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What’s next for the airline industry?

PEXELS-ANDREA PIACQUADIO

Commercial aviation is the pandemic’s most severely affected industry in terms of gross losses. Unfortunately, our very own Philippine Airlines (PAL) and Cebu Pacific were among those who suffered the brunt of the carnage. PAL Holding posted a massive loss of P73 billion in 2020 followed by another loss of P16.6 billion in the first half of 2021. Last month, the flag carrier filed for Chapter 11 bankruptcy in the United States to gain creditors protection and the legal basis to restructure its debts. Filing bankruptcy will also give it leverage to re-negotiate aircraft leases. For its part, Cebu Pacific posted a loss of P20.8 billion last year and another P13.8 billion in the first half of 2021.

Unlike Singapore Airlines, Malaysian Airlines, Garuda Indonesia, Vietnam Air, and Thai Airways, all of whom received financial bailouts from their respective governments, PAL and Cebu Pacific received no financial aid from the Philippine government despite their crucial role in national security, trade, tourism, social security, and national logistics. Both must survive on the back of their own resources. This is why the Philippine carriers had to undergo a comprehensive restructuring.

About 12,000 Filipinos rely on PAL and Cebu Pacific for their livelihood. Of this number, 40% have already been retrenched, retired, or put on furlough.

PAL and Cebu Pacific mirror the trends in the international airline industry. Last year, airline revenues worldwide dropped to just $328 billion, from $820 billion in 2019. For perspective, the revenues generated last year were about the same as it was in the year 2000. Analysts forecast that the industry will only recover to 2019 levels by 2025.

Like most other industries, COVID-19 changed the competitive landscape of the airline industry. It has also changed the way people fly. What can we expect from the aviation industry as we move forward?

According to Changi Airport Consultants of Singapore, there will be a new obsession towards sanitation and disinfection. We will see dark floor carpets giving way to white marble flooring or slate tiles to better see dirt and grime. We will also see mandatory hand disinfection in every touch point, UV disinfection lamps in the luggage conveyors as well as testing and vaccination centers as a permanent fixture in airports. Contactless check-in, immigration, and customs processes will become the new normal.

In terms of passenger volume, analysts estimate that only 80% of business travel will recover by 2024 due to the prevalence of remote working. Leisure trips and family visits will fuel the recovery in the next three years. The downside is that most leisure travelers fly economy and usually purchase heavily discounted tickets. Airlines that rely on business travelers (those who book flights on Business Class, pay a premium for direct flights and last-minute bookings) will continue to experience losses per flights.

This will compel airlines to restructure the economics of their fleets and destination networks. Whereas in pre-COVID years, airlines maintained several flights between hubs using small wide-bodied aircrafts like the Boeing 787, the subdued demand will compel airlines to lessen their frequencies but use larger aircrafts like the A350 or Boeing 777.

Airlines will also reconfigure the layout of their cabins to address the reduction in business passengers and increase leisure passengers. At the simplest level, lower business-class demand may warrant smaller business-class cabins.

The flying public can expect higher ticket prices too. Many airlines have had to borrow huge sums of money to stay afloat and cope with high daily cash burn rates, PAL and Cebu Pacific included. The industry amassed a staggering $180 billion in debt in 2020 alone, which represents half of the industry’s revenues. These costs will need to be recouped and higher ticket prices is one of the ways airlines will do it.

The pressure on price is exacerbated by demand exceeding supply. Last year, large chunks of airline’s fleet were either retired or returned to their manufacturer or lessor. Many airlines cancelled orders of new aircrafts. There are substantially less air seats available today than there were two years ago. It will take some time before supply of air-seats meets the demand.

The few airlines in good financial position will take advantage of the supply glut to acquire (or lease) new aircrafts. See, prior to COVID, aircraft manufacturers ramped up production in anticipation of continued growth. When COVID hit, orders were cancelled by the hundreds while hundreds more planes were returned to their manufacturers. Brand new or slightly used aircraft can be had for deep discounts. In fact, PAL recently sold one of its A350s to Lufthansa. For those leasing, the monthly rate of a 2016 Boeing 777-300ER aircraft was around $1.2 million in 2019. It now goes for less than $800,000.

Demand for air freight services will continue to increase. Before the pandemic, cargo typically made up 12% of the sector’s total revenue. However, with e-commerce coming into the mainstream, demand for airfreight has increased three-fold. Cargo space has been scarce and this allowed carriers to charge a premium for airfreight. A recent survey showed that cargo revenue accounted for 49% of total airline revenues last year.

In response to the high demand and low supply of air freight, carriers are now looking into boosting their cargo capacities by converting some of their aircrafts into “preighters” or passenger airplanes that are used to transport cargo. This will become a growing trend in the industry, especially since most airlines have already reduced their fleets.

The circumstances of the airline industry have changed dramatically. Carriers need to be agile to survive. Although tourism is slowly normalizing in certain parts of the world with vaccinations ramped-up, still, the road to recovery is three years away. At least the worst is over and things can only improve from here.

There is a silver lining at the end of all this. Air travel will become greener and more efficient since inefficient aircrafts have been forced into retirement. More importantly, airlines that survive the carnage will emerge leaner, meaner, and more profitable. This includes our very own Philippine Airlines and Cebu Pacific.

 

Andrew J. Masigan is an economist

andrew_rs6@yahoo.com

Facebook@AndrewJ. Masigan

Twitter @aj_masigan

A Nobel to remind us there’s no peace without free speech

A NOBEL PEACE PRIZE doesn’t solve thorny political problems. It didn’t draw a line under Apartheid when South African activist Albert Luthuli won it in 1960, or bring freedom to the Soviet Union when physicist and human rights campaigner Andrei Sakharov did in 1975. But it does, unfailingly, shed light on causes that need global attention. And rarely has a cause been in greater need of support than press freedom in 2021.

Friday’s win for Maria Ressa —  indefatigable Filipino journalist, co-founder of digital media company Rappler, and bete noire of President Rodrigo Duterte — and Dmitry Muratov — co-founder and editor-in-chief of Russia’s Novaya Gazeta, an opposition voice in a country that leaves no room for criticism — is a joint victory that highlights their resilience in the face of near-daily harassment. Both continue to publish critical work in countries run by strongmen who will stop at very little to silence them.

Novaya Gazeta has been under pressure throughout Vladimir Putin’s presidency. Fifteen years ago nearly to the day, Anna Politkovskaya, an investigative journalist working for Muratov’s paper who chronicled abuses in the region of Chechnya, was shot dead in Moscow. The statute of limitations for the crime expired on Thursday. Ressa, meanwhile, critical of police violence in Duterte’s drugs war, has been tangled in libel and tax evasion cases. The Philippines remains one of the most dangerous countries in the world for journalists.

But this year’s prize celebrates more than just the outstanding work of its recipients. It acknowledges many thousands of other reporters who run risks daily — keeping democracy and free speech alive. It’s a victory for civil society.

More journalists than ever were in jail last year and the number of media workers killed rose by a third compared with 2019, numbers that speak to a global attack that is stifling democracy. According to the latest survey from Reporters Without Borders, journalism is completely or partly blocked in nearly three-quarters of the 180 countries ranked by the organization. It’s a grim picture that few pause to take in — much less to consider its consequences.

Russia has been waging the most aggressive crackdown in years on independent media, labeling critical outlets as “foreign agents,” hampering their ability to operate. But there are more pervasive everyday pressures, including the squeeze on media owners, the rise of state-owned outlets and the fostering of disinformation by the powerful. Not to mention basic financial troubles that reduce the ability of any news gathering organization to adequately investigate and report.

It’s significant, in that sense, that the committee chose two different journalists working in different parts of the world, under different political regimes. The Philippines is still a democracy, though one left bruised by Duterte’s years in power. Russia is far harder to define that way. But free speech, assaulted by demagogues and misinformation, is under fire everywhere, and by extension so, too, is democracy and peace. We need only think back to Donald Trump’s years in the White House to remember a time when even in the United States, where press freedoms are guaranteed by the constitution, the president referred to critical media as “enemies of the people.” 

The Nobel Prize is often castigated for awarding prizes to those who have not achieved enough. The committee has certainly not always got its choices right. But it very clearly understands its role as an amplifying force, one that takes into account not only what individuals have achieved, but the positive effects that attention might bring to the issue at hand. It loudly proclaimed, in the words of Ressa on hearing the announcement, that a world without facts means a world without truth or trust. And one where giant challenges like coronavirus and climate change cannot be conquered.

There are risks too. Regimes may not take kindly to having their critics lauded, and can come down even harder. But for those who live in countries like Putin’s Russia, those risks already exist.

BLOOMBERG OPINION

Ceteris Paribus

PHILIPPINE STAR/MICHAEL VARCAS

“Ceteris paribus, literally ‘holding other things constant,’ is a Latin phrase that is commonly translated into English as ‘all else being equal.’ A dominant assumption in mainstream economic thinking, it acts as a shorthand indication of the effect of one economic variable on another, provided all other variables remain the same.” (www.investopedia.com).

How can you hold other things constant, while discerning cause and effect between one thing and another, the philosopher asks the scientist? The inertia of interaction moves physics in its space and time. Yet the vanities of the scientific mind venture beyond the insinuations of Reality and foray into the Abstract to insist on measurements, in the frustrating lack of perfect information. (Even technology has limitations.) Economists are perhaps the most guilty of the fallacy of ceteris paribus, in the efforts to measure what one has achieved and what one owns, in this world of scarce resources. The hard science of Statistics has been a handy aide for macroeconomic growth rates and microeconomic market share.

Ceteris paribus is the disclaimer for the equilibrium of the demand-and-supply curve, where prices go up as demand exceeds supply, when all other factors are “held constant” and left out in the analysis. Analysts and investment brokers surely know that in reality, “with something like the stock market, for example, one can never assume ‘all other things being equal.’ There are too many factors affecting stock prices that can and do change constantly; you can’t isolate just one” (Ibid.).

And thus do analysts, academicians, research organizations, governments and even the more scholarly and savvy investors, practitioners and passive onlookers live with the tenuous assumption of ceteris paribus, conscious of its limitations. But how do we ever know the real score, for our surviving and thriving?

In the halt or slowdown of many economic activities in the year-and-a-half COVID-19 pandemic, ceteris paribus becomes oxymoronic more than ironic. In the cowering stillness and isolation forced by the raging contagion, many drastic changes overwhelm the “New Normal” into depressive doubts for the future. Again, as in times of war, the neat economic models of equilibrium become frayed and worn. Ceteris paribus certainly cannot be invoked now, for COVID-19 would certainly be omnipresent in any forced analysis on one dependent variable upon one independent variable of economic consequence.

To summarize the global COVID-19 effects since 2020: “The only major economy to grow in 2020 was China. It registered a growth of 2.3%. The IMF is, however, predicting global growth of 5.2% in 2021. That will be driven primarily by countries such as India and China, forecast to grow by 8.8% and 8.2% respectively. Recovery in big, services-reliant, economies that have been hit hard by the outbreak, such as the UK or Italy, is expected to be slow” (BBC, Jan. 24).

The World Bank says that the Philippines Gross Domestic Product (GDP) growth shrank (-9.573%) as of end-2020 at the height of COVID-19 pandemic, even lower than the slump (-7.307%) in 1985, at the height of political unrest in the last year of the 14-year Marcos martial law dictatorship. “Looking ahead, we see a strong growth of around 7.7% in 2022 and 6.5% in 2023,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said in August (BusinessWorld, Aug. 9). The IMF has not been as optimistic in predicting global growth, with a careful climb of 5.2% in 2021 — perhaps it is difficult to jump to Diokno’s expectations for the Philippines.

The GDP growth rate in the Philippines averaged 1.08% from 1998 until 2021, reaching an all-time high of 8% in the third quarter of 2020 and a record low of -14.90% in the second quarter of 2020 (https://tradingeconomics.com). How acrobatic it seems, to jump from very low negative in one quarter to high positive growth in the next immediate quarter! How arbitrary must the ceteris paribus assumptions in the measurement and analysis have been, in those years of high variance from the average GDP performance! The cumulative and compounding effects of past experience, empirical or deduced, must temper Prophets of Boom and guide Prophets of Gloom alike.

As an example for establishing correlation more than causation, the Consumer Price Index (CPI, average price of a basket of basic goods and services) is watched for its movement to measure inflation, where prices would indicate shifts in the supply/demand curve. The CPI rose 4.8% from a year earlier, but slowed from 4.9% in August, mainly due to a slowdown in the transport index, government data showed last week. The headline inflation was at the low end of the central bank’s projected (wide) range of 4.8%-5.6% for the month (Reuters, Oct. 5). Out of 17 economists, 13 projected the rate of increase in prices of basic commodities to hit between 5% and 5.2% — a level unseen since skyrocketing rice prices jacked up the inflation rate in 2018 (https://www.thestar.com, Oct. 5). BSP’s Diokno expects inflation to remain firmly within target range for 2022 to 2023, with prices likely to be dampened further by lockdown measures, thus reiterating “to maintain an accommodative monetary policy stance (low interest rates) for as long as necessary… to the extent that the inflation outlook would allow.”

Surveys are common instruments used to gather hard statistics on what is happening (as in actual market price increases) and the perceptions or reactions of a calibrated sample universe of random respondents from representative demographics. Where facts mingle with perceptions, biases, or even strong emotions and past trauma, these may challenge the integrity of the research. The survey instrument is very critical. In the extreme, surveys can be tweaked in the process and at the outcome, to the utilitarian interest of the parties participating in the survey research. In the economics of the firm, favorable market survey results are usually the best endorsement for the product.

What for then, are survey research and econometrics that can be force-fit into quantitative models albeit by sincere hard study — or unforgivably, maybe by plain malice and manipulation? Alas for those misled by erudite-sounding proclamations and statistics by so-called reputable authority. Whether true or false, such declarations insinuate into the collective consciousness. And priorities have changed. In the concerns in the New Normal the suggestion of the ceteris paribus model of discernment can be fatal — no one factor may be analyzed independent of other influences. The trauma of the pandemic has made people wary and suspicious of others and of issues that may further aggravate fragile hopes for earlier release from fear and anxiety.

What a dismal, desperate time for the people, to be torturously masked and shackled by the COVID-19 and to rage in anger with the unmasking of graft and corruption in high government! And amidst this, there are the coming national elections on May 9, 2022. Seeming to add insult to injury, the ubiquitous popularity surveys top-ranked surprising “winnables” who are allegedly involved themselves or related to the suspected gang of corrupt incumbents in government. When critics raised doubts as to the integrity of the surveys, survey outfits defended themselves as presenters of the objective results of structured research, as in market-share economics.

The opposite of the economic term ceteris paribus (holding all other things constant) is the legal term Mutatis mutandis which approximately translates as “allowing other things to change accordingly” or “the necessary changes having been made.”

Let us vote for a change to a clean and honest government, on May 9, 2022.

 

Amelia H. C. Ylagan is a doctor of Business Administration from the University of the Philippines.

ahcylagan@yahoo.com

Philippines OK’s Ronapreve for emergency use

The Philippine Food and Drug Administration (FDA) on Friday said it had approved American and Swiss-developed Ronapreve for the emergency treatment of the coronavirus.

The drug may be used for people aged 12 and above, FDA Director-General Rolando Enrique D. Domingo told an online news briefing.

Ronapreve could cut the risk of hospitalization and death from the coronavirus by at least 70%, he said, citing the results of initial clinical trials.

The Department of Health (DoH) reported 10,670 coronavirus infections on Friday, bringing the total to 2.64 million.

The death toll rose to 39,232 after 191 more patients died, while recoveries increased by 7,691 to 2.49 million, it said in a bulletin.

There were 118,203 active cases, 77.7% of which were mild, 13.4% did not show symptoms, 2.7% were severe, 5.15% were moderate and 1.1% were critical.

The agency said 57 duplicates had been removed from the tally, 42 of which were reclassified as recoveries, while 128 recoveries were tagged as deaths. Two laboratories failed to submit data on Oct. 6.

World should deter China aggression toward Taiwan, says former Aussie PM

By Alyssa Nicole O. Tan

The threat of China invading Taiwan is growing every day, which should push world leaders to work together in ways never done before, former Australian Prime Minister Anthony John Abbott said on Friday.

“The more aggressive it becomes, the more opponents it will have,” he told an online forum organized by the Taiwan-Asia Exchange Foundation.

Mr. Abbott noted that while the world had gained from China’s progress, it has also been harmed by Beijing’s power plays. “It’s been so unreasonable,” he said, enough that countries find the need to unite against it.

Mr. Abbott cited comments by Victor Gao, who was once communist leader Deng Xiaoping’s translator, that Australia would become a target for possible nuclear attacks in the future after it signed a nuclear submarine deal with the United States and Britain.

Mr. Gao said the military pact was a “gross violation of international law” that will have “profound consequences” for “brainless” Aussies.

After secret negotiations with Britain and the US, Prime Minister Scott Morrison last month announced a deal for eight nuclear-powered submarines aimed at dealing with “threats to regional stability.”

With China’s growing belligerence against Taiwan, Beijing may attack soon. “Nothing is more pressing right now than solidarity with Taiwan,” Mr. Abbott said

Taiwan has reported Chinese jets flying nearby for more than a year. Since early October, more than 150 Chinese war planes including military jets and nuclear-capable bombers have entered Taiwan’s air defense identification zone.

Taiwan President Tsai Ing-wen earlier said that it would be catastrophic if the country were to fall to China. Taiwan, although not intending to fight, would “do whatever it takes to defend itself,” she said.

Taiwan sees itself as a sovereign state while China considers it a democratic breakaway province.

Former US Undersecretary of State Keith J. Krach the need for a strategy to combat China’s economic aggression by amplifying democratic values and strengthening international partnerships.

Global support for alliance partners especially Taiwan should be strengthened by building trusted relationships, creating deep economic and technological partnerships and boosting trade ties he told the forum.

Ms. Tsai told the forum Taiwan had been boosting international relationships. She promoted cooperation in the so-called new normal by resetting priorities amid a global coronavirus pandemic.

Duterte critic wins Nobel Peace Prize

PHILSTAR

A journalist critical of President Rodrigo R. Duterte’s government has won the Nobel Peace Prize, organizers of the Oslo-based group tweeted on Friday.

The Norwegian Nobel Committee the prize to Rappler founder Maria A. Ressa along with Russian journalist Dmitry Muratov “for their efforts to safeguard freedom of expression, which is a precondition of democracy and lasting peace.”

“It’s a recognition of the difficulties, but also hopefully of how we’re going to win the battle for truth,” Ms. Ressa told a forum after the announcement.

Mr. Duterte has called Rappler a “fake news outlet.” Ms. Ressa is facing cyber-libel and tax evasion cases that she said were politically motivated. — Russell Louis C. Ku

Quarantine requirements for travelers eased

Passengers wearing protective masks, following confirmed cases of coronavirus in the country, arrive at the departure area of the Ninoy Aquino International Airport. -- REUTERS

An inter-agency task force has cut the quarantine period for inbound travelers from countries with low to medium coronavirus infections.

Fully vaccinated travelers need only to undergo a five-day quarantine at a facility and five more days in their homes, presidential spokesman Herminio L. Roque, Jr. told a televised news briefing on Friday.

The requirements for unvaccinated people are higher at seven days at a facility and seven days at home, he added.

Foreign passengers must pre-book their own accommodations for a quarantine period of at least six days for the fully vaccinated, and at least eight days for unvaccinated ones.

The old requirement was a 10 to 14 days of quarantine inside a quarantine facility.

Tourism Secretary Berna Romulo-Puyat said this was an “encouraging development for the country’s tourism industry.”

It would make travel more appealing to tourists, she said in a statement. “The faster we are able to adjust to this situation, the faster we can bounce back better and regain our position in the global tourism market.” — Bianca Angelica D. Añago

Robredo says Marcos issue nonnegotiable

FORMER PRESIDENT FERDINAND E. MARCOS — BW FILE PHOTO

By Kyle Aristophere T. Atienza, Reporter

Vice-President Maria Leonor “Leni” G. Robredo on Friday said Francisco “Isko” M. Domagoso’s soft stance on the Marcoses had pushed her to run against the Manila mayor in the elections next year.

“The Marcoses are a nonnegotiable [issue] for me,” she told reporters.

Ms. Robredo said communication lines with other candidates outside the ruling party remained open, but she would no longer pursue unity talks with them.

“I was really exerting a lot of effort to unify many different personalities but there’s a limit,” she added.

Mr. Domagoso earlier said the family of the late dictator Ferdinand E. Marcos should be allowed to redeem themselves, more than three decades after he was ousted by a popular street uprising.

The Manila chief, whose rags-to-riches story has captivated many Filipinos, said he had admired Mr. Marcos at some point.

“So that’s the only reason why she’s running?” Mr. Domagoso asked at a party event, a video of which was uploaded on PTV-4’s Facebook page. He added that the lives of Filipinos need not revolve on the quarrel between the Marcos and Aquino families.

Ms. Robredo said she was worried about splitting the votes with other opposition candidates, but she trusts that voters would know that her tandem with Senator Francis “Kiko” N. Pangilinan is the genuine opposition.

Mr. Pangilinan filed his certificate of candidacy for vice-president on Friday.

“I am not too concerned anymore. You can see that we are the true opposition,” said Ms. Robredo, who had opposed the Duterte administration’s war on drugs and ties with China.

“No tandem is similar to us in the sense that we have been fighting from the start,” she added. — with Bianca Angelica D. Añago

Duterte’s ex-police chief eyes presidency

Senator Ronald M. de la Rosa on Friday said he’s running for president next year, which he said was decided by a faction of the ruling PDP-Laban.

“This was a party decision,” he told reporters during the filing of his certificate of candidacy in Pasay City. “This was not my personal decision.”

Mr. de la Rosa’s vice-president is Senator Christopher Lawrence T. Go, who filed his candidacy certificate last week.

He said it was possible to give up his slot for Davao City Mayor and presidential daughter Sara Duterte-Carpio via substitution, but she would have to join the party.

“I don’t know how we will do it if that will happen,” the senator, a former police chief who enforced President Rodrigo R Duterte’s drug war said in mixed English and Filipino.

Ms. Carpio, who filed for reelection as Davao City mayor, is not from PDP-Laban. Substitution is open until Nov. 15, but is exclusive to candidates under the same political party.

Her father last week said she would run for President in tandem with Mr. Go, the president’s former aide. — Alyssa Nicole O. Tan

Several senators seek reelection

BW FILE PHOTO

Several senators on Friday filed for reelection in the elections next year, including Leila M. de Lima, Sherwin T. Gatchalian and Richard J. Gordon.

Ms. de Lima, who is in jail while being tried for drug trafficking, said she would continue her fight against President Rodrigo R. Duterte whom she accused of corruption and mass murders.

“Even as I fight my own battle for my freedom, I cannot but also join the struggle of our people against injustice and oppression,” she said in a statement read by her spokesman, who filed her certificate of candidacy in Pasay City.

Mr. Gatchalian said he would push more laws that would help the country recover from a coronavirus pandemic.

Former Agriculture Secretary Emmanuel F. Piñol also filed his candidacy certificate for senator, as did former Vice-President and broadcast journalist Manuel Leuterio “Noli” de Castro, Jr. and former Senators Antonio F. Trillanes IV and Gregorio B. Honasan II.

Party-list Rep. Rodante D. Marcoleta also joined the senatorial race, as did actor Robinhood Ferdinand C. Padilla.

Chief presidential legal counsel Salvador S. Panelo, Presidential Anti-Corruption Commission Chairman Greco Antonious Beda B. Belgica, former Ifugao Rep. Teodoro B. Baguilat, Jr. and broadcaster Reynante C. Langit also filed their certificates of candidacy for senator.

Meanwhile, Basilan Rep. Mujiv S. Hataman, Manila Rep. Manuel Luis T. Lopez, Camarines Sur Rep. Luis Raymund Villafuerte, Jr. filed for reelection.

Camarines Sur Governor Miguel Luis R. Villafuerte will run for congressman, while lawyer Bel Zamora will seek to replace her father Ronaldo B. Zamora as San Juan’s representative.

More than 200 party-lists have also signed up for next year’s elections as of Friday, the last day of filing.

Substitutions for candidates in the 2022 elections are allowed until Nov. 15. — Alyssa Nicole O. Tan and Russell Louis C. Ku

Central bank sees prices easing in Q4

By Luz Wendy T. Noble, Reporter

The Philippine central bank expects consumer price increases to slow in the coming months as meat prices go down.

Meat prices, which contributed to faster inflation in the past months, have eased, Bangko Sentral ng Pilipinas ng Pilipinas (BSP) Governor Benjamin E. Diokno told a televised news briefing on Friday. Meat inflation slowed to 15.6% in September from 22.1% in May.

“It could still slow down because of our programs that allow higher pork imports and lowering the tariff for these products,” he said in Filipino.

Mr. Diokno said food inflation had remained elevated in the past months because of low fish, vegetables, and meat supply caused by typhoons and an African swine fever outbreak.

Inflation eased to 4.8% in September from 4.9% a month earlier, though still above the central bank’s 2-4% target this year.

BSP expects inflation to hit 4.4% this year before easing to 3.3% and 3.2% in 2022 and 2023. Mr. Diokno said they expect improving supply conditions next year to help them hit their inflation target.

Inflation in 2022 may benefit from favorable base effects this year, Nicholas Antonio T. Mapa, a senior economist at ING Bank-NV Manila said in a note.

“Should cost-side remedies to the supply side shocks finally work their way through, we can expect at least some price pressures to fade in the quarters ahead,” he said. “Nonmonetary measures are most effective against cost side inflation as they directly address the issue of supply.”

BSP eyes more gold from small miners

PHILSTAR

Monetary authorities are trying to encourage small-scale miners to sell more gold to the Philippine central bank after through tax exemptions.

“We’re looking at making our rates more attractive to small scale miners,” Joseph Norbert S. David, director of the central bank’s Mint and Refinery Operations Department told an online lecture on Friday. “We’re also looking at minimizing the processing costs.”

Mr. David said gold sellers get 99% in advanced payment. The remaining 1% “retention money” is settled once they complete the assaying of the gold.

The Bangko Sentral ng Pilipinas is considering increasing the advanced payment further, he added. It might also fast-track processing of payments to attract more small miners.

“We’re trying to fast-track the turnaround time,” Mr. David said “We’re looking at possibilities on how to minimize the turnaround time of the payments and final assaying of golds sold to us.”

Much of the gold output comes from Baguio and Davao, he said.

The initiatives are expected to spur small-scale miners to sell gold to the central bank instead of the black market.

“Unfortunately, we have unverified reports and some studies that there are sellers who still go to the black market” Mr. David said. “Improving our rates, our prices and our operations by reducing our cost is one way of addressing this.”

The central bank’s gold holdings stood at $9.148 billion as of end-August, 0.7% higher than in July but 24% lower year on year.

A 2019 law exempted small-scale miners and traders from paying tax for gold sold to the BSP to strengthen the country’s foreign exchange buffers.

The gross international reserves rose by 0.7% to $107.96 billion as of end-August from a month earlier, according to the latest BSP data.

Last year, the central bank said it would shift to active gold trading amid rising prices of gold, which is considered a safe-haven asset during crises. — Luz Wendy T. Noble

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