THE NBA Board of Governors gave final approval Tuesday to the agreement with the players union on a Dec. 22 start date for the 2020-21 season.
The move confirms details settled by the sides Monday night. The upcoming season will include 72 regular-season games, down from a typical 82-game season.
Other key dates finalized are a Nov. 18 National Basketball Association (NBA) draft, the opening of free agent negotiations on Nov. 20 and the first day players can sign free agent deals on Nov. 22.
With the just-concluded 2019-20 season pushed into October because of COVID-19 pandemic delays, the typical late-October start to a new season had to be scuttled.
The previous regular season was interrupted on March 11 due to the pandemic and did not resume until more than four months later at a “bubble” environment near Orlando. The Los Angeles Lakers won the championship on Oct. 11—four months later than the season typically ends.
The Dec. 22 start date for the upcoming season will allow the league to have its annual Christmas Day showcase of games.
Another provision already announced Monday: A salary cap of $109.1 million for the upcoming season and a luxury-tax threshold of $132.7 million—both figures unchanged from last season.
Under the collective bargaining agreement, the salary cap will increase between 3 and 10 percent each subsequent season, though the tax hit would lower should league revenue decrease from one season to the next.
The league still has not announced if and when fans would be allowed to attend games. — Reuters
ALL the things that allowed China’s internet innovators to become big, powerful, and hugely profitable are under threat. The implications are chilling for established players.
Draft rules detailed by China’s antitrust watchdog Tuesday are aimed at rooting out monopolistic practices among internet companies, Bloomberg News reported. That could be invigorating for potential challengers to industry leaders such as Alibaba Group Holding Ltd., Tencent Holdings Ltd., Meituan, and Baidu, Inc.
Take Alibaba. The Hangzhou-based company has a side gig selling cloud computing services, which has posted chronic operating losses as the company chases customers and market share. The huge profits of Alibaba’s legacy e-commerce business have helped to buffer these losses, which widened 23% last year to $1 billion. The new rules could conceivably put an end to that kind of subsidization, forcing the company to raise prices and churn a profit, or even divest the business altogether.
Delivery and booking service giant Meituan could also be in regulators’ sights. Within a year of its Hong Kong listing, Meituan managed to turn profitable thanks to its deep knowledge of consumer habits, which it could then leverage to sell ads to vendors who use its platform. That, too, could be in jeopardy under the antitrust rules, which would restrict the use of such data to target specific customers.
Games and social-networking company Tencent, e-retailer JD.Com, Inc., and search provider Baidumay also face scrutiny, given the size and dominance they have in their respective niches.
Beijing’s goal may be to clear the decks for fresh companies to enter.
A challenger in the cloud business would struggle to compete if Alibaba, with $60 billion in cash and equivalents, can just keep undercutting it until the new entrant runs out of money. In a market without competition rules, predatory pricing is just regular business.
With data being almost as valuable as cash, companies like Meituan and Tencent have a distinct advantage because they know more about the market and consumers than any newbie that wants to hang out its shingle and start offering services. Throttling that data flow could help even the playing field.
It’s possible this intervention will add fresh energy to an internet market that has passed its growth heyday, exacerbated by a slowing of the Chinese domestic consumer sector and the pandemic-hit global economy. It may also let Beijing shepherd in a new crop of companies that better align with its economic and political goals, which include tighter control over information and money flows.
The nixing last week of Ant Group Co.’s much-anticipated listing is evidence that not even the world’s biggest IPO is immune to regulatory change. In Ant’s case, the concern was over the fintech giant’s risk management and market dominance.
Hints as to Beijing’s goal can be seen in plans to require variable interest entities to get operating approval. For more than a decade, VIEs have existed in a legal gray area that lets Chinese companies skirt restriction on foreign ownership. A clampdown may accelerate moves to delist from US markets and return home, a trend spurred by President Donald Trump’s aggressive policies toward China. Doing so would allow regulators to keep a tighter grip on the money that flows into and out of these giants, and redirect funds to projects that better align with Beijing’s China-first policies.
Regulation may well achieve the goal of limiting monopolies and opening up the market. But companies are quick to adapt, with every chance that new behemoths will appear. Witness the considerable efforts to crack down on Microsoft Corp. in the late 1990s, aimed at separating its internet browser from its operating system. In the subsequent decade, Alphabet, Inc.’s Google and Facebook, Inc. rose to dominate new domains. The world is now engaged in efforts to limit the market power of the new titans. Meanwhile, Microsoft still holds a commanding share of the OS market.
Beijing may be successful in stymieing China’s current Big Tech cohort. Just don’t expect the era of Internet leviathans to end. — Bloomberg
XI JINPING’s Communist Party stepped up efforts to rein in some of China’s most powerful companies, jolting investors and dealing a blow to the country’s richest entrepreneurs.
Beijing on Tuesday unveiled regulations to root out monopolistic practices in the internet industry, seeking to curtail the growing influence of corporations like Alibaba Group Holding Ltd. and Tencent Holdings Ltd. The rules, which sent both stocks tumbling over two frenetic days and sparked a wider selloff in Chinese equities, landed about a week after new restrictions on the finance sector triggered the shock suspension of Ant Group Co.’s $35 billion initial public offering.
While Xi’s government has been steadily tightening its grip on the world’s second-largest economy, it has until recently taken a relatively hands off approach toward businesses that dominate China’s burgeoning internet, e-commerce and digital finance industries. Authorities are concerned the companies have become too powerful, according to Ma Chen, a Beijing-based partner at Han Kun Law Offices.
“This is a watershed moment,” said Ma, who specializes in antitrust.
Alibaba, Ant, and Tencent alone commanded a combined market capitalization of nearly $2 trillion before last week, easily surpassing state-owned behemoths like Bank of China Ltd. as the country’s most valuable companies. Wednesday’s selloff sent Alibaba shares down another 7% to its lowest since August in Hong Kong, while analysts have estimated that Ant’s $280 billion valuation could be cut in half due to stricter regulations. That’s after Alibaba’s 5% decline on Tuesday. Both companies were co-founded by billionaire Jack Ma, China’s most celebrated businessman.
Tencent, the gaming-to-payments giant whose rise turned co-founder Pony Ma into China’s richest man, fell as much as 6% on Wednesday in Hong Kong after sinking 4.4% the previous day. Meituan, the food-delivery startup that has since expanded into hotel bookings and movie tickets, dived a further 6% before paring losses. It had tumbled 10.5% Tuesday. The company declined to comment while representatives from Alibaba and Tencent didn’t immediately respond to queries.
China’s antitrust watchdog is seeking feedback on a raft of regulations that establish a framework for curbing anti-competitive behavior such as colluding on sharing sensitive consumer data, alliances that squeeze out smaller rivals and subsidizing services at below cost to eliminate competitors. They may also require companies that operate a so-called Variable Interest Entity — a vehicle through which virtually every major Chinese internet company attracts foreign investment and lists overseas — to apply for specific operating approval.
The latest proposal follows heightened scrutiny of technology companies worldwide, as regulators investigate the extent to which internet giants from Facebook, Inc. to Alphabet, Inc.’s Google can leverage their dominance. Consumers in China — home to some of the world’s largest corporations from e-commerce giant Alibaba to WeChat-operator Tencent — have in recent years protested against the gradual erosion of their privacy via technology from facial recognition to big data analysis.
Tech selloff deepens after new rules threaten to rein in internet giants.
Beijing is increasingly seeking to diminish the influence that a handful of its tech corporations wield over vast swathes of the economy. It investigated Tencent’s music arm’s exclusive agreements with publishers last year and, most recently, modified regulations to rein in risk at fast-growing, micro-lending entities such as Ant Group. The latter step derailed Ant’s planned IPO last week, before it was to complete what would have been the world’s largest such offering on record.
“There seems to be a broader China government sentiment that internet platforms are becoming too powerful,” said Hoi Tak Leung, a Hong Kong-based lawyer specializing in Chinese internet companies at Ashurst LLP. “This would be consistent with worldwide developments as well.”
The new rules were proposed in accordance with and built on China’s Anti-Monopoly Law, which in January included broad language governing internet companies for the first time. They restrict targeting specific customers through their online behavior, a common practice adopted by players both at home and abroad. Under the regulations unveiled by the State Administration of Market Regulation, violators may be forced to divest assets, intellectual property or technologies, open up their infrastructure and adjust their algorithms. The watchdog will seek public feedback on the regulations till Nov. 30.
Representatives from Alibaba, Tencent, TikTok-owner ByteDance Ltd. and 24 other tech giants attended a meeting with regulators from the antitrust and cyberspace authorities earlier this month to discuss issues ranging from unfair competition to counterfeiting. “Internet platforms are not outside the reach of antitrust laws, nor are they the breeding ground for unfair competition,” the regulators said in a subsequent statement.
Further measures to tighten oversight of the tech companies may be in the offing. Regulators plan to release new rules governing internet transactions by June 2021, according to a State Council statement released Tuesday.
Shares of Chinese tech companies listed in Hong Kong tumble.
The government is now trying to update its laws for the internet era, to adapt to an industry where market dominance isn’t always easily quantifiable. In the past, China used revenue or market share to determine whether a company held a monopoly. But those precepts may not apply to internet firms, which sometimes control valuable information that haven’t yet been monetized.
JD.com, for instance, has accused bigger rival Alibaba of unfairly locking in exclusive agreements with merchants, which Alibaba has denied. Regulators have investigated the legality of Cheng Wei’s Didi Chuxing acquiring Uber Technologies, Inc.’s Chinese business. And Tencent’s WeChat dominates many aspects of daily Chinese life from payments to gaming, though ByteDance, co-founded by Zhang Yiming, has in recent years begun to eat into its advertising business through video service Douyin and news platform Toutiao.
Alibaba and Tencent now dominate e-commerce and gaming, but are also key backers of leaders in adjacent businesses such as Wang Xing’s Meituan and car-hailing leader Didi. They’ve together invested billions of dollars in hundreds of up-and-coming mobile and internet companies, gaining kingmaker status in the world’s largest smartphone and internet arena by users. Companies like ByteDance and Tencent-rival NetEase Corp., controlled by William Ding, that have risen to prominence without backing from either of the pair are viewed as rare exceptions. In other areas, Robin Li’s Baidu, Inc. dominates online search.
“The Party is faced with the conflicting desires to empower domestic tech companies to be internationally competitive, while keeping their market activities firmly under control at home,” said Kendra Schaefer, head of digital research at the Trivium China consultancy in Beijing. “The horizontal spread of Chinese big tech makes anti-monopoly regulation that much more urgent for Chinese regulators.”
Han Kun Law’s Ma said the specific regulation pertaining to VIEs requiring approval should be of concern to much of the industry as well. The model has never been formally endorsed by Beijing but has been used by tech titans such as Alibaba to list their shares overseas. Under the structure, Chinese corporations transfer profits to an offshore entity with shares that foreign investors can then own. Pioneered by Sina Corp. and its investment bankers during a 2000 initial public offering, the VIE framework rests on shaky legal ground and foreign investors have been nervous about their bets unwinding overnight.
“It will not only have a huge impact on Alibaba, but also all the companies that use a platform business model and a VIE structure,” Ma said. — Bloomberg
HOW bad is the damage from China’s plan for Ant Group Co. to become more like a bank? Before regulators put the brakes on the planned initial public offering, Jack Ma’s fintech platform was weighing in at 4.4 times its book value, versus two times at traditional global banks. In other words, Ant could be worth less than half what it was two weeks ago. At the latest pre-IPO round, the company was priced at $280 billion. Now, its value could be just $140 billion, some analysts say.
Actually, no. Banks — contrary to what some would have you believe — can be quite lucrative. Even within the conventional banking space, there’s plenty of variation. Winners emerge. China Merchants Bank Co., with a vibrant retail franchise, and Bank of Ningbo Co., which has a successful regional small business loan operation, both boast a handsome 15% return on equity.
Things start looking even better when tech is used to drive economies of scale. Take WeBank Co., whose largest shareholder is Tencent Holdings Ltd., with a 30% stake. China’s first and largest digital bank, it reported a 28% return on equity last year, up from around 9% in 2016. Compare that to the 11% to 12% (and declining) for the big lenders.
None of that is lost on Ma, founder of Alibaba Group Holding Ltd. and Ant. The financial outfit has a similar 30% ownership in MyBank, and describes the licensed digital lender as one of its largest customers and “most important partner,” serving more than 12 million small and medium business clients in 2019. Net interest margins are close to 4%; those at large, traditional banks are around half that.
The strong user traffic seen by Ant’s AliPay and Tencent’s WeChat can significantly bring down customer acquisition costs. WeBank’s effective retail clients grew 68% to 200 million last year compared to 2018, the fifth-largest customer base in China. The bank has 900,000 small and medium companies as clients.
This gives the digital bank a lot of operating leverage. In just three years, WeBank’s cost-to-income ratio fell to 35% from 54%. Cost per account is only 3.60 yuan (55 cents), versus 20 yuan at big traditional banks, data provided by CLSA Ltd. shows. Last year, with revenue at only 74 yuan per head, WeBank was servicing the lower tiers of Chinese society, a business segment regular banks didn’t tap because of higher operating costs.
At a 16% return on equity, Ant’s MyBank isn’t quite as lucrative, but chances are it will expand. The company had until recently been relying on a loan-facilitation matchmaking model for its consumer lending business. Given the recent actions by China’s regulators, that operation plan is on its way out.
In the speech last month that ultimately led regulators to halt Ant’s $35 billion IPO, Ma said that China’s financial system works like a pawnshop: Banks won’t lend without collateral or guarantees. Ma wants the lending industry to evolve into one based on effective credit systems. Using real-time payments data and its own risk management tools, MyBank can quickly decide whether to make small loans.
Running a bigger, successful MyBank would prove Ma’s point. One clear path of expansion would be consumer loans, leveraging the co-lending model with traditional banks. That’s a strategy that seems to be working for WeBank.
There’s a business case for financial innovation, even if Beijing is squirming. Regulators are rightly fixated on stability and cutting risk. Anxiety about a futuristic, gargantuan digital finance platform like Ant is understandable. But it ignores the reality of where the industry is headed. There must be other ways of dealing with their discomfort with Ant’s many products and businesses, and of disentangling various segments.
When it comes to banks, taking a page from big tech’s books seems worth a shot. WeBank raked in 4 billion yuan last year. China’s traditional lenders could use the money. The large banks forfeited 1.25 trillion yuan in profits between January and October to support the real economy during the coronavirus crisis.
In theory, regulators would like to protect consumer interests. Skepticism of the evolving financial world is understandable, given the challenge of imposing rules on high-yielding wealth management investment and insurance products over the last couple of years. However, consumers also need credit.
For years, Beijing has had to force banks to lend to small and medium enterprises. They wouldn’t be reluctant if there was profit in it. WeBank has shown state planners that lenders can serve the broader economy more effectively.
So, take your pick: Banks that make money or, well, those that don’t. Tamping down the profitable ones seems like a bad idea. After all, operating leverage is the kind we all want, especially China’s banking and insurance regulator. — Bloomberg
Wilcon Depot, the country’s leading home improvement and construction supply retailer,
provided relief assistance to the communities of Naga City and Daraga, Albay who were
seriously affected by the recent super typhoon. With the assistance of the local workforce of Wilcon in coordination with the Local Government Units (LGUs), all relief goods were successfully turned over to the local community of Naga and Daraga on November 6, 2020.
For more updates about Wilcon, you can log onto www.wilcon.com.ph or follow their social
media accounts on Facebook and Instagram at @wilcondepot.ph and subscribe and connect with them on the Viber community at Wilcon Depot PH, LinkedIn, and YouTube.
SHANGHAI – Chinese e-commerce giant Alibaba Group Holding Ltd kicked off its annual Singles’ Day mega-shopping event on Wednesday, looking to cash in on consumers itching for discounts as the economy rebounds from the COVID-19 crisis.
This year’s online shopping extravaganza also comes a week after Alibaba lost almost $76 billion of its market value, following China’s suspension of the $37 billion listing of Ant Group, the financial technology firm Alibaba owns a third of.
Pop star Katy Perry made an appearance at the company’s gala for the first time, albeit via livestream, as travel restrictions on outside visitors remain in place in China.
Alibaba has said it will introduce more than 2 million new products, double the amount last year.
Analysts expect that this year will be a boon for luxury brands, as Chinese consumers accustomed to going overseas to buy high-end goods are now stuck at home.
Andy Halliwell, senior director retail and retail analyst at digital consultancy Publicis Sapient said in a note that “the lack of consumer tourism which has hit European and U.S. stalwarts like Harrods, Galeries Lafayette and Nordstroms will likely see bigger spending locally”.
Alibaba launched the online blitz early this year, with two primary discount periods taking place from Nov. 1 – Nov. 3 and again on the full day of Nov. 11.
According to the company, within the first hour of the event on Nov. 1, its e-commerce sites Taobao and Tmall sold over 110 million cups of coffee, 4.2 million kilograms (9.3 million pounds) of rice, and 2.5 million kilograms (5.5 million pounds) lb) of tea.
The company will calculate Gross Merchandise Volume (GMV) over the full 11-day period, as opposed to the usual 24-hour period.
Alibaba first launched the shopping event in 2009 and has made it the world’s biggest online sales festival, eclipsing Cyber Monday in the United States. Last year, it recorded $38.4 billion in GMV on the day. — Reuters
MANILA – Philippine authorities have ordered thousands of residents in eastern coastal communities to evacuate ahead of the landfall of Typhoon Vamco on Wednesday, only weeks after the country was battered by the strongest cyclone so far this year.
Vamco, which carries sustained winds of 125 kph (78 mph) and gusts of up to 155 kph, is the 21st tropical storm to hit the Philippines this year.
“We are just 1% into our recovery and then here comes another typhoon. We’re now feeling strong wind and rain,” Joseph Cua, the governor of Catanduanes province, told DZMM radio.
The island province of Catanduanes and nearby Albay, both southeast of the capital Manila, bore the brunt of Typhoon Goni in late October, a category 5 typhoon that killed 25 people and left six people missing.
Vamco is due to make landfall in Polilio Island on Wednesday evening and hit rice-producing provinces north of the capital before exiting the Philippines’ main island of Luzon on Thursday, Chris Perez, a state weather forecaster, told DZMM.
Residents in coastal communities, who are expecting up to a three-metre (nine foot) storm surge, were ordered to leave their homes, said Cristina Bosque, mayor of Polilio. But ensuring the prevention of the spread of COVID-19 in evacuation centres remained a challenge, she said.
The Philippines, an archipelago of more than 7,600 islands, sees around 20 tropical storms annually.
After lashing the Philippines, Vamco is forecast to head towards Vietnam. Vietnam’s weather agency is expecting Vamco to arrive in its central region on Sunday, bringing intense rains.
Floods and mudslides over the past month have killed at least 160 people in central Vietnam, left dozens missing and damaged 390,000 houses, official data showed. — Reuters
The coconut tree has long been considered as the “Tree of Life” and for good reasons. All the parts of the tree can sustain a human life—the coconut fruit as food, the coconut juice is better than water as it very nutritious, the palms and trunks can be used to make shelter among many more. In short, it can supply man’s basic needs for survival. In fact, even the wastes from coconuts, such as its husks, are important in many people’s lives.
And Senator Cynthia Villar, through the Villar Social Institute for Poverty Alleviation and Governance of Villar SIPAG, has turned coconut wastes into a viable source of livelihood and income for many communities. In doing so has also helped in waste management efforts in the country.
“There are two-fold benefits in turning waste coconut husks into something useful, we got rid of garbage that used to litter our streets and clog our rivers and waterways. Secondly, we helped residents by providing them with livelihood and additional source of income. It’s a win-win for people and the environment,” said Villar who is chairperson of both the Senate Committees on Agriculture and the Environment.
Las PiñasCoconet Factory
Villar SIPAG’s coconet weaving enterprises convert waste coconut husks intococonets, which are used as riprap materials in construction projects to prevent soil erosion. Vista Land buys the coconets for its housing subdivisions.
Extracting of fiber
The workers extract fiber and coco peat from the waste coconut husks using a decorticating machine, which can extract fiber from up to 8,000 husks of coconuts daily. The fibers are then made into twines by women workers. Each twine is eight meters long. Another group of workers weave the loom of twines and within two hours they can weave one roll measuring one meter by 50 meters that can earn for them 200 pesos. The coconets cost 2,000 pesos per roll.
Twinning and weavingCoconet finished products
The coco peat or dusts extracted by the same machine are mixed with household wastes to make organic fertilizers. All the fertilizers produced are distributed all over the country and given free to farmers and urban gardeners. These have become in demand during the pandemic when the popularity of growing one’s food and vegetable gardening dramatically increased.
The people who are involved in making coconets and organic fertilizers have made it a viable source of income. Thus, they are committed to it. “One of my learnings as a social entrepreneur is that we really have to put a income component in our projects for them to be successful or sustainable. Otherwise, people will be hesitant or half-hearted to participate,” cited Villar.
According to Villar, their coco wastes project at also demonstrates how technological innovation can improve people’s lives. In coconet-weaving, it’s the decorticating machine invented by Dr. Justino Arboleda that paved the way for the production of the coconets from waste coconut husks.
“Dr. Arboleda’s invention has won awards. It is a good example of how a simple invention is now the source of livelihood of many families and has helped many cities get rid of wastes cause floods and pollute rivers and waterways,” said Villar.
It was in fact the persistent flooding in her home city of Las Piñas that brought attention to the notorious role of coco wastes in the problem. Villar said when they took a closer look and studied what’s causing the floods, they discovered the culprit—waste coco husks, thrown away by itinerant buko (coconut) vendors.
“Las Piñas River has become a big dumping area of waste coconut husks, which caused the clogging of the riverways. So we thought of controlling the wastes with the people’s cooperation. We designated areas where coconut vendors can bring or deposit waste coconut husks. Then we turned those as raw materials for coconet weaving enterprise that we put up,” the senator said. Besides the coconets, even the coco dust became a raw material mixed with household wastes to make organic fertilizer.
Indirectly, the coconet enterprise is also supporting farmersall over the country because they don’t have to buy fertilizer. It also boosts organic agriculture in the country.Incidentally, November is ‘Organic Agriculture Month’ by virtue of Proclamation No. 1030, which cites organic farming as an effective tool for development, environmental conservation, and protection of the health of farmers, consumers and the general public.
Villar is an active proponent of organic agriculture. In fact, Villar-authored Organic Agriculture Bill has been passed in the Senate on June 1. Senate Bill No. 1318 will introduce the Participatory Guarantee System (PGS), a more affordable and accessible certification system for organic products. It amends Republic Act No. 10068 (The Organic Agriculture Act of 2010) will provide the much-needed impetus to support the growth of organic agriculture in the country.
As an environmentalist and social entrepreneur, Villar is continuously searching for ways and means to provide livelihood to Filipinos that also help protect the environment. Besides waste coconut husks, the raw materials used in Villar’s other livelihood projects are all from wastes. These are water hyacinths for the waterlily handicraft-weaving enterprise and the handmade paper factory; kitchen and garden wastes for the organic fertilizer composting facility; and plastic wastes for the waste plastic recycling factory that produces school chairs. The senator has set up over 3,000 livelihood projects nationwide.
Villar believes that there should be greater private sector and public participation in the development waste management programs. Her projects are implemented by Villar SIPAG in partnerships with numerous government departments/agencies, private sector groups and companies. It has established barangay-based livelihood enterprises that are models of proper waste management and good examples of how garbage can be turned into useful end-products.
MOTORCYCLE taxis have been allowed to start providing service again after the government’s task force against the coronavirus issued guidelines on health and safety requirements. Under the guidelines, dated Nov. 4 but released only on the 10th, two-wheeled taxis as well as back-riding in tricycles can operate provided drivers have undergone a coronavirus testing and certified to be in good health by a government-accredited facility. Passengers, on the other hand, must wear their own helmet and fill-up a health declaration form before riding. Other requirements include regular temperature check and vehicle sanitation, and the use of a cashless payment system. Meanwhile, at least 816 traditional public utility jeepneys (PUJs) have also been given the greenlight to resume operations in 16 routes in Metro Manila, according to the Land Transportation Franchising and Regulatory Board (LTFRB). In a memorandum dated Nov. 9, the LTFRB said the operators of the PUJs need not secure special permits to operate but are required to use downloadable quick response or QR codes. They must also implement minimum health standards such as wearing of face mask and regular vehicle disinfection. Almost 34,000 traditional PUJs have been allowed to resume operations in 387 routes, 865 modern jeepneys in 48 routes, 4,499 commuter buses in 35 routes, 387 point-to-point buses in 34 routes, and 6,755 U Express units in 118 routes. — Gillian M. Cortez and Emmanuel Tupas/PHILSTAR
The Philippine economy remained in a recession in the third quarter, as gross domestic product contracted by 11.5%. — PHILIPPINE STAR/MICHAEL VARCAS
THE Philippine economy continued to shrink for a third straight quarter, although at a slower pace compared with the second quarter, as lockdown restrictions were further loosened amid the coronavirus disease 2019 (COVID-19) pandemic.
The economy remained in a recession as gross domestic product (GDP) contracted by 11.5% in the third quarter after the 16.9% plunge in the second quarter, data from the Philippine Statistics Authority (PSA) showed on Tuesday. GDP grew by 6.3% in the third quarter of 2019.
A BusinessWorld poll of 19 economists last week showed a median forecast of a 9.2% decline in the third quarter.
Year to date, the GDP performance stood at -10%. The government expects the economy to contract between 4.5%-6.6% this year.
The government gradually lifted lockdown restrictions starting June, although Metro Manila and nearby areas returned to a strict lockdown for two weeks in August to curb the rise in COVID-19 cases.
Household spending continued to be a drag in the third quarter, contracting by 9.3% year on year in the third quarter compared with the 6% expansion a year ago. However, this was slower compared with the 15.3% fall in the second quarter.
Private investment, which is represented in the data as capital formation, plunged by 41.6% in the third quarter compared with the declines of 53.7% and 0.1% in the second quarter of 2020 and third quarter of 2019, respectively.
The exports of goods and services declined by 14.7% compared with the 1.8% growth last year. However, this was slower than the 35.8% fall in the second quarter. Similarly, imports slipped by 21.7% compared with the declines of 37.9% in the previous quarter and 0.1% in the third quarter of 2019.
Government spending grew at a much slower pace of 5.8% in the third quarter compared with 21.8% in the previous quarter and 8.8% last year.
On the supply side, the services sector recorded a 10.6% decline in the third quarter, slower than the -17% seen in the second quarter and the 7.3% expansion in the third quarter of 2019.
Likewise, the industry sector slid by 17.2% compared with the -21.8% in the preceding quarter and the 5.4% rise a year ago.
On the other hand, agriculture posted a 1.2% growth rate, but was slower than the second quarter’s 1.6% and last year’s 3%.
Gross national income — the sum of the nation’s GDP and net income received from overseas — saw a 13% drop in the third quarter compared with a 5.2% growth in 2019’s comparable three months.
MIXED OUTLOOK The government, however, said the economic contraction has already bottomed out in the second quarter and that the “worst is over.”
“The smaller GDP contraction of 11.5% in the third quarter from a contraction of 16.9% in the second quarter indicates that the Philippine economy is on the mend. The path is clearer to a strong bounce back in 2021,”Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua was quoted in a statement by the National Economic and Development Authority as saying.
In an e-mail, University of Asia and the Pacific Senior Economist Cid L. Terosa said economic performance in the fourth quarter “will be better” owing to easing lockdown restrictions as well as the onset of the holiday seasons that would reinvigorate production and consumption activities.
In a separate e-mail, Colegio de San Juan de Letran Economist Emmanuel J. Lopez said the economy is expected to recover in the fourth quarter.
“[Fourth-quarter] GDP is expected to display a semblance of normalcy… [with a GDP performance] of at least 2-4%,” he said.
On the other hand, some economists were not so optimistic.
“With unemployment still elevated at 10% and business sentiment negative according to the Bangko Sentral ng Pilipinas (BSP), we do not expect a quick rebound in growth with GDP remaining in negative territory until a base effect-induced bounce in [the second quarter of 2022],” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in a note.
“Household consumption, which delivers the bulk of economic activity, will be handicapped in months ahead given the challenging labor market while bank lending slowed to single-digit growth, signaling a parallel slowdown in investment momentum,” he added.
Mr. Mapa also noted the “persistent threat” of the coronavirus pandemic, citing the sustained and elevated number of daily infections that may increase from eased lockdowns.
In a separate note, HSBC Global Research Economist Noelan C. Arbis said third-quarter GDP performance “did not look that much different from the second-quarter numbers.”
“Private consumption and fixed investment continued to drag down growth, albeit to a lesser extent, while net exports and government spending contributed positively, similar to the previous quarter,” Mr. Arbis said, adding the economic contraction this year is “likely to exceed” expectations of economic managers.
“The main takeaway perhaps is that [the] numbers suggest… the economic contraction this year is likely to exceed the government’s -6% forecast. We expect full-year GDP to decline by 9.6% in 2020,” he said.
For Capital Economics’ Asia Economist Alex Holmes, Philippine economic output “is unlikely to regain its pre-crisis level until late next year.”
“A large driver of the rebound was the easing of strict lockdown restrictions. But with the virus still not under control, a further scaling back of containment measures will take longer, meaning life is unlikely to return to normal anytime soon,” he said.
“What’s more, the economic scars from the downturn, including business insolvencies, weaker household balance sheets and high unemployment, will weigh heavily on demand for many months to come. On the external front, while merchandise exports returned to growth in September, second waves of the virus in the US and Europe have made the outlook more uncertain. The tourism industry is likely to remain on its knees for some time,” he added.
STIMULUS NEEDED Reacting to the continued contraction in household spending in the third quarter, House Ways and Means Committee Chairman and Albay Rep. Jose Ma. Clemente S. Salceda reiterated his call for another round of direct cash transfers.
“If the disposable income goes down deeply, below expectations, we should be open to a direct, universal cash transfer. There should be some fiscal space left since we outperformed revised revenue targets this year,” Mr. Salceda said in a statement.
Mr. Salceda, who also co-chairs the economic stimulus and recovery cluster of the House Defeat COVID-19 Committee, has stressed the need to expand the third round of the Social Amelioration Program in the 2021 budget “to a more universal level.”
“In 2021, stimulus measures will work because mobility restrictions will be less than that of 2020, so we should not be afraid to spend more. I estimate that we have at least P150 billion more in fiscal space for the 2021 budget…,” he said.
The House of Representatives transmitted to the Senate on Oct. 27 its final version of the 2021 General Appropriations Bill, containing P4.5 trillion worth of spending items for next year’s budget. Senate President Vicente C. Sotto III has said the proposed budget will be signed into law before Christmas barring “unforeseen circumstances.” — Michelle Anne P. Soliman with inputs from Kyle Aristophere T. Atienza
The government will revisit its macroeconomic projections, as the pandemic and recent typhoons pummel the economy. — PHILIPPINE STAR/EDD GUMBAN
THE Development Budget Coordination Committee (DBCC) may revise macroeconomic projections once again, after latest data showed the economy is recovering slower than expected.
“The DBCC will be meeting immediately to reassess the latest numbers to see if there is a need to adjust the full-year projections,” Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said in a media briefing Tuesday.
Gross domestic product (GDP) slumped by 11.5% in the third quarter, after a 16.9% contraction in the second quarter pushed the country into its first recession in nearly three decades.
In its July 28 meeting, the DBCC projected GDP will shrink by 4.5-6.6% this year, before growing by 6.5-7.5% in 2021 and 2022.
Mr. Chua said GDP is expected to improve in the fourth quarter, as lockdown restrictions have been further loosened to boost economic activity.
“Given the policy changes and the further opening up of the economy and the policy not to revert to more stringent lockdown, I think the trend really is a further improvement in the fourth quarter, and hopefully we will begin to see better figures, or positive year-on-year quarterly growth starting early next year,” Mr. Chua said.
“The programs that we have laid out, the 2021 budget, the CREATE (Corporate Recovery and Tax Incentives for Enterprises) bill, the FIST (Financial Institutions Strategic Transfer) and the GUIDE (Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery) bills are all important elements in ensuring that we accelerate the recovery, alongside our risk management strategy,” he added.
The DBCC has yet to schedule an exact date of the upcoming meeting, said Budget Assistant Secretary Rolando U. Toledo in a Viber message.
Mr. Chua said the DBCC will also review projections on poverty and unemployment rates. The government earlier estimated that the poverty rate may rise to 16%-17.5% (from 16.7% in 2018), and unemployment rate to average 11% by end-2020.
By 2022, the government targets to bring down the poverty rate to below 14% and thejobless rate to 3-5%, as the economy is expected to grow by an annual rate of over 6%.
Also, Mr. Chua said the DBCC will assess the current fiscal program of the government.
Latest data available showed the government expects the budget deficit to hit 9.6% of GDP this year, before narrowing to 8.5% in 2021 and 7.2% in 2022.
For next year, Mr. Chua said the accelerated implementation of the “Build, Build, Build” infrastructure program, seen to generate 1.7 million jobs, and the timely passage of the P4.5-trillion budget will be crucial for a stronger recovery.
“A delay in passage of the budget will be detrimental to our recovery. Each day of delay will result in P1.1 billion not spent,” he said. — Beatrice M. Laforga
THE Philippine economy continued to shrink for a third straight quarter, although at a slower pace compared with the second quarter, as lockdown restrictions were further loosened amid the coronavirus disease 2019 (COVID-19) pandemic. Read the full story.
