggest companies, finance houses and cities called Mission 2025 urged governments to adopt policies that they said could unleash up to $1 trillion in clean energy investments by 2030. The policies include setting new capacity targets and offering tax credits or long-term electricity contracts that would encourage investment.

 

“WE DID IT”

Giving his final major speech on climate change at a forum attended by clean energy business leaders, U.S. President Joe Biden celebrated his $369 billion signature climate law.

“We were told it couldn’t get done and we did it,” he said of passing the Inflation Reduction Act in 2022, adding that the legislation has since encouraged innovation and created hundreds of thousands of jobs.

“Private companies have announced investments of over $1 trillion in clean manufacturing,” he told the event. “We are just getting started.”

Some companies and investors are looking at artificial intelligence technologies with excitement for the solutions they might bring but there is also concern about the energy-intensive data centers that are needed to power them.

AI is “a problem, and it’s part of the solution,” Andres Gluski, the chief executive officer of U.S. power firm AES Corporation told Reuters in an interview.

“With AI, we could come up with new materials that are better for batteries, that are better than copper,” he said.

“If we have labor shortages, AI will help us. If we have to do demand management, AI will help us.” – Reuters

‘Fishing net’: Police quotas, surveillance trap North Koreans in China

RAWPIXEL.COM

 – Border police in China’s northeast have been given quotas to identify and expel undocumented migrants, one key aspect of broader surveillance that is making it harder for North Korean defectors to evade capture, according to previously undisclosed official documents and a dozen people familiar with the matter.

China has implemented new deportation centers, hundreds of smart facial-recognition cameras and extra boat patrols along its 1,400-kilometer frontier with North Korea, according to a Reuters review of more than 100 publicly available government documents that outline spending on border surveillance and infrastructure.

In addition, Chinese police have begun to closely monitor the social media accounts of North Koreans in China, and collect their fingerprints, voice and facial data, four defectors and two missionaries told Reuters. Stephen Kim, a missionary who helps North Koreans defect, told Reuters that based on his contacts with some 2,000 defectors, more than 90% of those currently in China had registered personal and biometric data with the police.

The measures took effect since the COVID-19 pandemic and have ramped up from 2023.

Cracking down on unauthorized migration helps Beijing manage a thorny issue in ties with Pyongyang while ensuring stability on China’s periphery, according to eight people, including security scholars, rights activists and a former North Korean official. It also gives China potential leverage over its neighbor because Beijing can control the fate of these undocumented North Koreans, several of them said.

“But primarily, China has feared that if too many North Koreans find refuge in China, more and more North Koreans would follow suit, and in time the outflow would destabilize North Korea and lead to reunification under South Korea and to the expansion of U.S. political and military influence on the peninsula,” said Roberta Cohen, a human rights specialist and a former U.S. deputy assistant secretary of state.

China’s National Immigration Administration, which is responsible for border police, and the Ministry of Public Security, which oversees the immigration agency, did not respond to queries about efforts to identify and deport North Koreans.

Beijing’s Foreign Ministry said China protected “the rights and interests of foreigners in China, while lawfully maintaining the order of border entries and exits”. It said the “relevant report is completely not factual”, in an apparent reference to Reuters reporting. The ministry didn’t respond to additional questions about Reuters findings and which elements it considered incorrect.

North Korea’s embassy in Beijing and its U.N. missions in Geneva and New York didn’t respond to questions about China’s handling of defectors.

While the documents don’t explicitly identify North Koreans as targets of the surveillance and deportations, the measures are focused on areas adjoining North Korea.

Reuters found little evidence of similar actions at China’s other borders, except its porous frontier with Myanmar, where China has been tackling organized crime and recently opened a deportation centre.

In a statement, Myanmar’s government said 48,000 of its nationals were repatriated from China between 2022 and August 2024. Both countries collaborate on border management to ensure stability, it added.

 

BORDER PATROL

Among the documents examined by Reuters was the 2024 budget for China’s border police in Jilin province, which adjoins North Korea.

Of 163 million yuan in spending, almost 30 million yuan went to border security upgrades. That included 22.3 million yuan for an unspecified number of new patrol boats, and funding for “deportation and repatriation” of foreigners that illegally enter, live and work in Jilin.

The budget set goals for 18 border police stations and teams: Investigate and “deal with” at least 10 undocumented foreigners; spend no more than 30 days to process each deportation; and remind residents of the “harm and price paid” for aiding undocumented migrants. It lists performance metrics, including 10 points for achieving a repatriation rate of 95%.

There were no such quotas in the 2023 and 2022 budgets.

Construction also began last year on a deportation station in the border city of Dandong, in Liaoning province, while another is planned for Changchun city, in Jilin, government tenders show.

In March, Jilin border police awarded a 26.5 million-yuan contract to a Beijing sensor maker, HT Nova, to build a surveillance system that “emits high-energy rays to penetrate vehicles and goods” and can use deep learning to continuously improve its facial-recognition capabilities, according to one tender document.

The system, funded in the 2023 border police budget, would be installed at two crossings in the Changbai area, a route defectors use. The company didn’t respond to a request for comment.

Separately, a 7,713 square-meter deportation station in the town of Tumen, which was in the works before the pandemic, was completed in 2023, according to the National Immigration Administration.

Since June 2022, the agency has published several job ads seeking graduates with Korean-language ability to work at the Tumen and Changchun facilities, who would be “mainly engaged in the detention of illegal immigrants pending deportation, identity verification, and implementation of repatriation”.

 

POLITICAL DYNAMICS

Beijing denies that there are any North Korean defectors, instead treating them as illegal economic migrants. There is no publicly available data on deportations of North Koreans, but rights groups say the tighter surveillance has increased the risk of capture.

About 70% of defectors who tried to reach South Korea over the past two years have been arrested by Chinese police, up from about 20% previously, according to the Seoul-based Transitional Justice Working Group, which monitors deportations. China returned at least 60 North Koreans in April, said the group’s executive director, Lee Younghwan.

The number of defectors reaching South Korea has declined overall since 2017, which Seoul’s Unification Ministry said was due to tighter surveillance on the China-North Korea border, though there has been an increase since the pandemic ended.

In a statement, South Korea’s Foreign Ministry said Seoul is making “all-out efforts” to prevent China from forcibly repatriating North Korean defectors.

Five security scholars told Reuters that while both sides wanted to stanch the flow of defectors, China’s ability to determine defectors’ destiny gave it a card to play in diplomacy with North Korea, which is reliant on trade with China but has been forging increasingly close ties with Russia.

China “can demand something from North Korea that is beneficial to China”, said Lee Dong Gyu, a China expert at Asan Institute for Policy Studies in Seoul. He said the crackdown helped Beijing from a stability standpoint, because North Korea was in economic turmoil and China did not want the effects of that spilling into its territory.

Lee Jung-hoon, an international relations professor at Yonsei University and a former South Korean ambassador-at-large for North Korean human rights, said there was a “high chance” that Pyongyang had asked China for help in blocking routes for defectors. He didn’t provide specifics and Reuters could not establish whether North Korea had made such a request.

 

‘TRAPPED’

This isn’t the first time that China has cracked down on defectors. Reuters reported in 2019 that Chinese authorities had conducted raids that disrupted defector networks and resulted in the arrests of at least 30 North Koreans.

But some defectors say the heightened surveillance has intensified fear.

Choi Min-kyong, who reached South Korea in 2012 and runs a support group for defectors, said widespread facial-recognition technology in China made it difficult for defectors to move around. Using public transportation, for example, had become too risky.

Shin Ju-ye, who fled North Korea in the 1990s and settled in China’s Heilongjiang province, said that during the pandemic, village officials began ordering North Koreans to register their biometric information with the police. Many of her North Korean friends complied, then regretted it, she said.

“My friends told me, ‘Sister, don’t do it. We are trapped in a fishing net now. If North Korea tells China to catch and send us, we’re dead,'” Shin, 50, said in an interview in Seoul.

Reuters could not independently verify Shin’s account, and she declined to share her acquaintances’ contact information.

Wei Songxian, head of the Heilongjiang government’s media office and vice-head of the provincial Communist Party publicity department, did not respond to questions about Shin’s account.

Ultimately, Shin did not register her details. Instead, she hatched a plan to leave China.

Traveling in private vehicles, she escaped across the southern border to Vietnam, she said. She then ventured onward by bus, boat and on foot to reach Laos and Thailand, where she was handed to South Korean authorities. She arrived in South Korea in 2023. – Reuters

Thailand’s same-sex marriage bill gets royal endorsement

CHANDLERVID85-FREEPIK

 – Thailand’s King has endorsed a marriage equality bill passed by parliament earlier this year, officially making the kingdom the first country in Southeast Asia and third place in Asia to recognise marriages of same-sex couples.

The royal endorsement was published in the official royal gazette late on Tuesday, meaning the bill will come into force in 120 days, which would be Jan 22, 2025.

The law, the culmination of two decades of efforts by activists, was approved by the Senate in June.

Thailand, one of Asia’s most popular tourist destinations, is already known for its LGBT culture and tolerance. – Reuters

From trash to treasure: Cura Furn makes upcycled furniture

Cavite City-based Cura Furn is furthering its sustainability advocacy by turning discarded pieces into upcycled furniture, helping businesses reduce their carbon footprint.

“Imagine more businesses will do upcycling, taking away truckloads of discarded furniture, upcycling them, and giving them new home. That would be truckloads of waste being reused and repurpose,” Guiliana B. Anastacio, owner and creative head of Cura Furn said.

Interview by Edg Adrian A. Eva
Editing by Jayson John D. Marinas

Discounts and delights: A thrilling new shopping experience at SM Supermarket and Savemore Market

Get ready to elevate your shopping experience with Discounts and Delights at SM Supermarket and Savemore Market! From Aug. 1 to Sept. 30, 2024, shoppers can enjoy incredible discounts, exclusive promo offers, and a chance to win amazing raffle prizes. With fun activities and massive savings, Discounts and Delights promises to make your shopping trips more rewarding than ever.

Whether you’re restocking your pantry, preparing for celebrations, or simply grabbing your daily essentials, SM Supermarket and Savemore Market have got you covered. Enjoy unbeatable discounts on a wide range of products that will help you shop smarter and save big.

Unlock Exclusive Discounts and more at the Grand Expo

Mark your calendars for the Discounts and Delights Grand Expo, happening every weekend of September! This special event will take place at select SM Supermarket and Savemore locations, offering a thrilling blend of interactive activities, exclusive deals, and exciting prizes.

  • Play, Win, and Have Fun with these game modules

Prize Catcher: Test your luck and grab fantastic prizes with the Prize Catcher machine! Simply spend a minimum of P1,000 on any Discounts & Delights participating items with your SM Advantage Card (SMAC) to play.

Basketball Challenge: Show off your shooting skills and score amazing rewards! Spend a minimum of P500, including any Discounts & Delights participating items with your SMAC, to take your shot.

  • Expo-exclusive Offers and Freebies

Free Treat Bag: The first 50 customers each day with a minimum purchase of P2,000 worth of Discounts & Delights participating items using SMAC, will receive a special Treat Bag.

Free Gift Certificates: Spend at least P500 on groceries, including a minimum of P200 on Nutri Asia products, to receive a raffle coupon and a chance to win up to P3,500 e-GC.

  • Catch the Discounts and Delights Grand Expo at these locations: SM Supermarket Fairview from Sept. 7-8, Savemore Festival Mall from Sept 14-15, SM Supermarket San Lazaro from Sept, 21-22 and SM Supermarket SouthMall from Sept. 28-29.

This exciting event is made possible with the support of our esteemed brand partners, including Purefoods, Knorr, Argentina, Century Tuna, Angel, Hunts, Rebisco, Milo, Nestlé, Ensure, Pediasure, Similac, Jack ‘n Jill, Ajinomoto, UFC Sauces, Barrio Fiesta, Del Monte, McCormick, Alaska, Filippo Berio, Silver Swan, Lotte, Delimondo, Old English Simply, Ariel, EQ, and Johnson’s.

Don’t miss out on the first salvo of Discounts and Delights! Visit your nearest SM Supermarket or Savemore Market to be part of this exciting debut. Enjoy exclusive deals, play engaging games, and walk away with fantastic prizes. This is definitely one shopping experience you won’t want to miss!

 


Spotlight is BusinessWorld’s sponsored section that allows advertisers to amplify their brand and connect with BusinessWorld’s audience by publishing their stories on the BusinessWorld Web site. For more information, send an email to online@bworldonline.com.

Join us on Viber at https://bit.ly/3hv6bLA to get more updates and subscribe to BusinessWorld’s titles and get exclusive content through www.bworld-x.com.

ADB maintains growth forecast for Developing Asia

People wait to board trains at the Shanghai Hongqiao railway station in Shanghai, China Sept. 28, 2023. REUTERS/Aly Song

MANILA – Developing Asia is on track to grow 5% this year, supported by strong consumption and high demand for tech exports, the Asian Development Bank (ADB) forecast on Wednesday, and said China was expected to roll out more economic support measures.

In an update to its Asian Development Outlook report, the ADB left most growth projections for economies in the region unchanged from its July report, maintaining its growth outlook for developing Asia at 5.0% this year and 4.9% next year.

It revised down its inflation forecasts for developing Asia, which groups 46 countries in the Asia-Pacific, to 2.8% for this year and 2.9% for next year from previous forecasts of 2.9% and 3.0%, respectively.

The Manila-based lender highlighted some downside risks to its outlook, including rising protectionism, escalating geopolitical tensions, adverse weather conditions, and a deterioration in China’s property market.

China, the world’s second-largest economy, is battling deflationary pressures, and struggling to lift growth despite a series of policy measures aimed at spurring domestic spending.

On Tuesday, China’s central bank announced broad monetary stimulus and property market support measures as authorities look to restore confidence in the economy.

“Whether that will work remains to be seen because a lot of the structural problems in the property sector remain persistent,” ADB Chief Economist Albert Park said at a briefing.

“It may take more effort and work by their government” to alleviate concerns of consumers and investors, Mr. Park said, adding “more proactive government policy would be helpful.”

Park also said the ADB was not so concerned about deflation in China as it sees prices recovering.

Last week, the U.S. Federal Reserve kicked off its own easing cycle with a hefty half-percentage-point rate cut.

“With the Fed’s 50 basis point rate cut, central banks have more space to ease, and we expect more of them to do so,” Mr. Park said.

The ADB kept its 2024 growth forecast for China at 4.8%, below the government’s official target of about 5%. Growth for 2025 is still forecast at 4.5%.

“The PRC (People’s Republic of China) growth forecast is retained despite the prolonged downturn in the property sector, on the assumption that further fiscal and monetary easing will help sustain the economy,” Mr. Park said.

Sept. inflation likely eased to 2.5% — Recto

Vegetables are on display at a stall in Quinta Market, Quiapo, Manila, Sept. 6, 2024. — PHILIPPINE STAR/EDD GUMBAN

PHILIPPINE INFLATION would likely ease to 2.5% this month, giving the central bank room to cut interest rates more than expected, Finance Secretary Ralph G. Recto said on Tuesday.

But the government remains cautious as the escalating conflict in the Middle East could lead to a spike in global oil prices, he said.

“Inflation is on a downward trend,” Mr. Recto, fresh from a Cabinet meeting on managing food and nonfood inflation, said at a Palace briefing. “We expect inflation to go down to 2.5% by September.”

September inflation data will be released on Oct. 4.

Mr. Recto said the Bangko Sentral ng Pilipinas (BSP) can further reduce interest rates and match the size of the US Federal Reserve’s jumbo rate cut.

“The Fed cut by 50 basis points (bps) or half a percent, I think, we can also do half a percent,” he said in mixed English and Filipino.

BSP Governor Eli M. Remolona, Jr. earlier said that they could cut by another 25 bps in the fourth quarter.

Easing inflation had prompted the BSP to begin its easing cycle at its Aug. 15 meeting. The Monetary Board cut rates by 25 bps, bringing the benchmark rate to 6.25% from the over 17-year high of 6.5%. This was the first time the BSP reduced rates since November 2020.

Headline inflation slowed year on year to a seven month low of 3.3% in August, from 4.4% in July, due to a moderate rise in food prices and a decline in transport costs.

Year to date, inflation rose by 3.6%, slower than 6.6% a year ago.

Mr. Recto said inflation could average 3.4% this year, and further ease to 2.9-3.1% in 2025.

The BSP last month adjusted its baseline inflation forecasts to 3.4% for 2024 (from 3.3% previously), 3.1% for 2025 (from 3.2% previously), and 3.2% for 2026 (from 3.3% previously).

“The beauty about reducing inflation is that your gross domestic product (GDP) growth goes up and more jobs can be created, your borrowing cost goes down,” Mr. Recto said.

He said the possible rate cut will boost the Philippines’ chance of hitting its 6.5-7.5% growth target for 2025.

However, Mr. Recto said the tensions in the Middle East threaten the government’s inflation expectations, noting that global oil prices could spike if a war breaks out.

“Our biggest challenge is external headwinds. One is the war in the Middle East, and we don’t want that to go out of hand and possibly lead to oil price increases,” Mr. Recto said, referring to the escalation in the conflict between Israel and Lebanon’s Hezbollah.

“There is also a pressure for electricity prices to go up,” he added.

Meanwhile, Diwa C. Guinigundo, country analyst for the Philippines of GlobalSource Partners, said geopolitical conflicts “could trigger a possible escalation in oil prices, energy and food prices and ultimately, inflation.”

“With inflation showing some easing trend, within-target inflation forecasts and the balance of risks tilting to the downside, there is definitely some scope for further accommodation by the BSP,” he told BusinessWorld.

Asked to comment on Mr. Recto’s statements, the former BSP deputy governor said: “I would expect our fiscal authorities to avoid speaking on monetary policy especially on matters of inflation forecasts and the likely direction of monetary policy, as well as providing some sort of forward guidance to the market.

Security Bank Corp. Chief Economist Robert Dan J. Roces said external threats, particularly conflicts in the Middle East and global oil prices, are still “significant concerns.”

“While these projections signal effective anti-inflation measures, the true test lies in translating lower inflation into tangible benefits for ordinary citizens through job creation, improved social services, and sustainable economic practices,” Mr. Roces said in a Viber message.

Leonardo A. Lanzona, who teaches economics at Ateneo de Manila University, said the government appears to be forgetting that the recent inflation has been fueled by food prices, not external factors.

“This has to do more with internal management of the economy. Unless food, especially rice, prices are controlled, the inflation risks remain,” he said in a Facebook Messenger chat.

At the Tuesday briefing, Agriculture Secretary Francisco Tiu Laurel said the pressure on pork prices will likely ease as the government rolls out vaccines for African Swine Fever, which has forced producers to cull hogs.

The government has tested the vaccines locally with 10,000 doses, he noted, adding that the next 450,000 doses will be awarded next month.

“We hope to complete the procurement of 600,000 doses by the end of December this year,” he said.

EXCESS LIQUIDITY
Meanwhile, Mr. Guinigundo said the government should keep a close eye on the potential excess in liquidity following the lifting of banks’ reserve requirement ratio (RRR) by 250 bps.

“(This) could add nearly P500 billion in domestic liquidity. With a small negative output gap, we would not want to dissipate that window and risk a potential resurgence in inflation due to additional liquidity injection,” he said.

“What is supporting this monetary stance by the BSP is the favorable inflation expectations even following the recent reduction in both the policy rate and the RRR,” he added.

At the Palace briefing, Mr. Recto, a member of the Monetary Board, said the BSP had considered the RRR cut’s potential impact on inflation.

“We’ve considered that when we decided on the policy in the last BSP meeting. This will be good for the economy. It will improve the capital markets,” he said. “We’re injecting roughly P380 billion into the system. It will be good for banks. And then, it will have a lag effect.”

The BSP will reduce the RRR for big banks and nonbank financial institutions with quasi-banking functions by 250 bps to 7% from 9.5% previously, effective Oct. 25.

It will also reduce the ratio for digital banks by 200 bps to 4%, thrift banks by 100 bps to 1%, and rural banks and cooperative banks by 100 bps to 0%. — Kyle Aristophere T. Atienza