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Under-funded WHO seeks ‘reinforced’ role in global health at key meeting

IMAGE VIA WHO/P. VIROT

GENEVA — The World Health Organization (WHO) will push at its board meeting this week for an expanded role in tackling the next global health emergency after COVID-19, but is still seeking answers on how to fund it, according to health policy experts.

The Geneva meeting sets the program for the U.N. agency this year — as well as its future budget — with the WHO facing two key challenges: a world that expects ever more from its leading health body, but which has not yet proven willing to fund it to tackle those challenges.

At the Executive Board’s annual meeting from Jan. 30-Feb. 7, countries will give feedback on WHO Director-General Tedros Adhanom Ghebreyesus’ global strategy to strengthen readiness for the next pandemic which includes a binding treaty currently being negotiated.

“I think the focus is very much on the program budget, then sustainable financing,” Timothy Armstrong, WHO director for governing bodies, told journalists when asked about the agenda.

Also on his list was “the position of the World Health Organization, recognizing there is a need for a reinforced central role for WHO” in the global health emergency system.

The WHO is seeking a record $6.86 billion for the 2024-2025 budget, saying that approving this sum would be “a historic move towards a more empowered and independent WHO.”

But approval will require member states to make good on promises made last year to hike mandatory fees — a fact which is uncertain since the deal was always subject to conditions.

“What we are currently seeing is that some member states are now trying to pre-condition lots of things,” said a source close to the talks, saying it “remains to be seen” if all countries will commit to raising fees. Reuters could not immediately establish which countries might withhold support.

The current base budget, which does not include the funding changes, has a nearly $1-billion financing hole, a WHO document showed — although that gap is not unusual at this point, two sources added. However, one did add that it was “absurd” that the WHO still has to scrabble for money after COVID-19.

“It’s a huge knot,” said Nicoletta Dentico, the co-chair of the civil society platform the Geneval Global Health Hub. “The weakness of WHO is under our eyes.”

The agency is also considering starting big replenishment rounds every few years to top up its coffers, a document showed.

The WHO, which celebrates its 75-year anniversary having been set up in 1948, will also use the meeting to advocate for a boosted role in pandemic preparedness, documents showed.

Tedros will call for a Global Health Emergency Council to be set up linked to WHO governance. However, external experts have said such a council needs higher-level political leadership.

“Given that pandemic threats involve and impact almost every sector, it must be an outcome of a UN General Assembly resolution, be appointed by and accountable to it,” Helen Clark, former prime minister of New Zealand and head of the independent panel set up to review the handling of COVID, told Reuters. — Reuters

Australia searches for tiny radioactive capsule believed lost on desert highway

MELBOURNE — Rio Tinto Ltd. apologized on Monday for the loss of a tiny radioactive capsule believed to have fallen from a truck that has sparked a radiation alert across parts of the vast state of Western Australia.

It is unclear how long the radioactive capsule, part of a gauge used to measure the density of iron ore feed, has been missing.

The gauge was picked up by a specialist contractor from Rio’s Gudai-Darri mine site on Jan. 12. When it was unpacked for inspection on Jan. 25, the gauge was found broken apart, with one of four mounting bolts missing and screws from the gauge also gone.

Authorities suspect vibrations from the truck caused the screws and the bolt to come loose, and the radioactive capsule from the gauge fell out of the package and then out of a gap in the truck.

Authorities are now grappling with the daunting task of searching along the truck’s 1,400 kilometer (870 mile) journey from north of Newman — a small town in the remote Kimberley region — to a storage facility in the northeast suburbs of Perth — a distance longer than the length of Great Britain.

“We are taking this incident very seriously. We recognize this is clearly very concerning and are sorry for the alarm it has caused in the Western Australian community,” Rio’s iron ore division chief Simon Trott said in a statement.

The silver capsule, 6 millimeters (mm) in diameter and 8 mm long, contains Caesium-137 which emits radiation equal to 10 X-rays per hour.

Authorities have recommended people stay at least five meters (16.5 feet) away as exposure could cause radiation burns or radiation sickness, though they add that the risk to the general community is relatively low.

The state’s emergency services department has established a hazard management team and has brought in specialized equipment that includes portable radiation survey meters to detect radiation levels across a 20-meter radius and which can be used from moving vehicles.

Mr. Trott said Rio had engaged a third-party contractor, with appropriate expertise and certification, to safely package and transport the gauge.

“We have completed radiological surveys of all areas on site where the device had been, and surveyed roads within the mine site as well as the access road leading away from the Gudai-Darri mine site,” he said, adding that Rio was also conducting its own investigation into how the loss occurred.

Analysts said that the transport of dangerous goods to and from mine sites was routine, adding that such incidents have been extremely rare and did not reflect poor safety standards on Rio’s part.

The incident is another headache for the mining giant following its 2020 destruction of two ancient and sacred rock shelters in the Pilbara region of Western Australia for an iron ore mine. — Reuters

Viber adds features to increase brand awareness among users, aims to become superapp

MESSAGING PLATFORM Viber launched two features last week to improve brand-user interaction, a “high priority” given the app’s 106% year-on-year growth in retail users in the Philippines. 

Business Inbox is a dedicated folder for business messages from official brand accounts while Commercial Accounts is a channel where users can find brands and communicate with them through a mini-website experience within the app. 

“It’s our ambition to have brands on Viber build awareness, generate interest, and drive conversion down to user loyalty and after-sales care. A brand can use our solutions to meet the users at every step in the customer journey,” said Cristina V. Constandache, chief revenue officer of Viber, at a media briefing on Jan. 26. 

“Our vision for 2023 is to become a superapp,” she added.  

Business Inbox, the default space for brand-user interactions, is pinned at the top of the chat screen and is kept separate from personal messages. It allows Viber users to store and organize notifications — bank reminders, delivery order confirmations, or promotional offers — from brand accounts in one folder. 

Meanwhile, Commercial Accounts allows users to engage with a brand in just one channel, where they can find business information, services, and Viber chats under a single searchable business entity. Brands will be better able to customize the customer experience through this feature. 

David Tse, Rakuten Viber’s senior director for APAC, told BusinessWorld that the new features will increase user safety and trust when engaging with a business. 

“For example, the Business Inbox will automatically have business messages from verified brands, which have a blue tick, and it’s basically inaccessible to private accounts trying to impersonate a business,” he explained. 

In 2022, Philippine stats for the app show a 603% growth in transactional business messages, an 83% growth in conversational business messages, and an 11% growth in promotional messages year-on-year. There has also been a 34% increase in chatbots. 

With these stats, adding new features is a “no-brainer,” according to Ms. Constandache. 

“We want to become a single gateway to manifold services, wherein users can do everything that they want or as many things as they want within one app,” she said. 

Mr. Tse also shared at the briefing that the Viber Pay feature, available in Germany and Greece, has to “overcome quite a few licensing hurdles” before launching in the Philippines. — Brontë H. Lacsamana

The goal is to launch the payment feature within the year, said Ms. Constandache. 

Adani firms lose $65 billion in value as US short-seller battle escalates

ADANI.COM

NEW DELHI — Most Adani Group shares fell sharply on Monday as the Indian conglomerate’s rebuttal of a US short-seller’s criticism failed to pacify investors, deepening a market rout that has now led to losses of $65 billion in the group’s stock values.

Led by Asia’s richest man Gautam Adani, the Indian group has locked horns with Hindenburg Research and on Sunday hit back at the short-seller’s report of last week that flagged concerns about its debt levels and the use of tax havens.

Adani said it complied with all local laws and had made the necessary regulatory disclosures.

Adani Transmission, Adani Total Gas, Adani Green Energy, Adani Power and Adani Wilmar fell between 5% and 20% on Monday.

Flagship Adani Enterprises, which is facing a crucial test this week with a follow-on share offering, swung between gains and losses before settling 4.8% higher. It stayed well below the offer price of the issue, which if successful will be largest such share offering ever in India.

Adani Enterprises’ $2.5 billion secondary share sale closed its second day amid weak investor sentiment. The stock closed at 2,892.85 rupees, 7% below the 3,112 rupees lower end of the offer price band. The upper band is 3,276 rupees.

Data from stock exchanges on Monday showed Adani has now received bids for 1.4 million shares, or just over 3%, of the 45.5 million shares on offer. The deal closes on Tuesday.

Foreign and domestic institutional investors, as well as mutual funds, have made no bids so far, according to the data.

“Retail participation is likely to have a shortfall with current market prices still trailing the offer price and sentiment taking a hit due to the Hindenburg controversy,” said Hemang Jani, equity strategist at Motilal Oswal Financial Services.

“While there is a risk that the share sale does not go through, it will be crucial today to wait and see how institutional investors participate.”

Abu Dhabi conglomerate International Holding Company said on Monday it would invest 1.4 billion dirhams ($381.17 million) in the offering.

ON SCHEDULE
Adani Group told Reuters in a statement on Saturday that the sale remained on schedule at the planned issue price, even as sources said bankers of the country’s largest secondary share sale were considering extending the timeline beyond Jan. 31, or tweaking the price due to the fall in its share price.

Indian regulations say the share offering must receive minimum subscription of 90%, and if it does not the issuer must refund the entire amount. Maybank Securities and Abu Dhabi Investment Authority are among investors who bid for the anchor portion of the issue.

Maybank said in a statement “there is no financial impact” on it as the subscription to Adani’s offer was fully funded by client funds.

State-run insurance behemoth Life Insurance Corporation (LIC) told Reuters on Monday it was reviewing the Adani Group’s response to Hindenburg’s report and would hold talks with the management within days.

LIC took 5% of the $734 million anchor portion. It already holds a 4.23% stake in the flagship Adani firm, while its other exposures include a 9.14% stake in Adani Ports and 5.96% in Adani Total Gas.

“Since we are a large investor we have the right to ask relevant questions,” LIC Managing Director Raj Kumar said.

DEBT, DE-LEVERAGING
US dollar-denominated bonds issued by Adani Ports and Special Economic Zone continued their fall into a second week with the bond maturing in August 2027 down 5 cents to 73.03 cents, the lowest since June 2020. Other dollar denominated bonds of the group were also trading lower.

Index provider MSCI has said it was seeking feedback from market participants on Adani and was monitoring the factors that “may impact the eligibility of those relevant securities” in SCI indexes.

In its response on Sunday, Adani highlighted its relationships with local and international banks and its access to diverse funding sources and structures, listing US banks
Citigroup and JPMorgan Chase & Co, as well as other lenders including BNP Paribas, Credit Suisse, Deutsche Bank, Barclays, and Standard Chartered.

The stock market meltdown is a dramatic setback for 60-year-old Adani. The school-dropout’s stunning rise came with over 1,500% gains in some of his group stocks over three years, making him the world’s third richest man before he slipped to rank eighth on the Forbes list on Monday.

Responding to Adani’s rebuttal, Hindenburg said the company’s “response largely confirmed our findings and ignored our key questions.”

Hindenburg in its report said Adani companies had “substantial debt” and that shares in seven Adani listed companies have an 85% downside due to what it called “sky-high valuations.”

Adani’s response stated that over the past decade, its group companies have “consistently de-levered.” — Reuters

Brian Poe-Llamanzares named Rising Tigers Magazine co-owner

(From left to right) Andrew Troy Nicolas CEO of Rising Tigers Magazine, Brian Poe Llamanzares CEO of Oracle Media Group, and Andria Terese Nicolas, Vice President of Tag Media Group

Brian Poe-Llamanzares is now the co-owner of one of the country’s leading business magazines, Rising Tigers Magazine.

The most-distributed local magazine right now in National Bookstore caught the attention of this serial entrepreneur.

Mr. Llamanzares’ Oracles Media Group will now be adding Rising Tiger Magazine to its portfolio, which already includes other media entities like The Manila Journal, Negosyante News, Rapid News PH, and Alike Magazine.

According to Mr. Llamanzares, “the team is very confident that it will top the market with its innovations and quality of content. The magazine has already perfected its marketing strategy even-though it’s still new and will celebrate its first anniversary this March 2023. A lot of big names in the business industry have already confirmed and committed their support. While I’m looking forward to helping the company grow.”

Focused on inspiring readers with the profiles of the emerging leaders and captains from different industries, the magazine, which was launched during pandemic, opened up to investors to provide more reach and growth for the company.

“We’re really grateful to have Brian as part of our team. I admire his grit and determination, and with him, I am very sure we will be able to reach our goals this year. We are looking forward to all of our future projects together. Rising Tigers Magazine will definitely reach new heights,” said Andria Terese Nicolas, vice-president of Tag Media Group.

The magazine is all about motivating the readers. It also aims to help them grow their businesses. Majority of content is all about leadership, while 20% is lifestyle written by socialite Becky Garcia. Entrepreneur Andrew Troy Nicolas publishes the magazine quarterly under Tag Media Group, with planned nine events under his company for this year, which include expos and forums.

“Brian is a valuable asset in the company, and with him we’re very confident that the objective will be accomplished fast. He is very aggressive and determined to help out,” Robert Laurel Yupangco, Rising Tigers Magazine adviser, added.

 

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Philippine companies seen raising up to $8.25B via bonds in 2023

BW FILE PHOTO

MANILA — Philippine companies are expected to generate up to P450 billion ($8.25 billion) through bond issuance this year to fund expansion and repay debt, the country’s bond market operator said on Monday.

“Domestic investment liquidity is alive and well,” Antonino Nakpil, president and chief executive officer of the Philippine Dealing & Exchange Corp (PDEX), told reporters.

PDEX sees companies raising P300 to P450 billion via bonds this year, he said, adding that big corporations and banks would be active in the fixed income market.

Companies tapped the bond market to raise a record P508 billion ($9.3 billion) last year, more than double the P213 billion in 2021, PDEX data showed.

Despite an expected slowdown in the economy this year because of inflation and higher interest rates, Philippine companies are selectively pursuing expansion in sectors that will benefit from the country’s economic reopening.

As of the end of 2022, PDEX had P1.38 trillion in tradable corporate debt instruments issued by 53 companies comprised of 196 types of securities. — Reuters

Israel drops plastic tax despite environmental gains

WIKIMEDIA COMMONS

JERUSALEM — Israel’s new hard-right government said on Sunday it had dropped a year-old tax that had significantly reduced the consumption of single-use plastic plates and utensils.

The decision, in apparent defiance of global efforts to reduce the amount of plastic waste that is polluting oceans, came after opposition to the levy from religious parties that said it unfairly targeted their communities.

Finance Minister Bezalel Smotrich said the tax was canceled and urged customers to check that stores were lowering prices of plastic wares. His spokesman said the tax was repealed for the coming year to help lower consumer prices amid high inflation.

Israel’s environmental protection minister said she had opposed ending the tax and hoped an alternative solution could be found. The ministry reported that sales of the disposable plastic items were roughly 40% lower now than when the tax came into effect in November 2021.

There was opposition to the plastic tax among ultra-Orthodox Jewish parties that are strongly represented along with the far right in the new governing coalition led by Benjamin Netanyahu.

A parliamentary report from November 2021 found that ultra-Orthodox families used plasticware three times more often than the rest of the population because they often have large families and low incomes, with many not owning dishwashers. — Reuters

Boeing’s 747, the original jumbo jet, prepares for final send-off

WIKIMEDIA COMMONS

SEATTLE/PARIS — Boeing’s 747, the original and arguably most aesthetic “Jumbo Jet,” revolutionized air travel only to see its more than five-decade reign as “Queen of the Skies” ended by more efficient twinjet planes.

The last commercial Boeing jumbo will be delivered to Atlas Air in the surviving freighter version on Tuesday, 53 years after the 747’s instantly recognizable humped silhouette grabbed global attention as a Pan Am passenger jet.

“On the ground it’s stately, it’s imposing,” said Bruce Dickinson, the lead singer of Iron Maiden who piloted a specially liveried 747 nicknamed “Ed Force One” during the British heavy metal band’s tour in 2016.

“And in the air it’s surprisingly agile. For this massive airplane, you can really chuck it around if you have to.”

Designed in the late 1960s to meet demand for mass travel, the world’s first twin-aisle wide body jetliner’s nose and upper deck became the world’s most luxurious club above the clouds.

But it was in the seemingly endless rows at the back of the new jumbo that the 747 transformed travel.

“This was THE airplane that introduced flying for the middle class in the US,” said Air France-KLM CEO Ben Smith.

“Prior to the 747 your average family couldn’t fly from the US to Europe affordably,” Mr. Smith told Reuters.

The jumbo also made its mark on global affairs, symbolizing war and peace, from America’s “Doomsday Plane” nuclear command post to papal visits on chartered 747s nicknamed Shepherd One.

Now, two previously delivered 747s are being fitted to replace US presidential jets known globally as Air Force One.

As a Pan Am flight attendant, Linda Freier served passengers ranging from Michael Jackson to Mother Teresa.

“It was an incredible diversity of passengers. People who were well dressed and people who had very little and spent everything they had on that ticket,” Ms. Freier said.

TRANSFORMATIONAL

When the first 747 took off from New York on Jan 22, 1970, after a delay due to an engine glitch, it more than doubled plane capacity to 350-400 seats, in turn reshaping airport design.

“It was the aircraft for the people, the one that really delivered the capability to be a mass market,” aviation historian Max Kingsley-Jones said.

“It was transformational across all aspects of the industry,” the senior consultant at Ascend by Cirium added.

Its birth become the stuff of aviation myth.

Pan Am founder Juan Trippe sought to cut costs by increasing the number of seats. On a fishing trip, he challenged Boeing President William Allen to make something dwarfing the 707.

Allen put legendary engineer Joe Sutter in charge. It took only 28 months for Sutter’s team known as “the Incredibles” to develop the 747 before the first flight on Feb. 9, 1969.

Although it eventually became a cash cow, the 747’s initial years were riddled with problems and the $1-billion development costs almost bankrupted Boeing, which believed the future of air travel lay in supersonic jets.

After a slump during the 1970s oil crisis, the plane’s heyday arrived in 1989 when Boeing introduced the 747-400 with new engines and lighter materials, making it a perfect fit to meet growing demand for trans-Pacific flights.

“The 747 is the most beautiful and easy plane to land … It’s just like landing an armchair,” said Mr. Dickinson, who also chairs aviation maintenance firm Caerdav.

AGE OF ECONOMICS

The same swell of innovation that got the 747 off the ground has spelled its end, as advances made it possible for dual-engine jets to replicate its range and capacity at lower cost.

Yet the 777X, set to take the 747’s place at the top of the jet market, will not be ready until at least 2025 after delays.

“In terms of impressive technology, great capacity, great economics … (the 777X) does sadly make the 747 look obsolete,” AeroDynamic Advisory managing director Richard Aboulafia said.

Nevertheless, the latest 747-8 version is set to grace the skies for years, chiefly as a freighter, having outlasted European Airbus’ double-decker A380 passenger jet in production.

This week’s final 747 delivery leaves questions over the future of the mammoth but now under-used Everett widebody production plant outside Seattle, while Boeing is also struggling after the coronavirus disease 2019 (COVID-19) pandemic and a 737 MAX safety crisis.

Chief Executive Dave Calhoun has said Boeing may not design a new airliner for at least a decade.

“It was one of the wonders of the modern industrial age,” said Mr. Aboulafia, “But this isn’t an age of wonders, it’s an age of economics.” — Reuters

[B-SIDE Podcast] Protecting artists and valuing creativity

Follow us on Spotify BusinessWorld B-Side

Jennifer Lee-Bonto, executive director of Artists’ Welfare Project Inc. (AWPI), speaks to BusinessWorld reporter Beatriz Marie D. Cruz about pursuing your passion while paying attention to the practicalities of life.

AWPI was founded in 2007 as a help desk for artists who, prior to the founding of AWPI, had to pass the hat every time the aches and pains of performing would catch up with them.

TAKEAWAYS

The ‘starving artist’ cliché is dangerous and should be thrown out.

Ms. Bonto called for end of the stereotypical view of freelancer artists suffering for their art.

“We just need to stop the notion that we are ‘Bohemian’, [that] we are ‘starving artists.’ … We have to stop ‘starving’ —  it’s not fashionable,” she said

Insist on a contract.

Contracts protect both sides by defining the scope of work and deliverables as well as terms of compensation.

“If you hire them [artists], don’t think that it’s a hobby for them. You have to value them as professionals,” Ms. Bonto said. “Give them a proper contract and pay them on time.”

Digitization is both blessing and bane.

Technology paved the way for more job opportunities outside the 9–5 office setup but, at the same time, created issues surrounding copyright, intellectual property rights, and more.

“The digital world is part good, but we still need to address some respect and protection issues,” said Ms. Bonto.

Recorded remotely in January 2023. Produced by Joseph Emmanuel L. Garcia and Sam L. Marcelo.

Follow us on Spotify BusinessWorld B-Side

PHL’s economic outlook in review

Economic growth seen to slow in 2023 amid headwinds

The Philippines’ economic growth is expected to continue this 2023, albeit at a slower pace than last year’s performance, given several external headwinds.

The Philippines’ gross domestic product (GDP) expanded by 7.6% in 2022, according to the Philippine Statistics Authority (PSA). While the growth in the fourth quarter slowed to 7.2% from the third quarter’s 7.6%, the full-year GDP growth in 2022 surpassed the 6.5%-7.5% target range of the Development Budget Coordination Committee (DBCC). The full-year growth also surpassed the 7.5% estimate by economists in a BusinessWorld poll, and it is seen as well as the country’s fastest economic growth since 1976.

For 2023, the DBCC projected the GDP growth momentum to slow from last year’s growth rate in the first three quarters, which also exceeded the target range.

“This momentum is expected to slightly decelerate in 2023 and range from 6.0% to 7.0% considering external headwinds such as the slowdown in major advanced economies,” the DBCC said in a statement last December.

The country’s economic team initially forecasted the GDP to grow 6.5%-8% this year.

“Nevertheless, growth is expected to pick up in 2024 to 2028 at 6.5% to 8.0%, as we push for government strategies and interventions of the Philippine Development Plan 2023-2028,” said the DBCC.

Among those strategies and interventions are the modernization of agriculture and agribusiness; revitalization of the industry sector; and reinvigoration of the services sector.

The DBCC consists of the National Economic and Development Authority (NEDA) and Department of Finance (DoF) secretaries as well as the Bangko Sentral ng Pilipinas (BSP) governor, with the Office of the President. The committee is chaired by the Department of Budget and Management (DBM) secretary.

For Finance Secretary Benjamin E. Diokno, “the best is yet to come” for the country.

“After the highly unprecedented pandemic, followed by Russia’s invasion of Ukraine and a weakening China growth, the global economy is likely to face a mild recession next year. But for the Philippines, the worst is over, and better years are expected,” Mr. Diokno said last month.

He noted that many organizations and experts projected a global recession this year, hence lowering their growth outlook on the country’s GDP below 6%.

DBCC’s outlook for the year, as mentioned, is at 6%-7%.

“But an average GDP growth of 6.5% is nothing to be sneezed at: it is still one of the highest, if not the highest, growth rates among ASEAN+6 economies,” he said.

ASEAN+6 comprise of the 10 member states of the Association of Southeast Asian Nations plus trading partners such as Australia, China, India, Japan, New Zealand, and South Korea.

Such an optimistic view has a lot of reasons, said Mr. Diokno. Among these is the early approval of the 2023 national budget and adoption of the Medium-Term Fiscal Framework FY 2023-2028 as well as the prompt approval of the Philippine Development Plan 2023-2028.

Meanwhile, the World Bank projected the growth of the Philippine economy to slow to 5.4% in 2023.

“After the strong rebound in 2022, growth in Malaysia, the Philippines, and Vietnam is expected to moderate as the growth of exports to major markets slows,” the World Bank said in its Global Economic Prospects report from this month.

The Asian Development Bank (ADB) also lowered its growth projection on the country’s GDP to 6% from 6.3%.

“There are downside risks to growth in 2023, including inflation stickiness, further increases in interest rates, and a sharper-than-expected slowdown in GDP growth in advanced countries,” ADB Philippines Country Director Kelly Bird said last month.

The ADB expected sustained upward pressures on commodity prices in 2023 as well. And this includes oil, which could lie heavy on the Philippines, being mainly oil-importing. It also noted continued uncertainty stemming from the conflict in Ukraine.

For Southeast Asia, ADB projected GDP growth to slow to 4.7% this year.

Also trimming its growth outlook, the ASEAN+3 Macroeconomic Research Office (AMRO) expected the country’s economy to grow by 6.2% this 2023, down from its earlier projection of 6.3%.

“The Philippines had a very strong year last year. It was very resilient and that’s why we revised up to 7.3% (from 6.9% previously). This year, we expect growth to revert back to 6.2%, so this is still a very strong growth rate, the economy has done well overall,” AMRO Chief Economist Hoe Ee Khor was quoted as saying.

AMRO also lowered its growth projection for the ASEAN+3 region (which includes ASEAN member-states plus China, Japan and South Korea) from 4.6% to 4.3%. It also trimmed its forecasted growth for the ASEAN region from 4.9% to 4.8%.

As BusinessWorld reported last October, Fitch Ratings slashed its 2023 GDP forecast from 7% to 5.5%, citing risks stemming from a foreseen global slowdown, as well as “potential economic scarring from the pandemic, in particular, due to learning losses.”

The following November, Fitch Solutions Country Risk & Industry Research also forecast a slowdown in the country’s economic growth at 5.9% as momentum is seen to slow over the quarters to come. “High inflation, continued policy rate hikes, and weakening external demand are likely to cause growth to slow over the coming quarters, with the impact only being softened by extended fiscal support,” read the report.

A study published by state think tank Philippine Institute for Development Studies (PIDS) last November also expected GDP growth to weaken this year, with a forecast below the government’s outlook.

Authored by Margarita Debuque-Gonzales, John Paul Corpus and Ramona Maria Miral, the study projected GDP growth to slow to 4.5%-5.5% in 2023, citing the International Monetary Fund’s (IMF) “gloomy and uncertain” outlook for the global economy. The PIDS study projection is lower even with DBCC’s cut in growth forecast from 6.5%-8% to 6%-7%.

“Projections incorporating the Philippine FCI (financial conditions index), which is tightly linked to GDP growth, particularly at important turning points and which has turned negative as of the last update (June 2022), indicate a slower GDP expansion of about 4.7% in the coming year,” the PIDS authors wrote in the discussion paper. “However, catchup spending in services, especially in tourism, and stronger deployment of overseas Filipino workers may bolster growth.”

On the other hand, the Federation of Filipino Chinese Chambers of Commerce & Industry, Inc. last December expressed its optimism about the country’s economic growth this year, which it pegs between 6.5%-7.5% and expects to be driven by the country’s “positive economic and demographic fundamentals.”

S&P Global Ratings, meanwhile, shared a slower growth outlook for 2023 last two months ago, trimming it from 5.7% to 5.2%. Yet, the credit watcher sees domestic demand recovery to boost growth in the country this year, while strong consumption in the country, alongside those of other economies, is forecast to lift the average Asia-Pacific regional growth.

Moreover, earlier in January, S&P Global Market Intelligence pointed sustained reopening of domestic and international tourism travel as a potential boost to the economy this year.

“Due to the importance of domestic tourism in the overall contribution of tourism to GDP, the recovery of domestic tourism could be a significant growth driver in 2023,” Rajiv Biswas, Asia-Pacific Chief Economist at S&P Global Market Intelligence, wrote in a report published in the intelligence firm’s website.

“Continued rapid GDP growth of around 5.6% [year on year] is expected in 2023, helped by continued strong private consumption spending, an upturn in government infrastructure spending and improving remittance inflows,” the report added.

The report goes as far as projecting a rapid economic growth for the country over the decade ahead.

“By 2034 the Philippines is set to join the ranks of a small group of countries in the Asia-Pacific region that have a GDP exceeding one trillion dollars. This will result in a significant transformation of the structure of the Philippines economy, with substantial expansion in the size of the domestic consumer market,” Mr. Biswas added. — Chelsey Keith P. Ignacio with A.P.B. Conoza

Understanding present economic challenges and opportunities facing the global market this year

Photo from freepik

With the confluence of factors like the ongoing Russia-Ukraine war, skyrocketing inflation rates and worldwide economic slowdown, the future of the global economy is turning out as the International Monetary Fund (IMF) described it — “gloomy and more unclear.”

Krishna Srinivasan, director for IMF’s Asia-Pacific department, who shared his insights on the organization’s economic outlook for 2023 during BusinessWorld’s most recent Economic Forum, said that, “We are dealing with a world of compound crises, and they are creating a challenging environment globally and for Asia.”

The IMF’s World Economic Outlook Report released last October forecast global growth to slow from 6% in 2021 to 3.2% in 2022 and 2.7% in 2023 — the weakest growth profile since 2001 except for the global financial crisis and the height of the coronavirus disease 2019 (COVID-19) pandemic.

The report further projected global inflation to rise from 4.7% in 2021 to 8.8% in 2022, but to decline to 6.5% in 2023 and to 4.1% by 2024.

“The headwinds are cultivating a marked slowdown in global economic activity, including in Asia and the Pacific. But the region continues to perform better than the rest of the world. Our latest forecasts have downgraded growth in Asia and the Pacific by 0.9 percentage points in 2022, reflecting the slowdown in the second half, and by 0.8 percentage points in 2023,” Mr. Srinivasan said.

“Monetary policy should stay the course to restore price stability, and fiscal policy should aim to alleviate the cost-of-living pressures while maintaining a sufficiently tight stance aligned with monetary policy. Structural reforms can further support the fight against inflation by improving productivity and easing supply constraints, while multilateral cooperation is necessary for fast-tracking the green energy transition and preventing fragmentation,” the report said.

The grim outlook is shared by the World Bank (WB), which recently published its latest Global Economic Prospects report.

The WB predicts that due to increased inflation, higher interest rates, decreased investment and disruptions brought on by Russia’s invasion of Ukraine, global gross domestic product (GDP) will continue to see sharp declines in growth for the foreseeable future.

According to the report, global economy is projected to grow by 1.7% in 2023 and 2.7% in 2024. The steep slowdown in growth is anticipated to be universal, and forecasts for 2023 have been lowered for 95% of advanced economies and almost 70% of emerging markets and developing nations.

In emerging market and developing economies, per-capita income growth is expected to average 2.8% during the next two years, which is a full percentage point less than the average for the period 2010-2019. The growth in per-capita income for 2023-2024 is predicted to average about 1.2% in Sub-Saharan Africa, which is home to nearly 60% of the world’s extreme poor. At this rate, poverty rates may increase rather than decline.

Real risks

The WB added that there are very real risks of the world plunging into another recession given the fragile economic environment at the start of 2023. Any adverse development — such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic, or escalating geopolitical tensions — could tip the balance.

This would mark the first time in more than 80 years that two global recessions have occurred within the same decade.

“The crisis facing development is intensifying as the global growth outlook deteriorates,” said WB Group President David Malpass.

“Emerging and developing countries are facing a multi-year period of slow growth driven by heavy debt burdens and weak investment as global capital is absorbed by advanced economies faced with extremely high government debt levels and rising interest rates. Weakness in growth and business investment will compound the already-devastating reversals in education, health, poverty and infrastructure, and the increasing demands from climate change.”

It is predicted that growth in advanced economies will decrease from 2.5% in 2022 to 0.5% in 2023. Slowdowns of this size have predicted a worldwide recession over the past 20 years. Growth in the United States is anticipated to slow to 0.5% in 2023, which is 1.9 percentage points below earlier projections and the lowest performance since 1970 that is not part of an official recession.

The forecast for euro-area growth in 2023 has been revised downward by 1.9 percentage points to zero percent. Growth in China is predicted to be 4.3% in 2023, which is a 0.9 percentage point decline from earlier projections.

With China excluded, it is anticipated that growth in emerging market and developing economies will slow from 3.8% in 2022 to 2.7% in 2023, reflecting significantly lower external demand that will be exacerbated by high inflation, currency depreciation, tighter financing conditions and other domestic headwinds.

The GDP levels in emerging and developing economies will be about 6% below what was anticipated before the epidemic by the end of 2024. Although it is predicted that worldwide inflation would moderate, it will still be higher than before the pandemic, according to the report.

The WB’s Global Economic Prospects report offers the first comprehensive assessment of the medium-term outlook for investment growth in emerging market and developing economies.

Collaboration, investments in fighting issues

Ayhan Kose, the director of the multilateral lender’s Prospects Group, said that worldwide economic slowdown will likely have an impact on the global fight against poverty and inequality.

“That is actually the crux of the argument, when we think about poverty, when we think about inequality, when we think about inclusive growth, when we think about the types of development goals global economy set for itself by 2030. These goals are possible. For us to make meaningful progress in these goals, we need to have sustained, robust growth,” she said in an interview for World Bank’s Expert Answers series.

However, there’s good news. Ms. Kose pointed out that there is a greater recognition of the inflation problem across the globe, and major central banks have been acting decisively to address it in both advanced and developing economies in the past year. Given this worldwide effort, inflation is expected to moderate. She also mentions as positive opportunities the resilience of the global financial sector at weathering the headwinds, as well as the growing strength of international measures addressing climate change.

“In this context, investment is critical. We raise the issue of investment weakness. Of course, without significant infrastructure investment, we cannot overcome the climate challenge. So, it is a demo outlook, but I think there are good reasons to be optimistic and we should look to the future, stay on course, and on the part of policy makers deliver what is necessary in a credible fashion,” she said.

“At the global level, there is no question what we need to do. We need to collaborate to address these global problems. Of course, that starts with the peace in Europe. We need to basically find ways to work even more aggressively to address the climate change challenge. We need to find ways to address the food insecurity in many countries, and we need to have robust frameworks to have quick and durable solutions in the context of debt-related challenges we have.” — Bjorn Biel M. Beltran

Government’s aspirations in the midst of adversities

Photo from freepik

Compared to the rest of the world, the Philippines is in a great spot economically entering into 2023, even as challenges like sky-high inflation weigh its growth down.

According to the recently released data by the Philippine Statistics Authority, the country closed 2022 with the fastest growth rate recorded in over four decades, driven by strong domestic demand, lowered unemployment and “revenge” spending following the lifting of pandemic restrictions.

The Philippines, in fact, is among the fastest-growing economies in Asia with a recorded gross domestic product (GDP) growth rate of 7.2% during the final quarter of 2022, bringing the full-year expansion to 7.6%.

This is the fastest growth the country has seen since 1976 and breaks past the government’s target growth range of 6.5% to 7.5%.

Yet, the challenges still remain. The Bangko Sentral ng Pilipinas (BSP) expects baseline inflation to remain at 5.8% for 2022 and 4.3% for 2023, only easing in 2024 when the inflation is forecasted to be at 3.1%.

As the central bank explained in its Monetary Policy Report last November, the projections are mainly driven by the higher-than-expected inflation outturns in the third quarter of 2022, higher nowcast for the fourth quarter of 2022 due to the nationwide transport fare hikes and weather-related disturbances during the quarter, higher GDP growth projections, and peso depreciation.

The BSP made the decision to increase its key policy rate by 75 basis points (bps), to 5%, in November last year. By choosing to increase the policy rate once more, the BSP hopes to lessen the likelihood that inflation expectations would diverge even more from the target, broaden price pressures and stay high indefinitely.

The BSP’s policy rate increase also aims to mitigate the effects of significant, sustained changes in the peso-dollar exchange rate on inflation expectations.

Inflation is intended to return to within the target range of 2%-4% in the medium term as a result of the sequence of policy rate increases.

Until prices return to normal, the increase in the BSP’s policy rate will promote less expenditure, especially on non-basic commodities. The use of credit and consumer spending may see declines. However, the central bank noted that the Philippine banking sector continue to be solid, and in 2022, it is anticipated that domestic growth would be within target.

House Speaker Ferdinand Martin G. Romualdez spoke about the other side of the equation about the government’s fiscal policy during the BusinessWorld Economic Forum last November, outlining the current administration’s plans.

“Our President Ferdinand Marcos, Jr. has an agenda for prosperity. This agenda has as its core mission the country’s economic transformation towards inclusivity and sustainability. We in Congress are one with the President in this mission, which is why for the first time in history, the House of Representatives adopted the administration’s Medium-Term Fiscal Framework and eight-point socioeconomic agenda which comprise the road map for the agenda for prosperity,” he said during his keynote address.

“For the first time, the country has a clear six-year agenda with clearly-defined growth. These are to achieve a 6.5%-7.5% GDP growth in 2022, which we are poised to achieve, and a 6.5%-8% annual GDP growth from 2023 to 2028. Second, to achieve single-digit or 9% poverty rate by 2028. Third, to bring the government deficit down to 3% by 2028. Fourth, to achieve less than 60% debt-to-GDP ratio by 2025. And finally, to achieve upper-middle income country status for the Philippines.”

Regarding the government’s eight-point socioeconomic strategy, Mr. Romualdez said that it was developed to make sure that the advancement made via such efforts is inclusive and long-lasting. He listed the goals as achieving food security, resolving issues related to public health, bolstering social protective programs, and lowering the price of transportation and energy.

“It is with this economic plan that the Philippines is not only surviving, but thriving in spite of the external or global economic challenges,” he said.

The eight-point agenda consists of the following objectives: protect purchasing power and mitigate socioeconomic scarring; reduce vulnerability and mitigate scarring from the COVID-19 pandemic; ensure sound macroeconomic fundamentals; create more jobs; create quality jobs; create green jobs by pursuing green economy; uphold public order and safety, peace and security; and ensure a level playing field.

In the same forum, Finance Secretary Benjamin E. Diokno went further into detail on the country’s economic agenda. For the short term, he said that the government plans to reduce the impact of inflation on vulnerable sectors, mitigate economic scarring from the COVID-19 pandemic, and reinforce the country’s strong macroeconomic fundamentals.

For the medium term, as outlined in the Medium-Term Fiscal Framework, the priorities are high-quality green job creation via higher investments in physical infrastructure, human capital development and the digitalization of the economy. The Medium-Term Fiscal Framework aims to enhance the fairness and efficiency of the tax system, while promoting sustainable long-term growth and solid fiscal management.

The road towards the Philippines’ desired prosperity will be long and full of obstacles. The BSP noted that there are multiple risks and threats on the horizon that can adversely affect the government’s plans.

Increased global food prices as a result of rising fertilizer costs, unfavorable weather patterns from climate change and tightening trade restrictions are just some of the variables that could cause inflation to increase, for instance.

This would then result in a restricted supply of some imported items. Domestically, increases in transportation costs, the cost of sugar, fruits and vegetables, as well as the failure to extend Executive Order No. 171, s. 2022, would result in increased tariffs on coal, corn, rice, and pork.

A further slowdown in global economic activity, which lowers demand worldwide, could moderate pricing pressures.

Many economic analysts are also skeptical of the government’s targets, expecting inflation to instead breach the upper end of the BSP’s target range in 2022 as the sources of price pressures become broader.

In a BSP survey conducted in November 2022, economists from the private sector also expect inflation to remain beyond the target range in 2023. Meanwhile, they expect inflation to decelerate toward the upper end of the band in 2024.

They also anticipate that the BSP would increase the policy rate by an additional 25 to 75 bps in 2023 before cutting it by 25 to 150 bps in 2024. — Bjorn Biel M. Beltran

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