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Landbank net income up in 1st half

STATE-OWNED Land Bank of the Philippines (Landbank) saw its bottom line rise in the first half of the year, surpassing its mid-year projections, with the lender bullish on hitting its year-end net income target.

In a statement e-mailed to reporters on Wednesday, Landbank reported its net profit reached P7.43 billion in the first six months, climbing by 3% from the P7.2 billion recorded in the same period a year ago.

Last semester’s figure was also 8% above its from its mid-year income target of P6.88 billion, which the bank said puts it on track to meet its end-2017 earnings guidance of P13.75 billion.

“We are confident about meeting our full-year target of P13.75 billion, as income from loans and investments remain strong,” Landbank President and Chief Executive Officer Alex V. Buenaventura said.

Landbank’s revenues from loans jumped 7% year-on-year after its lending book expanded to P587.1 billion in the first half of the year, 20% higher than the P490.6 billion recorded in the comparable period a year ago.

Meanwhile, its income from investments likewise rose 9% to P9.2 billion in the first six months from P8.4 billion in the same period in 2016. This translated to return on equity of 14.55% at end-June, while its net interest margin was at 3.03%.

The government-owned bank’s net assets posted a double-digit increase of 15% to P1.5 trillion in the January to June period from P1.3 trillion in the first half of the previous year.

Total deposits also climbed by 17% to P1.32 trillion in the six months ended June from  P1.13 trillion last year. Its total capital reached P97.4 billion, up 9% year-on-year.

The bank is planning to put up 10 new branches this year situated across the country to bring the bank’s network to almost 400 offices nationwide.

Landbank said the new offices will help boost its lending business and deposit base. — Janine Marie D. Soliman

How technology may be getting out of control

By Mark Buchanan
Bloomberg

HUMANITY has a method for trying to prevent new technologies from getting out of hand: explore the possible negative consequences, involving all parties affected, and come to some agreement on ways to mitigate them. New research, though, suggests that the accelerating pace of change could soon render this approach ineffective.

People use laws, social norms and international agreements to reap the benefits of technology while minimizing undesirable things like environmental damage. In aiming to find such rules of behavior, we often take inspiration from what game theorists call a Nash equilibrium, named after the mathematician and economist John Nash. In game theory, a Nash equilibrium is a set of strategies that, once discovered by a set of players, provides a stable fixed point at which no one has an incentive to depart from their current strategy.

To reach such an equilibrium, the players need to understand the consequences of their own and others’ potential actions. During the Cold War, for example, peace among nuclear powers depended on the understanding the any attack would ensure everyone’s destruction. Similarly, from local regulations to international law, negotiations can be seen as a gradual exploration of all possible moves to find a stable framework of rules acceptable to everyone, and giving no one an incentive to cheat — because doing so would leave them worse off.

But what if technology becomes so complex and starts evolving so rapidly that humans can’t imagine the consequences of some new action? This is the question that a pair of scientists — Dimitri Kusnezov of the National Nuclear Security Administration and Wendell Jones, recently retired from Sandia National Labs — explore in a recent paper. Their unsettling conclusion: The concept of strategic equilibrium as an organizing principle may be nearly obsolete.

Kusnezov and Jones derive insight from recent mathematical studies of games with many players and many possible choices of action. One basic finding is a sharp division into two types, stable and unstable. Below a certain level of complexity, the Nash equilibrium is useful in describing the likely outcomes. Beyond that lies a chaotic zone where players never manage to find stable and reliable strategies, but cope only by perpetually shifting their behaviors in a highly irregular way. What happens is essentially random and unpredictable.

The authors argue that emerging technologies — especially computing, software and biotechnology such as gene editing — are much more likely to fall into the unstable category. In these areas, disruptions are becoming bigger and more frequent as costs fall and sharing platforms enable open innovation. Hence, such technologies will evolve faster than regulatory frameworks — at least as traditionally conceived — can respond.

What can we do? Kusnezov and Jones don’t have an easy answer. One clear implication is that it’s probably a mistake to copy techniques used for the more slowly evolving and less widely available technologies of the past. This is often the default approach, as illustrated by proposals to regulate gene editing techniques. Such efforts are probably doomed in a world where technologies develop thanks to the parallel efforts of a global population with diverse aims and interests. Perhaps future regulation will itself have to rely on emerging technologies, as some are already exploring for finance.

We may be approaching a profound moment in history, when the guiding idea of strategic equilibrium on which we’ve relied for 75 years will run up against its limits. If so, regulation will become an entirely different game.

This article does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Peso slips ahead of GDP report

THE PESO ended almost flat versus the dollar on Wednesday but still logged another near 11-year low due to domestic corporate demand and ahead of the release of local economic growth data and minutes of the US Federal Reserve’s latest meeting.

The peso closed at P51.35 against the dollar yesterday, nearly unchanged from Tuesday’s finish of P51.34-to-the-dollar. Still, it was the local unit’s weakest close in almost 11 years or since it ended at P51.38 a dollar on Aug. 25, 2006.

The peso opened the session at P50.45 against the dollar. Its best showing was at P50.30, while its weakest intraday level was at P51.60 versus the greenback.

Trading volume was at $824.7 million, higher from the $659 million that changed hands in the previous session.

Traders attributed the peso’s performance to strong dollar demand from corporates, with investors also on a wait-and-see mode for local gross domestic product (GDP) data and the Federal Open Market Committee (FOMC) minutes.

The trader also noted they saw the Bangko Sentral ng Pilipinas (BSP) step in during the morning session.

“The movement was generally higher mainly because of higher US retail sales but the profit taking was capped because of investors waiting for GDP data and FOMC minutes,” another trader said.

Official second-quarter GDP data will be released today by the Philippine Statistics Authority, while the Fed’s July meeting minutes was scheduled for release overnight.

“Both reports might be an event and will dictate what the exchange rate will be,” the other trader said.

For today, both traders said the exchange rate could settle within P51.20 to P51.60 range.

CYCLICAL TREND
BSP officials on Wednesday downplayed perceived weakness in the peso-dollar exchange rate, noting that currency movements simply follow a cyclical trend at a time of rising imports and changing market conditions.

“There is justifiable reason for the peso to be where it is right now,” Assistant Governor Johnny Noe E. Ravalo said in a media briefing yesterday at the BSP headquarters in Manila.

“Experience tells us that it is rather a good thing to let the peso move so that it reflects the changing market conditions, the demand and supply.”

However, the BSP official said such figures should also be viewed in the context of “changing” market dynamics.

“The BSP does not target a particular exchange rate number, so there is no magical number beyond which there is a panic button either upwards or downwards,” Mr. Ravalo added. He clarified that the exchange rate adjustments have become “consistent” with the country’s robust economic growth story and price movements, which makes it a lesser cause of concern for the monetary authority.

At the Senate, BSP Governor Nestor A. Espenilla, Jr. stressed that the depreciation of the peso “reflects market concerns” on the country’s current account deficit, and as the currency normalizes after previously gaining strength.

“However, it should be emphasized that the current account position signals the country’s higher propensity to import as the country gears up for higher growth momentum,” Mr. Espenilla told members of the Senate Committee on Finance during a briefing on the P3.767-trillion national budget for 2018.

The Philippines posted a $318-million current account deficit during the first quarter, equivalent to 0.4% of gross domestic product. This compares to a $600-million deficit expected by the central bank for the full year, and shows a turnaround from the $601-million surplus posted in 2016.

Mr. Ravalo added that the pass-through impact of the peso in terms of headline inflation has gone down to 0.14% for every P1, versus a share of 0.48% before the BSP adopted an inflation targeting framework in 2002.

Should the exchange rate see extreme swings, the BSP is ready to intervene by selling units in order to calm the volatility by using the country’s hefty reserve stash to be an active player and rate influencer. — Melissa Luz T. Lopez and Janine Marie D. Soliman

How PSEi member stocks performed — August 16, 2017

Here’s a quick glance at how PSEi stocks fared on Wednesday, August 16, 2017.

PSEi_081717

Employment of PWDs

Republic Act (RA) No. 10524, An Act Expanding the Positions Reserved for PWDs, amending for the purpose RA No.7277 (Magna Carta for Persons with Disability) in April 2013, expanded employment opportunities for PWDs. Its Implementing Rules and Regulations (IRR) were published on Aug. 15, 2016, the full text of which the Bureau of Internal Revenue (BIR) circulated through Revenue Memorandum Circular No. 48-2017 dated 30 June 2017.

WHO ARE PERSONS WITH DISABILITY?
Under RA 10524, Persons with Disability (PWDs) refer to individuals who suffer long-term physical, mental, intellectual or sensory impairments which, upon interaction with various barriers, may hinder their full and effective participation in society on an equal basis with others.

The seven types of disabilities mentioned in RA No. 7277 are psychosocial disability, disability due to chronic illness, learning disability, mental disability, visual disability, orthopedic disability, and communication disability. They are defined in Department of Health A.O. No.2009-0011 as follows:

Psychosocial Disability — any acquired behavioral, cognitive, emotional, social impairment that limits one or more activities necessary for effective interpersonal transactions and other civilizing process or activities for daily living, such as but not limited to deviancy or anti-social behavior.

Chronic Illness — a group of health conditions that last a long time. It may get slowly worse over time or may become permanent or it may lead to death. It may cause permanent change to the body and it will certainly affect the person’s quality of life.

Learning Disability — any disorder in one or more of the basic psychological processes (perception, comprehension, thinking, etc.) involved in understanding or in using spoken or written language.

Mental Disability — disability resulting from organic brain syndrome (i.e., mental retardation, acquired lesions of the central nervous system, or dementia) and/or mental illness (psychotic or non-psychotic disorder).

Visual Disability — impairment of visual functioning even after treatment and/or standard refractive correction, with visual acuity in the better eye of less than 6/18 for low vision and 3/60 for blind, or a visual field of less than 10 degrees from the point of fixation. A certain level of visual impairment is defined as legal blindness. One is legally blind when the best corrected central visual acuity in the better eye is 6/60 or worse or side vision of 20 degrees or less in the better eye.

Orthopedic Disability — disability in the normal functioning of the joints, muscles or limbs.

Communication Disability — an impairment in the process of speech, language or hearing, further broken down into two types: (a) Hearing Impairment is a total or partial loss of hearing function which impede the communication process essential to language, educational, social and/or cultural interaction; and (b) Speech and Language Impairment means one or more speech/language disorders of voice, articulation, rhythm and/or the receptive or and expressive processes of language.

PWDs can further be classified as a Qualified Person with Disability, which includes an individual with disability who, with reasonable accommodations, can perform the essential functions of employment position that such individual holds or desires.

For accreditation purposes, PWDs with non-obvious disabilities such as psychosocial, learning, mental/intellectual, visual and hearing disabilities should secure a certification from the Department of Health through its regional hospitals, medical centers, and specialty hospitals attesting to the individual’s impairment.

As provided in the law, equal employment opportunity shall be given to PWDs in the selection process based on qualification standards for an appointment to a position in government and requirements set by employers in private corporations. They shall also be subject to the same terms and conditions of employment, compensation, privileges, benefits, incentives, or allowances as an able-bodied person.

EMPLOYMENT RATIO OF PWDS
Government agencies shall reserve at least 1% of their regular and non-regular positions for PWDs.

Private corporations, on the other hand, who employ at least 100 employees are encouraged to reserve at least 1% of all positions for PWDs. Those who employ less than 100 employees are encouraged to hire PWDs.

INCENTIVES FOR EMPLOYING PWDS
To promote active participation, private corporations that hire PWDs are entitled to the following incentives under the IRR:

1. 25% additional deduction from the private corporation’s gross income of the total amount paid as salaries and wages to PWDs.

To avail of this incentive, private corporations are required to present proof that they are employing PWDs who are accredited or registered with the Department of Labor and Employment and Department of Health as to their disability, skills, and qualifications.

2. Private entities that improve or modify their physical facilities in order to provide reasonable accommodation for PWDs shall be entitled to an additional deduction from their net income, equivalent to 50% of direct costs of the improvements or modifications.

Facility improvement under this incentive should be different from the requirement of Batas Pambansa (BP) Blg, 344 otherwise known as an Act to Enhance the Mobility of Disabled Persons by requiring certain buildings, institutions, establishments, and public utilities to install facilities and other devices. Under BP Blg. 344, buildings, institutions, establishments, and public utilities are required to install facilities and other devices to allow the mobility of disabled persons.

The IRR further provides that the conditions of hiring and employment of PWDs should be made with the welfare of PWDs in mind. This means that accommodation of PWDs should not impose undue or disproportionate burden, but must ensure the exercise of equal opportunity for PWDs in all fundamental rights. As may be practicable, a work schedule given to a PWD should be modified to favor the employee.

Installation of auxiliary aides and assistive devices in a work place should also be considered to ensure that PWDs are able to perform their assigned task with ease.

RA 10524 and its IRR aim to provide equal work opportunities to PWDs and at the same time incentivizing the private sector for its participation. More than the incentive, integrating PWDs in the work force means rehabilitation, self-development, self-reliance and affirmation of PWDs as productive members of society.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.

Larissa C. DALISTAN-Levosada is a senior manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.

+63 (2) 845-2728

larissa.c.dalistan@ph.pwc.com

Here’s what you need to know about a proposed law for innovative startups

The world is seeing an onslaught of young and promising entrepreneurs, whose success, in large part, is hinged on the revolution of tech.

Social media platform Facebook founded by Mark Zuckerberg in 2004, for example, is already among the largest companies in the world, holding a market cap of $407.3 billion as of May this year. Ride‑hailing platform Uber, online music streaming Spotify, and online marketplace and hospitality service platform Airbnb are also now considered to be Unicorns in the global market.

But building a startup up to that stature is no walk in the park. Beyond the financial struggles, introducing a new enterprise involves a horrendous process of complying with government requirements, not to mention the pressure brought by market validation and constant wooing with investors.

Filipino startups, particularly the tech‑related and innovative ones, may no longer have to struggle in entering the business jungle if Senate Bill No. 1532 or the Innovative Startup Act filed by Sen. Paolo Benigno “Bam” Aquino IV gets enacted.

The bill, filed last Aug. 1, aims to “develop the country’s startup ecosystem” and reduce the barriers to the success of innovative startups by providing development program, tax breaks, and financial and technical assistance.

Under the proposed law, an innovative startup is defined as an enterprise that has been operating for not more than five years and whose gross annual revenue is not over ₱50 million. It should also have a research and development (R&D) budget equivalent to 15% of its total operational cost or a patent or registered software owner.

Here’s what it will bring to the table:

AN ‘INNOVATIVE STARTUP DEVELOPMENT PROGRAM’

The program will support the R&D initiatives of innovative startups and support service providers, promote the participation of innovative startups in international startup events, and link startups to government agencies, academic institutions, or industry partners for product development support.

FREE, EXPEDITED PROCESSES

Free and expedited business permits and certificates processing.

GOVERNMENT AGENCIES’ SERVICES

Free use of equipment, facilities, and services of government agencies, including the Intellectual Property Office of the Philippines.

RESEARCH AND DEVELOPMENT GRANT

R&D grant from the Department of Science and Technology (DOST), Department of Trade and Industry (DTI) or Department of Information and Communications Technology (DICT).

TAX EXEMPTIONS

Exemption from paying income tax, Value Added Tax, creditable withholding tax on income, and expanded withholding tax on its income payment.

VENTURE FUND

Access to “Innovative Startup Venture Fund” worth ₱10 billion, to be administered by DOST.

FIVE‑YEAR VISA

Special visa with five‑year validity to be issued by the Bureau of Immigration.

AIRFARE AND ALLOWANCE FOR INTERNATIONAL TRIPS

Incentives such as free airfare and allowance for startups joining international events or competitions.

The proposed policy also tasks DICT to launch a website that will contain information about statistics, events, programs, and benefits for startups and related enterprises in the country.

In his sponsorship speech, Mr. Aquino, who leads the Senate Committee on Science and Technology, said there are more than 200,000 startups in the Philippines that have a potential to address the country’s problems and contribute to Filipinos’ lives.

He called on lawmakers to pass the bill to “empower our innovators and entrepreneurs with a heart for nation‑building.”

“Let us pass the Innovative Startup Act and encourage our innovative entrepreneurs to create solutions for our nation,” the senator urged.

A staunch advocate for micro‑entrepreneurship in the country, Mr. Aquino has previously pushed for laws dedicated to micro, small and medium enterprises, including the Go Negosyo Act and Youth Entrepreneurship Act.

What are your thoughts about the proposed Innovative Startup Act? Let us know in the comments and we might just include it in our next story.

Belgian town makes giant omelet

Members of the World Brotherhood of the Huge Omelet create a 6,500 egg omelet within a four meter diameter frying pan on August 15, 2017 in Malmedy, Belgium.
Ten thousand hen’s eggs will be used for the traditional event in the town near the German border despite a scandal sweeping Europe involving eggs tainted with the insecticide fipronil. AFP

omelet
AFP

 

Farm growth fuels Q2 GDP hopes

FARM OUTPUT last quarter turned around from a year-ago decline, growing faster than January-March’s expansion due to the past year’s low base, the Philippine Statistics Authority (PSA) reported on Tuesday ahead of its gross domestic product (GDP) report tomorrow.

PSA said value of agricultural production — which has historically contributed a 10th to GDP and a fourth to the country’s jobs — grew by 6.18% in the second quarter, faster than the preceding three months’ 5.28% pace and turning around from the 2.21% contraction recorded in April-June 2016.

The second quarter took the farm sector’s first-half growth to 5.71%, also a turnaround from the 3.39% contraction recorded in 2016’s first six months.

The Department of Agriculture had earlier given a five-percent growth estimate for second-quarter farm output growth.

Farm sector expansion is now expected to have added impetus to second-quarter GDP growth — which Socioeconomic Planning Secretary Ernesto M. Pernia has estimated to approach seven percent — together with bigger state spending, continued recovery of merchandise exports and strong household consumption.

The crops subsector, which contributed 50.75% to total farm production value last quarter, grew by 11.72%, compared to a 4.98% year-ago drop.

In terms of volume, palay — which contributed about 17.55% to total value of farm output — grew 11.72% annually to 4.15 million metric tons (MT), while corn — which contributed 4.31% — surged 45.97% to 1.33 million MT.

Farm growth fuels Q2 GDP hopes

 

Second-quarter performance made palay and corn output grow by 12.06% to 8.569 million MT and by 30.7% to 3.696 million MT, respectively, last semester.

In a separate July-round Rice and Corn Situation and Outlook report released also yesterday, the PSA said the fourth quarter may see a 3.58% hike in palay output to 7.263 million MT, making production this semester grow 6.76% year-on-year. Palay output is now projected to grow by 9.058% to 19.224 million MT this year from 2016’s 17.627 million MT.

The PSA gave third- and fourth-quarter projections for corn output: a 1.23% dip to 2.63 million MT and 2.04% drop to 1.693 million MT, respectively. Corn output is now expected to fall by 1.55% this semester but still grow 11.08% for the full year. The PSA blamed projected contraction this semester on “frequent rainfall during growth stages” of the grain and “farmers’ apprehension of the peace-and-order situation in the Autonomous Region in Muslim Mindanao”.

Last quarter also saw value of production of fisheries (16.84% of the total), livestock (16.38%) and poultry (16.02%) drop 2.93% and 1.38%, as well as increase by 8.36%, respectively.

Sought for his own projection of farm output performance this semester, Rolando T. Dy, executive director of the University of Asia and the Pacific’s Center for Food and Agri-Business, said in a mobile phone message yesterday that growth will likely slow “to a maximum of four percent”, still building on last year’s low base as the sector recovered from an earlier prolonged El Niño-induced dry spell. — Janina C. Lim

Remittances in June biggest in three months

By Melissa Luz T. Lopez
Senior Reporter

MONEY SENT HOME by overseas Filipino workers (OFWs) — a driver of household spending that contributes more than 73% to gross domestic product (GDP) — grew faster in June to hit a three-month high amid strong deployment, the central bank said yesterday.

Cash remittances grew by 5.7% to reach $2.467 billion that month, rising 5.7% from the $2.334 billion posted in June 2016. It also picked up by 6.8% from May’s $2.31-billion inflow and is the highest since the record-high $2.615 billion in March, according to data of the Bangko Sentral ng Pilipinas (BSP).

In a statement, the central bank said the bigger remittances came on the back of steady growth seen in amounts sent by land-based OFWs that rose by 3.8% to $1.9 billion, coupled with a 13.3% jump from those working at sea.

For that month alone, cash transfers from Filipinos in the United States and the United Arab Emirates posted the biggest increases, each contributing 1.9 percentage points to growth.

June inflows brought the first-semester tally to $13.813 billion, up 4.7% from $13.192 billion recorded in 2016’s comparable six months.

The BSP attributed the steady growth in remittances to “stable” demand for workers, with 1.14 million OFWs deployed as of end-June.

One analyst said Filipinos likely chose to send more money home to help their families meet school-related expenses as classes opened in June, and as they sought to get more out of their earnings with the weaker peso.

“We estimate the peso to have depreciated by 1.4% in June alone. This may have probably induced OFWs to take advantage of the stronger US dollar vis-à-vis the peso by remitting more,” said Angelo B. Taningco, economist at Security Bank Corp.

“I think remittance growth could rise further in the subsequent months on the back of a peso depreciation and steady demand for OF workers abroad.”

The peso traded around P49 to the greenback earlier that month, but has hovered weaker than P50 to the dollar since June 20.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, added that the robust growth in remittances likely fueled faster GDP growth last quarter. The government is scheduled to report second-quarter GDP data tomorrow. “This robust increase… continuously supports household consumption and consequently boosts domestic investment. Looking at Q2 GDP growth, the sustained increase of remittances more likely quickened the anticipated uptick in domestic economic expansion.”

The BSP expects remittances to git a record-high $28 billion this year, four percent more than last year’s $26.9 billion.

Remittances in June biggest in three months

Economic managers pitch PHL opportunities to investors in Singapore

ECONOMIC MANAGERS of President Rodrigo R. Duterte flew to Singapore this week to woo more foreign firms to invest in the Philippines, branding the country as Asia’s “next economic powerhouse” with fresh opportunities for growth, particularly in infrastructure.

Finance Secretary Carlos G. Dominguez III, Socioeconomic Planning Secretary Ernesto M. Pernia and Budget Secretary Benjamin E. Diokno, as well as Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. made the case before a group of investors in Singapore on Tuesday, the government’s Investor Relations Office (IRO) said.

Executive Secretary Salvador C. Medialdea also joined the team of technocrats.

The top Philippine officials assured the foreign business community that gross domestic product (GDP) growth will remain on an upward trend, approaching or hitting the 7-8% annual target set by the government over the next five years compared to 2010-2015’s 6.2% average.

The Cabinet members specifically pitched the P8.44-trillion ($170 billion) infrastructure spending plan as the biggest pocket of opportunities for businesses to cash in.

“Upgrading infrastructure is seen to boost economic productivity and enhance connectivity that will cut down the cost of doing business,” Mr. Diokno said in a separate statement yesterday, describing the “Build, Build, Build” blueprint as the “boldest” plan that the country has ever laid out.

Having more investments in the Philippines spells additional jobs and capital to support business expansion and opportunities for locals.

FUND RELEASES ‘ON THE DOT’
Mr. Diokno also allayed fears of slow disbursements and low absorptive capacity among state agencies, noting that underspending has been trimmed to 3.6% of the total budget versus 12.8% in 2015.

For the first semester, fund releases have been “practically on the dot,” the Budget chief said.

Apart from infrastructure, gains made via higher spending on social services and stronger household spending should help fuel economic growth momentum, alongside increased factory output, real estate and other construction activities, wholesale and retail trade, tourism and business process outsourcing sales, the IRO said.

Such support is expected to keep the Philippines in the ranks of Asia’s fastest-growing economies and will bring the country to upper-middle-income status by 2022, as targeted by the current administration.

For his part, the central bank’s Mr. Espenilla said that the Philippines can “sustain high growth supported by sound macroeconomic management” and can withstand global volatilities with its “domestic sources of resilience.”

The current administration targets robust economic growth that will in turn translate to lower poverty and unemployment rates among Filipinos by 2022, when Mr. Duterte ends his six-year term.

The government hopes to trim by 2022 the poverty incidence to 14% from 21.6% in 2015 and unemployment rate to 3-5% from 5.5% last year. — Melissa Luz T. Lopez

Higher metals prices boost value of PHL output

THE Mines and Geosciences Bureau said the value of metals produced in the first half rose 4.27% from a year earlier, after miners obtained higher prices for their output.

In a report sent to journalists on Tuesday, the bureau said the value of metals output in the six months to June totaled P50.81 billion, up from P48.73 billion in the same period last year.

“The upside during the period, despite the listless mine output of the metals with the exemption of MNCS (mixed nickel-cobalt sulfide), was the more favorable metal prices year on year,” the report said.

“Nickel ore went up to $4.39 per pound from $3.92 per pound while precious metals gold and silver enjoyed an improvement of 1.69% and 9.91%, respectively,” the report added while noting that prices were primarily driven by stronger demand from China’s infrastructure and manufacturing sectors coupled with supply disruptions from the world’s key copper and nickel mines.

Gold accounted for 45.04% or P22.89 billion, up slightly from P22.69 billion a year earlier as prices of the yellow metal rose to $1,238.46 per troy ounce from $1,217.85 a year earlier.

The Masbate Gold Project of Filminera Mining Corp./Philippine Gold Processing and Refining Corp. and OceanaGold Philippines, Inc. in Cagayan Province were the country’s major gold producers, accounting for 56% of the total output, or 6,471 kilograms produced during the period.

Contribution of nickel ore directly shipped and mixed sulfides followed with 36.32% or P18.45 billion, followed by copper with 17.63%, or P8.96 billion  

The value of directly shipped nickel ore declined to P8.37 billion with output at 8.64 million dry metric tons (DMT).

The value of mixed nickel-cobalt sulfide surged to P10.08 billion on production of 46,444 DMT.

The remaining 1.01%, or P0.51 billion, was shared by silver and chromite. — Janina C. Lim

Central bank likely to hike rates within 2017 as inflation picks up

By Melissa Luz T. Lopez,
Senior Reporter

THE Bangko Sentral ng Pilipinas (BSP) will still have to raise interest rates by yearend to keep up with faster inflation, analysts at BMI Research said, as they expect prices to rise by as much as 4% later this year.

The Fitch Group unit has said that the central bank is likely to hike rates once within 2017, although lower than the two increases it was previously projecting.

If realized, the projected increase of 25 basis points (bp) would be the first in three years since September 2014.

This will be followed by another 25bp hike in 2018, the research firm said, taking the cue from BSP Governor Nestor A. Espenilla, Jr. who has said the monetary authority is in no rush to tighten its policy stance.

“Inflation in the Philippines inched up to 2.8% year-on-year in July, from a downwardly revised 2.7% in the previous month, and we expect price pressures to continue to rise over the coming months for several reasons,” BMI said in a report released yesterday.

The BSP kept borrowing rates steady during its review last week, noting that inflation remains benign and with domestic activity fairly robust. It kept the overnight lending rate 3.5%, the overnight reverse repurchase rate at 3%,  and the overnight deposit rate at 2.5%. Reserve requirement ratios imposed on banks were likewise kept steady.

This, even as it raised its full-year inflation forecast to 3.2% from 3.1% previously to factor in the uptrend in global crude prices. As of July, headline inflation averaged 3.1%, well within the 2-4% target band.

Apart from inflation, BMI analysts pointed to robust loan growth — which clocked in at 19% in June — alongside higher public spending on infrastructure and the tax reform program which could push prices upward, enough to warrant the BSP’s intervention.

“Taken together, these factors inform our forecast for inflation to rise to 4.0% by the end of 2017,” the research unit added.

Introducing higher interest rates could likewise ease further capital outflows, as investors would not have to flee to other markets as margins in the Philippines pick up as global interest rates trend higher. Otherwise, foreign funds will likely head for the exit.

“While the BSP could certainly keep rates low to facilitate the government’s expansionary fiscal plans, this would risk further capital outflows and jeopardise macroeconomic stability,” BMI Research said.

Mr. Espenilla has said that the central bank would not have to move in sync with the Federal Reserve even after the two rate hikes introduced by the US central bank during the first half of 2017, noting that domestic inflation and other local indicators remain to be their biggest concern more than global developments.

He also said the recent weakness of the peso should not be a cause of alarm, as the BSP remains armed with enough buffers to prevent a “free fall.”

On Monday, analysts at ANZ Research said “intensifying” imbalances in the economy, particularly the robust pickup in bank lending and the widening gap in external trade, have been weighing on the exchange rate, which may be addressed through monetary policy tweaks.

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