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Senator seeks veto of double appropriations

A senator on Friday asked the Executive branch to veto overlapping and double appropriations in the reconciled version of the P4.5-trillion national budget for 2021.

“It is clear that questionable items such as double and overlapping appropriations should be vetoed, along with at least 793 line items for multi-purpose buildings with a uniform P1-million appropriation each,” Senator Panfilo M. Lacson told DzRH radio on Thursday night.

Mr. Lacson, vice chairman of the Senate finance committee and a member of the bicameral conference committee, objected to the ratification of the national budget on Wednesday.

The senator had flagged the provisions during the period of interpellations. He questioned the budget of the Department of Public Works and Highways that increased by P28.35 billion in the reconciled version of the budget bill.

The bicameral conference committee allotted P694.822 billion to the DPWH, higher than P667.3 billion originally.

The questionable provisions had been included as a concession to congressmen and to avoid delays in the budget ratification, Mr. Lacson told an online news briefing on Friday.

He said he plans to write to the Executive branch, identifying the items that he thinks should be vetoed. The senator was among those who questioned a total of P95.3 billion “unconstitutional” items in the 2019 spending plan, which was later vetoed by President Rodrigo R. Duterte.

Mr. Lacson raised some P83.87 billion worth of infrastructure projects that were “migrated” while P55.52 billion “disappeared.” He said the P83.87 billion was used to create new DPWH items or augment other items, while the other P55.52 billion consisted of items that had been completely removed.

“Since there is a difference of P28.35 billion, they had to extract from the programs, activities and projects of other departments or agencies to make up for the shortage,” he said in a separate statement. — Charmaine A. Tadalan

Anti-insurgency budget to help villages

The P19-billion budget for anti-surgency activities would help rehabilitate more than 1,400 villages nationwide, according to a Senate leader.

The 2021 budget, provided to the National Task Force to End Local Communist Armed Conflict would sustain government efforts to cut communist influence in rural communities, Senate President Vicente C. Sotto III said in a statement on Friday.

The Senate earlier kept the agency’s budget intact after some senators proposed channel the fund to the government’s coronavirus vaccine program.

The P4.5-trillion national budget allotted P2.5 billion for vaccines under the Health department budget and P70 billion more in unprogrammed funds.

“We want to sustain rural development programs that the government has already started to carry out in these barangays,” Mr. Sotto said.

Defense Secretary Delfin N. Lorenzana told a separate online news briefing on Friday the budget would be used to build roads, provide water and for street lighting projects, among other things. — Charmaine A. Tadalan

Consumers, companies more upbeat for next year

By Beatrice M. Laforga, Reporter

Consumer sentiment for the last quarter of the year turned less pessimistic, while business confidence improved as lockdowns were eased and companies expected better job and sales prospects, according to the Philippine central bank.

The consumer outlook turned positive for the next quarter and more people and businesses remained optimistic for the next 12 months, the Bangko Sentral ng Pilipinas (BSP) said in a statement on Friday, citing the results of its latest survey.

The consumer confidence index improved slightly to -47.9% in the fourth quarter from -54.5% in the past quarter, signaling Filipinos’ hope for more available jobs and higher income for some family members, Some Filipinos also expected an end to the coronavirus pandemic as vaccines become available.

Business sentiment turned positive this quarter to 10.5% from -5.3% in the third quarter, the BSP said. “The positive reading indicates that respondents with optimistic views increased and outnumbered those with pessimistic views.”

But the reading was still lower than levels before the pandemic, when the business confidence index hit 40.2% in the last quarter of 2019.

The respondents also traced the improved consumer outlook to expectations that state relief programs for affected sectors would continue.

The consumer outlook for the next quarter turned positive at 4.3%, and the optimistic outlook was expected to persist in the next 12 months. The index is seen to settle at 23.6% in the next 12 months compared with the earlier 25.5% expectation.

The outlook on household spending for the next quarter was unchanged at 26.4%, the lowest since the nationwide survey started in 2017, the central bank said.

Meanwhile, the improved confidence among companies was traced to the reopening of more businesses during the so-called new normal, easing restrictions and increased demand during the holiday season.

Companies remained positive for the first quarter of next year, with the confidence index jumping to 37.4% from 16.8% in the previous survey.

“Respondents’ more buoyant outlook for Q1 2021 was associated mainly with expectations of reopening of firms and adapting to the ‘new normal,’” the BSP said. They also expected a pickup in sales as coronavirus vaccines become available, it added.

Business sentiment turned more optimistic for the next 12 months as the confidence index rose to 57.7% from 37.5% in the previous survey.

The employment outlook index for both next quarter and in the coming year also turned positive, indicating that companies were likely to hire more workers.

The central bank interviewed 5,612 households for the consumer expectation survey on Oct. 1-13, while 1,513 companies responded for the survey on Oct. 6 to Nov. 24.

BoP estimates raised as current account swings to surplus

The Philippine central bank on Friday raised its balance of payment projections for this year and 2021 amid a prolonged coronavirus pandemic, as the country’s current account reverted to a $4.1-billion surplus in the third quarter.

The surplus came as the trade in goods deficit fell and net receipts of secondary income rose, making up for the lower net receipts of primary income and trade in services, the Bangko Sentral ng Pilipinas (BSP) said in a statement.

Last quarter’s current account surplus was a turnaround from the $456-million deficit in the third quarter of last year, but smaller than the $4.4-billion surplus in the second quarter.

“The latest BoP assessment for 2020 reflects the apparent bottoming out of the COVID-19 impact in Q2 2020,” the BSP said in a statement. “While recent external account figures remain below pre-pandemic trend and still in the negative territory, these are expected to improve from the first half of the year,” it added.

The payment position is expected to post a surplus of $12.8 billion in 2020, equivalent to 3.4% of economic output and higher than its previous estimate of P8.1 billion.

This reflects largely the $10.3 billion overall BOP position in the 10 months through October, supported by higher foreign borrowings by the National Government and lower merchandise trade deficit, the central bank said.

For 2021, the major BoP accounts are expected to show continued improvements but could still remain below pre-pandemic levels, the central bank said. “The overall BoP position is projected at $3.3 billion in 2021, attributed mainly to the expected moderation of the current account surplus next year.”

The central bank said it had raised its projected current account surplus to $8.4 billion, or equivalent to 2.3% of gross domestic product (GDP) this year from the $6-billion estimate in October.

This is expected to narrow to $6.1 billion or 1.5% of the economic output next year, higher the previous estimate of $3.1 billion or 0.8% of output.

The BSP expects a “sustained surplus in the current account over the medium term but one that is moderating as the economy recovers and imports also recover,” Deputy Governor Francisco Dakila, Jr. told an online news briefing.

Keeping more outflows than inflows might bode well for economic growth when imports were strong before the pandemic since the Philippines is a net importing country and has been posting a current account deficit in the past, said Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc.

“This means that a surplus may not actually be good in a crisis and that the challenge is to get the economy moving again to a point when the current account settles in a healthy deficit,” he said in a Viber message.

BSP data showed the trade in goods deficit narrowed to $4.227 billion from $8.605 billion. Primary income fell by 15.7% from a year earlier to $1.061 billion, while secondary income rose by 4.1% to $7.28 billion.

In the nine months to September, the current account balance posted an $8.7-billion surplus from a $3-billion deficit a year ago, it said in a separate statement.

The central bank traced the surplus to a fall in the trade in goods deficit, offsetting the lower net receipts of trade in services, primary and secondary income.

The current account shows the country’s economic interaction with the rest of the world. It includes trade in goods and services, remittances from migrant Filipino workers, profits from Philippine investments overseas, interest payments to foreign creditors and gifts, grants and donations to and from abroad.

BoP remains in surplus for Q3

THE PHILIPPINES’ balance of payments (BoP) — a measure of the country’s transactions with the rest of the world — continued to post a surplus last quarter at $2.8 billion, more than three times the past year’s amount.

“The increase in the BoP position was underpinned by the reversal to a surplus of the current account, attributed mainly to the narrowing of the trade in goods deficit as imports of goods recorded a higher decline than exports of goods,” the BSP said.

The central bank traced the slowdown in merchandise trade to sustained risks and uncertainties during the pandemic.

This brought the nine-month BoP surplus to $6.9 billion, 24% higher than a year earlier. A surplus means more funds entered the economy.

The central bank kept its forecasts for cash remittances at a 2% decline this year and 4% growth next year as it expects improving global conditions, further reopening of sectors and the arrival of vaccines to benefit overseas Filipino workers’ employment prospects.

Foreign direct investments are projected to rebound with inflows of $7.5 billion, while foreign portfolio investments are expected to reach $3.5 billion in 2021 “in line with the consensus view of a recovery in investment sentiment given better global and domestic economic prospects next year,” the BSp said.

The outlook for the gross international reserves was raised to $105 billion by year-end from $100 billion estimated earlier. It also expects reserves to continue rising next year to $106 billion, up from the previous forecast of $102 billion. — Beatrice M. Laforga

BSP fully awards 28-day bills

The Bangko Sentral ng Pilipinas (BDP) fully awarded the short-term securities it offered on Friday on ample liquidity during the holiday season.

The central bank raised P80 million in 28-day debt paper as planned. The auction was more than 1.5 times oversubscribed as bids reached P141.25 billion.

This marked the 13th straight week that the central bank made a full award since it started selling its own securities in September.

“The sustained strong demand for the BSP deposit facilities amid the coming holidays supports the view that financial liquidity remains ample,” BSP Deputy Governor Francisco Dakila, Jr. said in a statement. “Looking ahead, the BSP’s monetary operations will continue to be guided by its assessment of market developments and liquidity conditions.”

Rates sought ranged from 1.68% to 1.7%, lower than 1.69-1.71% at last week’s auction. The one-month bills fetched an average rate of 1.6921%, down 0.64 basis point from 1.6985%.

Total tenders were also bigger than P117.1 billion last week.

“Demand seems to be sustained as liquidity in the financial system remained at ample levels, and the facility continues to complement the term deposit facility to mop up the excess and investors looking for less interest rate risk,” Security Bank Chief Economist Robert Dan J. Roces said in a Viber message. — Beatrice M. Laforga

Philippine external debt stock rises

The country’s outstanding external debt rose by 5.2% at the end of September from the previous quarter as companies and the government continued to borrow more from overseas amid a coronavirus pandemic, according to the Philippine central bank.

The foreign debt stock hit $92 billion as of end-September from $87.5 billion as of end-June, the Bangko Sentral ng Pilipinas (BSP) said in a statement on Friday. The debt stock has gone up by a tenth this year.

The central bank traced the quarterly uptick to $2.8 billion in net loans obtained by private nonbank companies to boost their working capital, and the $2.4 billion government borrowing meant to boost its pandemic response.

Also pushing up the debt level were the weaker dollar against the peso and higher nonresident investments in Philippine debt securities issued offshore worth $294 million.

External debt refers to all types of borrowings by residents from nonresidents.

BSP Governor Benjamin E. Diokno said key external debt indicators show that the debt stock remained at prudent levels, with the gross international reserves reaching $100.4 billion as of end-September, which could cover short-term obligations by nine times.

The debt service ratio, which relates principal interest payments to exports of goods and receipts from services and primary income, rose to 7% last quarter from 6.4% a year earlier.

The total outstanding debt climbed to 25.3% as a share of overall economic output last quarter from 23.7% a quarter earlier.

“The ratio indicates the country’s strong position to service foreign borrowings in the medium to long-term,” Mr. Diokno said. The ratio of the country’s external debt to economic output remained one of the lowest in the region, he added. — Beatrice M. Laforga

BSP tightens reserve rules for lenders

The central bank has set a limit on the amount of loans to small and large businesses that lenders can count as part of their reserve requirement compliance, Governor Benjamin E. Diokno said on Friday.

In a statement, Mr. Diokno said total loans to micro-, small- and medium-sized enterprises (MSME) and large enterprises counted as alternative compliance with the reserve requirements were capped at P300 billion and P425 billion, respectively.

The limits, which were based on simulations, would ensure that the use of loans as an alternative compliance is consistent with local liquidity conditions and projected growth, he said.

BSP-supervised financial institutions should continue to avail themselves of the relief measures to sustain lending and financial support to viable MSMEs and large enterprises, Mr. Diokno said.

“Access to finance by these businesses will contribute to the recovery of the domestic economy and will help secure our envisioned path of sustainable and inclusive growth,” he added.

The central bank in April allowed lenders to use credit to MSMEs as part of their reserve requirement compliance to support lenders amid a coronavirus pandemic.

Once the limit has been reached before the end of 2022, the central bank would amend policies to close the validity of the relief measure. The rules allow banks to use these loans as part of their compliance until Dec. 29, 2022, unles closed earlier.

The cap on loans would not affect the rural banks because it is too high considering the sector’s asset base, Elizabeth C. Timbol, president of the Rural Bankers Association of the Philippines, said in a Viber message on Friday.

“Rural banks will continue to extend loans to MSMEs and utilize the regulatory relief on alternative compliance with the reserve requirement,” she said.

MSMEs make up 99% of all establishments in the country and employ more than 60% of the total labor force. — Beatrice M. Laforga

Peso weakens vs dollar

The peso on Friday depreciated further against the dollar on weak economic data after lower flows and higher bad loans.

The currency closed at P48.07 a dollar on Friday, 0.5 centavo weaker than a day earlier, according to data posted on the Bankers Association of the Philippines website.

The peso opened the session at P48.08 a dollar, weakening to as much as P48.085 and peaking at P48.055 against the greenback.

The total volume of dollars traded roes to $540.85 million from $498.1 million on Thursday.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., traced the weak performance to data showing foreign direct investments (FDI) had eased further, while banks reported higher bad loans.

“Offsetting positive factors for the peso are the expected seasonal surge in overseas Filipino workers’ remittances and conversion to pesos shortly before Christmas, narrower trade deficit data, weak US dollar versus major global currencies among 2.5-year lows recently,” he said in a Viber message.

FDI net inflows to the Philippines dropped by 12.3% from a year earlier to $523 million in September, according to the central bank. This was also 17% lower than $637 million in August.

The gross bad loan ratio rose to 3.69% as of end-October from 3.47% a month earlier and 2.2% a year ago. The ratio of soured loans was the highest since 2013.

The Bangko Sentral ng Pilipinas expects the bad loan ratio to rise to 4.6% by year-end. — Beatrice M. Laforga

DBP lists P21-billion bonds

State-run Development Bank of the Philippines (DBP) listed P21 billion worth of two-year peso-denominated bonds on Friday.

The bond sale which would support its lending activities to strategic sectors, President and Chief Executive Officer Emmanuel G. Herbosa said at the listing ceremony at the Philippine Dealing & Exchange Corp. (PDEx).

The debt paper fetched a coupon of 2.5%, the lowest coupon yield listed to date, he said. The two-year debt was issued on Friday and will mature on Dec. 11, 2022.

“With additional funds to be raised at our disposal for development initiatives, DBP can further support projects and investments that help generate employment, ensure access to basic goods and services, and address or mitigate a specific social issue to achieve positive social outcomes,” Mr. Herbosa said.

He added that the bank would sustain its lending programs to support sectors hit hard by the pandemic such as micro-, small- and medium-sized enterprises.

The state-run bank is among the main implementing agencies of the government’s relief programs during the pandemic, such as the interest rate subsidy program for loans obtained by local governments.

DBP had P761.5 billion in assets last year and was the country’s ninth biggest bank by assets. — Beatrice M. Laforga

Ayala energy unit says 2.27-B offer shares exempt from SEC registration

AC Energy Philippines, Inc. said on Friday that it had received confirmation from the securities regulator that the Ayala Corp. unit’s proposed stock rights offering is exempt from the registration requirement of the securities code.

The company is planning to offer up to 2,267,580,434 common shares at a price of P2.37 per share, it told the Philippine Stock Exchange. The offering consists of two rounds, and will be followed by a domestic institutional offer.

The first round will be offered on a pre-emptive rights basis to eligible shareholders who may subscribe to 1 share for every 1.11 common shares held as of record date.

During the mandatory second round, shares will be offered to shareholders who exercised their rights in the first round and who had signified their intention to subscribe to any unsubscribed rights shares.

Under the domestic institutional offer, the remaining rights shares will be sold by the joint lead underwriters to qualified buyers as defined in the 2015 Implementing Rules and Regulations of the Securities Regulations Code (SRC) at the same offer price.

Unsold shares will be taken up by the joint lead underwriters BPI Capital Corp. and China Bank Capital Corp.

AC Energy Philippines said the confirmation letter was issued by the markets and securities regulation department of the Securities and Exchange Commission. 

Section 10.1 (e) of the SRC exempts from the requirement of registration “the sale of capital stock of a corporation to its own stockholders exclusively, where no commission or other remuneration is paid or given directly or indirectly in connection with the sale of such capital stock.” 

On Friday, shares in the company slipped by 0.63% to P6.35 each. 

Del Monte Pacific turns around to net profit in three months to Oct.; shares rise over 9%

DEL MONTE Pacific Ltd. (DMPL) said attributable net profit was $21.9 million in the three months to October, turning around from a year-earlier loss of $37.35 million, following improved sales in the Philippines and the US.

In a disclosure on Friday, the food manufacturer said its sales during the second quarter rose 12% year on year to $623.5 million due to better figures in the United States (US) and the Philippines.

The company’s fiscal year bands in April, and the three months to October represent its second quarter.

US subsidiary Del Monte Foods, Inc. (DMFI) posted sales growth of 13% to $446.7 million due to stronger demand in the branded retail segment during the pandemic.

In the Philippines, sales rose 10% in dollar terms and 4% in peso terms, led by pineapple juice, meal mixes, and ketchup.

“Retail sales grew by a strong 13% despite a weak economy and high unemployment resulting from the pandemic. However, this was offset by the food service business which remained soft notwithstanding improvements over the first quarter,” according to the disclosure.

The company said Del Monte Philippines, Inc. (DMPI) posted a net income of $23.6 million.

“The strength of our brands and our products sought by consumers in the US and the Philippines, and improving sales in other Asian markets were at the centre of the robust performance for the quarter,” DMPL Managing Director and Chief Executive Officer Joselito D. Campos, Jr. was quoted as saying.

“We are razor-focused on managing costs while our solid fundamentals as a staple food business with trusted brands, and high quality, healthy and shelf-stable products will continue to drive our growth,” he added.

For the first half of its fiscal year, the company said attributable net profit was $18.6 million, a turnaround from a year-earlier $75.6 million loss.

Sales oduring the half rose 11% year-on-year to $1.04 billion, with DMFI accounting for 69% of the total at $714.9 million.

“The Philippines also generated increased sales of 15% and 10% in dollar and peso terms, respectively,” it said.

In October, the company announced that DMPI raised $134 million from an issue of fixed-rate bonds.

The oversubscribed issue consisted of three-year bonds priced at 3.484% rate and five-year bonds at 3.7563%.

Proceeds were used to refinance at a funding lower cost over longer maturities.

The company said it expects to return to profitability in the 2021 fiscal year.

“DMPL is well-positioned in this environment given its nutritious and long shelf-life products which enable consumers to prepare healthy meals at home and build their immunity amidst the pandemic,” it said.

On Friday, Del Monte Pacific rose 9.62% or 61 centavos to P6.95. — Revin Mikhael D. Ochave

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