India economic inequality to persist despite roaring GDP growth

June 20, 2024 | 11:58 am

BENGALURU – The Indian economy is likely to remain the fastest-growing major one in coming years, but a majority of independent economists and policy experts polled by Reuters are not confident it will make any difference in narrowing stark economic inequality.

Despite over 8% economic growth last fiscal year and a roaring stock market in Mumbai that is easily one of the world’s most expensive, New Delhi still distributes free food grains to more than 800 million of its 1.4 billion people.

Prime Minister Narendra Modi, sworn in for a third term with the support of regional parties after a shock election where his Bharatiya Janata Party lost its sizable majority in parliament, has retained most ministers from his second one.

Yet rising economic inequality – around its highest in decades – and high youth unemployment were widely reported as reasons for the electoral drubbing after securing sweeping victories in 2014 and 2019 on development and economic reform platforms.

A nearly 85% majority of development economists and policy experts, 43 out of 51, in a May 15-June 18 Reuters poll, said they were not confident economic inequality would significantly reduce over the next five years, including 21 who said they had no confidence at all.

Only six said they were confident and two said very confident. These are separate from private economists who regularly forecast economic data and interest rates.

“Acknowledging that it is a problem will be a good first step … Currently, reduction of economic inequality is not a policy objective of decision-makers,” said Reetika Khera, a development economist at the Indian Institute of Technology in New Delhi.

“Inequality is not something that will go away on its own … it needs proactive government interventions.”

Even for a developing economy, income inequality in India is too extreme, according to a March report from the World Inequality Lab.

However, not everyone agrees.

“I don’t think the inequality metrics are meaningful for India. The key issue is not inequality but how the bottom of the pyramid fares economically. This is not a function of how the top does,” said Nagpurnanand Prabhala, finance professor at Johns Hopkins University.

India has the second-highest number of billionaires in Asia but has tens of millions who depend on the government’s 100 days minimum guaranteed wage employment program, digging wells, building roads, and filling potholes for about $4 a day.

“The present government has created an economic system that shrunk the middle-income group considerably. The poor are on public dole … the rich are on public cross-subsidy using crony capitalism,” said Saibal Kar, professor of industrial economics at the Center for Studies in Social Sciences.

“The economic and social freedoms are low owing to repressive public policies. This has to change. Unless it changes, inequality will rise further.”

SKILLS NEEDED, NOT JUST JOBS

Asked to rate the quality of India’s economic growth over the past 10 years, a near-80% majority of economists surveyed, 42 of 53, said it was not inclusive, with 17 saying not at all. Eight said fairly inclusive and three said inclusive.

And yet 60%, 32 of 53, said India would maintain or exceed the current solid GDP growth rate over the next five years. The rest said it will fall short.

While the Modi government has set a target of turning India into a developed economy by 2047, several experts in the survey said the government should first improve workers’ skills, create more jobs and focus on inclusive growth.

In December, the government’s chief economic adviser said the subsidized grain distribution, as well as spending on education and health had helped to distribute income more equally.

During the election campaign, a government document showed Modi wanted to focus on 70 areas of improvement including workforce skills and vocational training.

Over 90% of experts polled, 49 of 54, who answered a separate question said unemployment would be the biggest economic challenge for the government over the next five years.

The unemployment rate was at 7.0% in May, according to the Center for Monitoring Indian Economy, a think-tank, up from around 6% before the pandemic.

“Most countries that have experienced more rapid growth did it on the basis of a farm-to-factory structural transformation,” said Parikshit Ghosh, professor at the Delhi School of Economics, adding manufacturing as a share of GDP has hovered around 15% for about 30 years.

“Of the multiple factors behind this, perhaps the most important is the failure to invest seriously in education.”

India spends around 3% of GDP on public education, half the 6% the government’s National Policy on Education recommends.

Other experts pointed out the ongoing challenges presented by a society still mired in caste and class divisions.

“We don’t even talk about the cleavage that has been ripping our society apart for thousands of years now in our living rooms – we still live in a world where Dalit families are cleaning toilets in urban and rural areas, generation after generation,” said Aditi Bhowmick, a public policy expert, who previously worked as India Director at Development Data Lab. – Reuters

Bank of England to keep rates at 16-year high before UK election

June 20, 2024 | 11:53 am

LONDON – Britain’s central bank looks on course to hold interest rates at a 16-year high of 5.25% on Thursday as underlying inflation pressures prove persistent, depriving Prime Minister Rishi Sunak of a much-needed boost ahead of a July 4 election.

Bank of England Governor Andrew Bailey opened the door early last month to a rate cut, saying he was “optimistic that things are moving in the right direction” and that a June rate cut was an option – although no fait accompli.

But despite data on Wednesday showing headline inflation fell back to the BoE’s 2% target for the first time in nearly three years in May – reaching its goal quicker than in the United States or euro zone – the medium-term picture is now less reassuring.

Services price inflation has fallen less than the BoE expected at the time of the last meeting – only declining to 5.7% rather than 5.3% – and private-sector wage growth is almost twice the rate the BoE judges as compatible with 2% inflation.

Last month the central bank forecast inflation would rise to around 2.6% by the end of the year, as the effect of recent cuts to regulated household energy bills faded.

None of the 65 economists in a Reuters poll last week said they expected the BoE to follow the lead of the European Central Bank and cut rates this month, with the next statement on Aug. 1 looking by far the most probable start date for an easing cycle.

Instead, the expectation is for a repeat of May’s 7-2 vote split, when Deputy Governor Dave Ramsden and external Monetary Policy Committee member Swati Dhingra voted for a quarter-point cut.

“We think the Bank of England is left waiting for more reassuring data … either in the shape of a more decisive moderation in services CPI or with all other broader signals … pointing in a softer direction,” Victoria Clarke, chief UK economist at Santander, said.

While unemployment is at a two-and-a-half year high of 4.4%, economic growth this year has been reasonable by Britain’s recent weak standards.

Financial markets are doubtful about an August rate cut. On Wednesday they priced in only a 30% chance, with a first move more likely in September and a risk of a delay until November, similar to expectations for the US Federal Reserve.

Either way, any cut is likely to be too late for Mr. Sunak, whose Conservative Party is around 20 points behind the opposition Labour Party in the pre-election polls.

While Mr. Sunak has sought credit for the fall in inflation since he took office in October 2022, when it was at a 41-year high of 11.1%, Labour blames high mortgage rates on economic mismanagement by the Conservatives’ previous leader, Liz Truss.

Since the start of the election campaign the BoE has been in a self-imposed period of silence, cancelling public events.

Before that, BoE Chief Economist Huw Pill had described an excessive focus on a June rate cut as “ill advised” but both he and Deputy Governor Ben Broadbent – who steps down at the end of this month – said a rate cut over the summer was possible.

The BoE began to raise rates in December 2021, earlier than other major central banks, and they reached their current peak in August 2023. – Reuters

Fossil fuel use, emissions hit records in 2023, report says

June 20, 2024 | 11:45 am

LONDON – Global fossil fuel consumption and energy emissions hit all-time highs in 2023, even as fossil fuels’ share of the global energy mix decreased slightly on the year, the industry’s Statistical Review of World Energy report said on Thursday.

Growing demand for fossil fuel despite the scaling up of renewables could be a sticking point for the transition to lower carbon energy as global temperature increases reach 1.5C (2.7F), the threshold beyond which scientists say impacts such as temperature rise, drought and flooding will become more extreme.

“We hope that this report will help governments, world leaders and analysts move forward, clear-eyed about the challenge that lies ahead,” Romain Debarre of consultancy Kearney said.

Last year was the first full year of rerouted Russian energy flows away from the West following Moscow’s invasion of Ukraine in 2022, and also the first full year without major movement restrictions linked to the COVID-19 pandemic.

Overall global primary energy consumption hit an all-time high of 620 Exajoules (EJ), the report said, as emissions exceeded 40 gigatons of CO2 for the first time.

“In a year where we have seen the contribution of renewables reaching a new record high, ever increasing global energy demand means the share coming from fossil fuels has remained virtually unchanged,” Simon Virley of consultancy KPMG said.

The report recorded shifting trends in fossil fuel use in different regions. In Europe, for example, the fossil fuel share of energy fell below 70% for the first time since the industrial revolution.

“In advanced economies, we observe signs of demand for fossil fuels peaking, contrasting with economies in the Global South for whom economic development and improvements in quality of life continue to drive fossil growth,” Energy Institute Chief Executive Nick Wayth said.

Industry body the Energy Institute, together with consultancies KPMG and Kearney, has published the annual report since 2023. They took over from BP BP.L last year, which had authored the report, a benchmark for energy professionals, since the 1950s.

Fossil fuel accounted for almost all demand growth in India in 2023, the report said, while in China fossil fuel use rose 6% to a new high.

But China also accounted for over half of global additions in renewable energy generation last year.

“China adding more renewables than the rest of the world put together is remarkable,” KPMG’s Virley told reporters.

Here are some highlights from the report on 2023:

CONSUMPTION

Global primary energy demand rose by 2% in 2023 from 2022, to 620 EJ.
Fossil fuel use rose 1.5% to 505 EJ, which accounted for 81.5% of the overall energy mix, down by 0.5% from 2022.
Fossil fuel use did not increase in a single European country in 2023.
Electricity generation rose by 2.5% in 2023, up slightly from 2.3% of growth the previous year.
Renewable fuel generation (excluding hydro) gained 13% to a new record high of 4,748 terawatt-hours (TWh).
Renewables’ share of the overall energy mix excluding hydro was 8%, up from 7.5% in the 2022 report.
Including hydro renewables accounted for 15% of the global mix.

OIL

Oil consumption exceeded 100 million bpd in 2023 for the first time ever, following a 2% year-on-year rise.
Oil supply growth was met by non-OPEC+ producers, with US output gaining 9% on the year.
China overtook the U.S. as the country with the largest refining capacity in the world last year at 18.5 million bpd, though refining volumes still lagged behind at 82% utilisation vs the US’ 87%.
Global gasoline consumption hit 25 million bpd last year, just above its 2019 pre-pandemic level.
Biofuels production increased by 8% to 2.1 million bpd in 2023, driven by gains in the U.S. and Brazil.
The US, Brazil, and Europe accounted for 80% of global biofuels consumption.

NATURAL GAS

Global gas production and consumption remained relatively flat on the year in 2023.
LNG supply rose by almost 2% to 549 billion cubic metres (bcm).
The US overtook Qatar as the leading global supplier of LNG after a 10% rise in production.
Overall European gas demand was down 7% on the year in 2023.
Russia’s share of European gas supply was just 15% in 2023, from 45% in 2021.

COAL

Coal consumption hit a new high of 164 EJ in 2023, up 1.6% on the year, driven by China and India.
India’s coal consumption exceeded that of Europe and North America combined.
US coal consumption fell by 17% in 2023 and has halved in the last decade.

RENEWABLES

The record high in renewable generation was driven by higher wind and solar capacity, with 67% more additions in those two categories in 2023 than 2022.
As much as 74% of net growth in overall power generation came from renewables.
China accounted for 55% of all renewable generation additions in 2023, and was responsible for 63% of new global wind and solar capacity.

EMISSIONS

Emissions grew by 2% on the year to exceed 40 gigatonnes.
Emissions rose despite the slight drop in fossil fuels’ share of the energy mix, because emissions within the fossil fuels category became more intense as oil and coal use rose and gas held steady.
The report notes that since 2000, emissions from energy have increased by 50%.

– Reuters

UK election pledges fall short of $48 bln health funding gap, think tank says

June 20, 2024 | 11:39 am

LONDON – Election pledges by Britain’s governing Conservatives and the opposition Labour Party do not set out how they plan to meet a 38 billion pound ($48 billion) funding shortfall in the National Health Service (NHS) in England, a report said on Thursday.

The performance of the state-run NHS is a major concern for voters ahead of a national election on July 4, as it has been hobbled by COVID and industrial action, while Prime Minister Rishi Sunak has struggled to bring down long waiting lists.

The next government will need to increase healthcare funding by 4.5% per year in real terms over the next five years to help with COVID recovery, meet rising needs and improve services, analysis by the Health Foundation think tank said.

That means an extra 46 billion pounds of funding is needed by 2029/30, but current planned increases in public spending would only deliver an 8 billion pound increase in the health budget, and neither leading party has clear plans to substantially close that gap.

“The health service is in crisis and all the main political parties have said they want to fix it – yet the funding they have so far promised falls well short of the level needed to make improvements,” said Anita Charlesworth, Director of the Health Foundation’s REAL Centre.

While Labour and the Conservatives have proposed extra funding for a handful of specific health policies, neither have outlined general increases for baseline NHS spending.

The winning party is set to hold a spending review, which could allocate more funding to the NHS at the expense of other departments.

However, without such allocations, both Labour and Conservative plans for healthcare funding would leave the NHS with tighter budgets than under the austerity policies pursued by the Conservative-Liberal Democrat coalition ten years ago.

“An incoming government therefore will face incredibly difficult choices. Either increased taxes to provide more funding, reduce spending on other public services, or see the NHS do less,” Ms. Charlesworth said.

“The risk … if you cut other public services to protect the NHS, is that over the longer term, you actually make the health of the population worse, and the challenge facing the NHS even greater.”

Labour says it will deliver growth, helping it plug gaps in public finances without raising personal taxes. Ms. Charlesworth said the Health Foundation had not modeled different growth.

“If the economy grew more strongly, this problem would be much smaller,” she said. – Reuters

Most Japan firms see no need to follow the US with tariffs on China

June 20, 2024 | 11:37 am

TOKYO – Most Japanese companies see no need for their government to follow the US in raising tariffs on Chinese imports, saying excessive production capacity in China’s industrial sector does not affect them, a Reuters survey showed on Thursday.

US President Joe Biden last month unveiled steep tariff increases on an array of Chinese goods including electric vehicles, batteries and semiconductors, criticizing Beijing for generous subsidies and policies that he said help flood global markets with cheap goods.

The European Union has also slapped hefty duties on EV imports and the Group of Seven major economies, which includes Japan, last week echoed concerns about what they called harmful non-market practices by China.

But 61% of respondents to the survey, conducted June 5-14, said there was no need for Japan to embark on similar measures. The rest said Japan should. Around 53% said China’s excessive production capacity had little to no impact on their business.

“It could lead to an escalation in measures and countermeasures against each other and economic conditions will get worse,” a manager at a chemical company wrote in the comment section of the poll.

In response to the tariffs, China has accused the United States of subverting its own free trade principles and has said the G7 statement lacks factual basis.

The survey of 492 companies was conducted for Reuters by Nikkei Research, with firms responding on condition of anonymity. Roughly 230 companies responded.

The companies were also asked whether they think a pledge by Prime Minister Fumio Kishida to have wages consistently climb faster than inflation was attainable but only 7% did.

“I’m afraid there are many mid-sized and small companies that just can’t make ends meet if they implement wage hikes that keep pace with inflation,” a manager at a wholesale company wrote.

Half said the goal was not attainable while 43% said it was hard to tell.

As a temporary measure to cushion the economic blow from rising inflation, Mr. Kishida’s government is cutting annual income tax by 30,000 yen ($190) and the residential tax by 10,000 yen for each taxpaying citizen who can also claim the same amount in tax breaks for dependents and a spouse with limited income.

But 69% of the companies in the poll saw the measure as having little or no effect in stimulating consumer spending.

On domestic politics, 54% of the companies expect Mr. Kishida to be replaced as prime minister by the end of the year in the wake of a fund-raising scandal.

The ruling Liberal Democratic Party (LDP) has said more than 80 of its lawmakers received proceeds from fund-raising events that were kept off the books. Prosecutors have indicted three lawmakers.

An Asahi newspaper poll conducted last week showed support for Mr. Kishida’s government fell to 22%, down 2 percentage points from a month ago and the lowest since he took office in October 2021.

Former Defense Minister Shigeru Ishiba was corporate Japan’s top choice for the country’s next leader, with 24% of firms deeming him a suitable successor. Economic Security Minister Sanae Takaichi was next with 14%.

A security maven, Mr. Ishiba regularly ranks high in voter surveys on future prime ministers but is less popular with fellow LDP lawmakers whose backing is necessary to win the party’s leadership election.

About 80% of companies said they want the LDP and junior coalition partner Komeito to remain in power if Mr. Kishida calls a snap election this year.

If the coalition government were to lose power, “I fear that political confusion might develop into economic confusion and the weakening of Japan’s competitiveness,” a manager at a food company wrote.

Only 6% of the companies surveyed wanted a government led by the Constitutional Democratic Party of Japan, currently the largest opposition party. – Reuters

Canada to ban open-net salmon farms in British Columbia waters by 2029

June 20, 2024 | 11:32 am

sockeye-salmon-492258_1280 — STOCK PHOTOS | Image by Barbara Jackson from Pixabay

Canada will ban open-net salmon farms off the coast of British Columbia by the middle of 2029 in order to help protect dwindling wild Pacific salmon populations, the federal government said on Wednesday.

Salmon are a culturally and ecologically significant species on Canada’s west coast, but more than half of the 9,000 distinct populations in British Columbia are in a state of decline, according to the Pacific Salmon Foundation.

The province has dozens of open-net salmon farms, which campaigners say can spread lice and disease to wild fish. In 2019 Liberal Prime Minister Justin Trudeau pledged to phase out open-net farms by 2025.

In a statement released on Wednesday, Fisheries and Oceans Minister Diane Lebouthillier said existing salmon aquaculture licenses will be renewed for five years to ensure a successful transition, but with stricter conditions around managing sea lice on farmed fish, reporting requirements for the industry, and monitoring of marine mammal interactions.

“It’s great to see the federal government commit to concrete deadlines, even though they do not meet the government’s original commitment to transition from open-net pens by 2025 or the urgency of the moment given the dire state of many wild salmon runs,” said Kilian Stehfest, marine conservation specialist for the David Suzuki Foundation.

Salmon farming supports 7,000 jobs in coastal communities and contributes about C$1.5 billion ($1.09 billion) annually to the provincial economy, according to the BC Salmon Farmers Association.

A number of First Nations and coastal communities rely on open-net salmon farms for their livelihood and the government intends to release a draft salmon aquaculture transition plan by the end of July.

From July 1 this year only closed-containment systems on land or in the sea will be considered for new salmon aquaculture licenses.

Ms. Lebouthillier said the government recognized closed-containment systems would be a more expensive investment and planned to issue nine-year licenses to successful applicants to ensure greater certainty.

While some Indigenous communities in British Columbia have been calling for an end to open-net salmon farms, others criticized Ottawa for lack of adequate consultation and the speed of the phase-out.

“Five years to transition to land-based or closed-containment in my territory is the same as shutting our operations down,” said Hereditary Chief Hasheukumiss of the Ahousaht First Nation on the west coast of Vancouver Island at a press conference.

The British Columbia government urged Ottawa to support local communities through the transition period by funding new economic opportunities and creating good jobs.

“We recognize the importance of meaningful and thoughtful engagement with First Nations partners and communities as we move forward, in order to ensure that economic impacts are mitigated,” federal Natural Resources Minister Jonathan Wilkinson said in a statement. – Reuters

Globe earns spot on Fortune Southeast Asia 500 list

June 20, 2024 | 10:05 am

Inaugural regional list includes largest companies in the region

Globe, a leading telco and expanding technology company in the Philippines, has earned a spot on the inaugural Fortune Southeast Asia 500 list, cementing its stature as one of the largest companies in the region.

Globe ranked 111, with revenues at $3.240 billion and profits of $441 million as of end 2023. It joins 38 companies from the Philippines that made the list.

“Globe’s inclusion on the first-ever Fortune Southeast Asia 500 list is an affirmation of our success in serving our customers guided by our purpose, delivering products and services that impact lives and solving the pain points of Filipinos. The company grew serving millions of customers locally and now abroad. Amid the new digital landscape, we envision to continue growing through responsible use of technology to fill in the societal gaps and allow our country to reach economic prosperity,” said Ernest Cu, President and CEO of Globe.

“To uplift the nation is our North Star. This recognition inspires us to keep innovating to serve our customers as their needs evolve,” he added.

Globe has been the country’s mobile leader based on revenue market share for over seven years. It has 61.3 million subscribers as of Q1 2024, including 58.8 million mobile subscribers, 1.7 million home broadband customers, and 797,000 landline subscribers.

It employs over 7,200 employees and provides business to over 414,000 load retailers, distributors and business partners across the country as of the first quarter of this year.

Fortune’s new ranking indexed companies by total revenues as of Dec. 31, 2023. It said the list ”reflects the rise and fall of energy markets, multinational supply chains and tourism in some of the world’s most dynamic economies.”

“The Fortune Southeast Asia 500 reflects a dynamic and fast-changing region — one whose core economies are growing notably faster than those of Europe or the US. This is partly due to Southeast Asia taking on far greater significance in the global economy, not least because a host of Global 500 multinationals have shifted more of their supply chains to Southeast Asian nations,” says Clay Chandler, executive editor, Fortune Asia.

Fortune said companies on the regional list “join an elite group of firms recognized under the Fortune 500 franchise,” which includes Fortune 500, Fortune Global 500, Fortune Europe 500, and Fortune China 500.

Learn more about Fortune Southeast Asia 500 here. To know more about Globe, visit www.globe.com.ph.

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BingoPlus Foundation conducts flu vaccination, supports Palarong Pambarangay in Rizal

June 20, 2024 | 10:00 am

Photo-1-OL — While flu-like illnesses may be on the rise due to the rainy season, getting vaccinated helps multiply the fun by providing Filipinos with healthier days ahead.

Health and wellness important during the rainy season

In the Philippines, rainy season is flu season. As PAGASA (Philippine Atmospheric, Geophysical, and Astronomical Services Administration) officially declared the start of the wet season in the country, the Department of Health (DoH), on the other hand, is monitoring cases of influenza-like illnesses, as it may increase during this period.

In response to this health challenge, BingoPlus Foundation, the social development arm of DigiPlus Interactive Corp. (DigiPlus) — one of the fastest-growing digital entertainment companies in the country — recently held its Barangay Bigayan medical mission program in Rizal Province.

BingoPlus Foundation provides vaccination and preventive healthcare in barangays to combat flu and other illnesses.

The Foundation rolled out free flu vaccination to 550 residents across Barangay Sta. Cruz in Antipolo City, aiming to save more lives, since flu vaccines can help protect against serious outcomes, such as hospitalization and death, especially among the immunocompromised. Flu, also known as influenza, is a contagious illness caused by influenza viruses. The DoH recommends an anti-flu shot yearly.

“We are conducting vaccination programs in different parts of the country to not only augment the DoH’s efforts to mitigate the spread of diseases but to also provide communities with better quality of life. This is us helping multiply the fun in communities by providing Filipinos with healthier days ahead,” said Andy Tsui, Digiplus president and Bingoplus Foundation chairman.

Barangay Sta. Cruz of Antipolo City, together with BingoPlus Foundation and ArenaPlus, opened the SK Palarong Pambarangay basketball league, promoting health, wellness and good sportsmanship across its 55 sitios. The event was graced by Antipolo City District 1 Board Member Randy Puno, Councilor Susan Garcia Say, Councilor Agnes Oldan, Barangay Sta. Cruz Captain Cirilo Tenorio, Sangguniang Kabataan Chairperson Kent Masula and BingoPlus Foundation Executive Director Angela Camins-Wieneke.

To further support the health and wellness of residents in Rizal, ArenaPlus, DigiPlus’s 24/7 sports betting app, supported the SK Sta. Cruz Palarong Pambarangay in the same barangay, witnessing the opening of its basketball liga. These efforts aligned with one of the Foundation’s advocacy pillars, Bingo sa Kalusugan, providing accessible healthcare and sports programs to communities.

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IT-BPM industry likely to hit 7% goal

June 20, 2024 | 12:34 am

THE INFORMATION TECHNOLOGY and business process management (IT-BPM) industry is on track to achieve a 7% growth in revenue and headcount by the end of 2024, an industry group said.

Jack Madrid, president of the IT and Business Process Association of the Philippines (IBPAP), told reporters on Wednesday that the industry anticipates around 6.5-7.5% growth in headcount and revenue in 2024.

“In the next 60 to 90 days we will have a much clearer picture of the 2024 performance, but from all indications, I think it’s safe to say we will grow around 7% for both headcount and revenue,” he said in an online briefing.

However, Mr. Madrid noted that achieving 7% growth this year meant the industry would only be hitting the “baseline scenario” and not the aggressive targets set under the IT-BPM Industry Roadmap 2028.

The industry ended 2023 with 1.7 million direct jobs and $35.5 billion in export revenues. It is projected to hit 1.84 million in headcount and $40 billion in revenues in 2024 under the roadmap.

If the 7% growth projection is achieved, the industry will end the year with 1.82 million in headcount and around $38 billion in revenues.

“In our roadmap projections, we have three different scenarios: the aggressive scenario, the baseline scenario, which is in the middle, and the constrained scenario, which is the most conservative,” Mr. Madrid said. “What we are confident to achieve, obviously, are the baseline scenarios.”

Under the roadmap, the industry is targeting to reach 2.5 million jobs and generate $59 billion in revenues by 2028.

Asked why the industry is optimistic about achieving its growth targets, Mr. Madrid said the demand for Filipino IT-BPM workers remains strong.

“The number one reason is the same: there is still a very high demand for the Filipino workforce to continue delivering global business services to our global customers,” he said.

Mr. Madrid said that cost optimization in global companies is also driving the demand for outsourcing.

“Offshoring and outsourcing are ways to address cost optimization, so delivering more work from the Philippines or India still represents a way of cost optimization for global or North American customers,” he said.

The Bangko Sentral ng Pilipinas projects service exports to grow to $55.1 billion and $60.5 billion in 2024 and 2025, respectively, while it projects business process outsourcing revenues to grow 7% annually in 2024 and 2025.

“We are a world capital in the IT-BPM industry, which is why when our global customers decide where to offshore, they will always choose between India and the Philippines and maybe some other options outside of India and the Philippines,” Mr. Madrid said. — Justine Irish D. Tabile

PHL may grow below target until 2028

June 20, 2024 | 12:33 am

vegetables-cart-worker-wc — THE BANGKO Sentral ng Pilipinas (BSP) has kept its benchmark rate steady at a 17-year high of 6.5% since October 2023 to tame inflation. — REUTERS

THE PHILIPPINE ECONOMY may grow slower than the government’s targets this year through 2028, as high interest rates weigh on consumption, according to a global think tank.

“High interest rates constrict domestic demand, so that’s one of the reasons why we’re a bit more bearish on the [Philippine] economy,” Andrew J. Staples, Asia-Pacific head of thought leadership and public policy at the Economist Impact, told reporters on the sidelines of the forum.

Mr. Staples projected the Philippine economy will expand by 5.4% this year, below the government’s 6-7% gross domestic product (GDP) growth target for the year. It will also be a tad lower than the revised 5.5% GDP expansion in 2023.

The Bangko Sentral ng Pilipinas (BSP) has kept its benchmark rate steady at a 17-year high of 6.5% since October 2023 to tame inflation.

When asked if the BSP is likely to wait for the US Federal Reserve before easing, Mr. Staples said: “It’s so big and powerful that everybody sort of follows its wake.”

He said the Philippines is one of the fastest-growing economies in the region, but “interest rates as a result of inflation have been holding back growth somewhat.”

For 2025, Mr. Staples said Philippine GDP is expected to expand by 6.4%, slightly lower than the government’s 6.5-7.5% target.

He projects Philippine GDP growth to ease to 5.6% in 2026 and 5.9% in 2027 and 2028, also below the government’s 6.5-8% goal through 2028.

To accelerate growth, the Philippine government must focus on policies to bolster foreign direct investment (FDI) and improve domestic consumption, he said.

Mr. Staples said risks to the growth outlook include mass early retirement if the government pushes through with the military pension system reform.

Ongoing tensions with China may also cause delays in the country’s infrastructure development, Mr. Staples said. The Philippines last year dropped China as a funding source for two key railway projects due to slow negotiations.

TRUMP PRESIDENCY
The possible re-election of former US President Donald J. Trump may pose some risks to the Philippines’ relationship with the US.

“There would be some impact particularly on trade and security but not as pronounced as it would be for other countries,” Mr. Staples said during the Management Association of the Philippines (MAP) event on Wednesday.

He gave the country a “quite low” score of 31.60 in the Trump Risk Index, which measures the impact of a Trump presidency on other economies. A score of 100 means a country is “most exposed” while zero signals least exposure.

Mr. Staples said major US trading partners are likely to face higher tariff and trade restrictions, tighter border and security controls, and security burden-sharing under a Trump presidency.

If elected, he said Mr. Trump could also end the US’ participation in the Indo-Pacific Economic Framework for Prosperity (IPEF), a 14-member supply chain agreement with participating countries like the Philippines, Australia, Brunei, Fiji, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Singapore, Thailand, and Vietnam.

“Trump will probably kill IPEF,” Mr. Staples said. “[He] is all about transaction, so he doesn’t want to be tied down by big trade agreements and so on.”

The US presidential elections will be held on Nov. 5.

ROOM TO CUT
Meanwhile, HSBC Global Research said the BSP may have room to cut ahead of the US Federal Reserve amid the improving current account deficit and FDI outlook.

“By keeping its ‘less hawkish’ stance, we expect the BSP to stand in contrast to the Fed’s hawkish pause, suggesting that the BSP won’t necessarily need to wait for the Fed,” HSBC economist for ASEAN (Association of Southeast Asian Nations) Aris D. Dacanay said in a report.

“It will be a bold move by the central bank, but we think the BSP finds confidence in something market players may have been sleeping on — the economy’s fundamentals.”

HSBC noted factors that give the Philippine central bank “confidence” to cut ahead of the Fed, such as the faster-than-expected recovery in the current account deficit.

“The Philippine economy is known for its robust consumption and overseas remittances. And perhaps, this may be the reason why many may have overlooked the fact that the Philippines’ external fundamentals are improving faster than what many had anticipated,” Mr. Dacanay said.

The BSP projects the current account deficit to settle at $4.7 billion this year, equal to 1% of gross domestic product (GDP).

HSBC also said that FDI growth also makes the case for the BSP to cut ahead of the Fed.

Separate BSP data showed that FDI net inflows jumped by 42.1% to $2.969 billion in the first quarter from $2.09 billion a year ago.

Mr. Dacanay also noted the Philippines is the only ASEAN economy whose “real policy rate differential” with the US central bank exceeded pre-pandemic levels.

“This differential could widen further if the rice tariff rate cut pushes through. This would be a substantial decrease in inflation, which, in turn, would widen the Philippines’ real policy rate differential with the Fed. If there is one policy that we suggest keeping an eye on, it would be this. Its quick implementation could set the stage for the BSP to break free, even partially, from the Fed.”

However, HSBC said it is still holding on to its expectation that the BSP will only begin policy easing by the fourth quarter.

“We still don’t think the BSP will cut ahead of the Fed based on our baseline scenario of the Fed cutting as early as September this year,” Mr. Dacanay said. — B.M.D.Cruz and L.M.J.C.Jocson

Gov’t urged to boost education spending as students fare badly in latest PISA study

June 20, 2024 | 12:32 am

Students-classroom — Students answer test questions at a state high school in Manila. — REUTERS

By John Victor D. Ordoñez, Reporter

THE PHILIPPINE government should boost spending on its public education system, arts and technology, as well as improve on-the-job training programs for students after a global study found Filipino students among the worst in the world in creative thinking, according to economists and education experts.

In a study by the Organization for Economic Cooperation and Development (OECD), the Philippines ranked 63^rd out of 64 countries in a 2022 global assessment that ranked 15-year-old students worldwide in producing and evaluating original ideas that would translate into effective solutions.

“It is time to seriously consider a comprehensive financial reform program in the whole education sector towards one that places a premium on foundational basic education and redistributes more funds to poor regions that sorely need to enhance education quality,” Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila University, said in a Facebook Messenger chat.

“Since learning is cumulative, this fundamental weakness in education will make our workers unproductive and unskilled, thus reducing our chances of reaching upper middle-income status.”

The government of President Ferdinand R. Marcos, Jr. is aiming for the Philippines to reach upper middle-income status by 2025. The Philippines is currently classified as a lower middle-income country.

IBON Foundation Executive Director Jose Enrique “Sonny” A. Africa said the government should invest more in arts and culture, science, and technology to spur creative thinking in Filipino students.

“Creativity is both cause and effect of a progressive society and the state has a key role in fostering or suppressing this,” he said in a Viber message. ‘Our education system has to be at the forefront of pushing for all the factors needed for creativity, innovation and development.”

Filipino students got an average score of 14 on creative thinking, according to the 2022 Programme on International Student Assessment (PISA) Volume III. The Philippine score was way below the global average of 33, and only better than Albania which had a score of 13.

Singapore topped the list getting a score of 41, with South Korea and Canada trailing with a score of 38.

Maria Ella Calaor-Oplas, an economics professor who specializes in human capital development research at De La Salle University, said developing on-the-job training programs that focus on innovation and critical thinking would better prepare students to enter the workforce.

“I believe that we still confine education in a box. Our education should take into consideration that children have different gifts and that they should not be assessed according to common standards,” she said in a Facebook Messenger chat.

“We see education as something that can be assessed using exams, recitation, and other factors taken inside the classrooms.”

In the PISA’s 2022 assessment for student performance in mathematics, reading and science, Filipino students were among the world’s weakest in those subjects, ranking 77^th out of 81 countries and performing worse than the global average in all categories.

On the other hand, the Philippines placed 22^nd out of 111 countries in the 2022 English Proficiency Index by Education First.

Terry L. Ridon, a public investment analyst and convenor of the think tank InfraWatch PH, said the government must conduct a comprehensive review of the basic education system to address these learning gaps.

“It will take more than significant spending to improve our results,” he said in a Facebook Messenger chat. Government should continue to review its basic education curriculum and work on how to improve results.”

Senator Aquilino Martin D. Pimentel III earlier this month called on the government to upgrade teacher education training institutions to increase its pool of licensed teachers and raise the quality of education.

The government had allocated P924.7 billion for education in this year’s P5.768-trillion national budget, with the Department of Education receiving P758.6 billion. Under the Constitution, the government must prioritize funding the education sector.

The Second Congressional Commission on Education (EDCOM II) is prioritizing the internationalization of higher education and improving research productivity this year, EDCOM II Executive Director Karol Mark R. Yee told a Senate hearing in February.

EDCOM II and the Philippine Institute for Development Studies said in a report in May that there is a “severe underinvestment” in the welfare of very young children in the Philippines, causing their early education to suffer.

The government only spends about P3,870 per child for health, compared with the $150 (P8,809.95) that other lower and middle-income countries spend on children’s health, the report showed.

Philippines slips in WEF Energy Transition Index

June 20, 2024 | 12:31 am

Solar panels — SOLAR PANELS are seen on the roof deck of a parking building in Quezon City, April 18, 2024. — PHILIPPINE STAR/MIGUEL DE GUZMAN

THE PHILIPPINES dropped 11 spots in an index that measures countries’ energy transition efforts, reflecting the slowing global momentum amid increasing uncertainty.

The Philippines ranked 105^th out of 120 countries in the World Economic Forum’s (WEF) Energy Transition Index (ETI), from 94^th in 2023.

The Philippines’ latest ranking was its lowest since 2015 when it ranked 87^th in the ETI, which analyzes a country’s current energy system performance and enabling environment for energy transition.

It scored 48.4% on a 0% to 100% scale, lower than 50.2% last year. This is below the global average score of 56.5% and emerging and developing Asia’s average score of 53.9%.

European countries topped this year’s index led by Sweden with a score of 78.4, followed by Denmark (75.2), Finland (74.5), and Switzerland (73.4).

Among the emerging and developing Asian countries, the Philippines had one of the lowest rankings, only ahead of Bangladesh (109^th), Pakistan (113^rd) and Mongolia (116^th).

China had the highest ranking among Asian countries at 17^th place, followed by South Korea (23^rd), Japan (26^th), Vietnam (32^nd), Malaysia (40^th) and Indonesia (54^th).

“Ensuring equitable access to energy is a critical issue in this region, characterized by limited rural electricity access, affordability challenges, extensive energy subsidies and energy prices not returning to pre-pandemic levels,” the WEF said.

The WEF noted this year saw the highest global average scores in the history of the energy transition index, “with modest improvements in system performance of about 0.2% and strong progress in transition readiness, with a growth of 2%.”

“From 2015 to 2024, the global average scores for the ETI have consistently increased, driven by improvements in both system performance and transition readiness,” the report read.

However, WEF said the overall pace of energy transition has slowed worldwide, due to “economic volatility, heightened geopolitical tensions and technological shifts.”

“We must ensure that the energy transition is equitable, in and across emerging and developed economies,” Roberto Bocca, WEF’s head of the center for energy and materials, said in a news release.

“Transforming how we produce and consume energy is critical to success. We need to act on three key levers for the energy transition urgently: reforming the current energy system to reduce its emissions, deploying clean energy solutions at scale, and reducing energy intensity per unit of GDP (gross domestic product),” he added.

The latest annual edition of the report, published in collaboration with Accenture, used indicators such as energy access, energy affordability, economic development, supply, resilience, reliability, energy efficiency, decarbonized energy, clean energy, regulation and political commitment, finance and investment, education and human capital, innovation, and infrastructure.

Terry L. Ridon, a public investment analyst and convenor of think tank InfraWatch PH, said the Philippines still has limited innovation and research on low-carbon technology.

“Government should partner with other nations which have advanced low carbon research in order to develop our knowhow in this field,” he said in a Viber message. — S.J. Talavera