INDONESIAN national flags fly at a business district in Jakarta, Indonesia, Feb. 5, 2021. — REUTERS
JAKARTA — Indonesia plans to run clinical trials of several vaccines to fight surging cases of tuberculosis (TB) this year, with concerns the disease might affect economic growth, ministers said on Monday.
The Southeast Asian country has seen TB cases spike during the past few years, with the health ministry estimating there were over 1 million cases in 2023, compared to around 820,000 in 2020.
In 2022, deaths from TB in Indonesia reached around 134,000, the second highest in the world after India.
Three-quarters of the patients were in the productive age group and 45% of all patients did not work, raising concerns that the spread of the disease is hurting economic activity, human development minister Muhadjir Effendy told a government meeting with provincial leaders. The minister did not provide an estimate of the impact on growth.
Health minister Budi Gunadi Sadikin said Indonesia plans to conduct a trial of TB vaccine developed by global pharmaceutical company GlaxoSmithKline in July, involving 2,500 people. The vaccine development is funded by the Bill and Melinda Gates Foundation.
A clinical trial for a vaccine made by China’s CanSino Biologics is also expected this year, Budi said.
“We hope to be one of the first countries to do tuberculosis vaccination,” Mr. Budi told the same meeting.
“We’re also in the stage to conduct a clinical trial for an mRNA vaccine that is being developed by BioNTech, that had founded COVID vaccine for Pfizer,” Mr. Budi said.
In the same meeting, home affairs minister Tito Karnavian ordered provincial leaders to set up task forces to detect TB infections.
Indonesia aims to lower its mortality rate from TB by 80% to only six deaths per 100,000 lives by 2030, Mr. Budi said. — Reuters
PEOPLE walk on Shibuya crossing in Tokyo, Japan on April 23, 2021, in this photo taken by Kyodo. — KYODO/VIA REUTERS
TOKYO – Japan’s economy contracted less than initially reported in January-March on upward revisions to capital spending and inventory data, lending modest support to the central bank’s plans to raise interest rates again this year.
Analysts expect the Japanese economy to have bottomed out in the first three months of the year, although a stubbornly weak yen and disruptions at major automaker plants continue to cloud the outlook for the current quarter.
Still, “the revised GDP results made it easier for the Bank of Japan (BOJ) to feel encouraged about future rate hikes as it can assess capital investment is picking up even by a little bit,” said Kohei Okazaki, senior economist at Nomura Securities.
Japan’s GDP shrank a revised 1.8% annualized in the first quarter from the previous three months, Cabinet Office data showed on Monday, a smaller decline that economists’ median forecast for a 1.9% contraction and a 2.0% decline in the preliminary estimate.
The revised figure translates into a quarter-on-quarter contraction of 0.5% in price-adjusted terms, unchanged from the initial reading issued last month.
RATE HIKES
The revised GDP data comes on speculation the BOJ may discuss cuts in its Japanese government bond (JGB) purchases at its policy review this week as part of efforts to unwind monetary stimulus to curb yen weakening.
Investors are looking for clues on the timing of further rate hikes by the central bank, which raised rates in March for the first time since 2007 in a landmark shift away from ultra-loose monetary policy.
“We can say capital spending picked up in the latter half of the fiscal year-end in March 2024…current capex conditions are a relief but we must be cautious about the outlook,” Okazaki said.
“We can also maintain the view that consumption is on track for recovery due to hefty pay raise agreed at annual labor talks and income tax cuts that kicked in from June.”
Private consumption, which accounts for more than half of the Japanese economy, fell 0.7% in the first quarter, unchanged from the preliminary estimate as rising living costs squeezed household finances. It was a fourth straight quarter of decline.
External demand, or exports minus imports, shaved 0.4 of a percentage point off overall GDP, while domestic demand knocked off 0.1 point, the data showed. – Reuters
SEOUL – South Korea and the United States were set to hold talks on Monday in Seoul on better coordinating an allied nuclear response during a war with North Korea, amid anxiety over Pyongyang’s growing arsenal, Seoul officials said.
The third meeting of the Nuclear Consultative Group (NCG) is designed to follow up on last year’s summit, during which the United States promised to give South Korea more insight into its nuclear planning for a conflict with the North.
The talks came as North Korea races ahead to advance its nuclear weapons and their delivery systems, which triggered questions in South Korea about its reliance on “extended deterrence” – in essence the American nuclear umbrella.
Some politicians, including some senior members of President Yoon Suk Yeol’s party, called for Seoul to develop its own nuclear weapons, a step Washington opposes.
In late May, North Korea’s attempt to launch a military reconnaissance satellite failed after a newly developed rocket engine exploded in flight. Seoul and Washington condemned the launch as a violation of U.N. Security Council sanctions banning Pyongyang’s use of ballistic technology.
The latest talks will be led by Cho Chang-rae, South Korea’s deputy defense minister for policy, and Vipin Narang, acting U.S. assistant secretary of defense for space policy.
After their second meeting in December, both sides warned that any nuclear attack by North Korea against the United States or its allies will be met with a “swift, overwhelming and decisive response” and result in the end of Kim Jong Un’s regime.
Last week, South Korea’s Defense Minister Shin Won-sik and US Defense Secretary Lloyd Austin met on the sidelines of the annual Shangri-La Dialogue security conference in Singapore, during which they reaffirmed the goal of North Korea’s complete denuclearization and continued efforts to boost US extended deterrence. – Reuters
PARIS – French President Emmanuel Macron rolled the dice on his political future on Sunday, calling snap legislative elections for later this month after he was trounced in the European Union vote by Marine Le Pen’s far-right party.
Mr. Macron’s shock decision set off a political earthquake in France, offering the far-right a shot at real political power after years on the sidelines and threatening to neuter his presidency three years before it ends.
If Ms. Le Pen’s National Rally (RN) party wins a parliamentary majority, Macron would be left with little sway over domestic affairs.
Mr. Macron said the EU result was grim for his government, and one he could not ignore. In an address to the nation, less than two months before Paris hosts the Olympics, he said lower house elections would be called for June 30, with a second-round vote on July 7.
“This is an essential time for clarification,” Mr. Macron said. “I have heard your message, your concerns and I will not leave them unanswered … France needs a clear majority to act in serenity and harmony.”
After Mr. Macron’s announcement, a few hundred anti-far-right protesters gathered at Paris’ Place de la Republique, waving flags for green and leftist groups and chanting against the RN.
Led by telegenic 28-year-old Jordan Bardella, the RN won about 32% of the vote in Sunday’s vote, more than double the Macron ticket’s 15%, according to exit polls. The Socialists came within a whisker of Macron, with 14%.
Ms. Le Pen, widely seen as the frontrunner for the 2027 election in which Mr. Macron is unable to stand, welcomed his decision.
“We are ready to take over power if the French give us their trust in the upcoming national elections,” she said at a rally.
Mr. Macron’s Renaissance party currently has 169 lower house lawmakers, out of a total of 577. The RN has 88.
If the RN wins a majority, Macron would still direct defense and foreign policy, but would lose the power to set the domestic agenda, from economic policy to security.
“Emmanuel Macron is a poker player, we’ve seen that tonight,” said Green Party lawmaker Sandrine Rousseau.
UNCOMFORTABLE ‘COHABITATION’
Teneo, a consultancy, said “Mr. Macron has called an election he might lose.”
It said his ultimate “goal might be to bring an RN victory forward in time to expose the party’s lack of experience in government and make them confront politically painful decisions ahead of the 2027 presidential election.”
Olivier Blanchard, a former International Monetary Fund official who is now at the Massachusetts Institute of Technology, said Macron had made the best of a weak hand.
“Either the incoherence of the RN program becomes clear during the campaign and it loses the election. Or the RN wins, gets to govern and quickly makes a mess of it,” he wrote on X.
Mr. Macron’s gambit has echoes of Spanish Prime Minister Pedro Sanchez’s move to call a snap national election last year after the far right thrashed his party in local government polls.
Mr. Sanchez managed to retain power but only after months of wrangling with regional parties and a controversial deal to offer an amnesty to Catalan separatists.
France has known so-called “cohabitation” periods before, when the president is from a different political party than the parliamentary majority. In such cases, the majority party’s prime minister becomes France’s top domestic decision-maker.
In the last such period, from 1997-2002, President Jacques Chirac played second fiddle to Socialist Prime Minister Lionel Jospin.
The euroslipped to its lowest level in around a month in early trading in Asia, reflecting the uncertainty.
Macron’s decision underlined what was a grim night for centrist parties across Europe, with Eurosceptic nationalists making the biggest gains in the European Parliament vote.
SUCCESSION BATTLE HEATS UP
Ms. Le Pen’s strong electoral showing, notching a 10-point increase on her 2019 EU result, is likely to lure conservative rebels to the RN, a party with a clear sense of momentum.
On Sunday night, Ms. Le Pen’s niece Marion Marechal, a political ally of Eric Zemmour and his far-right Reconquete party, said she was prepared to meet with her aunt to explore a pact.
“A right-wing coalition to me seems more necessary than ever,” Ms. Marechal said.
Ms. Le Pen’s ascent is also likely to turbocharge the centrist succession battle to replace Mr. Macron.
Several big names – including Interior Minister Gerald Darmanin, former Prime Minister Edouard Philippe, the current one, Gabriel Attal, and Finance Minister Bruno Le Maire – are all eager to take the top job, political sources say.
“We’ll have to do some soul-searching and explain to the French why we haven’t been able to listen to them enough,” Darmanin said in comments prior to Macon’s announcement.
Sunday’s results also saw the resurgence of the French centre-left, with Socialist candidate Raphael Glucksmann, a pro-Ukraine moderate, who won some 14%. His strong showing will embolden the Socialists, who had faced electoral oblivion after Mr. Macron’s 2017 election win. – Reuters
Microsoft kicked off its annual Xbox Games Showcase on Sunday, unveiling a new all-digital version of its Xbox Series X and S consoles as well as trailers for more than a dozen games including the next installment of “Call of Duty.”
The Games Showcase comes at a crucial time for Xbox and Microsoft as the gaming industry faces a downturn and publishers grapple with softer sales, layoffs and studio shutdowns.
Microsoft showed off three gaming consoles including a disc-less version of the Xbox Series X and S consoles, and a special edition of the Series X with 2 terabytes of storage.
The hardware refresh could help Xbox boost sales of its consoles which compete with Sony’s 6758.T PlayStation 5.
Among the games on display was “Doom: The Dark Ages”, the latest installment in the long-running “Doom” franchise, as well as a sneak peak at the newest “Gears of War” title, ending a five-year wait for one of Xbox’s most popular properties.
A sizable number of games including the new “Doom” and “Call of Duty” will be available on Xbox Game Pass on the day of launch, indicating that Microsoft is making big bets on the subscription service as it tries to woo consumers grappling with a relatively softer economy.
The Games Showcase was followed by a special feature from Activision Blizzard’s studios that highlighted features, characters and gameplay of the new “Call of Duty: Black Ops 6”, which is slated for a release in October.
Developers Treyarch and Raven software showed clips from the campaign of the game that takes place in the early 1990s, touting features such as a new movement system allowing players to sprint in all directions, and a glimpse at the fan-favorite “Zombies” mode. – Reuters
An MH-60R Sea Hawk helicopter launches during flight operations aboard the US Navy aircraft carrier USS Ronald Reagan in the South China Sea, July 17, 2020. — US NAVY/MASS COMMUNICATION SPECIALIST 2ND CLASS CODIE L. SOULE/HANDOUT VIA REUTERS.
The opinions expressed here are those of the author, a columnist for Reuters.
by Peter Apps, Reuters Columnist
LONDON – As a joint US-Philippines exercise drew to a close last month, US troops at Basco airport in the northern island province of Batanes were testing a cutting-edge high-altitude drone to conduct reconnaissance and transfer information to the Filipino military.
Exercise “Balikatan”, the main annual US-Philippines joint military drill has been held 39 times since 1991. This year’s iteration – from April 22 to May 10 – included more than 16,000 personnel from the U.S., Philippines, Australia and France.
Traditionally held in the center of the Philippines, this year’s exercise also took in small northern islands in the Luzon Strait – including Batanes province, the area of the Philippines closest to Taiwan some 120 miles (200 km) away.
Giving the US military access to those remote locations would be critical to any conflict over Taiwan, which US officials say Chinese President Xi Jinping has ordered his military to be ready for by 2027, sparking a host of US and allied military preparation across the Asia Pacific region.
The first months of this year have also seen an ongoing escalation in tensions between the Philippines and Beijing.
China’s coast guard has used increasing levels of non-lethal force – including water cannon and collisions – against Filipino fishing boats as well as ships reinforcing a Filipino military detachment on the landing craft “Sierra Madre” that is purposely grounded on the disputed Second Thomas Shoal.
On June 4, Philippines officials said Marines on the landing craft drew their weapons as a “precautionary” measure in self-defense as rigid inflatables of the Chinese coast guard approached the “Sierra Madre” and seized packages of supplies that had just been dropped by Filipino forces by air to reinforce the tiny garrison.
At the major annual Shangri-La national security meeting in Singapore in late May organized by London’s International Institute for Strategic Studies, Philippines President Ferdinand Bongbong Marcos was asked how Manila might respond to the death of a Filipino sailor in such an incident.
The Philippines and United States have a mutual defense treaty, and some analysts increasingly worry that the mounting face-off over several disputed maritime boundaries might yet trigger an unintended war.
The Filipino leader, son of ousted late dictator Ferdinand Marcos, denounced what he called the “illegal, coercive, aggressive and deceptive actions (by China that) continue to violate our sovereignty, sovereign rights and jurisdiction”.
“If a Filipino citizen is killed by a willful act, that is, I think, very very close to what we define as an act of war, and therefore we will respond accordingly,” Marcos told an audience that included US Defense Secretary Lloyd Austin and Chinese counterpart Admiral Dong Jun. “And our treaty partners, I believe, also hold that same standard.”
Admiral Dong delivered his own hawkish speech at Shangri-La, just days after some of the most aggressive Chinese military posturing so far around Taiwan in maneuvers US officials said appeared to be a rehearsal for invasion and blockade.
RISING RHETORIC
Mr. Dong warned that “Taiwan separatists” would be “nailed to the pillar of shame in history” and that any countries interfering with “reunification” of Taiwan with China would face “self-destruction”.
He said Beijing had exercised restraint in the face of “infringements and provocations” carried out by a certain country he did not name, but clearly implied to be the Philippines.
China claims democratically governed Taiwan as its own territory and has never renounced the use of force to take over the island. Taiwan strongly objects to China’s sovereignty claims, saying only the island’s people can decide their future.
The Shangri-La meeting saw the first direct face-to-face meeting between Chinese and US defense chiefs since 2022, designed to help manage the risk of accidental conflict. But neither side appeared to be backing down.
US officials said Austin specifically raised the issue of Chinese “provocations” in the 75-minute session, while Austin’s public remarks reasserted US commitment to the region.
“Let me be clear: the United States can be secure only if Asia is secure,” Mr. Austin said. “That’s why the United States has long maintained our presence in the region.”
Most analysts believe there are two ways a conflict might start in Southeast Asia. The first would be an accidental escalation of an incident in the South China Sea such as around Second Thomas Shoal, and the second would be a deliberate Chinese act – most likely an invasion of Taiwan – that then sparks a much wider conflict.
Building up the US and Filipino military presence in the northern Philippines is regarded as crucial to deterring such outcomes, or indeed fighting such a conflict if deterrence fails.
US-Filipino military links declined after the fall of the first Marcos from power in 1986, with US forces evicted entirely in the 1990s. But they have ratcheted up substantially once again since his son was elected president in 2022, driven by shared perceptions of a rapidly rising threat from China.
The 1988 constitution bans the permanent stationing of foreign forces on Filipino soil. But since Marcos’ election, US forces have increased what they described as a “temporary, rotational presence” of a variety of units within the country.
Last year, the US and Philippines announced joint naval patrols along the northern Filipino coast, where the Manila government is roughly doubling the number of its forces as part of a broader military expansion.
UNAMBIGUOUS MESSAGING
Over the last year, analysts and US officials have begun to talk of the Philippines, Japan, Australia and United States as the “Squad”, conducting informal joint meetings and policy coordination as the four nations most committed to cooperating in the event of a regional war with China.
That four-way relationship, insiders say, is now notably tighter than that between the Australia-Japan-U.S.-India grouping known as the “Quad”, which also holds joint military drills and works together on humanitarian responses.
India, however, continues to pursue a more independent foreign policy – including much closer relations with Russia – in comparison with the Philippines, which now openly expects to find itself fighting alongside the United States in any war.
The US now has access to nine bases across the Philippines, spending more than $100 million on them by the end of 2023.
This has included rebuilding runways and command and control systems at Basa Air Base, the largest Filipino air force installation now capable of housing most types of US aircraft in a crisis.
According to the US Marines, several Reaper drones are also rotating through the Philippines, although further details of that have been kept largely under wraps.
Much more widely publicized, however, was the “SINKEX” element of the most recent drills, in which Filipino and US forces used missiles to sink a Chinese-built merchant ship.
Footage of that was then heavily shared by Filipino social media channels in what appeared a not-so-subtle message to Beijing.
According to US officials, future iterations of joint military drills are likely to be even larger – and considerably more high-tech. That is likely to include testing drone swarms as well as deploying heavy weapons.
This year’s exercise saw the deployment of the US Army’s Mid-Range Capability (MRC) missile system, a land-based variant of the naval Tomahawk missile capable of hitting land targets in either China or Taiwan from the northern Philippines.
“Every Balikatan is increasingly more complex,” said Philippines exercise director Major General Marvin Licudine. “This year has produced several new collaborations considering dynamic challenges across all domains.” – Reuters
US dollar banknotes are seen in this photo illustration taken Feb. 12, 2018. — REUTERS
By Luisa Maria Jacinta C. Jocson, Reporter
THE PHILIPPINES saw its dollar reserves soar to its highest level in over two years, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.
Gross international reserves (GIR) rose by 1.8% to $104.48 billion as of end-May from $102.65 billion as of end-April.
This was also 3.9% higher than the $100.59 billion in the same period a year ago.
The dollar reserves were also at its highest level in 25 months or since the $105.4 billion recorded in April 2022.
“The month-on-month increase in the GIR level reflected mainly the National Government’s (NG) net foreign currency deposits with the BSP, which include proceeds from its issuance of Republic of the Philippines (ROP) global bonds, and net income from the BSP’s investments abroad,” the BSP said.
Ample foreign exchange buffers protect the country from market volatility and ensure that it is capable of paying its debts in the event of an economic downturn.
The level of dollar reserves as of end-May is enough to cover about 5.9 times the country’s short-term external debt based on original maturity and 3.6 times based on residual maturity.
It is also equivalent to 7.7 months’ worth of imports of goods and payments of services and primary income.
The value of the central bank’s gold holdings declined by 2.3% to $10.02 billion at end-May from $10.26 billion a month ago. It likewise dropped by 1.8% from $10.21 billion in the same period in 2023.
BSP data show that foreign investments stood at $89.02 billion, up by 2.2% from $87.13 billion as of end-April and higher by 5% from $84.76 billion a year earlier.
Meanwhile, net international reserves increased by 1.8% to $104.46 billion as of end-May from $102.59 billion as of end-April.
Net international reserves refer to the difference between the BSP’s reserve assets (GIR) and reserve liabilities, including short-term foreign debt, and credit and loans from the International Monetary Fund (IMF).
The BSP’s reserve assets also include foreign investments, foreign exchange, reserve position in the IMF and special drawing rights (SDR).
Reserves with the IMF inched up by 0.15% to $737.2 million as of end-May from $736.1 million a month earlier, but fell by 7.5% from $797.2 million in the same month a year ago.
SDRs — or the amount which the Philippines can tap from the IMF’s reserve currency basket — edged higher by 0.2% to $3.749 billion as of end-May from $3.741 billion in the month prior and went up by 0.13% to $3.753 billion in 2023.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that the rise in dollar reserves was due to higher foreign investments and foreign exchange holdings amid the government’s recent dollar bond issuance.
The Philippines raised $2 billion from its issuance of dual-tranche fixed-rate dollar bonds in May, its first global bond sale for the year.
John Paolo R. Rivera, president and chief economist at Oikonomia Advisory & Research, Inc., said that the increase in GIR may be due to positive valuation adjustments in the value of the BSP’s gold holdings.
“The price of gold in the world market has been increasing in recent months. It is also an indication of net income from BSP’s foreign investments. This can also be due to foreign currency inflows from other instruments,” he said in a Viber message.
Mr. Ricafort said that the GIR level could continue to improve in the coming months.
“The country’s GIR could still be supported by the continued growth in the country’s structural inflows from overseas Filipino workers’ remittances, business process outsourcing revenues, exports (though offset by imports) (and) relatively fast recovery in foreign tourism revenues,” he said.
The BSP is expecting a GIR level of $103 billion for this year.
THE PHILIPPINE banking industry’s nonperforming loan (NPL) ratio in April rose to the highest in 11 months, as soured loans increased due to elevated interest rates.
Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed the banking industry’s gross NPL ratio rose to 3.45% in April from 3.39% in March and 3.41% a year ago.
This was the highest bad loan ratio in 11 months or since 3.46% in May 2023.
BSP data showed that bad loans increased by 3.4% to P480.648 billion in April from P464.673 billion a month ago and jumped by 12.3% from P427.881 billion a year earlier.
Loans are considered nonperforming once they remain unpaid for at least 90 days after the due date. They are deemed as risk assets since borrowers are unlikely to settle such loans.
The loan portfolio of Philippine banks rose by 1.8% to P13.94 trillion at end-April from P13.69 trillion in the previous month. Year on year, it grew by 11% from P12.56 trillion.
Past due loans went up by 5% to P618.036 billion in April from P588.447 billion in March. It also climbed by 19.2% from P518.549 billion in the same period in 2023.
This brought the past due ratio to 4.43% in April from 4.3% a month earlier and 4.13% a year ago.
On the other hand, restructured loans slipped by 1.4% month on month to P290.373 billion from P294.538 billion. It also declined by 10.5% from P324.382 billion in the year-ago period.
These borrowings made up 2.08% of the industry’s total loan portfolio. This was lower than the 2.15% a month earlier and 2.58% in the previous year.
Banks’ loan loss reserves stood at P471.353 billion in April, inching up by 0.8% from P467.757 billion in March and higher by 6.6% from P441.984 billion a year prior.
This brought the loan loss reserve ratio to 3.38%, down from 3.42% last month and 3.52% a year ago.
Lenders’ NPL coverage ratio, which gauges the allowance for potential losses due to bad loans, slipped to 98.07% from 100.66% in March and 103.3% in the same month in 2023.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the uptick in bad loans was due to elevated interest rates and a weaker peso exchange rate.
The Monetary Board has kept the benchmark rate steady at 6.5% for a fifth straight meeting, its highest in 17 years.
In April, the peso sank to the P57 level for the first time since November 2022. It further depreciated to the P58-per-dollar level in May.
“However, possible Fed and local interest rate cuts in the latter part of 2024 and in 2025 could reduce borrowing costs and could help ease banks’ NPL ratio, going forward,” Mr. Ricafort added.
BSP Governor Eli M. Remolona, Jr. earlier said that the central bank may begin its policy easing cycle as early as August.
Traders saw the Fed only starting to cut rates from their 23-year high of 5.25-5.5% by November. US interest rate futures also lowered the chances of the Fed’s cutting rates by 25 basis points in September to 56%, down from around 70% on Thursday, according to LSEG’s Fedwatch, Reuters reported. — Luisa Maria Jacinta C. Jocson
FITCH RATINGS affirmed the country’s long-term foreign currency issuer default rating at “BBB” and retained its “stable” outlook. — PHILIPPINE STARMIGUEL DE GUZMAN
By Luisa Maria Jacinta C. Jocson, Reporter
THE PHILIPPINES is still on track to meeting its goal of achieving an “A” rating status, Finance Secretary Ralph G. Recto said.
This after Fitch Ratings affirmed the country’s long-term foreign currency issuer default rating at “BBB” and retained its “stable” outlook.
“Yes, as expected. We are on the road to an ‘A’ rating. A better credit rating will help us create more jobs and reduce poverty by 2028,” Mr. Recto told BusinessWorld in a Viber message.
In a commentary dated June 7, Fitch Ratings affirmed the Philippines’ “BBB” investment grade rating and maintained its “stable” outlook.
A “BBB” rating indicates low default risk and reflects the economy’s adequate capacity to pay debt. Meanwhile, a “stable outlook” means it is likely to be maintained rather than lowered or upgraded over the next 18-24 months.
Fitch cited the Philippines’ “strong medium-term growth, which supports a gradual reduction in government debt/gross domestic product (GDP) over the medium term and the large size of the economy relative to ‘BBB’ peers.”
“The rating is constrained by low GDP per head, despite an upward trend. Governance standards are weaker than at ‘BBB’ peers, though Fitch believes World Bank Governance Indicator scores somewhat overstate this,” it added.
The Philippine economy grew by 5.7% in the first quarter, better than the 5.5% in the previous quarter.
The government is targeting 6-7% growth this year, although Fitch expects Philippine GDP growth to average 5.8% this year.
“We forecast real GDP growth of above 6% over the medium term, considerably stronger than the ‘BBB’ median of 3%, supported by large investments in infrastructure and reforms to foster trade and investment, including public-private partnerships (PPPs).”
Meanwhile, Fitch noted the government’s latest revisions in its fiscal consolidation targets, which “scaled back” both revenue and expenditure programs.
“We believe there is some risk of further fiscal slippage, given the government’s continued focus on economic growth and the approach of midterm elections in May 2025,” the credit rater said.
Fitch also expects inflation to average 3.8% this year, within the 2-4% target band but above the central bank’s 3.5% full-year forecast.
In a separate statement, Budget Secretary Amenah F. Pangandaman said that Fitch’s assessment of strong growth prospects in the country is a welcome development.
“We hope to sustain our momentum for growth and keep our lead as one of the fastest-growing economies in Southeast Asia,” she said.
Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted that the debt watcher has maintained its rating even during the pandemic.
“These reflect the Philippines’ improved economic and credit fundamentals, as well as improvements in fiscal performance in recent years that could help attract a bigger roster of international investments and international credit at much lower cost and with better terms into the country,” he said in a Viber message.
Mr. Ricafort said Fitch’s latest credit rating shows signs of the country’s resilience and improved investor confidence.
This was also reflected by the narrower credit risk premium in the Philippines’ latest global bond issuance, he added.
The Philippine government raised $2 billion from its dual-tranche issuance of dollar bonds in May.
The Finance department earlier said it was able to secure funding at very cheap rates due to the country’s “exceptional performance beyond its current credit rating.”
On the other hand, Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University, said that the latest rating action is “nothing to crow about.”
“While it meets the minimum grade for almost all forms of investment agencies, it indicates a certain elevated level of risks. In this period of great uncertainty and greater protectionism, this rating does not provide any advantage for countries competing for greater investment, especially in the Southeast Asian region,” he said in an e-mail.
“The grade only reflects a financial good standing but has no complimentary regard for its real sector where growth should now emanate. Without a strong and stable real sector, even this financial status is bound to weaken,” he added.
Mr. Lanzona also said that the country is unlikely to achieve an “A” rating unless there is “comprehensive industrial reform and structural transformation.”
The government is targeting to achieve an “A” level rating by 2028 or the end of the Marcos administration.
In 2019, the Finance department and Bangko Sentral ng Pilipinas organized an interagency committee for the “Road to A Credit Rating Agenda.”
Apart from Fitch’s latest rating action, the Philippines currently holds investment grade ratings of “Baa2” with Moody’s Ratings and “BBB+” with S&P Global Ratings. Both have also assigned a “stable” outlook to their ratings.
THE COMBINED ASSETS of the Philippines’ biggest lenders rose in the first quarter, fueled by increasing confidence in the economy’s prospects.
The latest edition of BusinessWorld’s quarterly banking report showed that the aggregate assets of 44 universal and commercial banks (U/KBs) grew by 10.54% year on year to P24.93 trillion in the first quarter from P22.55 trillion a year ago.
This pace was faster than 7.6% logged in the last three months of 2023.
Asset growth was the fastest since it posted 11.25% in the first quarter of 2023.
Total loans of these big banks went up by 13.75% to P12.52 trillion in the January-to-March period, faster than the 10.84% a year ago.
In the first three months, lending growth logged its highest in 21 quarters or since the 15.13% logged in the fourth quarter of 2018.
The growth in assets and lending may be attributed to the improved economic outlook, after gross domestic product (GDP) expanded by 5.7% in the January-to-March period. Businesses are likely to borrow more to support investment plans while consumers may take out loans when they expect higher incomes.
BSP data also showed the share of bad loans to the total loan portfolio, also known as the nonperforming loan (NPL) ratio, jumped to 3.6% in the first quarter from 3.39% in the previous quarter. A year ago, NPL ratio stood at 3.63%.
Loans are considered nonperforming if any principal and/or interest are left unpaid for over 90 days from the contractual due date or accrued interests for more than 90 days have been capitalized, refinanced, or delayed by agreement.
The net NPL ratio, on the other hand, jumped to 1.5% from 1.48% in the previous quarter.
Meanwhile, the banks’ median return on equity (RoE), which is an indicator of profitability, dipped to 8.02% in the first quarter from 8.79% in the same period a year ago.
The RoE, the ratio of net profit to average capital, measures the amount that shareholders make on every peso they invest in a company.
Additionally, the big banks’ median capital adequacy ratio (CAR) — which reflects the lender’s ability to absorb losses from risk-weighted assets — reached 19.64% during the period. This was lower than the 19.73% in the same period last year and the 20.17% a quarter earlier.
The ratio remained well above the regulatory minimum of 10% set by the BSP as well as the international minimum standard of 8% under the Basel III framework.
The leverage ratio — which gauges the institution’s ability to absorb shocks by measuring the bank’s capital relative to total exposure — reached a median of 11.27% during the period.
The current figure exceeded the central bank’s 5% guideline as well as the international standard of 3%.
Meanwhile, the net interest margin (NIM) of these big banks slipped to 3.32% from 3.97% in the previous quarter.
This is an indicator of banks’ investing efficiency by dividing annualized net interest income by average earning assets.
During the January-to-March period, the return on assets (RoA), which measures the profit generated per peso of an asset, rose to 1.6% from 1.5% in the fourth quarter.
In the first quarter, BDO Unibank, Inc. (BDO) remained the largest bank in terms of total assets with P4.49 trillion, followed by Metropolitan Bank & Trust Co. (Metrobank) with P3.59 trillion and Land Bank of the Philippines (LANDBANK) with P3.29 trillion.
Sy-led BDO also led the industry in lending with P2.92 trillion worth of loans issued, followed by Bank of the Philippine Islands (BPI) with P2.03 trillion and Metrobank with P1.58 trillion.
In terms of deposits, BDO led with P3.63 trillion, followed by LANDBANK with P2.9 trillion and BPI with P2.42 trillion.
Among banks with at least P100 billion assets, MUFG Bank Ltd., logged the fastest year-on-year asset growth with 27%, followed by Security Bank Corp., (22.51%) and Metrobank (22.08%).
Meanwhile, Philippine Trust Co. was the most aggressive lender with an annual increase of 34.03%, followed by Maybank Philippines, Inc. with 33.09% and Standard Chartered Bank with 24.85%.
BusinessWorld Research has been tracking the financial performance of the country’s large banks quarterly since the late 1980s using banks’ published statements.
The ERC joined the Business-to-Business Matching Event to Support Energy Transition (B2B SET) organized by the Department of Energy in collaboration with the United States Agency for International Development last February.
The Energy Regulatory Commission (ERC) has been an essential institution in overseeing and regulating the energy sector in our country since its inception. With its commitment to ensuring a dependable, cost-effective, and sustainable energy supply, the ERC has continued to uphold the highest standards and promote a resilient energy industry for the benefit of the nation.
The ERC’s roots can be traced back to the early regulation of public services in the Philippines in the early 20th century. In 1914, the Board of Public Utility Commissioners was created, patterned after the Public Service Law of the State of New Jersey. This board was responsible for regulating public services, including electricity.
With the enactment of Commonwealth Act No. 146 on Nov. 7, 1936, also known as the Public Service Law, the regulation of public utilities, including the electric power sector, was placed under the jurisdiction of the Public Service Commission (PSC). The PSC was responsible for overseeing and controlling public services, ensuring fair rates, and maintaining quality standards in the delivery of these services.
Later on, the government created the Department of Energy (DoE) and consequently abolished the Oil Industry Commission in 1977, which was replaced by the creation of the Board of Energy (BoE) through Presidential Decree No. 1206. The BoE assumed the powers and functions of the Board of Power and Waterworks (BoPW) over the electric power industry.
ERC Chairperson and CEO Monalisa C. Dimalanta participated in BusinessWorld Insights x Project KaLIKHAsan Energy Forum, themed “Achieving Balance in the Philippine Energy System,” last April.
In 1987, significant changes occurred with the issuance of Executive Order No. 172 by President Corazon C. Aquino as the BoE was reconstituted into the Energy Regulatory Board (ERB). The establishment of the ERB was part of the former President’s government reorganization program aimed at consolidating regulatory and adjudicatory functions pertaining to the energy sector under a single entity.
A landmark development in the Philippine energy sector was the enactment of the Electric Power Industry Reform Act (EPIRA) in 2001. EPIRA, or Republic Act No. 9136, was a comprehensive legislation aimed at restructuring the Philippine electric power industry to promote competition, ensure transparency, and improve efficiency in the delivery of electricity services. Under EPIRA, the Energy Regulatory Commission (ERC) was established to replace the ERB.
Decades of driving a competitive energy sector
Since its inception, the ERC has been instrumental in addressing consumer complaints and resolving disputes within the energy sector. According to the ERC’s latest report for the Office of the President’s 8888 Citizens’ Complaint Center, the commission received a resolution rate of 100% of citizens’ concerns from January to September 2023.
1 of 3
Last April, ERC led a dialogue with local leaders, sectoral representatives and consumers in Occidental Mindoro in a bid to address issues on the rising costs of electricity in the province.
Last April, ERC led a dialogue with local leaders, sectoral representatives and consumers in Occidental Mindoro in a bid to address issues on the rising costs of electricity in the province.
Last April, ERC led a dialogue with local leaders, sectoral representatives and consumers in Occidental Mindoro in a bid to address issues on the rising costs of electricity in the province.
One of the ERC’s primary responsibilities is setting electricity rates for transmission and distribution utilities. In 2006, the commission introduced the performance-based regulation (PBR) framework to govern these rates. PBR, an internationally-accepted rate setting methodology, aims to achieve competitive outcomes by incentivizing utilities to improve efficiency and service quality.
In 2013, the ERC implemented the Retail Competition and Open Access (RCOA), allowing large consumers to choose their electricity suppliers. This move was substantial in fostering competition and driving down electricity prices. As a result, industrial and commercial consumers experienced reduced power costs, which in turn benefited the economy.
In 2020, the ERC further expanded the coverage of RCOA, aligned with Section 31 of EPIRA and Rule 12 of its Implementing Rules and Regulations (IRR), which mandates the promotion of competition and the restructuring and modernization of the electric power industry. The new resolution, promulgated by the ERC, extended the RCOA coverage to end-users with an average monthly peak demand of at least 500 kW for the preceding 12 months, starting Feb. 26, 2021.
ERC Chairperson & CEO Monalisa C. Dimalanta joined the Clean and Affordable Renewable Energy (CARE) Convergence 2023 last November to discuss the commission’s role in advancing renewable energy transition in the country.
The ERC’s thorough evaluation of market readiness, infrastructure, customer awareness, and economic impact informed the decision to lower the threshold. Under the new resolution, qualified end-users, now categorized as contestable customers within the 500 kW-749 kW consumption range, can switch to the Competitive Retail Electricity Market (CREM).
The operational RCOA scheme is currently effective in Luzon and Visayas grids. With the expanded implementation, further reductions in electricity rates are anticipated and are expected to attract more investors, create job opportunities, and contribute to the country’s economic recovery, particularly in the aftermath of the COVID-19 pandemic.
In 2023, the ERC issued 14 rules and regulations, 77 decisions, and 1,156 orders as of December 2023, demonstrating its commitment to regulatory clarity and consistency. The commission also issued Certificates of Compliance (COCs) for 135 independent power producers, 4,124 qualified end-users, 489 self-generation facilities and distributed energy resources, and 7 retail electricity suppliers.
Furthermore, the ERC tested and calibrated 2,073,598 new watt-hour meters, approved 33 new meter types, certified 22 meter shops, and conducted 36,988 in-service testing in November 2023.
Meanwhile, the ERC has launched the full implementation of the Lifeline Rate Subsidy Program last January, aimed at providing significant discounts on electricity bills for qualified low-income households.
The program is designed to alleviate the financial burden on poor households by subsidizing their electricity costs. Qualified beneficiaries, specifically those enrolled in the Pantawid Pamilyang Pilipino Program (4Ps) and other low-income electricity consumers who use no more than 100 kilowatt-hours (kWh) per month, are eligible for the subsidy.
As of the latest data, around 4.2 million households are beneficiaries of the 4Ps, which forms a significant portion of the lifeline rate subsidy target group. The average monthly electricity consumption for these households typically falls well below the 100-kWh threshold, making them prime candidates for the subsidy. According to the ERC, the subsidy can reduce electricity bills by as much as 50%, providing substantial financial relief to these households.
The lifeline rate subsidy is established under Republic Act 11552, which extends and enhances the implementation of the lifeline rate as specified in Section 73 of Republic Act 9136, also known as the Electric Power Industry Reform Act.
The ERC also played a crucial role in implementing the Renewable Energy Act, which aimed to accelerate the development of renewable energy sources. The ERC remains committed to fostering the growth of the sector for the country to attain energy self-reliance and reduce dependence on fossil fuels.
In a statement, ERC Chairperson Atty. Monalisa C. Dimalanta said that there has been a 20% increase in renewable energy utilization in the Philippines since 2008. With the energy sector valued at P7.6 trillion, the chairperson shared the responsibilities of the commission, including enforcing least-cost pricing, promoting market competition, and providing consumer choices.
The ERC’s regulations facilitated the integration of renewable energy into the national grid, contributing to a more sustainable energy mix. Hence, the implementation of policies promoting renewable energy has led to substantial growth in this sector. As of 2022, the current energy mix in 2022 is made up of 32.7% of renewable energy.
A vision of independence and fairness
In a recent address, Atty. Dimalanta said that the ERC operated with a budget of over P1.2 billion in 2023, the highest budget allocated to the commission since its establishment. The chairperson emphasized that the agency must use the budget wisely to fulfill its responsibilities and ensure the efficient and effective regulation of the energy sector.
Regarding renewable energy (RE), the Philippine government aims to increase the share of RE in the supply mix to 35% by 2030 and 50% by 2050. This will be achieved by promoting energy efficiency and conservation, as well as pursuing emerging technologies to ensure energy security.
In addition, the ERC and the Board of Investments have joined forces to address issues in the electric power industry, aiming to attract more investments in the Philippines.
Both agencies have agreed to work together to effectively address issues in the electric power industry, particularly those affecting contestable customers who are struggling with financial distress caused by abrupt increases in power rates leading to disconnection of power supply.
The partnership is expected to have a significant impact on investments in the Philippines, particularly as the world transitions to green energy.
Atty. Dimalanta also revealed ERC’s partnership with the National Economic and Development Authority (NEDA) in developing an affordability index during the Foundation for Economic Freedom’s monthly Fellows Meeting in 2023. This index is expected to provide clearer metrics on the energy sector’s performance across different regions, aiding in better energy efficiency planning.
The chairperson emphasized the importance of the commission’s independence, credibility and fairness in its regulatory decisions. Hence, the ERC will continue to engage with stakeholders and implement programs aimed at promoting transparency, accountability, and public participation in the energy sector. — Mhicole A. Moral
CITICORE Renewable Energy Corp. (CREC) is exploring the possibility of issuing green bonds next year, the listed company’s president said.
The decision hinges on the prevailing interest rate environment, CREC President and Chief Executive Officer Oliver Y. Tan told reporters on Friday last week.
“Most likely (it will be) next year because we would want to wait for a rate cut, for rates to go down,” he added.
Mr. Tan also said there is neither a range nor a size yet for the planned green bonds issuance.
On Friday, CREC listed its P5.3-billion initial public offering (IPO) consisting of 1.79 billion common shares, with a 10% overallotment option of up to 178.57-million secondary common shares at P2.70 apiece.
The company’s stock price was unchanged at the close of trading.
The public listing also secured a $12.5-million investment from the United Kingdom’s Mobilist Program, which provides assistance to support infrastructure development and green transition in Southeast Asia.
Mr. Tan said that while CREC remains open to potential mergers and acquisitions, he clarified that such endeavors are not currently part of the company’s immediate agenda,
“Of course, there are opportunities because if you look at solar, these are fragmented. There are opportunities to consolidate. But right now, we are focused on rolling out our projects,” he said.
Sought for comment on CREC’s market debut, Chinabank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message: “It was a decent first-day performance with fairly stable trading throughout the session. CREC’s listing shows the equity market remains very open to promising renewable energy companies.”
“Moreover, the general success of Oceanagold (Philippines), Inc. and CREC could pave the way for other IPOs, though the larger offerings might wait until we see a dovish shift in monetary policy,” he added.
Meanwhile, Mr. Tan said that CREC is interested in participating in the third round of the Energy department’s Green Energy Auction program (GEA-3).
“Primarily, solar. I believe the Energy Department will include solar and battery energy storage systems. So that will also be another technology we are interested in. Also onshore wind,” he said.
The GEA program seeks to promote renewables as the primary source of energy through competitive selection. It will help achieve the government’s target of hiking the share of renewables in the energy mix to 35% by 2030 and 50% by 2040.
CREC aims to add one gigawatt (GW) of solar energy capacity annually to the Philippine energy mix, focusing on ready-to-build or under construction projects over the next five years, aiming for a total of around 5 GW by 2028. — Revin Mikhael D. Ochave
Meanwhile, the ERC has launched the full implementation of the Lifeline Rate Subsidy Program last January, aimed at providing significant discounts on electricity bills for qualified low-income households.
In addition, the ERC and the Board of Investments have joined forces to address issues in the electric power industry, aiming to attract more investments in the Philippines.
The chairperson emphasized the importance of the commission’s independence, credibility and fairness in its regulatory decisions. Hence, the ERC will continue to engage with stakeholders and implement programs aimed at promoting transparency, accountability, and public participation in the energy sector. — Mhicole A. Moral