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IOC says it respects US decision on Beijing Winter Olympic Games 

SHOUGANG Big Air Venue for the Beijing Winter Olympics — N509FZ

LAUSANNE, Switzerland — The International Olympic Committee (IOC) said on Tuesday it respected the US government’s decision for a diplomatic boycott of the Beijing 2022 Winter Olympics in February over China’s human rights record.

“We always ask for as much respect as possible and least possible interference from the political world,” said Juan Antonio Samaranch, the IOC’s coordination commission chief for the Beijing Olympics. “We have to be reciprocal. We respect the political decisions taken by political bodies,” he told a virtual news conference.

“We are extremely proud, happy and hopeful that all athletes of the world will live in peace in 59 days (in Beijing),” he said.

The White House said on Monday that US government officials would boycott the Winter Olympics because of China’s human rights “atrocities,” although US athletes were free to travel there to compete.

The US boycott, encouraged for months by some members of Congress and rights groups, comes despite an effort to stabilize ties between the world’s two largest economies, with a video meeting last month between US President Joseph R. Biden, Jr. and China’s Xi Jinping.

China opposes the boycott and will take “resolute countermeasures,” foreign ministry spokesman Zhao Lijian told a media briefing in Beijing, host city of the 2008 Summer Olympics, on Tuesday.

“This is a political domain and we respect their right to take that political decision and them to respect the athlete’s right to take part in the Games,” IOC spokesperson Mark Adams said.

He said the UN’s recent adoption of an Olympic Truce resolution for Beijing 2022 proved countries around the world were backing the Olympics.

“We think that countries and their governments are very much behind the Games and very much understanding,” Adams said.

“They clearly support the aims of the Olympic Games and they understand that we are, hopefully, beyond politics.” — Reuters

Novak Djokovic on Australian Open entry list

NOVAK DJOKOVIC FB PAGE

SYDNEY — World number one Novak Djokovic was named on the official entry list for next year’s Australian Open on Wednesday, but 23-times Grand Slam singles champion Serena Williams was not included.

Djokovic, who was also on the entry list for the Association of Tennis Professionals (ATP) Cup in Sydney when that was released on Tuesday, has declined to disclose his vaccination status despite everyone at Melbourne Park needing to be inoculated against coronavirus disease 2019 (COVID-19).

Williams, who won the last of her seven Australian Open titles in 2017, had an injury-disrupted season and has not played since she limped out of her first-round match at Wimbledon in tears due to the leg injury.

Tournament organizer Craig Tiley said last month that the 40-year-old American, who needs one more Grand Slam title to match Margaret Court’s record of 24, would be playing at Melbourne Park from Jan. 17 to 30. — Reuters

Shenzhen Open missing as WTA announces schedule for first half of 2022

PENG Shuai at the 2017 BNP Paribas Open

THE Women’s Tennis Association (WTA) has confirmed the traditional season-opening Shenzhen Open will not take place in the first half of 2022, with the women’s tour staging events in January in Australia before following a conventional pattern until Wimbledon in June.

The WTA 250 tournament, which is usually played in the first week of the year, was held last year before events in China were wiped out due to the coronavirus disease 2019 (COVID-19) pandemic.

The women’s tour has suspended its tournaments in China due to concerns over the treatment of former doubles world number one Peng Shuai. It is unlikely the tournament would have gone ahead early this year anyway due to China’s travel restrictions.

The WTA said in a statement late on Monday that in the first half of next year, the Tour will have five WTA 1000 events in Doha, Indian Wells, Miami, Madrid and Rome, along with eight WTA 500 events and at least 15 WTA 250 events.

“The 2022 WTA Tour calendar will once again provide a prestigious stage for the world’s best women’s tennis players to compete on,” WTA Chairman Steve Simon said.

It is the second half of the year when the WTA calendar is usually more crowded with events in China, with the world’s most populous country hosting nine tournaments in 2019 — the last full season before the spread of the novel coronavirus. — Reuters

Japan downgrades Q3 GDP on deeper hit to consumer spending

Image via Toyota

TOKYO — Japan’s economy shrank slightly faster than initially reported in the third quarter, as a sharp rise in local coronavirus disease 2019 (COVID-19) cases hit private consumption and a global chip supply shortage hurt corporate sentiment.  

The deeper contraction is a setback for policymakers hoping easing supply shortages and loosened pandemic curbs would support a recovery in the world’s third-largest economy this quarter.  

Japan’s economy declined an annualized 3.6% in July–September, revised Cabinet Office data showed Wednesday, worse than the preliminary reading of a 3.0% contraction.  

The data, which was worse than economists’ median forecast for a 3.1% drop, equals a real quarter-on-quarter contraction of 0.9% from the prior quarter, versus a preliminary 0.8% drop.  

“This confirms that economic conditions were stagnating in the July–September quarter,” said Atsushi Takeda, chief economist at Itochu Economic Research Institute.  

“Growth turned negative due to the resurgence of the coronavirus.”  

The faster decline was mainly due to a larger fall in private consumption, which makes up more than half of gross domestic product, and shrank 1.3% from the previous three months, worse than the initial estimate of a 1.1% drop.  

Consumption fell as bad weather kept shoppers at home and a global chip shortage hit sales of cars and electronics due to production snags, a government official said.  

“A large contraction in durable goods [spending] indicated that car production cuts had a huge impact,” said Wakaba Kobayashi, an economist at Daiwa Institute of Research.  

Durable goods spending posted its biggest drop since 1994 when comparable data first became available, the official said, slumping 16.3% quarter-on-quarter and pulling down household consumption by 0.7 percentage points.  

The data showed public investment dropped 2.0% versus the initial estimate of a 1.5% decline, while capital spending saw a smaller fall, shrinking 2.3% from the prior quarter, compared with a 3.8% preliminary drop.  

The net contribution of exports to the GDP change was zero, offset by imports. Meanwhile, domestic demand pulled GDP down by 0.9 percentage point, matching a preliminary contribution.  

The GDP downgrade, which took into account a change in the way seasonal adjustments were calculated, comes after data on Tuesday showed household spending fell for a third straight month in October.  

However, in a more recent sign that consumption has picked up, a sentiment index of “economy watchers,” or workers close to consumer and retail trends, rose in November to an eight-year high.  

Since the start of the pandemic, Japan’s government has sought to support the fragile economy by large-scale fiscal spending. It unveiled a record $490 billion package last month.  

Analysts are hopeful spending will pick up due in part due to that spending package, with Daiwa’s Kobayashi seeing positive impact from the first quarter of next year.  

“We expect the stimulus package to boost Japan’s GDP by around 2%, by pushing up private consumption, government spending and public investments,” she said. — Daniel Leussink and Kantaro Komiya/Reuters 

Study suggests Pfizer COVID-19 vaccine may only partially protect against Omicron

The Omicron variant of the coronavirus can partially evade the protection from two doses of Pfizer Inc. and partner BioNTech’s coronavirus disease 2019 (COVID-19) vaccine, the research head of a laboratory at the Africa Health Research Institute in South Africa said on Tuesday.  

Still, the study showed that blood from people who had received two doses of the vaccine and had a prior infection were mostly able to neutralize the variant, suggesting that booster doses of the vaccine could help to fend off infection.  

Alex Sigal, a professor at the Africa Health Research Institute, said on Twitter there was “a very large drop” in neutralization of the Omicron variant relative to an earlier strain of COVID-19.  

The lab tested blood from 12 people who had been vaccinated with two doses of the Pfizer/BioNTech vaccine, according to a manuscript posted on the website for his lab. The preliminary data in the manuscript has not yet been peer reviewed.  

Blood from five out of six people who had been vaccinated as well as previously infected with COVID-19 still neutralized the Omicron variant, the manuscript said.  

“These results are better than I expected. The more antibodies you got, the more chance you’ll be protected from Omicron,” Mr. Sigal said on Twitter.  

He said the lab had not tested the variant against blood from people who had received a booster dose, because they are not available in South Africa yet.  

According to the manuscript, the lab observed a 41-fold decline in levels of neutralizing antibodies against the Omicron variant.  

Mr. Sigal said on Twitter that figure is likely to be adjusted after his lab does more experiments.  

While neutralizing antibodies are an indicator of the body’s immune response, scientists believe other kinds of cells such as B-cells and T-cells also are stimulated by the vaccines and help protect against the effects of the coronavirus.  

The preliminary data does not indicate that the vaccine is less able to prevent severe illness or death. While lab tests are under way, BioNTech CEO Ugur Sahin said last week “we think it’s likely that people will have substantial protection against severe disease caused by Omicron.”  

The Omicron variant, first detected in southern Africa last month, has triggered alarms globally of another surge in infections, with more than two dozen countries from Japan to the United States reporting cases.  

The World Health Organization classified it on Nov. 26 as a “variant of concern,” but said there was no evidence to support the need for new vaccines specifically designed to tackle the Omicron variant with its many mutations.  

There is not significant data yet on how vaccines from Moderna, Johnson & Johnson and other drugmakers hold up against the new variant. All the manufacturers, including Pfizer and BioNTech, are expected to release their own data within weeks.  

BioNTech’s Mr. Sahin told NBC News on Tuesday that the drugmaker has data coming on Wednesday or Thursday related to the new variant.  

Top US infectious disease expert Dr. Anthony Fauci said on Tuesday that preliminary evidence indicates that the Omicron variant of the coronavirus likely has a higher degree of transmissibility but is less severe.  

He said the United States was doing its own tests to determine the protectiveness of the current vaccines against the variant and expects results sometime next week.  

Umer Raffat, an analyst for Evercore ISI, cautioned against reading too much into a single study, noting there has been significant variability in measuring declines in antibody levels in previous lab studies.  

“Let’s wait for additional studies to draw a mosaic,” he said. — Michael Erman/Reuters 

Metaverse, virtual storefronts to boost SME recovery in APAC — Meta

Screenshot via Meta/YouTube

The metaverse has “major potential” to help small and medium enterprises (SMEs) in the Asia Pacific better cope with disruptions such as the pandemic, according to global tech firm Meta.  

“[The metaverse] is the next evolution of digital platforms,” said Dan Neary, vice president of Meta in Asia Pacific, at a virtual press conference on Dec. 3. “It’s more pronounced in APAC than anywhere else if you think about the speed by which many industries, entire industries, have adapted to things like mobile or messaging.”  

He defined the metaverse as a “set of virtual spaces where you can create and explore with other people who aren’t in the same physical space as you.” This includes sites like Facebook and Instagram where livestreaming allows for interactive experiences.  

In September, Meta’s report on business recovery found that 21% of operational SMEs in the Philippines that use Facebook reported higher sales this year compared to 2020.   

However, only 60% of Filipino SMEs surveyed said they use digital tools for their operations. In Vietnam, 94% of their SMEs have adapted — the highest in the region.  

“The power of digital transformation is helping businesses weather the storm,” explained Karen Teo, Meta APAC’s vice president for Global Business Group. “They use our apps to create virtual storefronts and reach customers.”  

Bee Books, an independent publishing house in India, shut their physical stores and moved entirely to social media. By hosting Q&As, storytelling on Facebook live, and collaborating with authors on an Instagram video series, the business survived on a digital customer base, said Ms. Teo. 

In the future, these two-dimensional apps will make way for more immersive 3D experiences, but Mr. Neary cautioned: “The reality is this is going to unfold over many years. This is closer to the start of the journey than the end of the journey.”  

With the metaverse still in its early days, developers are being careful. “We’re not building the metaverse, we’re building for the metaverse — addressing things like safety and security and making sure we’re anticipating the risks and getting things right,” said Mr. Neary.  

Meta is investing in research about safety, ethics, and responsible design, in collaboration with institutions such as the University of Hong Kong. “2022 is about helping businesses get future-ready,” he said. — Brontë H. Lacsamana 

Omicron sets back airline industry’s recovery hopes

New travel restrictions prompted by the Omicron coronavirus variant have set back the nascent recovery in international flights, creating delays and headaches in some regions, according to airline and airport officials.  

The flurry of new testing rules and border closings has raised concerns ahead of the important Christmas travel season, but some airline bosses said they hope any backward moves will be short-lived.  

Global airlines have blamed a patchwork of shifting rules for depressed demand for international travel, which is critical for their return to profit following steep coronavirus disease 2019 (COVID-19) pandemic-related losses in 2020.  

American Airlines incoming Chief Executive Robert Isom told Reuters the Texas-based carrier’s return to profitability is contingent on a full-scale recovery in travel demand. American has the largest debt stock in the US airline industry.  

“If there’s anything [in the way], it just delays recovery,” he said.  

He said the airline’s domestic business remained strong but the new travel restrictions had dampened demand in some international markets.  

Airline stocks have recovered some ground following a sell-off last week. While investors are taking heart from anecdotal evidence that suggests the new variant might not be as lethal as originally feared, it could take weeks, even months to know its effect on the course of the pandemic.  

UN agencies specializing in aviation and tourism pleaded on Tuesday for travel restrictions in response to new coronavirus variants to be imposed only as a last resort.  

Japan has banned foreigners, the United States is requiring a COVID-19 test 24 hours before flying, and travelers to Singapore now must be tested daily for seven days after arrival.  

“We were seeing accelerating openings until Omicron,” Campbell Wilson, chief executive of Singapore Airlines budget offshoot Scoot, said at an event held in Sydney by market-intelligence company CAPA Centre for Aviation.  

“We have seen basically a pause since then,” Mr. Wilson added.  

Airlines and travel agencies are hopeful that rising vaccination rates and new medicines would make a difference.  

“This is not the spring of 2020,” said Booking Holdings Inc.’s Chief Executive Glenn Fogel. “Absolutely not.”  

But Sue Carter, head of Asia Pacific at booking technology firm Travelport, said she has seen some searches go down week on week, adding that traveler confidence tends to be closely linked to government announcements.  

EVER-CHANGING RULES CAUSE CONFUSION 
A spokesperson for trade group Airports Council International (ACI) World said the global patchwork of travel rules is challenging airport operations and called for better coordination between countries.  

At Calgary International Airport, the line upon arrival is longer than it had been before the introduction last week of a plan by Canada to eventually test all passengers arriving from countries other than the United States, an airport spokesperson said.  

The Public Health Agency of Canada did not immediately respond to requests for comment.  

A Reuters reporter departing from a US airport to Montreal last week had to repeatedly inform airline agents of an update that exempted Canadian passengers returning to the country after less than 72 hours abroad from needing a COVID-19 test.  

Rules brought in after the discovery of Omicron are just the latest in “a constant state of change,” said Leslie Dias of Unifor, the union that represents customer service workers at Air Canada among other carriers.  

In Australia, fully vaccinated travelers to Sydney and Melbourne must now isolate at their home or a hotel for 72 hours after arrival. An earlier policy of no isolation led Hawaiian Airlines to add five weekly Honolulu-Sydney flights starting this month, rather than an initial plan for three, its chief executive Peter Ingram said.  

Qantas Airways Chief Executive Alan Joyce said his hope is that once more is known about Omicron, the 72-hour isolation requirement would be removed.  

“We still haven’t figured out whether this is a spanner in the works or a fly in the ointment,” Association of Asia Pacific Airlines Director General Subhas Menon said of Omicron. “From what we see now, it looks more like a fly in the ointment that is still good for using.” — Jamie Freed, Allison Lampert and Rajesh Kumar Singh/Reuters 

China’s Evergrande edges closer to default after missing debt deadline

REUTERS

HONG KONG/SHANGHAI — China Evergrande did not make payments on some US dollar bonds at the end of a month-long grace period, sources familiar with the situation told Reuters on Tuesday, setting the stage for a massive default by the world’s most indebted property developer.  

Adding to a liquidity crisis in China’s once bubbling property market, smaller peer Kaisa Group Holdings was also unlikely to meet its $400 million offshore debt deadline on Tuesday, a source with direct knowledge of the matter said.  

Failure by Evergrande to make $82.5 million in interest payments due last month would trigger cross-default on its roughly $19 billion of international bonds and put the developer at risk of becoming China’s biggest defaulter — a possibility looming over the world’s second-largest economy for months.  

Non-payment by Kaisa would push the 6.5% bond of Kaisa, China’s largest holder of offshore debt among developers after Evergrande, into technical default, triggering cross defaults on its offshore bonds totaling nearly $12 billion.  

Evergrande did not respond to Reuters’ request for comment. Kaisa, which in 2015 became the first Chinese developer to default on an offshore bond, declined to comment.  

No holders of two bonds issued by China Evergrande Group’s unit Scenery Journey Ltd had received overdue coupon payments as of 1400 GMT on Tuesday, a source familiar with the situation told Reuters.  

Another four sources holding the bonds confirmed they had not received payment. All declined to be named as they were not authorized to talk to the media.  

“From our point of view it has been a question of when, not if — the scale of the interest payments and then early next year redemption payments has made this [default] seemingly inevitable,” said one bondholder, declining to be named.  

Evergrande was once China’s top property developer, with more than 1,300 real estate projects. With $300 billion of liabilities, it is now at the heart of a property crisis in China this year that has crushed almost a dozen smaller firms.  

The government has repeatedly said Evergrande’s problems can be contained and moves to boost liquidity in the banking sector along with the firm’s plans to forge ahead with a restructuring of its overseas debt have helped reassure global investors. The provincial government of Guandong, where Evergrande is based, stepped in last week to help manage the fallout, reinforcing the view that its failure would be managed.  

Evergrande has not issued any communication to bondholders about the missed payment, one of the five sources said.  

The developer had said on Monday it had established a risk-management committee that included officials from state entities to assist in “mitigating and eliminating the future risks.”  

That came after it said creditors had demanded $260 million and it could not guarantee funds to repay debt, prompting the authorities to summon its chairman and reassure markets that broader risk could be contained.  

Rating agency S&P said on Tuesday the $260 million repayment demand showed Evergrande’s liquidity remained “extremely weak”, with a default looking inevitable especially given maturities totaling $3.5 billion in March and April 2022.  

China’s property market has for years been an engine of growth for the world’s second-biggest economy. Investors, policymakers and central bankers are now trying to calculate the global knock-on effects if the major developer defaults.  

BUSINESS MODEL SCUTTLED 
So far, any Evergrande fallout has been broadly contained in China and with policymakers becoming more vocal and markets more familiar with the issue, consequences of its troubles are less likely to be widely felt, market watchers have said.  

State involvement and hope of managed debt restructuring helped lift Evergrande stock as much as 8.3% a day after diving 20% to a record closing low. Still, it ended Tuesday up only 1.1% while its bonds continued to trade at distressed levels.  

Notes due on Nov. 6, 2022, — one of two tranches with a coupon payment deadline that passed on Monday midnight in New York —  traded at 18.282 cents on the dollar, Duration Finance data showed, little changed from a day earlier.  

Founded in 1996, Evergrande epitomized a freewheeling era of borrowing and building. But that business model was scuttled by hundreds of new rules designed to curb developers’ debt frenzy and promote affordable housing.  

Evergrande became one of several developers subsequently starved of liquidity, prompting offshore debt default and credit-rating downgrades, and a plunge in the value of developers’ stocks and bonds.  

A string of developers has scrambled to raise funds by selling shares and assets. Only some have found takers.  

Shimao Group and Logan Group both announced on Tuesday a top-up share placement to raise around $150 million each, while Guangzhou R&F Properties said it had agreed to sell a 30% stake in a Guangzhou logistics park.  

For Kaisa, the risk of defaulting emerged after it failed to make a notes exchange deal with bondholders last week.  

To avoid default, bondholders owning over 50% of notes due on Dec. 7 and Kaisa notes worth a total of $5 billion, sent the company draft terms of forbearance late on Monday, a separate source with direct knowledge of the matter said.  

Even in the case of a technical default, Kaisa and offshore bondholders could discuss forbearance terms, two sources with knowledge of the matter said.  

Kaisa, whose shares rose 1.1% on Tuesday, said it was open to discussion on forbearance, without elaborating.  

Sources previously said bondholders had offered Kaisa $2 billion in funding last month but the offer had not progressed. — Clare Jim, Scott Murdoch and Andrew Galbraith/Reuters  

UAE to shift to Saturday-Sunday weekend in line with global markets

REUTERS

DUBAI — The United Arab Emirates (UAE) will shift to a working week of four and half days with a Saturday-Sunday weekend from the start of next year to better align its economy with global markets, but private companies will be free to choose their own working week.  

The oil-producing Gulf state, the region’s commercial, trade and tourism hub, currently has a Friday-Saturday weekend. From Jan. 1, however, the weekend will start on Friday afternoon, including for schools, a government circular said.  

“Each company, depending on the sector they operate in and what suits and serves their business best, can choose the weekend they decide for their employees,” Minister of Human Resources and Emiratisation Abdulrahman al-Awar told Reuters.  

Over the past year, the UAE has taken measures to make its economy more attractive to foreign investment and talent at a time of growing economic rivalry with Saudi Arabia.  

Addressing any religious sensitivities in the Sunni Muslim-ruled country, where expatriates make up most of the population, the government said work on Friday would end at noon before Muslim prayers, which would be unified on Friday across the UAE.  

It said the longer weekend would improve employees’ work-life balance and noted that several majority-Muslim nations, such as Indonesia and Morocco, have Saturday-Sunday weekends.  

The UAE said the move would “ensure smooth financial, trade and economic transactions with countries that follow a Saturday-Sunday weekend, facilitating stronger international business links and opportunities” for UAE-based and multinational firms.  

The change will impact state entities like the central bank, which would communicate details about the new working hours to commercial banks, said al-Awar, adding that UAE stock exchanges would also be more integrated with global markets.  

“This change will enhance the integration of the banking sector in the UAE with the banking community internationally… it will eliminate the gap that existed in the past,” he said.  

Mohammed Ali Yasin, chief strategy officer at Al Dhabi Capital, said the financial sector would benefit from being able to make simultaneous payment settlements with developed markets and the tourism industry would also be a beneficiary.  

“It could be a good experiment for other countries in the region,” he said.  

Friday is a weekly holiday in the other five Gulf Arab states and many predominantly Muslim countries.  

Monica Malik, an economist at Abu Dhabi Commercial Bank, said she expects many private sector companies in the UAE to follow the Saturday-Sunday weekend, describing the move as a “very meaningful development” alongside other recent reforms.  

The UAE has liberalized laws regarding cohabitation before marriage, alcohol and personal status laws in addition to the introduction of longer-term visas to lure businesses and talent. — Davide Barbuscia and Ghaida Ghantous/Reuters 

Fewer Filipinos jobless in October

PHILIPPINE STAR/ MICHAEL VARCAS

THE RANKS of Filipinos who were jobless and looking for work declined in October, while those employed but wanting more work increased from the previous month, latest labor data showed.

The preliminary report of the Philippine Statistics Authority’s (PSA) October round of the labor force survey (LFS) put the country’s unemployment rate at 7.4% compared with 8.9% in the previous round. It was the lowest jobless rate in three months or since July 2021’s 6.9%.

In absolute terms, there were 3.504 million unemployed Filipinos in October, down from 4.255 million in September.

Philippine labor force situation (Oct. 2021)

Meanwhile, the quality of available jobs declined as the underemployed rate — the proportion of those already working but still looking for more work or longer working hours — increased to 16.1% from 14.2% in the previous month, equivalent to 7.044 million Filipinos, from 6.183 million a month ago.

The underemployment rate in October was the highest since July’s 20.9%.

The size of the labor force was about 47.330 million in October, down from 47.847 million in September. This brought the labor force participation rate to 62.6% of the working-age population in October from September’s 63.3%.

The employment rate stood at 92.6% of the labor force in October, up from 91.1% in September. This is equivalent to 43.826 million employed individuals during the period from 43.592 million previously.

Services and industry made up 57.6% and 17.8% of total employment in October, respectively, down from 57.8% and 18.7% in September. Meanwhile, agriculture’s share of employment increased to 24.6% from 23.5% a month earlier.

In an online Q&A, the PSA attributed the slight improvements in employment in October to the easing of granular level lockdowns. However, they said the full effects of looser restrictions will be reflected in the November data.

The Philippines on Sept. 16 started enforcing granular lockdowns with five alert levels in its capital region. It initially placed Metro Manila under Alert Level 4, the second-highest level, until Sept. 30. As of Dec. 2, the entire country is now under Alert Level 2, the second most relaxed lockdown level.

IMPROVEMENT SEEN AS ECONOMY REOPENS
In a joint statement, Socioeconomic Planning Secretary Karl Kendrick T. Chua, Department of Finance Secretary Carlos G. Dominguez III, and Department of Budget and Management Officer-in-Charge Tina Rose Marie L. Canda said the October result of the LFS “affirmed the soundness of the government’s push to safely reopen the economy, restore employment, and manage the spread of COVID-19 (coronavirus disease 2019).”

They said the government’s economic development cluster has approved a “10-point agenda” towards making the country a “COVID-19-resilient society” as well as foster further recovery.

The economic managers noted the policy agenda covers the following areas: metrics, vaccinations, healthcare capacity, economy and mobility, schooling, domestic and international travel, digital transformation, pandemic flexibility bill, and medium-term preparation for pandemic resilience.

“Backed by a stronger healthcare system, we will solidify our recovery by reopening the economy to Alert Level 1 in January 2022. At the same time, to avert long-term productivity losses and restore more employment, we will resume face-to-face schooling in January 2022, increase public transport capacity for all transport types to 100%, and relax restrictions for domestic and international travel,” they said.

“We will restore our path towards a more sustainable growth against future crises by enacting pending economic liberalization and digital transformation bills to improve telecommunications services and attract more foreign direct investments,” they added.

Security Bank Corp. Chief Economist Robert Dan J. Roces said in an e-mail that he expects a “steady recovery” in the labor market as economic activities improve in the fourth quarter driven by looser restrictions, an inventory buildup that is seen to favor the manufacturing sector, and increased spending amid the holiday season.

“Upside risks to unemployment as of now is the emergence of new COVID-19 variants which could lead to stricter curbs and job losses once more. Nonetheless, we see the unemployment rate to end the year at around 6.0% in 2021 — or still at elevated levels — before it returns to the pre-pandemic average of 5% in 2022,” Mr. Roces said.

University of the Philippines Professor Emeritus Rene E. Ofreneo shared this view, adding that stimulus spending “matters a lot” as the policy to “go back to the old normal” is not enough, he said in a separate e-mail interview. — Bernadette Therese M. Gadon

Inflation eases to four-month low in November

PHILIPPINE STAR/ MICHAEL VARCAS

By Lourdes O. Pilar, Researcher

INFLATION eased for the third straight month in November to hit its lowest level in four months but remained above the government’s forecast for the year.

Philippine Statistics Authority (PSA) data released on Tuesday showed headline inflation was at 4.2% in November, the lowest since July’s 4%.

Last month’s result was also down from 4.6% in October, but still higher compared with the 3.3% print in November 2020. 

Headline inflation rates in the Philippines (Nov. 2021)

The latest reading was also higher than the 4% median estimate in a BusinessWorld poll conducted last week and the Bangko Sentral ng Pilipinas’ (BSP) 3.3%-4.1% forecast for November. This was the fourth straight month inflation exceeded the BSP’s 2-4% target for the year.

Year to date, inflation averaged 4.5%, also exceeding the BSP’s forecast of 4.3% for 2021.

The PSA attributed the downtrend in the headline print last month to slower inflation for food and non-alcoholic beverages (3.9% in November from 5.3% in October), as well as for alcoholic beverages (7.5% from 9.8%) and furnishing, household equipment and routine maintenance of the house (2.4% from 2.5%).

The National Economic and Development Authority (NEDA) noted slower price increases of food items, with an annual inflation rate of 4.2% in November from 4.6% the previous month.

“In particular, vegetable inflation turned negative at -1.8% in November from 11.4% in October. Fish inflation also dropped to 7.9% from 9.5% in the same period,” the NEDA said in a Viber message to reporters.

“Meat inflation likewise decreased to 10.7% from 11.9%, while pork inflation decreased to 17.3% from 23.3%. However, on a month-on-month basis, both meat and pork recorded positive inflation at 2.4% and 4.2%, respectively,” it added.

Socioeconomic Planning Secretary Karl Kendrick T. Chua said the government’s policy to temporarily import pork “has been effective” as pork prices have gone down month on month from July to early October.

“However, the uptick in prices in November shows that we need to further ease administrative requirements for the unloading and distribution of stocks to encourage more importation and help bring back pork prices to their pre-African Swine Fever level,” Mr. Chua was quoted as saying in the NEDA statement. 

INFLATION TARGET TO BE BREACHED
BSP Governor Benjamin E. Diokno said the year-to-date inflation average of 4.5% as of November “[points] to a breach of the inflation target for 2021.”

“Nonetheless, average inflation is still projected to fall within the government’s target range in 2022 and 2023 as supply side pressures moderate,” Mr. Diokno said in a Viber group message to reporters.

The central bank official said risks to the inflation outlook are “on the upside” for next year but “remain broadly balanced for 2023.”

“Upside risks are mainly linked to the potential impact of weather disturbances on the prices of key food items and the possibility of a prolonged recovery of domestic food supply. Strong global demand amid persistent supply-chain bottlenecks could also exert further upward pressures on international commodity prices,” Mr. Diokno said.

“Meanwhile, potential delays in the lifting of domestic lockdown measures as well as the emergence of more transmissible COVID-19 (coronavirus disease 2019) variants could dampen the prospects for both global and domestic demand and temper inflationary pressures,” he added.

The NEDA said a further easing in mobility restrictions while observing health protocols is “crucial” to sustaining the economy’s recovery amid the threat of COVID-19’s Omicron variant.

“As restrictions ease, we recommend increasing public transport capacity to 100% as vaccination rates increase to reduce crowding in terminals and help protect commuters and drivers from future oil price shocks,” said Mr. Chua.

Separate PSA data released on the same day showed inflation for the bottom 30%, which reflects the spending patterns of the poor by modifying the model basket of goods, settled at 4.2% in November. This is slower than the previous month’s 4.8% but still faster than the 3.6% print in November 2020.

From January to November, the bottom 30% inflation averaged 4.8%.

Asian Institute of Management economist John Paolo R. Rivera said in an e-mail that price movements “will slowly relax” if the global situation “will continue holding the threat of the Omicron variant constant.”

University of Asia and the Pacific Senior Economist Cid L. Terosa expects inflation to be “lower than 4.5% in December,” with the year’s print likely to settle between 4.2% and 4.5%.

He said the BSP’s Monetary Board is unlikely to raise interest rates in its policy meeting on Dec. 16 as price increases appear to be “transitory in nature.”   

Meanwhile, JPMorgan Chase Bank N.A. Singapore Branch economist Nur Raisah Rasid said they expect the BSP to tighten policy settings in the fourth quarter of next year.

“A broader economic recovery could narrow the saving-investment gap with the second order effects from growth-led currency weakness and impact on financial and price stability to set the stage for policy normalization in [the fourth quarter of 2022],” Ms. Rasid said in a statement. “A faster-than-anticipated recovery as inflation rises to the upper bound of BSP’s 2-4% target range increases the risk of an earlier move by the central bank.”

World Bank raises PHL growth forecast to 5.3%

UNSPLASH

THE WORLD BANK raised its Philippine growth forecast for this year to 5.3% following the economy’s faster-than-expected expansion in the third quarter, it said in its East Asia and the Pacific (EAP) economic update report released on Tuesday.

The multilateral lender in September cut its full-year outlook to 4.3% as coronavirus disease 2019 (COVID-19) cases surged, the third time it slashed its gross domestic product (GDP) growth projection for this year after the 5.9% it gave in January.

If realized, a 5.3% GDP growth this year would be a turnaround from the steep 9.6% slump in 2020, but is still lower than the pre-pandemic 6.1% expansion in 2019.

“For 2021, we raised the forecast to 5.3% mainly because of this upside surprise in Q3 numbers,” World Bank Senior Economist Kevin C. Chua said at a briefing on Tuesday.

“What happened in Q3? We saw a second surge in the pandemic due to the Delta variant… But then initially we thought this would impact growth even further, but what happened was mobility wasn’t hampered in the third quarter of 2021.”

Philippine GDP expanded by 7.1% year on year in the third quarter, lower than the 12% posted in the preceding three-month period after lockdowns were reimposed in response to a surge in COVID-19 cases.

Meanwhile, the World Bank expects the economy to expand by 5.9% next year and by 5.7% in 2023. Both are higher than the 5.8% and 5.5% GDP growth it forecasted for 2022 and 2023, respectively, in September.

The multilateral lender’s 2021 growth outlook exceeds the government’s downgraded 4-5% target for the year. However, the forecasts for 2022 and 2023 are both lower than the 7-9% and 6-7% goals for those years.

“The key idea here is that as far the World Bank’s projection is concerned, we considered economic scarring and its relation to the potential GDP of the Philippines,” Mr. Chua said, noting the effects of the pandemic on future growth.

Further reopening will back the economy’s expansion over the next two years, the World Bank said in its report.

“Alongside the progress in vaccination, the domestic economy will further reopen, allowing for a return of market confidence, and more dynamic economic activity. Public investment is expected to be a key growth driver in the medium term as the government is expected to pursue its infrastructure investment agenda, while private investment remains tepid due to subdued lending and market uncertainty,” it said.

“Household consumption is projected to recover as remittances pick up and employment slowly improves, barring new episodes of case resurgence and sudden hikes in inflation.”

The World Bank said a protracted pandemic would continue to be a downside risk to growth, emphasizing the need to speed up vaccination.

Slower growth could mean a widening of the budget deficit, which would require more fiscal consolidation, it said.

“The government is encouraged to pursue a progressive fiscal consolidation plan that protects the poor to ensure long-term fiscal sustainability. It must, however, carefully manage the risks and trade-offs associated with consolidation,” the World Bank said. — Jenina P. Ibañez

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