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Asia startups face tougher IPO market 

ASIA’S stock listing aspirants will likely face a less generous market following a first-half sales boom, as bubbly valuations and nervousness about US monetary policy make investors more cautious. 

Firms in Asia have raised $82 billion through initial public offerings (IPOs) so far this year, the most ever for a first half, and beating the previous record of $63 billion seen during a comparable period in 2010, data compiled by Bloomberg show. The performance is part of a global trend, with new listings having hit a record of almost $351 billion since 2021 began, as ultra-low interest rates and ample liquidity pushed yield-hungry investors into riskier assets. 

With bankers in Asia still staring at a busy deals pipeline for the second half, they may find it hard to repeat the success seen earlier in the year. That’s due to growing concerns that rising inflation will prompt the US and other major central banks to unwind some of the stimulus that laid the foundation for the remarkable global stock rally in the past year. 

“Going forward, people will tend to be a little bit more conservative,” said Selina Cheung, co-head of equity capital markets, Asia at UBS Group AG. “In the earlier part of this year, people were quite focused on just high growth. There are a lot of investors who find the valuations for tech stocks relatively rich now.” 

Tech stocks were at the forefront of Asia’s IPO boom earlier this year, led by TikTok ,Inc.’s Chinese rival Kuaishou Technology that pulled off the world’s biggest share sale of 2021 in February. 

But the tide started turning in March, when worries about tighter US monetary policy triggered a selloff in growth stocks from tech to healthcare. The ripple effects were felt in the IPO market, where prospective issuers were forced to lower targeted valuations amid rising trading volatility. 

Still, the shifting investment climate hasn’t stopped some of Asia’s hottest firms in South Korea to India from lining up to go public. 

An active source of the region’s IPO supply, South Korea is poised for a record year with mobile game developer Krafton, Inc. and internet-only lender Kakao Bank looking to raise more than $7 billion between them. 

Chinese companies’ presence in the listings pipeline remains dominant even as Beijing’s clampdown on some of the nation’s tech behemoths has chilled sentiment. Deals in the making include a likely $1- billion IPO from the music streaming arm of gaming giant NetEase, Inc. and a similar offering from Huitongda Network Co., an e-commerce platform serving China’s rural areas. 

One closely watched deal is taking place Wednesday, when Chinese electric-vehicle maker Xpeng, Inc. is set to raise $1.8 billion in a dual listing in Hong Kong, adding to the flow of US-traded Chinese firms selling shares in the city. 

Inflation will be key to the market’s outlook, said UBS’ Ms. Cheung, also noting that the policy-driven issues that have been clouding China’s market may remain present. 

Others are more sanguine. 

“Demand is still going to be there for the rest of the year due primarily to the macroeconomic conditions, with liquidity likely to remain supported by monetary and fiscal policy,” said Francesco Lavatelli, head of equity capital markets for Asia-Pacific at JPMorgan Chase & Co. — Bloomberg

China’s Didi raises $4.4 bln in upsized US IPO — sources

Image via Didi Global

Chinese ride hailing company Didi Global Inc. raised $4.4 billion in its US initial public offering (IPO) on Tuesday, pricing it at the top of its indicated range and increasing the number of shares sold, according to two sources familiar with the matter. 

Didi sold 317 million American Depository Shares (ADS), versus the planned 288 million, at $14 apiece, the people said on condition of anonymity ahead of an official announcement. 

This would give Didi a valuation of about $73 billion on a fully diluted basis and $67.5 billion on a non-diluted basis. 

The decision to increase the deal size came after the Didi investor order book was oversubscribed multiple times, one of the sources said. The company is expected to debut on the New York Stock Exchange on June 30. 

Didi did not respond to a request for comment. 

Didi’s IPO is more conservative versus its initial aim for a valuation of up to $100 billion, Reuters has previously reported. The size of the deal was cut during briefings with investors ahead of the IPO’s launch. 

Investors balked at the $100 billion target given concerns the company’s future growth prospects could be curbed by the chance of greater regulation of the ride-sharing sector by transport authorities in the future. 

There was also uncertainty over how an antitrust probe into Didi, revealed by Reuters this month, would impact the business. Didi said at the time it would not comment on “unsubstantiated speculation from unnamed source(s).” 

The listing, which will be the biggest US share sale by a Chinese company since Alibaba raised $25 billion in 2014, comes amid record and volatile IPO activity this year as firms rush to capture the lucrative valuations seen in the US stock market. 

“The volatile IPO environment helped to lower (Didi) IPO price and valuation looks attractive,” said Douglas Kim, a London-based independent analyst, who writes on Smartkarma. 

Didi’s IPO was covered early on the first day of the book-build last week and the investor books were closed on Monday, a day ahead of schedule. 

An over-allotment option, or greenshoe, exists where another 43.2 million shares can be sold to increase the deal size. 

DIDI HISTORY
Didi was co-founded in 2012 by former Alibaba employee Will Wei Cheng, who currently serves as the chief executive officer. Cheng was joined by Jean Qing Liu, a former Goldman Sachs banker and the current president of the ride-sharing company. 

The company counts SoftBank, Uber Technologies Inc and Tencent as its main backers. 

Didi is also known for successfully pushing Uber out of the Chinese market after the US company lost a price war and ended up selling its China operations to Didi for a stake. Liu Zhen, the head of Uber China at the time, is Didi’s Liu’s cousin. 

Didi is the dominant player in China, although ride-hailing services by automakers such as Geely and SAIC Motor are picking up market share. In Europe and South America, where Didi is expanding, Uber has a presence. 

Like most ride-hailing companies, Didi had historically been unprofitable, until it reported a profit of $30 million in the first quarter of this year. 

The company reported a loss of $1.6 billion last year and an 8% drop in revenue to $21.63 billion, according to a regulatory filing, as business slid during the pandemic. 

Its shares are due to start trading under the “DIDI” symbol.  Echo Wang, Anirban Sen and Scott Murdoch/Reuters 

North Korea’s Kim chides officials for unspecified pandemic lapse

North Korean leader Kim Jong Un attends a ceremony in Pyongyang, North Korea, in this photo released March 24, 2021 by North Korea’s Korean Central News Agency (KCNA). — KCNA VIA REUTERS

SEOUL  North Korean leader Kim Jong Un chastised top ruling party officials for failures in anti-epidemic work that led to an unspecified “great crisis” and put the safety of the country and people at risk, state media reported on Wednesday. 

The report by state news agency KCNA did not elaborate on what happened, or how it put people at risk. 

North Korea has not officially confirmed any coronavirus disease 2019 (COVID-19) cases, a claim questioned by South Korean and US officials. But the reclusive country has imposed strict anti-virus measures, including border closures and domestic travel curbs. 

Mr. Kim called a meeting of the Workers’ Party of Korea politburo to address some party executives’ neglect of duty, including failing to implement important long-term measures to fight the pandemic, KCNA said. 

“He mentioned that senior officials in charge of important state affairs neglected the implementation of the important decisions of the Party … and thus caused a crucial case of creating a great crisis in ensuring the security of the state and safety of the people and entailed grave consequences,” the report said. 

Several politburo members, secretaries of the central committee, and officials of several state agencies were replaced at the meeting, though KCNA did not specify if the shakeups were related to the neglect of pandemic-related duty. 

North Korea has treated the protection of its people from the coronavirus as a matter of national survival and anti-pandemic decisions are made by some of its most senior leaders, said Harvard Medical School’s Kee B. Park, who has worked on health care projects in North Korea. “The main objective of North Korea’s strategy is to prevent the virus from even getting into the country while simultaneously strengthening its treatment capabilities as well as acquiring vaccines,” he said. 

North Korea’s all-of-government, comprehensive approach and the repeated holding of large-scale public gatherings suggest that the country may have prevented any major outbreak, Mr. Park said. 

“However, the success comes with steep cost to its economy and increased vulnerability for the poorest of the population,” he added. 

Last year, North Korea said it had declared a state of emergency and locked down the border city of Kaesong after a person who defected to South Korea three years ago returned across the fortified border with what state media said were symptoms of COVID-19. 

The World Health Organization later said North Korea’s coronavirus test results for the man were inconclusive. — Josh Smith/Reuters 

Hong Kong security law is ‘a human rights emergency’ — Amnesty International

Image via Comma Papana BS200/CC BY-SA 4.0/Wikimedia Commons

HONG KONG  Hong Kong authorities have used a new national security law to target dissent and justify “censorship, harassment, arrests and prosecutions that violate human rights,” Amnesty International said on Wednesday, a year after the law was implemented. 

Beijing imposed a sweeping national security law in June last year that sets out punishment for anything it deems as subversion, secession, colluding with foreign forces and terrorism with up to life in prison, setting the city on a more authoritarian path. 

Authorities have said the law would affect an “extremely small minority” of people and that it had restored stability after months of often-violent protests in 2019. They have said rights and freedoms in the former British colony remain protected but they are not absolute. 

Most high-profile democratic politicians and activists have been arrested under the new law or for protest-related charges, or are in self-exile. 

“In one year, the National Security Law has put Hong Kong on a rapid path to becoming a police state and created a human rights emergency for the people living there,” said Amnesty International’s Asia-Pacific Regional Director Yamini Mishra. 

“Ultimately, this sweeping and repressive legislation threatens to make the city a human rights wasteland increasingly resembling mainland China.” 

The Hong Kong government did not immediately respond to requests for comment. 

Authorities have said all arrests have been lawful and no one was above the law, regardless of their occupation. 

In its 47-page report, the international human rights group cited analysis of court judgements, court hearing notes and interviews with activists, concluding the legislation has been used “to carry out a wide range of human rights violations.” 

Hong Kong returned to Chinese rule in 1997 with the promise of a high degree of autonomy from Beijing and that wide-ranging rights and freedoms would be protected for at least 50 years. 

Ms. Mishra said the law “has infected every part of Hong Kong society and fomented a climate of fear that forces residents to think twice about what they say, what they tweet and how they live their lives.” 

More than 100 people were arrested and more than 60 charged in the first year under the security law, according to a tally by Reuters. 

“Hong Kong’s NSL has been used as a false pretext to curb dissent,” the rights group said, referring to the security law. — Reuters

COVID fraud set to cost UK taxpayers tens of billions pounds — report

Images Money/CC BY 2.0/Flickr

LONDON  Fraud and error from a loan scheme to help businesses cope with the coronavirus disease 2019 (COVID-19) pandemic could cost the British taxpayer up to 27 billion pounds ($37 billion), on top of some 50 billion pounds a year lost to criminals and mistakes, a report said on Wednesday. 

The Bounce Back Loan Scheme was launched in May last year to allow banks to quickly lend businesses up to 50,000 pounds with 100% state guarantee to help them cope with losses during national lockdowns. 

But, the government’s business department (BEIS) estimates that between 3560% of loans may not be repaid because of fraud or credit issues, amounting to up to 27 billion pounds, parliament’s Public Accounts Committee (PAC) said in a report. 

Meanwhile, fraud and error in the Universal Credit welfare payment system rose by 3.8 billion pounds to a record high of 5.5 billion pounds between April last year and March 2021. 

The PAC said the COVID-19 losses came on top of government estimates of an annual cost of fraud and error of up to 51.8 billion pounds a year. 

“The government knows it is losing over 26 billion pounds a year to fraud and error in the tax and benefits systems, but admits to another 25 billion pounds it can’t even detect,” Meg Hillier, the committee chair said. 

“That’s over 50 billion pounds worth of public services a year given away to fraudsters and by mistakes in payments  before the frightening losses racking up in our COVID-19 spending so far, and against the backdrop of a massive surge in need.” 

The government said their priority during the pandemic had been to act fast to help businesses and workers, and that the Bounce Back Loan Scheme had been designed to minimize fraud and thousands of false claims had been rejected. 

“We won’t tolerate those who seek to defraud taxpayers and will take action against perpetrators, including through criminal prosecution,” a spokesperson said. — Reuters 

Top fashion brands found failing on gender equality in new index 

UNSPLASH

LONDON – Adidas and Gap Inc are among the best performing fashion brands at tackling gender inequality, according to a new index which found that most retailers are failing to support women in their boardrooms and factories. 
 
The World Benchmarking Alliance (WBA)’s Gender Benchmark showed that nearly two-thirds of the top 35 apparel brands have not publicly backed gender equality and women’s empowerment, while only 14 firms have implemented gender-specific policies. 
 
The index – which examined factors such as the gender pay gap, representation in leadership, and policies to stop violence and harassment – gave the companies an average score of 29 points out of a possible 100, which the WBA called “concerning”. 
  
Adidas, Gap and VF Corp – known for brands from The North Face and Timberland to Vans – were the only three fashion industry giants to score more than 50 points on the WBA’s index. 
 
“We see a marked difference between what companies say and do on vital issues such as pay, gender balance in leadership and violence and harassment,” said Pauliina Murphy, engagement director at the WBA, a global non-profit organization.
  
“This lip service has to stop,” she said in a statement. 
   
The garment industry is estimated to employ more than 60 million workers globally – mostly women – and regularly comes under scrutiny over labor exploitation and sexual harassment. 
 
Activists have said that pressure from brands on suppliers to deliver clothes quickly and cheaply is fueling exploitation – from a lack of bathroom breaks to verbal and sexual abuse – in a trend that has been exacerbated by the coronavirus pandemic.

The WBA said its research – based on public information and confidential data from companies – revealed “significant gaps” between commitment and action on gender equality in fashion. 
 
Less than a third of the 35 companies had provided violence and harassment training to their staff, while only three brands had taken measures to address gender pay gaps, the WBA found. 
 
Dominique Muller, policy director at campaign group Labour Behind the Label, said the index’s findings were unsurprising as brands had repeatedly failed to address gender discrimination and violence in their supply chains. 
 
“Progress has stalled and the pandemic has laid bare the weakness of voluntary and ineffective promises of the fashion brands,” Muller told the Thomson Reuters Foundation by email. 

The lowest scoring companies on the index included Urban Outfitters , The Foschini Group (TFG) – owner of G-Star Raw – and Zhejiang Semir Garment, a Chinese clothing giant. The retailers were not immediately available to comment. — Thomson Reuters Foundation 

Asia’s new coal plant plans jeopardize climate targets, report says

Shubert Ciencia/CC BY 2.0/Wikimedia Commons

LONDON  Five Asian countries are responsible for 80% of new coal power plants planned around the world, the Carbon Tracker group said on Wednesday, saying most would prove uneconomical and the new plants would put international climate goals out of reach. 

China, India, Indonesia, Japan, and Vietnam plan to build more than 600 new coal-fired power projects, with a combined capacity of more than 300 gigawatts. 

Coal use has declined in Europe, the United States and elsewhere, with governments under pressure to cut carbon emissions and keep the global average temperature rise below two degrees Celsius this century. Many investors no longer finance coal. But some emerging economies say they still need the fuel. 

Carbon Tracker, an independent financial think tank that analyses the world’s transition to cleaner energy, said in a report that 92% of planned coal projects in the five Asian countries would not be economical, wasting up to $150 billion. 

“Investors should steer clear of new coal projects, many of which are likely to generate negative returns from the outset,” said Catharina Hillenbrand Von Der Neyen, head of power and utilities at Carbon Tracker. 

The five Asian countries now operate almost three quarters of global coal-fired power plants. More than half of all plants are in China. Carbon Tracker said 27% of existing capacity was unprofitable and another 30% was only just breaking even. 

It said $220 billion of existing coal plants could be left stranded if Paris climate targets were reached, it said. 

By 2024, renewable energy sources would be cheaper than coal in every major region, the report said, adding that by 2026 almost 100% of global coal capacity would be more expensive to run than building and operating renewable power generation. 

The International Renewable Energy Agency said last week the cost of renewable energy sources was undercutting new and some existing coal-fired power plants.  Nina Chestney/Reuters 

After COVID surge, some signs of internal dissent against India’s Modi

Prime Minister's Office (GODL-India)/Wikimedia Commons

BALAI, India  Govind Pasi, a grassroots member of India’s Bharatiya Janata Party (BJP), says he got no help from his connections in the ruling party when his wife contracted coronavirus and died at home for lack of proper treatment. 

Now, he says, he is done with the party that has ruled India since 2014 and with its leader, Prime Minister Narendra Modi. 

“I am heartbroken, nobody came to help us when we needed help the most,” said Mr. Pasi, 45, speaking in Balai village in Uttar Pradesh state. Nearby, on the banks of the Ganges river, scores of bodies of people believed to have died of coronavirus disease 2019 (COVID-19) have washed up. 

Anand Awasthi, a district vice president of the BJP, said he was aware of the death of Mr. Pasi’s wife and that the party was trying to get him monetary compensation. He said there was some confusion around her death relating to whether a government database established she had COVID, but did not have details. 

Mr. Pasi is among more than a dozen ground and mid-level BJP members who told Reuters they are disillusioned with the government’s handling of the coronavirus pandemic that has devastated India. In addition, six state lawmakers in Uttar Pradesh have written letters criticizing the government for not responding to frantic calls for help from their constituents, which Reuters has reviewed. 

A high-profile national level BJP official in New Delhi said he was taking a sabbatical because of the “failings of providing basic medical care, mixed messaging on lockdowns, abysmal medical oxygen cylinder shortages and clear lack of priority.” 

He spoke on condition of anonymity, citing worries about a backlash for stepping out of line. 

The BJP is a mammoth organization, claiming 150 million members, and Reuters could not determine the degree to which the unhappiness has spread. But it is highly unusual for those within the party to speak out against Mr. Modi, who has dominated Indian politics in his seven years in power and whose control of the BJP has been unquestioned. 

The BJP headquarters and the prime minister’s office did not respond to requests for comment. 

Kailash Vijayvargiya, a senior BJP leader who is one of its nine general secretaries, told Reuters he had no knowledge of any unhappiness or dissent within the party. 

“The pandemic was tough for everyone and we know some of our workers also lost their loved ones,” he said. “At so many levels we have helped each other and there were times when we could not because the situation has been very difficult.” 

Mr. Modi, a Hindu nationalist who gets wide support in the country’s majority community, has faced criticism before, including for a shock demonetization that threw the economy into disarray and haphazard tax reform. But the shortage of hospital beds and medical oxygen in the COVID crisis and the country’s stuttering vaccination program have battered his reputation for action and competence, analysts and opposition leaders say. 

Analysts say public anger over the handling of the pandemic coupled with even some disaffection in the party rank-and-file could hurt the BJP when it faces its next political test  an election early next year in politically crucial Uttar Pradesh, India’s most populous state and currently ruled by the BJP. 

ELECTION MACHINE 

The party’s formidably successful election machine rests on a volunteer army of people like Mr. Pasi, grassroots workers in the countryside who know voters intimately, make sure they come out to vote and manage the election at the booth level. 

Suhas Palshikar, a columnist and former professor of political science who has written extensively about the BJP, said unhappiness among these people could be critical. 

“This will surely mean less voter mobilization in favor of BJP and therefore a crisis in constituencies that are borderline in terms of margin of victory/defeat,” he said. However, he added that the Uttar Pradesh election was still six months away, which was “a long time in politics.” 

Doing badly in Uttar Pradesh would be a major setback for the BJP, analysts say, and could have a knock-on effect on the next general election, although that is not due until 2024. 

According to two opinion polls last month, Mr. Modi’s approval ratings have fallen to a historical low. But his ratings still remain far above leading opposition figures. 

The lack of unity in the opposition would be another plus for Mr. Modi in any election, analysts say. Some of the smaller political parties have said they need to come together to defeat Mr. Modi, but the main opposition Congress party has not commented on the issue. 

Meanwhile, the government has launched efforts to win back public support. As the wave of COVID infections tapered this month, Mr. Modi appeared on national television to spell out how he will tackle the pandemic and aides have launched a publicity offensive on the number of vaccinations carried out. 

It was too early to say if the efforts had tempered any anger over the government’s handling of the crisis. 

Om Gaur, the national editor of one of the largest-selling newspapers, the independent Dainik Bhaskar, however said ground reports from 12 of India’s 28 states indicated the BJP had been severely damaged by the handling of the pandemic and that “the PM has never had such a tough moment in the past seven years.” 

“Policy failure has enraged even those who were Modi loyalists, they continue to support his outlook on religion and nationalism, but question his ability to manage the crisis,” he said. 

Muralidhar Rao, another BJP general secretary, said he was not aware of any anger against Modi “whether it’s in the party or among voters.” 

“Whatever happens in upcoming elections, that cannot and should not be discussed right now, we have to focus on vaccinating the entire eligible population and that is the main agenda.”  Saurabh Sharma and Rupam Jain/Reuters

English language teachers are in demand — online job portal

Image via JobStreet

Online job search portal JobStreet recently shared that the most popular job opportunities for fresh graduates are in the education sector, which represents 21% of the vacancies waiting to be filled. Many of the posts are for teaching English as a Second Language (ESL). 

The next biggest job contributor is the customer service or business process outsourcing (BPO) industry at 14%, followed by clerical or administrative support at 9%; general work at 7%, which includes housekeeping, driving, and dispatch; and healthcare at 7%. 

Based on the monthly average total of job vacancies, many of these jobs require less than a year of experience, according to JobStreet Philippines country manager Philip Gioca. In a press release, he said: “Our new graduates must submit job applications to as many companies as possible for more chances of landing their first job.” 

The job portal’s data also showed that majority of job vacancies for fresh graduates are located in the National Capital Region (34%), followed by Calabarzon (Cavite, Laguna, Batangas, Rizal, and Quezon) and Mimaropa (Mindoro, Marinduque, Romblon, and Palawan) at 12%, Central Luzon at 7%, Western Visayas at 7%, and Central Visayas at 6%. 

Of all job openings available for fresh grads, 3% offer work from home arrangements. This amounts to 16,000 remote jobs, including the likes of virtual assistant, online teacher, and customer service representative. 

“Remote work will be here for a while,” said Mr. Gioca, “That is why investing in a conducive work from home setup also helps fresh graduates be job-ready, especially for companies that are temporarily implementing this arrangement during the pandemic.” 

With millions of fresh grads joining the work force and competing for the limited career opportunities available, unemployment remains a serious problem, with jobless Filipinos at 3.44 million, according to the Philippine Statistics Authority’s (PSA) March 2021 report. — B. H. Lacsamana 

MultiSys forays into logistics, introduces digital platform ‘DeliveryBox’

Envisioning a smarter logistics industry, Multisys Technologies Corporation introduces its newest platform, DeliveryBox, which supports end-to-end pick-up, delivery, and scheduled delivery services.

Through DeliveryBox.ph, the leading software solutions company aims to enable companies to connect with various logistics providers and delivery channels from motorcycles and vans to cargo trucks and freight forwarders—all in one digital platform.

With automated logistics, companies can give quality customer experience with flexible shipping options through multiple courier partners that are currently dominating in the local logistics industry.

Managing business operations and client transactions has also been made easier with a seamless digital shipping experience to customers and partners. The built-in monitoring analytics, which are downloadable, help manage reports in transactions and collections easily in one dashboard.

The admin dashboard presents live data trends, reports, and comparative analysis of the company user, categorized by transaction and by collection. Companies can also monitor their monthly or yearly transactions and collections, as well as make comparative reports in customizable timelines to keep track of their performance—anytime and anywhere.

Companies can also manage its partners’ profiles and accounts, and classify them based on various categories such as active or inactive, parcel type, and delivery type, among others.

MultiSys CEO and founder David Almirol shares, “Since a lot of businesses have been affected by the pandemic, we foresee that eCommerce and logistics will continue to flourish. We are taking a step forward in the industry to create a seamless digital transaction experience for the couriers, delivery services, companies, and the public through DeliveryBox.”

System integrators can easily integrate DeliveryBox by visiting www.deliverybox.ph. MultiSys has openly shared the sample integration source codes for PHP, Node, Python, Ruby, Go, jQuery, and cURL on the website so that IT companies and developers can easily integrate DeliveryBox’s API to their own systems and applications.

DeliveryBox, alongside PayBox and StoreBox, makes up MultiSys’ Multistore—an end-to-end online shopping, e-grocery, and cloud kitchen system with door-to-door delivery services and e-payment features.

 

PHL raises $3B from global bond sale

REUTERS

THE PHILIPPINES raised $3 billion (P146 billion) from the sale of US dollar-denominated global bonds in a dual-tranche offering, which will be used to fund the national budget, a Treasury official said. 

National Treasurer Rosalia V. de Leon said the 25-year tranche raised $2.25 billion, while the 10.5-year tranche generated $750 million.

The 10.5-year bonds were priced at 60 basis points (bps) over the benchmark US Treasury yield, carrying a 1.95% coupon, while the 25-year debt papers fetched a coupon of 3.2%, the Bureau of the Treasury (BTr) said.

Ms. De Leon said the “heavy bias towards the 25-year offering” shows that the Philippines’ credit remains attractive for investors despite the impact of the coronavirus pandemic.

“Investors see our economic revival is imminent, strong, and long lasting,” she added.

The government will use the fresh funds to support the national budget amid the pandemic.

“This (global bonds) highlights the continuing confidence of the international investor community in the Philippines,” Finance Secretary Carlos G. Dominguez III said in a statement.

The Philippines will issue the bonds on July 6.

“Despite relatively volatile markets after the June FOMC (Federal Open Market Committee) meeting, the Republic was able to take advantage of the improving dynamics in both Treasury and credit markets and announce the transaction on Monday,” the BTr said.

The US Federal Reserve hinted earlier this month that it may need to start increasing its policy rates twice in 2023 as the US economy’s recovery picks up pace.

S&P Global Ratings assigned a “BBB+” long-term foreign currency rating to the issuance while Fitch Ratings gave a “BBB” rating with a stable outlook, similar to the sovereign rating the Philippines currently has.

Bank of China, Deutsche Bank, Goldman Sachs, Morgan Stanley, MUFG Securities, Standard Chartered Bank, and UBS served as the joint bookrunners for the transaction.

The issuance marked the third time the country tapped the international debt markets this year, following the $2.5 billion worth of euro-denominated notes it sold in April and the $500-million yen-denominated Samurai bonds issued in March.

The government is planning to raise a total of $7 billion (P340.5 billion) from the international debt market this year.

The BTr wants to borrow P3 trillion from local and foreign sources this year to fund its budget deficit seen to widen to 9.3% of gross domestic product.

Economic managers set an 85:15 borrowing mix for the year in favor of domestic sources to minimize risks from foreign exchange volatility and other external developments. — Beatrice M. Laforga

Slower PHL growth seen amid prolonged pandemic

PHILIPPINE STAR/ MICHAEL VARCAS

By Beatrice M. Laforga, Reporter

THE ASEAN+3 Macroeconomic Research Office (AMRO) tempered its economic growth forecast for the Philippines this year due to a resurgence in coronavirus disease 2019 (COVID-19) infections coupled with a sluggish vaccine rollout, highlighting the need for the government to boost fiscal support to minimize economic scarring.

The regional macroeconomic surveillance organization slashed its 2021 gross domestic product (GDP) forecast for the Philippines to 6.4% from the 6.9% estimate it gave in March, based on its latest Annual Consultation Report published on Tuesday.

This was still well within the government’s 6-7% growth target for the year and a turnaround from the record 9.6% GDP contraction in 2020.

AMRO economist Zhiwen Jiao said the further reopening of the economy, recovery in business and consumer confidence, and a faster vaccination program will support the baseline forecast for this year.

“This new wave of infections (in March) has significantly raised downside risk to both our output and baseline forecasts. For the recovery to catch up, mass vaccination becomes more urgent. So far, the vaccination rollout in the Philippines has remained relatively slow,” Mr. Jiao said at a briefing on Tuesday.

On a worst-case scenario, AMRO Chief Economist Hoe Ee Khor said another wave of COVID-19 infections and the reimposition of stricter lockdowns could hamper recovery, and bring Philippine GDP growth to 5.5% or even 4.5% this year.

The Health department reported 4,479 COVID-19 infections on Tuesday, bringing active cases to 50,037. However, experts have warned of a potential surge in infections because of the more contagious Delta variant from India.

As of June 27, the government has given out more than 10 million doses, 7.5 million of which were first doses.

The Philippines aims to inoculate at least 500,000 people daily in Metro Manila, Rizal, Bulacan, Cavite, Laguna, Metro Cebu and Metro Davao to achieve herd immunity by Nov. 27.

‘PERMANENT SCAR’
For 2022, AMRO also lowered its growth forecast to 6.8%, from an earlier projection of 7.8%. This falls below the 7-9% GDP growth target of the government.

Output gap, or the difference between the actual GDP and its potential output, will likely remain negative at least until the end of 2022, AMRO said, citing expectations that a weak recovery and prolonged sluggish activity might leave a “permanent scar” on the economy.

Private consumption will likely pick up by 5.3% this year from last year’s 7.9% contraction, before rebounding again by 5.8% in 2022.

Government spending, however, is seen slowing down to 8.7% from the 10.5% spike last year, before rising by 12.5% next year.

AMRO warned that muted state spending amid the crisis could only further derail the economy’s recovery.

“While expansionary fiscal policy in 2021 will continue to support economic recovery, the recovery is still nascent, and further fiscal support would be critical if the growth momentum proves weaker-than-expected and the economy falters,” AMRO said.

Faced with the risk of economic scarring lowering potential growth, AMRO Senior Economist Byunghoon Nam said the Philippine government still has ample fiscal space to expand its support to the economy.

Mr. Nam said higher fiscal spending will raise the country’s debt level relative to GDP in the next two to three years, but the ratio will start to ease over the longer term when faster economic growth boosts government revenues and the capacity to pay off its debts.

“In the short term, more growth-friendly and supportive fiscal programs will promote stronger economic recovery. A more expansionary fiscal policy can recover the potential growth path, faster than the current fiscal policy,” he said.

“We recommend that the Philippine government should leverage on a sufficient fiscal policy space to achieve robust recovery and a more sustainable growth,” he added.

AMRO expects the budget deficit to widen to 9.5% of GDP by year’s end, slightly higher than the limit set by the government’s economic managers at 9.3% but wider than the 7.6% ratio seen last year.

Monetary policy will remain accommodative until next year amid the relatively benign inflation outlook. AMRO said the Bangko Sentral ng Pilipinas (BSP) deployed its monetary and regulatory policy responses swiftly and effectively to ensure ample liquidity in the market, but it has been “less successful in stimulating credit growth.”

“To better support the recovery, more efforts should be placed on enhancing the effectiveness of monetary transmission and supporting credit expansion,” it said.

Philippine economy’s recovery momentum to depend on pace of vaccinations, continued fiscal support