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Argentina knocks Olympic champion Brazil out of Paris Games

ARGENTINA secured their ticket to this year’s Olympic Games by beating Brazil 1-0 on Sunday in the final four of the South American qualifying tournament, leaving the 2020 champions out of the tournament in Paris.

Javier Mascherano’s side required a win against their bitter rivals following draws with Venezuela and Paraguay in the round-robin qualifying stage for the 2024 Games, with only the top two teams securing berths in Paris.

Argentina’s Under-23 team finished with five points, one ahead of Paraguay, who were facing Venezuela later on Sunday. Brazil finished with three points.

Luciano Gondou’s header in the 77th minute was enough to give the victory to Argentina, gold medallists at the 2004 and 2008 Games.

Brazil, medal winners at the last four Olympics, have not missed the Games since 2004. — Reuters

Military man Prabowo Subianto targets Indonesia presidency

INDONESIAN national flags fly at a business district in Jakarta, Indonesia, Feb. 5, 2021. — REUTERS

JAKARTA — Dismissed from the military amid speculation of rights abuses, exiled in Jordan, and once banned from the United States over his alleged dark past, Defense Minister Prabowo Subianto is now in pole position to be Indonesia’s next leader.

The twice presidential loser is trying his luck for a third time, with incumbent Joko Widodo’s tacit backing, and the hugely popular president’s son as his running mate.

The former special forces commander has undergone a remarkable transformation since being appointed defence minister in 2019, cultivating a persona that is more charismatic statesman than the fiery, pious nationalist he earlier portrayed, analysts say.

From an elite Indonesian family and once the son-in-law of late strongman president Suharto, Mr. Prabowo is accused of involvement in the kidnapping of student activists in 1998 and human rights abuses in Papua and East Timor.

The allegations are unproven, and Mr. Prabowo has always denied any responsibility.

And as the 72-year-old draws closer to the Feb. 14 vote, the numbers suggest his rebranding is working.

Surveys have consistently shown Mr. Prabowo is the candidate to beat, with a lead that stretched to a huge 28 points in polls released late last week by Indikator Politik and Lembaga Survei Indonesia, which projected him winning a majority with 51.8% and 51.9% support respectively.

Unable to run after serving the maximum two terms, Mr. Widodo, better known as Jokowi, has signaled his support for once bitter enemy Prabowo, who he defeated in the 2014 and 2019 elections.

With his 36-year-old son as a possible vice president, Jokowi is seeking to retain some influence in government, analysts say.

By appointing Mr. Prabowo to his cabinet, Jokowi provided him with a level of validation and visibility he previously lacked, earning him red carpet treatment as defense minister on trips from Paris to Beijing, and the end of his de facto US travel ban in 2020 when he visited the Pentagon.

His 9 million Instagram followers get to see snaps from his day job, interspersed with offerings of his cats, artistic black and white portraits, and vintage family photographs. Many young Indonesians have become endeared to Mr. Prabowo, particularly his awkward dance moves in public that have gone viral on TikTok, helping him to tap a key demographic.

More than half of Indonesian voters are under 40, with limited knowledge of the darker narratives of his hardline military past and his ascent under Suharto’s autocratic rule.

“Prabowo’s team is clearly portraying Prabowo in a ‘softer’ way in an effort to win over undecided voters. It’s a change from previous campaigns where we’ve seen nationalist populist Prabowo, and pro-Islamist Prabowo,” said Ross Tapsell, from the Australian National University.

In another sign of the image makeover, in a television interview, Mr. Prabowo, known for his legendary temper, came across as humorous and avuncular.

Referring to his time as a soldier, Mr. Prabowo said: “Maybe the perception of me was that I was tough, scary. I am not scary now, right?” — Reuters

Israel frees hostages in Rafah amid airstrikes; officials say 37 killed

A view shows houses and buildings destroyed by Israeli strikes in Gaza City, Oct. 10, 2023. — REUTERS

DOHA/JERUSALEM — Israel launched a special forces operation that freed two Israeli hostages in Rafah amid airstrikes early on Monday, which local health officials said killed 37 people and wounded dozens in the southern Gaza city.

A joint operation by the Israel Defense Force (IDF), Israel’s domestic Shin Bet security service and the Special Police Unit in Rafah freed Fernando Simon Marman, 60, and Louis Hare, 70, the Israeli military said.

The two men were kidnapped by Hamas from Kibbutz Nir Yitzhak on Oct. 7, the military said.

“It was a very complex operation,” Israeli military spokesman Lt. Col. Richard Hecht said. “We’ve been working a long time on this operation. We were waiting for the right conditions.”

The hostages were being held on the second floor of a building that was breached with an explosive charge during the raid, which saw heavy exchanges of gunfire with surrounding buildings, Mr. Hecht said.

“I’m very happy to announce that this night two released hostages landed here at Sheba medical center, Israel’s largest hospital,” said Prof Arnon Afek, director of Sheba general hospital. “They were received in our ER and initial examinations were conducted by our ER staff and they are in a stable condition and being tended to.”

Israeli military said the air strike on Rafah coincided with the raid to allow its forces to be extracted.

The airstrikes caused widespread panic in Rafah as many people were asleep when the strikes started, said residents contacted by Reuters using a chat app. Some feared Israel had begun its ground offensive into Rafah. Israeli planes, tanks and ships took part in the strikes, with two mosques and several houses hit, according to residents.

Hamas said in a statement that the attack on Rafah was a continuation of a “genocidal war” and forced displacement attempts Israel has waged against the Palestinian people.

US President Joseph R. Biden told Prime Minister Benjamin Netanyahu on Sunday that Israel should not launch a military operation in Rafah without a credible plan to ensure the safety of the roughly 1 million people sheltering there, the White House said.

Aid agencies say an assault on Rafah would be catastrophic. It is the last relatively safe place in an enclave devastated by Israel’s military offensive.

Mr. Biden and Mr. Netanyahu spoke for about 45 minutes, days after the US leader said Israel’s military response in the Gaza Strip had been “over the top” and expressed grave concern over the rising civilian death toll in the Palestinian enclave. Mr. Netanyahu’s office has said that it had ordered the military to develop a plan to evacuate Rafah and destroy four Hamas battalions it says are deployed there.

Hamas militants killed 1,200 people in southern Israel and abducted at least 250 in their Oct. 7 incursion, according to Israeli tallies. Israel has responded with a military assault on the Gaza Strip that has killed more than 28,000 Palestinians, according to the Hamas-run health ministry.

Mr. Netanyahu said in an interview aired on Sunday that “enough” of the 132 remaining Israeli hostages held in Gaza were alive to justify Israel’s war in the region.

Hamas-run Aqsa Television on Sunday quoted a senior Hamas leader as saying any Israeli ground offensive in Rafah would “blow up” the hostage-exchange negotiations.

Egypt warned on Sunday of “dire consequences” of a potential Israeli military assault on Rafah, which lies near its border.

“Egypt called for the necessity of uniting all international and regional efforts to prevent the targeting of the Palestinian city of Rafah,” its foreign ministry added in a statement. — Reuters

North Korea develops new rocket launcher controller — state media

MICHA BRANDLI-UNSPLASH

SEOUL — North Korea has successfully developed a new ballistic control system for a multiple rocket launcher along with controllable shells, state media KCNA reported on Monday.

The Academy of Defense Science, which oversees the country’s missile development, conducted a “ballistic control” test firing of 240-mm caliber controllable multiple rocket launcher shells on Sunday, KCNA said.

KCNA said the strategic value of the 240 mm-caliber multiple rocket launcher will be “reevaluated” its role in battlefields will also increase due to what it called “rapid technical improvement.” The development of the shell and the ballistic control system will make a “qualitative change” in its army’s multiple rocket launcher force, the report added.

Sunday’s launch comes amid multiple missile tests by North Korea in recent weeks and growing ties between Pyongyang and Moscow — moves that have been criticized by the US and its allies as escalating tensions in the Korean Peninsula.

North Korea has accused the US and South Korea of escalating tensions with their large-scale military drills. — Reuters

IMF’s Georgieva says Mideast growth seen to slow in 2024 on oil cuts, Gaza

EUROPEAN Central Bank President Christine Lagarde and Managing Director Kristalina Georgieva share a moment at the G20 Finance Ministers and Central Bank Governors’ Meeting during the 2022 Annual Meetings at the International Monetary Fund. -- IMF PHOTO/ALISON SHELLEY

DUBAI — The International Monetary Fund (IMF) said on Sunday Middle East economies were lagging below growth projections due to oil production cuts and the Israel-Gaza conflict, even as the global economic outlook remained resilient.

Despite uncertainties, “the global economy has been surprisingly resilient,” IMF managing director Kristalina Georgieva told the Arab Fiscal Forum in Dubai, while warning of a potential wider impact on regional economies of continued conflict in Gaza.

In a regional economic report last month, the IMF revised its gross domestic product (GDP) growth forecast for the Middle East and North Africa down to 2.9% this year, lagging below October projections, due in part to short term oil production cuts and the conflict in Gaza.

The IMF last month edged its forecast for global economic growth higher, upgrading the outlook for both the United States and China and citing faster-than-expected easing of inflation.

Ms. Georgieva said economies neighboring Israel and the Palestinian territories saw the conflict weighing on tourism revenues, while Red Sea attacks weighed on freight costs globally.

Those factors compounded “the challenges of economies that are still recovering from previous shocks,” she told the forum on the sidelines of the World Governments Summit in Dubai.

The Iran-aligned Houthis in Yemen have been targeting commercial vessels with drones and missiles in the Red Sea since mid-November, and say their attacks are in solidarity with Palestinians as Israel strikes Hamas militants in Gaza. But the US and its allies characterize them as indiscriminate and a menace to global trade.

Several global shippers have been diverting traffic to the Cape of Good Hope, a longer route than through Egypt’s Suez Canal.

Egypt’s Finance Minister Mohamed Maait told Reuters on the sidelines of the summit that part of the impact of the diversion on Suez Canal revenues could be absorbed due to good growth in “the period before the events.”

The IMF will publish on Monday a paper that shows phasing out energy subsidies could save $336 billion in the Middle East, equivalent to the economies of Iraq and Libya combined, Ms. Georgieva said.

Ms. Georgieva said that eliminating regressive energy subsidies also “discourages pollution, and helps improve social spending.”

In the Middle East and North Africa (MENA) region, fossil fuel subsidies made up 19% of GDP in 2022, the IMF has said.

It has recommended the gradual unwinding of energy subsidies for the region’s economies, including oil exporters, and suggested targeted support as an alternative.

AI TSUNAMI
Advanced technology, including Artificial Intelligence (AI), is a key theme of focus at the World Governments Summit, with several top executives from major global tech firms due to speak, including Sam Altman, chief executive officer of OpenAI.

Ms. Georgieva said globally, 40% of jobs are exposed to AI, and countries that lack the infrastructure and a skilled workforce to invest could fall behind.

Regional economies such as the United Arab Emirates and Saudi Arabia have significantly increased investment in AI as part of strategies to diversify income sources. — Reuters

Biden’s campaign joins TikTok in push for young voters

US President Joseph R. Biden’s reelection campaign joined short-form video app TikTok on Sunday, using the National Football League’s Super Bowl to kick off its new account to reach young voters ahead of the presidential election in November.

The campaign’s launch on TikTok is notable given that the app, which is owned by Chinese tech giant ByteDance, is under review in the US for potential national security concerns. Some US lawmakers have long called for the app to be banned over concerns that the Chinese government could access user data or influence what people see on the app.

Last year, the Biden administration ordered government agencies to remove TikTok from federal government-owned phones and devices.

TikTok has maintained that it would not share US user data with the Chinese government and has taken substantial measures to protect the privacy of its users.

The company did not immediately respond to a request for comment on Sunday.

Biden campaign advisors said in a statement it would “continue meeting voters where they are,” including on other social media apps like Meta Platform’s Instagram and Truth Social, which is owned by former US President Donald Trump.

The campaign is taking “advanced safety precautions” for its devices and its presence on TikTok was separate from the app’s ongoing security review, a campaign official added.

Mr. Trump, the Republican frontrunner in the presidential race, does not have an official account on TikTok.

The video posted by the Biden-Harris HQ TikTok account made light of a fringe conservative conspiracy theory that the Super Bowl was rigged in favor of the Chiefs, in order for pop superstar Taylor Swift, who is dating Chiefs tight end Travis Kelce, to announce an endorsement of Mr. Biden.

Amid rapid-fire questions asking the president to choose from one of two options, Mr. Biden was asked if he was “deviously plotting to rig the season so the Chiefs would win the Super Bowl” or whether the Chiefs were simply just a good football team.

“I’d get in trouble if I told you,” Mr. Biden joked.

By Sunday night, the account had gained 10,900 followers. — Reuters

Breaking Barriers in the Digital Economy

By Mon Abrea, CPA, MBA, MPA

Chief Tax Advisor, Asian Consulting Group

The reforms under the Ease of Doing Business Act, TRAIN, CREATE and now the Ease of Paying Taxes Act have introduced significant changes in our tax system that are both necessary and important. However, there is still more that we can do to increase tax collections through voluntary compliance without adding new taxes.

There are certain ways that can make the tax system simpler and fairer for all, while also keeping in mind that the government must balance this goal with the need to collect more revenues. These proposals are not just intended to just be a strain on the government’s resources, but rather come with a benefit for both taxpayers and the government.

With the appointment of Secretary Frederick Go and Secretary Ralph Recto, I hope these proposals will be considered among other reforms they wish to introduce in improving ease of doing business and reducing the cost of doing business while increasing revenue collections from a broader taxpayer base: (1) adoption of pre-populated returns, (2) implementation of risk-based audit, (3) simplifying the tax regime for MSMEs, and (4) creation of a separate office to process VAT refund, among others.

One of the critical success factors here is the integration and full digitalization of our tax system with the capability to access information from other government agencies. Lifting of the bank secrecy law will also be indispensable if we want to prosecute big-time tax evaders and stop money laundering.

Adoption of pre-populated returns

Through the Ease of Paying Taxes Act, we have already further simplified tax returns for micro and small taxpayers by reducing the number of pages from four to two. However, we can further take this down by implementing pre-populated tax returns.

Pre-populated tax returns are essentially tax returns that have been partially filled-out by the government through a series of automated systems that gather data. This data can come from third parties or even data that the taxpayers provide themselves.

It has been aptly compared to turning tax returns into a “credit card bill.” What this means is that, just as a credit card holder receives a statement of account at the end of the month, a taxpayer would receive their tax return with the details already filled in. It would then be up to the taxpayer to confirm or inform the BIR if there is any additional or wrong information in the return. Thus, taxpayers would no longer have to repeat filling out data that the BIR should already have in its database or could easily get from third parties.

The implementation of this proposal would require more fine-tuning, but the basics are simple: since the BIR already has information on how much taxes are withheld from employees and/or self-employed and professionals, they can already generate returns automatically. If no sufficient data exists, the BIR can use a presumptive tax which the taxpayer could correct by providing more information and documents to pay less amount of taxes.

A study by Joe Bankman, a professor of tax law at Stanford University, showed that this generally makes taxpayers more honest since they are aware that the revenue collecting agency (in our case, the BIR) has already removed all the irrelevant questions and that whatever questions are left are important and tailored specifically for the taxpayer.

Utilizing pre-populated tax returns essentially combines the audit and the filing process into one since the BIR would already be conducting the audit at the point of filing. This would lead to less resources being used overall.

If adopted correctly, this will significantly increase collections from self-employed and professionals who are the least compliant with zero to less than P10,000 annual tax payments. It will also address any gap or discrepancy in the remittance of withholding tax on compensation since employees will have to confirm the pre-populated return issued by BIR, and not by their employers.

Implementation of risk-based audit

The next proposal is a measure that the government has already laid down the foundations for. Under the Ease of Paying Taxes Act, for purposes of VAT refund, the law has classified claims into low-risk, medium-risk, and high-risk based on the amount of the claim, the taxpayer’s tax compliance history, and their frequency of claiming VAT refunds, among others.

This classification-system can also be extended to the conduct of the BIR audit.

A risk-based audit, as its name implies, means that the BIR will be auditing taxpayers based on their assessment of the taxpayer’s risk level. To implement this, the BIR could set a benchmark for certain industries based on how these industries generally earn.

Businesses who pay below this benchmark would be considered high-risk or medium-risk, depending on how much below the threshold they have paid.

Presently, the BIR already has a system for the audit of priority cases as identified by the Internal Revenue Integrated System (IRIS), but this can further be expanded.

Implementing a risk-based audit would allow the BIR to focus on exerting efforts where it really matters instead of wasting resources auditing low-risk or same taxpayers every year. The current method of “random” audit should be discontinued. At best, a random audit allows the BIR to conduct a “shotgun” method and, at worst, it allows revenue officers unbridled discretion on who to audit (to the point that only the same taxpayers would be audited over and over again).

Thus, with this increased efficiency, the BIR would theoretically be able to increase its revenue collections and at the same time reduce expenses.

Simplifying the tax regime for MSMEs

Similarly, the Ease of Paying Taxes Act has laid down the foundations for classifying taxpayers into micro, small, medium, and large taxpayers. This same metric has in fact been used in that very law to grant certain benefits to micro and small taxpayers such as reducing the number of pages in tax returns and reducing the penalties in select cases.

Another further benefit that we could extend to micro and small enterprises is simplifying their tax compliance by allowing them to opt for a flat tax system.

Instead of being taxed at the regular rate, micro and small enterprises could be granted the option to be taxed at 10 percent of their gross sales/revenues in lieu of all taxes. We could also remove non value-adding and compliance requirements that are very costly for micro and small enterprises, such as books of accounts. In exchange, these taxpayers could be required to implement electronic invoicing and do an online submission of profit and loss statements. This would then make it easier for the BIR to monitor their sales, allowing less strain on the government’s resources.

While it is true that the 10% flat tax would be significantly lower than what the government currently imposes, it is best to note that the flat tax would be imposed on gross sales/revenues. At present, even with our current tax rates, most companies pay barely 5% of their gross sales or revenues for both VAT and income tax. The current effective rate of 5% is definitely lower than the proposed 10% flat tax.

Creation of a separate office to process VAT refunds

In the last Senate Ways and Means Committee hearing I attended, the issue on VAT refund has surfaced again. Time and again, one of the most common complaints of those claiming for VAT refund is the long and tedious process, with no guarantee that they would get a refund (and not a tax assessment) from the BIR.

Of course, the BIR is blamed for this, but the BIR couldn’t care less since their mandate is to assess and collect taxes, not the processing of VAT refunds. This does not mean that the BIR is intentionally delaying the VAT refund process or, worse, does not process it at all. What this means is that the BIR faces a conflict as a tax collection agency. They are being required to audit the documents for VAT refund to make sure that they do not approve an undue refund because, otherwise, they will be legally liable.

While the regulation is clear and most documents have been submitted to the concerned Investment Promotion Agency (IPA), data-sharing among government agencies is still on the way. Thus, the burden of resubmitting all these documents rests on those who wish to claim for VAT refund.

At the very least, this should be fully automated so all information and documents are already in the system. That was actually my understanding of what the TRAIN law prescribes — the establishment and implementation of an enhanced VAT refund system and the establishment of a VAT refund center in the BIR and the BOC, but again, it might be best if it is outside or other than BIR and BOC. An independent and system-based tax refund center under the Department of Finance may address the issues on VAT refund.

Other proposals

By following the same principles in the development of pre-populated returns, we can also adopt a system of pre-registration. Through pre-registration, all licensed professionals and individuals doing business which register either with the DTI, the local government, or any other relevant government agency including the Professional Regulation Commission (PRC) for licensed professionals would automatically be registered with the BIR. From there, the taxpayer can update their details through an online platform.

Another proposal worth considering is offering incentives to taxpayers to register, or incentives to startups and small businesses. This would encourage taxpayers to register, thereby drawing them out of the underground economy and broadening the taxpayer base.

Finally, I deem it necessary to revisit the definition of what constitutes a marginal income earner to encourage them to register and formalize their businesses. Presently, under the Ease of Paying Taxes Act, all taxpayers earning under P3 million are considered micro taxpayers. However, there are distinct reasons as to why we should classify taxpayers as marginal income earners, since we could then use that classification to give them additional benefits. As it is, the threshold for marginal income earners is P100,000 annually, but this clearly does not match today’s economic realities. Instead, I propose that we amend the threshold instead to P1 million sales so all online sellers and even ambulant vendors will register to formalize their business. Furthermore, the MSME classification under EOPT may also be revisited to consider not just annual gross sales but also total assets and employees to distinguish one type of industry from another without undue prejudice on those with higher amounts of gross sales but lower margins such as manufacturing firms. (See table below.)

What all these proposals entail is simple: we need to make tax compliance easier and fairer for everyone, especially small taxpayers who may have smaller contributions but constitute a bigger share in terms of total number of taxpayers. Toward this end, we must rid our tax system of unnecessarily complicated processes and instead adopt data and tech-driven approaches to tax compliance.

I believe that governance is a shared responsibility. We need to work with the government to serve the people and to ease their burdens. In relation to taxation, one of these burdens is the complicated tax system. It is because of this belief that I am putting forward these proposals – so that we can all work together toward a simpler, fairer, and less complicated tax system that will benefit all of us.

To uphold our advocacy and commitment of working with our policymakers to have better and more efficient economic and fiscal policies, I am inviting our government and business leaders, especially our foreign investors, to join the 2024 International Tax and Investment Conference on February 27, 2024. Register now and join us as we break barriers in the digital economy.

 


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PH Cancer Summit organizers urge Filipinos to undergo cancer screening for early detection

PCS CanCom Chair Manuel Roxas encourages Filipinos for cancer screening, with PCS CanCom Executive Director Tefel Pesigan-Valentino

The Philippine College of Surgeons Cancer Commission (PCS CanCom) Foundation is encouraging the public to have cancer screening tests as early diagnosis is vital to higher survival among cancer patients.

Based on data from PCS Cancer Foundation, the majority or 85% of those who get cancer are due to aging or unhealthy lifestyle and the remaining 15% are genetic or hereditary.

A surgeon and specialist on colorectal cancer, Dr. Manuel Francisco Roxas, who is also a chairperson of the PCS CanCom, stressed that the key to cancer survival is early diagnosis.

“For the majority of cancers when diagnosed early, they’re curable so, cancer can be curable when diagnosed early,” Mr. Roxas said during the recent Kapihan sa Manila Bay forum.

Mr. Roxas, who is also a medical director of the Ayala-owned Healthway Cancer Care Hospital, raised concern that cancer is the third leading cause of death among Filipinos and is projected to rise due to the country’s aging population.

In addition, Department of Health (DoH) Secretary Ted Herbosa informed the PCS Cancer Foundation that the government is planning to implement a program promoting cancer screening.

“The health chief said the DoH wants to focus on cancer screening and prevention if the government’s screening program is good for the population of all healthy Filipinos. We will pick up cancer early, and hopefully, late-stage cancer will decrease, better survivors and less cost for expensive treatment,” Mr. Roxas said.

Meanwhile, the PCS CanCom is looking forward to constructing the Philippine Cancer Center (PCC).

“The Philippine Cancer Center will focus on the less common cancers, the more complicated cancers and they will be expert on it. For the more common cancers, the DoH hospitals with cancer centers will be more than ready to take care of them,” he said.

The construction of PCC which is reportedly set to rise in East Avenue in Quezon City, is part of the mandate of the Philippine National Integrated Cancer Control Act (NICCA) which was signed into law in February 2019. The NICCA includes wide-ranging provisions covering the development of national and regional cancer centers.

Currently, the country has 35 designated cancer control centers.

In observance of World Cancer Awareness Day, the PCS CanCom together with the DoH, Cancer Coalition Philippines (CCPh), and the Philippine Cancer Society are convening a Philippine Cancer Summit this year, which will be held from Feb. 29 to March 1, 2024, to provide free cancer screening examinations at Novotel in Quezon City, where mobile buses will also be deployed for free screening for the public.

They also organized a fun run and a cancer summit on Feb. 11, 2024, at the CCP Complex. This will give the opportunity to avail free cancer screenings for breast, cervix, prostate, and thyroid for participants.

Included in the event are a cancer screening examination for participants for 100 breast, 150 thyroid, 60 cervical, and 50 prostate, and distribution of educational materials for the screening, diagnosis, and management of the different types of cancers.

 


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BSP may keep rates steady — poll

BW FILE PHOTO

By Keisha B. Ta-asan, Reporter

THE BANGKO SENTRAL ng Pilipinas (BSP) is widely expected to keep its policy rate at a 16-year high for a third straight meeting on Thursday amid upside risks to inflation and as economic growth remains robust, analysts said.

The Monetary Board is also not expected to cut borrowing costs ahead of the US Federal Reserve as a narrower interest rate differential with the US could cause the peso to weaken further, they said.

A BusinessWorld poll of 17 analysts held last week showed 15 analysts expect the Monetary Board to maintain its target reverse repurchase (RRP) rate at a 16-year high of 6.5% at its review this week. The BSP has kept its key rate at this level for two straight meetings since November.

Analysts' Expectations on Policy Rates (February 2024)On the other hand, two analysts said the BSP may cut the policy rate by 25 basis points (bps) to 6.25% at the Feb. 15 meeting after inflation slowed in January.

“We expect the BSP to remain on hold at its next meeting. Although inflation slowed to a more than three-year low of 2.8% in January, this is largely due to base effects,” Makoto Tsuchiya, an economist from Oxford Economics, said in an e-mail.

Headline inflation fell to 2.8% in January from 3.9% in December and 8.7% in the same month a year ago, marking the slowest print since the 2.3% in October 2020.

January was also the second straight month that inflation was within the BSP’s 2-4% target range. The consumer price index for the month was below the 3.1% median estimate in a BusinessWorld poll.

Finance Secretary and Monetary Board member Ralph G. Recto told reporters on the sidelines of an event on Thursday that the BSP may not deliver any more rate hikes this year amid slowing inflation.

“Inflation is on its way down. Assuming it continues to go down and is within the (2-4%) range, then realistically, what will happen next is the lowering of interest rates,” he said in mixed English and Filipino.

However, Philippine National Bank (PNB) economist Alvin Joseph A. Arogo said inflation may still pick up in the coming months, which could give the BSP a reason to keep rates elevated for now.

“Although headline inflation was within the 2-4% target range during the past two months, we think that the risk of a transient re-acceleration is material enough due to the threats from El Niño, Middle East conflict escalation, and lagged impact of minimum wage hikes,” he said.

Colegio de San Juan de Letran Graduate School Associate Professor Emmanuel J. Lopez likewise said the inflation outlook remains uncertain as the agriculture sector has started to feel the effects of El Niño.

Oil price hikes may also lead to higher transport costs of delivering goods and food products, he said.

Meanwhile, Pantheon Chief Emerging Asia Economist Miguel Chanco said the BSP has room to remain hawkish as fourth-quarter gross domestic product (GDP) data showed the Philippine economy is still robust.

“I think the surface-level strength portrayed by the fourth-quarter GDP numbers will, for now, reduce any urgency on the part of the Board to start loosening policy,” he said.

“The BSP is unlikely to trim its policy rate sooner than markets expect given the resilience in household spending seen in the fourth-quarter GDP reading,” Sarah Tan, an economist from Moody’s Analytics, said.

The Philippine economy grew by 5.6% in 2023, slower than the 7.6% expansion in 2022 and falling below the government’s 6-7% full-year target.

In the fourth quarter alone, GDP expanded by 5.6%, slower than the revised 6% growth in the third quarter and the 7.1% expansion in the fourth quarter of 2022.

Household spending jumped by 5.3% in the fourth quarter, bringing private consumption growth to 5.6% in 2023. This is slower than 8.3% in 2022.

Even as GDP growth slowed in 2023, key labor market indicators such as unemployment rates still indicate economic resilience, PNB’s Mr. Arogo noted.

“We therefore think that the BSP should be patient and only start cutting policy rates in the fourth quarter. Our baseline view is for the RRP rate to ease to 6% by the end of 2024,” he said.

Weaker demand due to the lagged impact of previous rate hikes and a global economic slowdown may result in Philippine GDP growth slowing further to 5.2% this year, Oxford Economics’ Mr. Tsuchiya said, which could cause the BSP to “resort to monetary easing to prop up the economy.”

“For the whole year, we think the BSP will cut its rate by 125 bps in total, bringing the rate to 5.25% at yearend,” he said, adding that inflation may average 3.5% in 2024, barring unexpected supply-side shocks.

WAITING FOR FED CUTS
According to Mr. Recto, the Monetary Board will consider the Fed’s policy moves in deciding when to begin easing benchmark interest rates.

“Are they going to start reducing rates? If they do, then possibly we can start reducing rates,” he said. “I think the Fed needs to (cut policy rates) first then we look at our own data… We’re affected by what the Fed does as well.”

The US central bank raised the fed funds rate by a total of 525 bps from March 2022 to July 2023 to the 5.25%-5.5% range. Markets expect the Fed to begin cutting borrowing costs by May.

“We see the BSP moving via rate cuts as soon as the Fed cuts policy rates. Given the ING house call for (Fed) rate cuts by May or June, we see the BSP cutting rates beginning June,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.

Security Bank Corp. Chief Economist Robert Dan J. Roces likewise said the BSP is unlikely to ease before the Fed given the peso’s recent depreciation against the dollar.

“The local policy rate is projected to decrease to 5.5% by the end of 2024, in cautious increments of 25 bps to total 100 bps — likely matching a similar-sized move by the Fed — and to provide support to economic activity through lower borrowing costs,” he said.

The peso closed at P55.911 a dollar on Thursday, 3.9 centavos stronger from its P55.95 close on Wednesday. Year to date, the peso was weaker by 54.1 centavos from its P55.37-per-dollar finish on Dec. 29, 2023.

ING’s Mr. Mapa noted that if the BSP’s risk-adjusted inflation forecast moves closer to the baseline, they may start reducing borrowing costs to help boost private investments.

The BSP sees headline inflation averaging 3.7% this year, slower than the 6% print in 2023, and easing further to 3.2% in 2025.

Meanwhile, the central bank’s risk-adjusted forecasts show that inflation could settle at 4.2% this year, above the 2-4% target, and slow to 3.4% in 2025.

“For the year we see 75 bps worth of rate cuts as [BSP Governor Eli M. Remolona, Jr.] finally shifts to a more dovish tone,” Mr. Mapa said.

“We all know that the growth engine of the Philippine economy is consumption. However, if economic managers are keen on reversing and compensating for years of underinvestment, they will need to consider giving growth another leg up via more accommodative monetary policy,” he said.

Moody’s Analytics’ Ms. Tan said the BSP may keep benchmark interest rates on hold until June, as inflation could still pick up due to El Niño and fading base effects.

“A series of rate cuts is expected to begin from June at the earliest, when inflation is firmly within the BSP’s 2% to 4% target range. We see a cumulative 100 basis points in cuts by the end of the year,” she said. — with a report from Luisa Maria Jacinta C. Jocson

Growth, fiscal goals need to be ‘more realistic,’ says DoF chief

BW FILE PHOTO

THE DEVELOPMENT Budget Coordination Committee (DBCC) may need to adjust its growth and fiscal targets to be “more realistic,” Department of Finance (DoF) Secretary Ralph G. Recto said last week.

“We’re discussing that right now because I think we have to come up with more realistic targets,” Mr. Recto told reporters on the sidelines of an event on Thursday.

“Don’t you think we need some adjustment there? I think we need to. Something more realistic but still high for 2024 and beyond,” he added.

The government is targeting gross domestic product (GDP) growth of 6.5-7.5% this year and 6.5-8% from 2025 to 2028 under the DBCC’s latest macroeconomic assumptions and medium-term fiscal and growth goals.

The economy grew by 5.6% in 2023, slower than the 7.6% expansion in 2022. It also fell short of the government’s 6-7% goal for the year.

“We are reviewing all of that. It’s a six-year term for the President and we’ve finished one year and a half. We know what’s happening globally, so we have an idea of something more realistic,” the DoF chief said in mixed English and Filipino.

National Economic and Development Authority Secretary Arsenio M. Balisacan earlier said it could be too early to adjust their economic growth targets.

“It’s only the first (quarter) of the year and now you want to say reduce the 6.5% — that’s too defeatist,” he said.

Meanwhile, the Finance chief said the entire medium-term fiscal framework is also under review.

“The fiscal plan was made when (Ferdinand R. Marcos, Jr.) became president in 2022. There was no war in the Middle East, the Ukraine war had just begun. Thereafter, prices of food and oil rose,” Mr. Recto said. “That plan was done way back a year and a half ago. It’s always under review and more so today.”

The DBCC expects the National Government’s budget deficit to hit P1.39 trillion this year, equivalent to 5.1% of GDP. Broken down, revenues are expected to reach P4.24 trillion while disbursements are seen to hit P5.63 trillion.

Under the fiscal framework, revenues are programmed to account for 15-16% of GDP, while expenditures are equivalent to around 20% of GDP.

Mr. Balisacan also said earlier that the contraction in state spending in the fourth quarter was “intentional” due to the government’s fiscal consolidation plan. In the fourth quarter, government spending contracted by 1.8%, a reversal of the 6.7% growth in the previous quarter and 3.3% a year ago.

Mr. Recto noted that the government is not planning on cutting back on its expenditures.

“I’m not considering slower spending. At the very least we will keep the spending level at whatever it is right now under the DBCC program. Hopefully, we can even improve it. For as long as the deficit is going down and your debt-to-GDP ratio is going down, that’s what is important,” he added.

The DBCC last reviewed its targets in December. Its next meeting is scheduled in March.

TAX REVENUES
Meanwhile, the Bureau of Internal Revenue (BIR) said streamlining tax processes to attract more investments could mean foregone revenues for the government, which it will need to make up for by intensifying collection efforts in other areas.

“That’s the challenge, as we try to improve the process and implement the ease of paying taxes, of course we may lose revenues because of all the improvements,” BIR Commissioner Romeo D. Lumagui, Jr. told reporters on the sidelines of an event on Thursday.

“As we want to grow the economy, we’ve been giving incentives. We’ve been lenient on those in the hopes we will be able to attract investors. There are lost revenues in the meantime, so there is a lot we need to do to set off those revenue losses.”

For example, Mr. Lumagui said the agency will be focusing on improving excise tax collection this year, especially on tobacco and vape products.

“For this year, that will be our concentration, excise tax. We’ve analyzed what happened in 2023,” he said.

Mr. Lumagui earlier said there was an estimated 20% shortfall in excise taxes in the first four months of 2023 due to illicit tobacco.

“So many are shifting to vape. Hopefully, vape product registration will increase. Last year, we saw an increase in registrations because of what we’ve done, so hopefully it will increase this year,” he added, noting that the excise tax collection shortfall has been trimmed to about 13-14% at the end of 2023.

Data from the BIR showed it generated P137.18 billion in revenues from operations targeting the illicit trade of cigarettes, vape and other excisable articles in 2023.

The BIR collected around P2.53 trillion last year, missing its P2.64-trillion target for 2023 but surpassing its P2.34-trillion collection in the previous year.

This year, the agency is tasked to generate P3.05 trillion in revenues.

Mr. Recto also ordered the agency to accelerate its digitalization and modernization programs to make tax compliance easier.

“Additionally, we will strengthen enforcement efforts against tax cheats and ensure fairness in the tax system to build taxpayers’ trust,” he added. — Luisa Maria Jacinta C. Jocson

Nonmonetary measures needed to address rice inflation as prices may continue to climb

PHILIPPINE STAR/ MICHAEL VARCAS

THE AGGRESSIVE rate hikes of the Bangko Sentral ng Pilipinas (BSP) over the past two years have helped stabilize inflation, but nonmonetary measures are still needed, especially as rice prices remain high.

Rice prices continue to be a “serious concern” as this could cause headline inflation to breach the 2-4% target anew in the second quarter, Monetary Board member V. Bruce J. Tolentino said.

“The Philippines produced a record level of rice in the past season. But work on pushing productivity must continue, because there is significant unmet demand for rice, and many are hungry,” he told BusinessWorld in a text message.

Rice production and agricultural productivity must grow faster and surpass the expansion in the population and per capita consumption, he said.

“Increasing productivity is a medium- to long-term effort that requires consistent and faithful effort,” Mr. Tolentino said, adding that the government should invest in scientific research and development for the long term.

Latest data from the Philippine Statistics Authority showed headline inflation eased to 2.8% in January from 3.9% in December and 8.7% in the same month in 2023.

This was the slowest inflation point since the 2.3% seen in October 2020 and was below the 3.1% median estimate in a BusinessWorld poll.

January also marked the second straight month that the consumer price index (CPI) was within the BSP’s 2-4% annual goal following 20 consecutive months of above-target inflation.

The central bank sees headline inflation averaging 3.7% this year, slower than the 6% print in 2023, and easing further to 3.2% in 2025.

Meanwhile, the central bank’s risk-adjusted forecasts show that inflation could settle at 4.2% this year, above the 2-4% target, and could slow to 3.4% in 2025.

The BSP has kept its policy rate unchanged at a 16-year high of 6.5% for two straight meetings since November. This was after it hiked benchmark borrowing costs by a cumulative 450 basis points (bps) from May 2022 to October 2023 to help bring down the CPI.

“I am happy that the monetary policy decisions made over the last year have helped to manage and bring down inflation,” Mr. Tolentino said.

“(But) rice prices continue to be high due to the dynamics of reduced global supplies due to India’s ban on rice exports, plus the emerging impact of fertilizer supply constraints arising from the war in Ukraine,” he added.

In January, rice inflation quickened to 22.6% in January from 19.6% in December. This is the highest rice inflation in nearly 15 years or since 22.9% in March 2009.

Rice was also the biggest contributor to January inflation, adding 1.3 percentage points to the 2.8% headline print. The commodity has the biggest weight in the overall CPI basket at 8.87%.

National Statistician Claire Dennis S. Mapa earlier said the higher rice inflation was due to an increase in prices in the global market and a low base, noting that annual rice inflation may hover at around 20% or even higher until July.

“A key factor in the continuing increases in rice prices is tight domestic stocks, which were not fully replenished because import permits were drastically constrained in 2022 up to mid-2023,” Mr. Tolentino said.

China Banking Corp. Chief Economist Domini S. Velasquez also noted that a large part of January inflation was driven by favorable base effects from last year’s peak.

“Persistent double-digit rice inflation has pushed up our inflation forecast for the year from 3.5% to 3.8%. Rice prices remain on an uptrend and will likely continue to drive inflation in the coming months,” she said.

“Looking ahead, El Niño, which is expected to persist until the second quarter of 2024, could drive up prices. Inward-looking policies of rice exporter nations have also exacerbated global rice prices,” Ms. Velasquez added.

She noted that the government’s rice supply deal with Vietnam could help ensure stable supply of rice. Under a memorandum of understanding signed during President Ferdinand R. Marcos, Jr.’s two-day state visit to Vietnam in January, Hanoi committed to supply 1.5 million to 2 million metric tons of white rice to the Philippines “at a competitive and affordable price” for five years.

Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said average inflation may hit 4.1% this year amid high food prices, before easing to 3.8% in 2025.

“As fading base effects meet the impact of the drought in the second quarter, headline inflation is expected to peak in the range of 5% year on year in June-July before tapering off to a low of 3.5% in September,” he said in an e-mail.

Mr. Asuncion said food inflation may spike to above 6% starting in April due to the impact of drought on food supply. It will likely start to go down in August, reaching an annual average of 4.7% for 2024.

Food inflation alone eased to 3.3% in January from 5.5% in the previous month and 11.2% a year ago. It was the slowest since the 2.8% in March 2022. — Keisha B. Ta-asan

PDEx expects bond issuances to exceed P400B this year

CORPORATE BOND issuances this year may surpass the Philippine Dealing & Exchange Corp.’s (PDEx) initial target of P400 billion amid expectations of increased offerings by the banking sector, its top official said.

“(The outlook) is a more robust year compared to last year… I think (we will surpass),” PDEx President and Chief Executive Officer Antonino A. Nakpil said on the sidelines of a listing ceremony last week when asked if they can hit the P400-billion target for 2024.

The full-year goal is almost double the P209 billion in issuances seen in 2023, but below the P508 billion raised in 2022.

“We started with [around] P70 billion just within February. We’ll be at P82 billion after this week. It is a very good start for the first quarter,” Mr. Nakpil added.

Big companies and the banking sector will drive the increase in fundraising as they expect interest rates to begin going down later this year, he said.

“There’s a lot of maturities that are going to occur. The banks in particular usually have an incentive to reissue their bonds again. That will be driving the growth. We believe the banks are coming back,” Mr. Nakpil said.

“The corporates who are coming early — and where interest rates haven’t fulfilled the downward trend yet — we’ll probably see. The banks, definitely, have always been very tactical on that. They are very astute when it comes to timing,” he added.

The Bangko Sentral ng Pilipinas (BSP) raised borrowing costs by 450 basis points from May 2022 to October 2023 to bring down elevated inflation, bringing the policy rate to a 16-year high of 6.5%.

BSP Governor Eli M. Remolona, Jr. earlier ruled out a rate cut in the first semester amid risks to the inflation outlook but said the central bank may start considering policy easing in the second half.

PDEx also aims to encourage smaller firms such as micro, small, and medium enterprises (MSMEs) to raise capital from bonds, adding that it is “an extremely large market,” Mr. Nakpil added.

“Focus on the MSMEs is one — focus on getting more people access to capital and going back to the basics of getting capital moving within the economy. That’s why you want the capital market developed so that capital will be accessible to not just family-owned firms or conglomerates, but to new firms,” he said.

“The mission of the capital market infrastructure is to have more issuers have access to capital… Capital should move around to all issuers,” he added. — Revin Mikhael D. Ochave