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Philippines has ‘very ample’ sugar stocks, no immediate plans to import — regulator

FABRIKASIMF-FREEPIK

MANILA — The Philippines has plentiful stocks of sugar as it enters a new crop year this month and thus has no immediate plans to import any additional volume of the sweetener, the chief of the industry regulator said on Thursday.

“At this very moment, as the milling season starts, we have very ample two-month buffer stocks. For crop year 2023/24, (importing) is not yet on the table,” Sugar Regulatory Administration (SRA) chief Pablo Luis Azcona told reporters on the sidelines of a business forum.

Spikes in sugar prices in recent months had prompted the SRA, chaired by President Ferdinand Marcos Jr., to allow imports to help curb high inflation. The government regulates sugar imports to protect local producers.

Early this year, the SRA board approved the import of an additional volume of 150,000 metric tons of refined sugar to stabilize local prices as a domestic shortfall loomed.

While retail prices of sugar have eventually stabilised, Azcona said lower prices seem not possible given high input and labour costs, among other factors.

“The people who are pressuring us (on price reduction) should understand…there’s only a threshold where you can lower farmgate (prices), unless the local producers become highly mechanized,” he said. — Reuters

US to send controversial depleted-uranium munitions to Ukraine

STOCK PHOTO | Image by David Mark from Pixabay

The Pentagon on Wednesday announced a new security assistance package worth up to $175 million for Ukraine, including depleted uranium ammunition for Abrams tanks, the first time the US is sending the controversial armor-piercing munitions to Kyiv.

Reuters was first to report last week that the rounds, which could help destroy Russian tanks, would form part of a new military aid package for Ukraine, which Russian forces invaded in February 2022.

On Wednesday, the Pentagon said the military aid would also include anti-armor systems, tactical air navigation systems and additional ammunition for High Mobility Artillery Rocket Systems (HIMARS).

The announcement coincides with top US diplomat Antony Blinken’s visit to Kyiv in a gesture of support as a Ukraine counteroffensive against occupying Russian troops grinds into its fourth month with only small gains.

The $175 million was part of a total of more than $1 billion in assistance that Blinken announced in the Ukrainian capital.

It also included over $665 million in new military and civilian security assistance and millions of dollars in support for Ukraine‘s air defenses and other areas.

Although Britain sent depleted uranium munitions to Ukraine earlier this year, this would be the first US shipment of the ammunition and will likely stir controversy.

The Russian embassy in Washington denounced the decision as “an indicator of inhumanity”, adding that “the United States is deluding itself by refusing to accept the failure of the Ukrainian military’s so-called counteroffensive.”

Mr. Blinken on Wednesday hailed progress in the pushback and said of the fresh US package of support: “This new assistance will help sustain it and build further momentum.”

Washington previously announced it would send cluster munitions to Ukraine, despite concerns over the dangers such weapons pose to civilians.

The use of depleted uranium munitions has been fiercely debated, with opponents like the International Coalition to Ban Uranium Weapons saying there are dangerous health risks from ingesting or inhaling depleted uranium dust, including cancers and birth defects. – Reuters

Mexico’s Supreme Court upholds abortion rights nationwide, paving way for federal access

MEXICO CITY – Mexico’s Supreme Court on Wednesday struck down a federal law criminalizing abortion, reaffirming an earlier ruling that criminal penalties for abortion were unconstitutional and allowing the federal healthcare system to provide services.

Mexico’s highest court, which consists of 11 justices, declared that criminal penalties for abortion were unconstitutional in 2021, but the ruling only applied to the northern state of Coahuila, where that case originated.

Wednesday’s ruling will increase abortion access throughout Mexico, marking a major victory for abortion rights advocates in the predominantly Roman Catholic country.

It’s also the latest in a wave of reproductive rights advancements across Latin America in recent years. In the United States, meanwhile, the Supreme Court struck down the national right to an abortion in 2022 and nearly half of the 50 states have restricted access dramatically.

“We wouldn’t have this ruling if we didn’t have the Coahuila one two years ago, but I would say that the one today has more reach, definitely in terms of access to abortion,” said Isabel Fulda, deputy director of the Information Group on Reproductive Choice (GIRE), the advocacy group that brought the case.

The court sided with GIRE in a challenge to the federal penal code and declared that the section of the national law that criminalized abortion could no longer take effect.

In a statement posted to X, formerly known as Twitter, the court said it found the abortion section of the federal penal code unconstitutional and that it violated the rights of those who can have children.

The ruling opens the door for the federal healthcare system to start providing abortions, which could become increasingly important as Mexico mulls centralizing healthcare services, abortion rights advocates say.

A representative for the health ministry, which oversees federal health services, did not immediately return a request for comment.

Since the court‘s decriminalization ruling in 2021, Mexico’s 32 states have been slow to repeal their penal codes accordingly. Aguascalientes became the 12th Mexican state to decriminalize abortion last month when the Supreme Court sided with GIRE in a similar challenge to that state’s penal code. – Reuters

Summer 2023 was hottest on record, scientists say

STOCK PHOTO | Image by Николай Оберемченко from Pixabay

AMSTERDAM – The summer of 2023 was the hottest on record, according to data from the European Union Climate Change Service released on Wednesday.

The three-month period from June through August surpassed previous records by a large margin, with an average temperature of 16.8 degrees Celsius (62.2F) – 0.66C above average.

Last month was the also the hottest August on record globally, the third straight month in a row to set such a record following the hottest ever June and July, the EU said on Wednesday.

August is estimated to have been around 1.5 degrees Celsius hotter than the pre-industrial average for the 1850-1900 period. Pursuing efforts to limit the global temperature increase to 1.5 degrees Celsius is a central pledge of the Paris international climate change agreement adopted by 196 countries in 2015.

July 2023 remains the hottest month ever recorded, while August’s record makes the northern hemisphere’s summer the hottest since records began in 1940.

“Global temperature records continue to tumble in 2023,” Copernicus deputy head Samantha Burgess said.

“The scientific evidence is overwhelming, we will continue to see more climate records and more intense and frequent extreme weather events impacting society and ecosystems, until we stop emitting greenhouse gases,” Burgess said.

In Europe, August was wetter than normal last month over large parts of central Europe and Scandinavia leading to flooding, while France, Greece, Italy and Portugal saw droughts that led to wildfires.

Well-above average temperatures also occurred over Australia, several South American countries and around much of Antarctica in August, the institute said.

Meanwhile, the global ocean saw the warmest daily surface temperature on record, and had its warmest month overall.

With four months left in 2023, this year is so far the second-hottest on record, only marginally behind 2016. – Reuters

China’s economic gloom hangs over Japan’s long-awaited recovery

REUTERS

TOKYO – Policymakers in Tokyo believe China’s deepening economic woes could hit Japan’s fragile recovery, especially if Beijing fails to shore up demand with meaningful stimulus, potentially delaying an exit from ultra-loose monetary policy.

China’s downturn would leave Japan’s export-reliant economy with little external support as aggressive Federal Reserve interest rate hikes cool growth in the United States, another key driver of global activity.

The risks from China will be among key topics of debate at the Bank of Japan’s September policy meeting, say five sources familiar with the bank’s thinking, and raise fresh questions about Governor Kazuo Ueda’s efforts to wean the economy off the massive monetary stimulus of the past decade.

“What’s happening in China is worrying and could deal a huge blow to Japan’s economy,” said one of the sources, who spoke on condition of anonymity due to the sensitivity of the matter.

“A downturn in China may diminish the chance of Japan achieving sustained wage growth,” which is a crucial condition for phasing out monetary stimulus, another source said.

In a sign of growing pessimism over China, the government also said its monthly economic report for August that “concern over China’s outlook” was among risks to Japan’s recovery.

“China is over,” a senior Japanese government official told Reuters on condition of anonymity because of sensitivity of the issue. “I think China will never return to 5% growth.”

Having taken steps in July to make its ultra-loose policy sustainable, the BOJ is widely expected to keep monetary settings unchanged at its Sept. 21-22 meeting.

 

NEW RISKS

While many Japanese policymakers expect China to avert a hard-landing, thanks in some part to Beijing’s recent support measures, the stakes for Japan are high.

China is Japan’s largest trading partner, accounting for 20% of its exports, having replaced the United States in 2020. Exports to China fell 8.6% in the first half of this year as demand for cars, steel and electronics wilted.

Economists believe China’s downturn could knock 1-2 percentage points off Japan’s annual growth, fueling fears of a prolonged slowdown in Asia’s two biggest economies, which combined account for about a fifth of global gross domestic product.

China is also losing its appeal as a production hub for Japanese firms with some already reducing exposure to the country.

Komatsu Ltd 6301.T, was among them. The world’s No. 2 construction machinery maker has shifted some operations away from China, its chief executive Hiroyuki Ogawa told Reuters this week.

Ogawa said going forward Komatsu will “cut down on production capacity in a way to match actual demand in China.”

Diplomatic tensions may also be a factor.

Suntory Holdings chief executive Takeshi Niinami warned China’s economy is in an “extremely difficult” situation, which may be contributing to a rising backlash against Japan over the release of treated Fukushima water into the ocean.

Those bilateral strains could additionally dash hopes of a revival in Chinese tourists, delaying a broad-based recovery in Japan’s service sector.

The risks from China heighten challenges for the BOJ in winding down its bond yield control, a key part of its monetary policy aimed at sustainably reflating stagnant consumer demand.

“Exports to China had already been weak and headwinds to inbound tourism are clearly bad for Japan’s economy,” said Toru Suehiro, chief economist at Daiwa Securities. “All in all, it’s hard to justify tightening monetary policy any time soon.”

Japan’s core inflation hit 3.1% in July, exceeding the BOJ’s 2% target for the 16th straight month. Firms also promised wage hikes unseen in three decades this year, heightening the case for a retreat from decades of ultra-loose monetary policy.

While some BOJ policymakers began dropping hints of a near-term policy shift, Governor Ueda has stressed the need to wait until domestic demand and wage growth replace import costs as a key driver of consumer inflation.

The darkening outlook for Japan’s recovery may push back the timing of a BOJ policy shift. Falling demand in overseas markets like China could weigh on manufacturers’ profits and discourage them from hiking wages – a prerequisite for phasing out monetary stimulus.

BOJ board member Toyoaki Nakamura last month described China’s high unemployment and shrinking investment as sources of concern.

Analysts expect Japan’s economic growth to slow in the current quarter after a brisk expansion in the April-June period, heightening uncertainty on whether a spiral of higher wages and inflation could take hold.

In a sign rising inflation is already taking a toll on consumption, Japan’s household spending suffered its biggest drop in nearly 2-1/2 years in July.

“China’s recent weakness alone won’t be enough for the BOJ to alter its optimistic projection on external demand,” said former top BOJ economist Seisaku Kameda, now an economist at a think tank affiliated with Japan’s Sompo Holdings.

“But China’s weakness certainly heightens the hurdle for Japan to sustainably achieve 2% inflation, which is a quite ambitious goal in the first place.” – Reuters

Moderna, Pfizer say updated COVID shots generate strong response vs newer variant

HAKAN NURAL-UNSPLASH

Moderna and rival Pfizer on Wednesday said their updated COVID-19 vaccines generated strong responses in testing against the highly mutated BA.2.86 subvariant of the coronavirus that has raised fears of a resurgence of infections.

Moderna said its shot generated an 8.7-fold increase in neutralizing antibodies against BA.2.86 compared with an untreated natural antibody response in clinical trials in humans. The variant is currently being tracked by the World Health Organization (WHO) and the US Centers for Disease Control and Prevention (CDC).

“We think this is news people will want to hear as they prepare to go out and get their fall boosters,” Moderna head of infectious diseases Jacqueline Miller said in an interview, adding that the data should also help reassure regulators.

Pfizer said its updated vaccine with partner BioNTech elicited a strong antibody response against BA.2.86 in a preclinical study in mice.

Moderna, Pfizer/BioNTech and relative newcomer to the COVID vaccine market Novavax have created versions of their shots aimed at the XBB.1.5 subvariant, the dominant variant through most of 2023. Those are expected to be rolled out this autumn.

Moderna shares were down 1.6% and Pfizer shares were off nearly 3% in afternoon trading.

TD Cowen analyst Tyler Van Buren said Wednesday’s news was unlikely to raise the share price because people already assume the mRNA vaccines will continue to be effective against new COVID variants as they crop up. Both the Moderna and Pfizer/BioNTech shots are based on mRNA technology.

“This was not an anticipated catalyst that people were waiting for,” he said, adding that Moderna continues to be a favorite target of Wall Street short sellers who bet that shares will fall.

The CDC has previously indicated that BA.2.86 may be more capable of causing infection in people who previously had COVID or were vaccinated with previous shots. The Omicron offshoot carries more than 35 mutations in key portions of the virus compared with XBB.1.5, the target of the updated shots.

Moderna said it had shared the new finding on its vaccine with regulators and submitted it for peer review publication. The retooled shot has yet to be approved by the U.S. Food and Drug Administration, but is expected to be available later this month or in early October.

Last month, Moderna and Pfizer each said their new vaccines appeared to be effective against another new subvariant of concern dubbed EG.5 in initial testing.

European regulators have since backed the Pfizer/BioNTech shot, with Britain’s Medicines and Healthcare products Regulatory Agency approving the vaccine on Tuesday, but have yet to make any announcements on Moderna’s updated vaccine.

BA.2.86 has now been detected in Switzerland and South Africa as well as Israel, Denmark, the US and Britain according to a WHO official.

While it is important to monitor the variant, several experts told Reuters it is unlikely to cause a wave of severe disease and death because of immune defenses built up worldwide from mass vaccination and prior infection. – Reuters

Is India changing its name to Bharat? G20 invite controversy explained

STOCK PHOTO | Image by jorono from Pixabay

NEW DELHI – Invites sent by Indian President Droupadi Murmu calling herself “President of Bharat” for a dinner on the sidelines of the G20 summit have stirred speculation that the government may be about to change the country’s name.

 

WHAT IS THE CONTROVERSY ABOUT INDIA‘S NAME?

By convention, invitations issued by Indian constitutional bodies have always mentioned the name India when the text is in English, and the name Bharat when the text is in Hindi.

However, the invites — in English — for the G20 dinner called Murmu the President of Bharat.

An official at the president’s office said they didn’t want to comment on the issue when asked by Reuters.

Given the Hindu-nationalist ideology of Prime Minister Narendra Modi’s government and its push for increased use of Hindi, critics responded to the use of Bharat in the invites by suggesting the government was pushing for the name to be officially changed.

Over the years, Modi’s nationalist Bharatiya Janata Party (BJP) government has been changing colonial names of towns and cities claiming to help India move past what it has termed a mentality of slavery.

 

WHAT IS THE OFFICIAL NAME OF THE COUNTRY?

In English, the South Asian giant is called India, while in Indian languages it is also called Bharat, Bharata and Hindustan.

The preamble to the English version of the constitution starts with the words “We, the people of India…,” and then in Part One of the document it states “India, that is Bharat, shall be a Union of States.”

In Hindi, the constitution replaces India with Bharat everywhere, except the part defining the country’s names, which says in Hindi, “Bharat, that is India, shall be a Union of States.”

Changing India‘s name to only Bharat would require an amendment to the constitution which would need to be passed by a two-thirds majority in both houses of parliament.

 

WILL THE GOVERNMENT OFFICIALLY CHANGE THE NAME?

For some, the timing of the controversy is suggestive.

The incident comes just days after the government announced a surprise five-day special session of parliament later this month, without disclosing any agenda. The move prompted unconfirmed reports that a change of name could be discussed and passed during the session.

There has been no confirmation that such a move is in the works, but members of the government and the ruling BJP have suggested that the name Bharat should take primacy over India.

The Rashtriya Swayamsevak Sangh, the ideological parent of the BJP, has always insisted on calling the country Bharat.

A government spokesperson did not immediately respond to a request seeking comment.

 

WHAT IS THE HISTORY OF BOTH THE NAMES?

Both names have existed for more than two millennia.

While some supporters of the name Bharat say “India” was given by British colonizers, historians say the name predates colonial rule by centuries.

India comes from the river Indus, which was called Sindhu in Sanskrit. Travelers from as far away as Greece would identify the region southeast of the Indus River as India even before Alexander the Great’s Indian campaign in 3rd century BCE.

The name Bharat is even older, occurring in ancient Indian scriptures. But according to some experts it was used as a term of socio-cultural identity rather than geography. – Reuters

 

Philippines’ $3-billion airport project has three potential bidders – secretary

Passengers crowd the departure lobby inside the Ninoy Aquino International Airport (NAIA) Terminal 3 in Pasay City, Jan. 1. — PHILIPPINE STAR/ MIGUEL DE GUZMAN

JAKARTA – A P170.6 billion ($3 billion) project to modernize the main international airport in the Philippines has attracted three potential bidders, including India’s GMR Group, the Philippine transportation secretary said on Wednesday.

Ranked among the world’s worst international gateways, the aging Ninoy Aquino International Airport (NAIA) badly needs an upgrade to end chronic flight delays, address congestion, and improve facilities.

The other two possible bidders were conglomerate San Miguel corporation and a Manila consortium, whose $4.9 billion unsolicited proposal for the project was rejected earlier, Transportation Secretary Jaime Bautista said.

India’s GMR group has been operating an airport on the Philippine tourism island of Cebu.

“We want somebody who has experience in operating an airport … and, of course, with a very good financial background. Those are two major requirements,” Mr. Bautista said in an interview on the sideline of an Association of Southeast Asian Nations (ASEAN) summit in Indonesia.

Bautista said the government would try to find overseas investors through two roadshows, in Singapore next week and in Paris in the third week of September, before opening bidding in the last week of December, and naming a winner in January.

The winning bidder must then operate and maintain the airport, the capacity of which would be doubled after the upgrade to about 60 million passengers a year, Mr.Bautista said, adding the concession period being offered was 25 years.

Apart from NAIA, the Philippines is seeking financing to upgrade four other airports, on Busuanga island, Zamboanga city, Sanga-Sanga island and General Santos city. It will also build a new airport in Brooke’s Point town on Palawan island.

The secretary presented the five projects during a business matching event on Wednesday on the sidelines of an ASEAN business summit. No deals had yet been agreed at this early stage, he said.

“This is more to give them information and we will need to do further communication with the audience,” he said.

RAILWAY PROJECTS

The Philippines has set an internal deadline to renegotiate Chinese loans for three railway projects worth $4.9 billion, at the end of December, Bautista said, adding that in parallel, the government had been talking to other possible investors.

Last year, President Ferdinand Marcos Jr ordered the transport ministry to renegotiate the loan agreements that were considered “withdrawn” after the Chinese government “failed to act on the funding requests”.

“If there will be no funding, we will have to cancel the existing agreement with them and look for another source of funding,” Mr. Bautista said, adding there were several interested investors.

The three projects are: Subic-Clark Railway Project, the Philippine National Railways South Long-Haul Project and the Davao-Digos segment of the Mindanao Railway Project.

Bautista said inflation might have pushed their costs up to more than $4.9 billion and the National Economic and Development Authority may have to be approve them again. — Reuters

Building an inclusive pathway to sustainable environment

In photo during this BusinessWorld Insights forum (clockwise, from top left) are moderator Patricia B. Mirasol, BusinessWorld multimedia reporter, and panelists Floradema Eleazar, leader of the Climate Action Team at UNDP Philippines; Jolan Formalejo, vice-president for Inventory Generation at Aboitiz Infracapital Economic Estates; and Chaye Cabal-Revilla, chief finance, risk and sustainability officer of Metro Pacific Investments Corp.

By Angela Kiara S. Brillantes, Special Features and Content Writer

The global call for responding to an intensifying climate change has intensified recently, and various industries are beginning to take heed by making significant moves. In this fight against climate risks, the environment, social, and governance (ESG) standard has a great potential in helping businesses embrace sustainability and integrate it into their operations.

With more companies seeking to become more sustainable in the near future, how does ESG further guide them in ensuring that they will have a positive impact on the environment today?

Last Aug. 30, at the BusinessWorld Insights online forum with the theme “ESG, A Bridge to a Greener Environment,” industry experts discussed how ESG is helping and can continue to help the country progress to a greener and more sustainable future.

Floradema Eleazar, climate action team leader at United Nations Development Programme Philippines (UNDP) Philippines, views ESG as a means of addressing environmental risks and serves as a pathway that leads us to the direction of sustainability, bringing greater advantages for people and the environment.

“The Philippines is considered one of the two biodiversity hotspots in the world, and this decline together with ecosystem degradation is reducing our resilience to disasters and climate impacts. But the government has done a lot, and the UNDP is partnering with the government in developing plans of action to address this,” Ms. Eleazar added.

Meanwhile, for Chaye Cabal-Revilla, chief finance, risk, and sustainability officer of Metro Pacific Investments Corp. (MPIC), ESG could be utilized to advance national development and enhance the quality of community and life for Filipinos.

Ms. Cabal-Revilla shared how ESG could serve a tool for addressing climate risks, including pollution, biodiversity loss, and climate change, which resulted in their sustainable projects and advocacies that help advance national development and enhance the quality of Filipino lives and the community that they serve.

“We have done many programs that are sustainability-linked advocacies, and this is something we put to heart and that we’re actually doing because we know and believe that addressing climate change can help to reduce your carbon footprint and take care of nature and our biodiversity resource,” she said.

Jolan Formalejo, vice-president for the Inventory Generation Group at Aboitiz InfraCapital Economic Estates, shared that they are committed to sustainable development by integrating ESG principles into their operations because they know how much businesses and the environment are interdependent with each other. Guided by ESG, their company has developed numerous projects to help build better and thriving communities in the Philippines.

“ESG is reshaping Philippine businesses, moving beyond trends to transform how we operate and expand. It’s not about profits anymore but also about our impact on the environmental society and governance,” Mr. Formalejo said.

“In a country like ours, with pressing environmental concerns, ESG has ignited positive changes. By weaving ESG into our strategies, we collectively address reduced carbon footprints, resource conservation, and sustainable practices. Beyond its altruistic side, ESG really makes business sense, it safeguards against climate risks, enhances long-term resilience, attracts conscientious investors, and alliances with evolving stakeholders in expectations.”

Partnerships and knowledge-sharing

A partnership between the public and private sectors matters, Aboitiz InfraCapital’s Mr. Formalejo emphasized. With the rise of ESG, it is clear that one sector cannot do it alone, which is why collaboration and partnerships are important factors in sustainable development. Public and private partnerships are a gateway to provide combined opportunities, from resources and skills that the other sector desperately needs that will generate a variety of social, environmental, and economic benefits that are aligned to achieving sustainable development goals.

Partnerships can start with understanding and awareness. Both sectors can help in promoting the importance of ESG and its benefits to communities in the long run.

“We need to bring ESG into the institutional sector, encouraging awareness of the benefits that this gives in the long run,” Mr. Formalejo said. “[By] promoting these initiatives, we can encourage more as well to follow us,” he added.

Ms. Cabal-Revilla of MPIC added that government support is needed in boosting the influence of ESG.

“From the Philippine perspective, what we need is government support because this has been started largely by the private sector and our local communities also know why they have to do it,” Ms. Cabal-Revilla explained. “So, we have actively partnered [way] before sustainability has [turned into] something that most companies need to comply to.”

She added that for ESG to be successful, the public sector must embrace it. The Department of Energy and Natural Resources, for instance, can implement a larger budget for environmental programs since the public sector has relied heavily on the private sector over the past few years.

Regarding policies, the private sector has also expressed the need to work on more policies from the government through incentives that can benefit companies that utilize and practice the ESG approach, Mr. Formalejo and Ms. Revilla agreed.

The initial success of ESG among leading companies reflect ESG as an effective tool for sustainable development. These experiences of businesses with ESG, for Ms. Eleazar of UNDP Philippines, should be shared in the business community, alongside the benefits the standard brings, how it responds to the customers’ changing needs, and how it affects profitability, branding, and relationships with customers and clients to make sure that ESG reaches out to every business.

“If we are able to collectively systematically report on this, make sure that these experiences are shared more widely, and ensure that ESG constraints and our implementations are addressed, then that would be [a start of going] into a more sustainable world and slowly addressing the triple planetary crisis that is presetting us at the moment,” Ms. Eleazar said.

This online forum is part of BusinessWorld Insights’ series on sustainability under Project KaLIKHAsan, PhilSTAR Media Group’s newest initiative that converges print, digital, and on-ground platforms to raise the cause of meaningful, concrete sustainability in industries and communities.

This session was in partnership with Aboitiz InfraCapital Economic Estates and Metro Pacific Investments Corp.; and is supported by Management Association of the Philippines, Makati Business Club, Philippine Franchise Association, and The Philippine STAR.

Economists hike inflation forecasts

Inflation accelerated in August for the first time in seven months. — PHILIPPINE STAR/EDD GUMBAN

A FASTER-THAN-EXPECTED Philippine inflation rate in August has prompted several economists to raise their forecasts for this year and 2024.

Inflation unexpectedly accelerated for the first time in seven months in August, as food and transport costs rose. Headline inflation quickened to 5.3% in August from 4.7% in July, ending six months of decline.

Nomura Global Markets Research raised its Philippine inflation projection to 5.9% for this year from 5.3% previously. It also hiked its 2024 inflation forecast to 3.6% from 3.1%.

GlobalSource Partners also upwardly adjusted its inflation forecast to 5.8% for this year from 5.5% given in August.

Pantheon Macroeconomics hiked its inflation projection to 5.6% (from 5.4% previously) for 2023 and 2.8% (from 2.6%) for 2024.

Also, Citigroup, Inc. raised its inflation expectation for this year to 5.6% from 5.4% previously. It hiked its 2024 inflation forecast to 3.1% from 2.9% previously but kept its 3.3% projection for 2025.

The BSP currently sees inflation averaging at 5.6% for this year before easing to 3.2% for 2024.

Nomura Chief Association of Southeast Asian Nations (ASEAN) Economist Euben Paracuelles said in a note that risks to food inflation have materialized early.

In August, food inflation alone quickened to 8.2% from 6.3% in July amid a spike in rice and vegetable prices.

“We expect upward pressure on food prices to intensify in the coming months owing to the ongoing El Niño phenomenon and the lagged effects of rising international food prices, which are likely to be exacerbated by increased protectionism among food exporters,” he said.

The El Niño weather event is expected to strengthen towards the latter part of the year and persist until the first quarter of 2024.

Citi said inflation expectations have risen due to elevated food prices, but inflation should return to the BSP’s 2-4% target band by the fourth quarter.

Nomura also raised its core inflation forecast to 6.4% from 6.2% previously, amid likely spillovers from high food and fuel prices. However, it noted that second-round effects may be more limited due to weakening demand. 

Core inflation, which excludes volatile prices of food and fuel, eased to 6.1% in August, from 6.7% in July, but above 4.6% in the same month last year.

Nalin Chutchotitham, economist for the Philippines at Citigroup, Inc., said in a note on Wednesday that the country is still vulnerable to rice inflation.

Rice inflation accelerated to 8.7% in August from 4.2% in July, its sixth straight month of increase. It was also its fastest pace since the 9% print in November 2018 when the country experienced a shortage of rice.

Ms. Chutchotitham said recent typhoons and El Niño could impact rice supply in the second half and up until next year.

“The government said it will allow more imports to ensure adequate supply, but the private sector appears to be waiting for global prices to stabilize before securing more imports,” she added.

RICE PRICE CAP
Analysts said the recently imposed price cap on rice may help alleviate inflationary pressures.

“Government measures such as the price ceiling on rice and a possible reduction in import tariffs should help ease these pressures, but likely only temporarily owing to the lack of fiscal space,” Nomura’s Mr. Paracuelles said.

The government on Tuesday began implementing a price ceiling of P41 per kilogram for regular milled rice and P45 per kilogram for well-milled rice, as it sought to combat price manipulation and hoarding.

“The authorities are hoping to nip this renewed upward pressure in the bud… (rice) is a staple in the Philippines and, together with vegetables, was mainly to blame for the latest leap in prices,” Pantheon Chief Emerging Asia Economist Miguel Chanco said in a Sept. 6 report.

He noted that September inflation data would show if the price ceiling is effective in relieving upward pressures or if it will “inadvertently lead to widespread shortages.”

“Nevertheless, the longer-term outlook for food inflation appears benign, as it is yet to reflect fully the more subdued gains globally, which leads by roughly half a year. The action in food prices last month masked big crosscurrents in oil-sensitive components,” he added.

GlobalSource analyst Marie Christine Teng in a note on Sept. 5 said that the price ceiling will be able to arrest the rapid increase in prices.”

“However, forecasts suggest that rice stocks will still be tight even as the country heads into another El Niño weather disturbance later this year. Hence, prices may stay high, especially if import costs remain higher than the price caps,” she added.

POLICY
Meanwhile, analysts said the BSP is unlikely to end its policy pause despite the quicker August inflation.

“In terms of monetary policy, we maintain our forecast that BSP will leave its policy rate unchanged at 6.25% over the next few months, although we see a rising risk of BSP resuming its hiking,” Mr. Paracuelles said.

The Monetary Board last month paused for a third straight meeting, keeping its key policy rate at a near-16 year high of 6.25%. From May 2022 to March 2023, the central bank hiked benchmark interest rates by 425 basis points (bps).

Pantheon Macroeconomics’ Mr. Chanco said that the recent inflation print is “unlikely to have a bearing on the BSP’s current pause.”

Citi’s Ms. Chutchotitham said that she does not expect further rate hikes from the BSP amid easing core inflation, weak second-quarter growth, and the government’s efforts to bring down rice prices.

“We continue to expect no change in the policy rate through early 2024. The BSP had cautioned about upside risks to inflation, but several factors would support the BSP’s continued pause,” she added.

Mr. Paracuelles said the central bank may be encouraged to resume its tightening cycle if core inflation stops declining.

“For now, despite the weakening growth outlook, BSP will likely maintain its hawkish rhetoric, underscoring that it remains vigilant against inflation risks and that it will continue to pledge its readiness to act if conditions warrant,” he added.

The Monetary Board is set to meet on Sept. 21. — Keisha B. Ta-asan

Variable rate format for RRP may shorten monetary policy lag

Bangko Sentral ng Pilipinas main office in Manila. — BW FILE PHOTO

THE SHIFT to a variable rate auction format for the reverse repurchase (RRP) facility of the Bangko Sentral ng Pilipinas (BSP) may help shorten the lag whenever the central bank adjusts borrowing costs, an official said.   

BSP Deputy Governor Francisco G. Dakila, Jr. on Wednesday said the implementation of the Overnight (ON) RRP Rate and the shift to a variable rate auction format were largely operational and will not affect the BSP’s monetary policy stance.   

However, the reforms will boost the efficiency of the central bank’s market operations and enhance the implementation of monetary policy, he said.

“Hopefully, (the changes) will shorten (the response lag),” Mr. Dakila said in mixed English and Filipino, adding that the reforms may also help banks in pricing their products for consumers and other lenders.   

“If, for example, there will be a change in the BSP’s monetary policy and the BSP raised its policy rate, the move will have a larger effect in market interest rates because of the daily operations,” he said.   

Starting Friday (Sept. 8), the BSP will shift to a variable rate format for the RRP and introduce the ON RRP Rate, which is a market-determined short-term interest rate.

The BSP also changed the term for its key policy rate, currently at 6.25%, to “Target RRP Rate.”   

According to Mr. Dakila, the Target RRP Rate will be set by the Monetary Board in every policy review, but the ON RRP Rate will change every day based on the daily auction results.

“The ON RRP Rate can be based on the Target, or even higher than the Target. But our objective is for the ON RRP Rate to be close to the Target,” he said.   

Mr. Dakila said that the RRP in auction format, together with the BSP’s term deposit facility (TDF) and the BSP securities facility, or the BSP bills, will help the central bank gauge where markets are and how far they are to the policy rate.   

The Monetary Board hiked borrowing costs by 425 basis points (bps) to bring the key rate to 6.25% from May 2022 to March 2023. 

The response lag, also known as impact lag, is the time it takes for monetary policy to affect the economy once they have been implemented.

Mr. Dakila also said the influence of the BSP on market operations has been limited for a long time, since the RRP facility had a previous ceiling of P305 billion which is the amount that the central bank can hold in terms of volume of government securities.

“For a long time, the volume (for the RRP facility) is only fixed. Our influence on the market is limited. If we want to mop up liquidity, there is only a fixed amount. What we did was to introduce other instruments such as the TDF and the BSP bills, but the ON RRP rate will be adjusted daily,” he said.

However, since mid-July, the BSP started to accept all offers for the RRP facility, and the volume has been raised from P305 billion to more than P500 billion.

Lara Romina E. Ganapin, director of the BSP’s Department of Economic Research, said the central bank shifted to a variable rate auction format due to “available collateral” which it did not have previously.

“Because of some operations that we did during the pandemic, we were able to have enough collateral to pursue these reforms for the RRP facility,” Ms. Ganapin said.   

BSP Senior Assistant Governor Illuminada T. Sicat noted that even if the pandemic had not happened, the BSP is authorized by the BSP Charter to purchase and sell government securities. — Keisha B. Ta-asan

Exports likely posted modest uptick in July

The Development Budget Coordination Committee’s 2023 exports and imports growth assumptions are set at 1% and 2%, respectively. — REUTERS

By Justine Irish D. Tabile, Reporter

PHILIPPINE EXPORTS likely posted a modest growth in July, despite sluggish global demand, according to economists and business groups.

Danilo C. Lachica, president of the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI), said electronics exports are recovering but “may be not at the same level as last year’s July year-to-date.”

In a text message, Mr. Lachica said electronics exports are still recovering from the 15% contraction in the first quarter.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said there may have been modest gains in exports in July.

“However, global trade remains sluggish on soft demand and thus any gains may be limited,” Mr. Mapa said in a Viber message.

The Philippine Statistics Authority is scheduled to release international merchandise trade statistics for July on Friday (Sept. 8).

The trade gap reached $27.96 billion in the first six months of 2023, narrower than the $29.84-billion deficit a year ago. This as exports declined by an annual 9.3% to $34.94 billion, while imports fell by 8% to $62.9 billion.

“Both exports and imports recently corrected higher in recent months. Exports are already up from near three-year lows a few months ago and recently among seven-month highs,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

He noted the exports were earlier weighed by the risk of a recession in the United States.

The Development Budget Coordination Committee’s 2023 exports and imports growth assumptions are set at 1% and 2%, respectively.

Meanwhile, Confederation of Wearable Exporters of the Philippines Executive Director Maritess Jocson-Agoncillo said the decline in garments exports could continue for the rest of the year.

She noted all four sectors of the wearable industry — apparel, textile, travel goods, and footwear — contracted by 22% in the first semester.

“We have been seeing the trend since the start of the year where we are hitting a double-digit negative growth which is not very good. The market has slowed down and we even have major brands that have pulled out,” Ms. Jocson-Agoncillo said in a phone interview.

However, she said the industry is expected to start exporting this month the product lines for spring and summer 2024.

“But even if it picks up, (our industry’s) growth can only be a single-digit thing because we had a double-digit decline,” Ms. Jocson-Agoncillo said.

Meanwhile, Philippine Exporters Confederation, Inc. President Sergio R. Ortiz-Luis, Jr. said exports will likely be an improvement from last year’s figures.

“I think at the end of the year it will have an improvement even if it is coming at a high base and despite the many supply chain disruptions. It will surpass 2022 business level but not so much,” Mr. Ortiz-Luis said in a phone interview.

For 2022, exports rose by 5.6% to $78.84 billion from a year earlier, while imports grew by 17.3% to $137.16 billion. This brought the full-year trade balance to a record $58.32-billion deficit.

ING’s Mr. Mapa said exports may contract by yearend as demand fades.

The lower risk of a recession in the US may help support further recovery in exports, Mr. Ricafort said.

“The US dollar/peso (exchange rate) being among nine-month highs would help make Philippine exports cheaper or more price competitive from the point of view of international buyers, a factor that could help support further pickup in exports,” he said.

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