Nation at a Glance — (05/02/19)

May 1, 2019 | 8:17 pm

News stories from across the nation. Visit www.bworldonline.com (section: The Nation) to read more national and regional news from the Philippines.

Millennials are here to stay — or so they hope we will

May 1, 2019 | 7:36 pm

As Baby Boomers and Gen X-ers prepare to retire, companies worldwide have been gearing up to accommodate more millennials in the workplace. With three generations having different values and attitude towards work sharing one office, culture shock and clashes are bound to happen.

Millennials, a demographic term coined in 1987 by authors William Strauss and Neil Howe, are individuals born in the early 1980s until the mid-1990s into a wide usage of technology, information, and media. This 2019, millennials are the employees aged roughly 25 to 37 years old. They are not your fresh graduates, who belong to Generation Z. Rather, they are most likely today’s supervisors and managers.

The challenge is that this generation is marked by restlessness to move between companies at high speed. Deloitte’s 2016 Millennial Survey, which includes Filipino participants, showed that 6 out of 10 millennials foresee leaving their current jobs within four years. This, coupled with a global market for young professionals, makes them less tolerant when they are not motivated or fully-utilized at work.

So how do you attract, train, and retain such an elusive generation?

youth

As a millennial, I believe the answer lies in the fact that we simply grew up differently. Technology allowed us to play, communicate, socialize, and learn in new platforms as children. Information allowed us to gain diverse perspectives from authorities all over the world, more than from our parents and teachers. Multi-sectoral crises such as global terrorism, corporate scandals, government corruption, and environmental issues made us crave for greater participation and contribution. In short, we grew up wanting different outcomes from the work we do.

To encourage millennials like me to stay, companies must have the following characteristics/values:

Authenticity. At the rise of fake news and sensationalized media, millennials have grown to be both opinionated in and skeptical of media. With a click of a button, this tech-savvy generation can verify and fact-check the catchiest company claims and are even vigilant of how their companies will react on various political or industry issues. As such, to retain their millennial employees, companies should display authenticity by matching their internal practices with their external messaging. Millennials will eventually find out misleading information and may drive them to be Internet “whistleblowers” of poor company practices.

Visibility. With the desire for authenticity comes the desire for accessibility. If companies in the 21st century aim to hire more young professionals, it is a must to have an updated website and social media platforms that display not just company information but also company values. Because millennials tend to look for companies that align with their personal values, digital platforms can be used not just for recruitment but also for corporate branding. Companies should be more open to post about their employee engagement activities, corporate social responsibility (CSR) practices, training opportunities, and other perks if they wish to attract more millennials to apply.

Flexibility. Millennials are keen on finding solutions to get things done faster using less resources. With work-life integration as one of their main values, millennials measure their productivity based on outputs rather than the number of hours worked at the office (PwC, 2013). They most likely prefer working remotely using various software to substitute tedious tasks and ultimately accomplish more work, rather than commuting to go on hour-long meetings. Some of the flexibility options millennials seek are telecommuting, freelance work, and part-time, flexible, or alternative schedules (Forbes, 2017). Companies offering space and time flexibility are definitely more attractive than those only with traditional office-based, nine-hour shifts.

Inclusivity. While other generations achieve results by hitting measurable targets, millennial employees are found to achieve results via collaboration — by gaining more ideas, insights, and perspectives from others (Deloitte, 2016). There must be a perceived safety to be vulnerable around team members, such as when sharing opinions or admitting a mistake without retaliation or judgment. This is called psychological safety, and it is one of the primary elements to make more effective teams (Google Project Aristotle, 2012). Companies will do well to provide a safe environment to get frequent feedback via evaluation forms, forums, and one-on-one sessions to make employees feel heard and valued when the management makes decisions.

Social responsibility. Despite being called entitled and narcissistic, the 2015 Cone Communications Millennial CSR study showed that millennials are actually willing to take pay cuts to work for responsible companies. Millennials want their work to impact other teams and the entire organization (Google, 2012). The so-called “woke” generation also want their companies to work on larger societal problems. However, companies do not need to simply dump funds on non-profits or participate in one-time volunteerism events. Being socially responsible can take the form of improving internal policies, such as on minimum wages, contractualization, carbon footprint, workplace diversity, and more.

By 2020, at least half of the global workforce are seen to be composed of millennials (PwC, 2011). They are occupying more and more positions to make decisions on targets, budgets, resources, and overall company directions. If a company hopes to survive another generation, it is not only wise but also essential to understand millennial employees.

Samantha Isabel V. Coronado, a millennial, is a corporate social responsibility practitioner and an MBA student at the De La Salle University.

samantha_coronado@dlsu.edu.ph

Banks’ Brunei boycott deserves a small cheer

May 1, 2019 | 7:32 pm

By Elisa Martinuzzi

JPMORGAN Chase & Co. is the latest global bank to take a stand against Brunei after the oil-rich sultanate introduced legislation that punishes gay sex with death by stoning. The idea that financial leaders will choose their business partners on the basis of ethical principles marks a notable shift. But praise for this push onto the moral high ground should be limited.

The financial crisis left lenders with tens of billions of dollars in fines for scandals ranging from rigging to mis-selling, and substantial reputational damage. The industry’s long haul to recover its position has, for the past decade, put it squarely on the receiving end of new rules and regulations, including a fresh push to abide by environmental, societal and governance standards. Concerns about the recent changes to Brunei’s penal code align with this — the laws have drawn condemnation from the United Nations, criticism from the United States and outrage from the entertainment world.

So it’s good to see that banks are doing their part by banning staff from staying at luxury hotels owned by Brunei’s sovereign wealth fund. JPMorgan has joined the boycott, the Financial Times reported this week. At least seven others including Deutsche Bank AG, have similar restrictions in place, according to Financial News.

That so many firms are on board with the restrictions is unprecedented, and demonstrates a renewed appetite within the industry to assert itself as an agenda-setter instead of merely a rule-taker. And even if driven by the demands of customers and millennial employees, the desire to make a stand in such fashion is welcome.

Yet the practical impact of this policy will be limited. The move may strain the finances of the hotel properties, which include the Dorchester in London and the Beverly Hills Hotel in California. But with oil back on a tear, Brunei’s fiscal position probably won’t change much. Nor does it appear that firms are giving up a pipeline of lucrative business. Brunei represents less than 0.03% of the global economy. It’s not exactly the IPO or bond issuance capital of the world.

At the moment, it doesn’t appear that the big lenders have the appetite to repeat this approach elsewhere.

The Cato Institute’s Human Freedom Index shows a number of other, larger countries score little better than Brunei on repression, if not worse. However, financiers appear to be perfectly willing to do business in some of these locations.

One example is Saudi Arabia. Ranked 155 out of 162 for personal freedom, just last week the kingdom drew the world’s top bankers and investors to a financial summit in Riyadh. In attendance were some of the very executives who had pulled out of a conference there in the autumn after the murder of US-based journalist and Saudi critic Jamal Khashoggi.

This year, conference participants expressed their excitement about the role they can play in an economy with a bright future, in the words of one finance chief.

One element of this is absolutely right: Saudi Arabia is enticing, financially. Amid a dearth of deals in Europe, Saudi Aramco’s $12 billion bond sale has been a bright spot in the capital markets this year and the kingdom’s economic transformation promises plenty more.

The reality is that pulling out of Saudi Arabia would be very expensive for global banks that have decades of shared business dealings, and hundreds of employees on the ground. It may not be possible for them to easily adopt the playbook of hedge fund Pharo Management, which decided in December to return about $300 million that it was managing for the kingdom’s central bank.

Big finance’s hard line against repressive regimes will be tested for consistency. The progress banks have made deserve praise — but lenders should recognize that standing firm on principles might be a little harder next time.

BLOOMBERG

Europe’s rebound shows Draghi got it right

May 1, 2019 | 7:32 pm

By Ferdinando Giugliano

THE European Central Bank faced a torrid start to the year, as critics said it was not providing enough stimulus to a slowing euro-zone economy.

In retrospect policy makers may have got it just right. The economy in the currency union expanded by 0.4% in the first quarter, beating expectations. The growth rate may not be spectacular, but is higher than in the last three months of 2018, when it came at 0.2%. The euro zone is not out of the woods yet, but the ECB’s wait-and-see approach may have been vindicated.

For much of the first quarter, the central bank could not really make up its mind about the extent of the region’s slowdown. President Mario Draghi noted how the industrial sector was clearly going through a rough patch courtesy of a range of one-off factors (including disruptions in Germany’s automotive sector) and global trade tensions. The question was whether these weaknesses would impair internal demand.

The data from the first quarter show that euro-zone factories are back. Italy’s emergence from a technical recession was probably the result of a rebound in manufacturing and entirely due to exports — the economy expanded 0.2% in the first quarter compared to the final three months of last year. In France, where the economy grew 0.3%, manufacturing accelerated significantly. In Spain, production bounced back strongly from a poor second half in 2018, driving a 0.7% increase in gross domestic product.

Meanwhile, there is no sign that the labor market is getting weaker: The region’s unemployment rate fell to 7.7% in March from 7.8% in February, hitting the lowest level in more than ten years.

These improvements, alongside rising wages, will continue to help the services sector, which is more dependent on domestic spending. The vicious circle Draghi feared between external conditions and internal demand may have stopped just in time.

This allows a reassessment of the announcements the ECB made last March to stimulate the economy. These included a new round of cheap loans to the banks and the decision to delay the first hike in interest rates to at least the start of 2020.

This set of measures was probably stingier than what it might have been, and did not include some crucial details such as the price of the loans. There was also no sign that the ECB might want to revive asset purchases after ending them in December. This package now looks broadly adequate and is unlikely to need further adjustments when the governing council meets again in the coming months.

Still, the ECB should be as generous as it can be within the limits policy makers have set themselves. There are signs that inflation is coming back, as price pressures in Germany in April vastly exceeded estimates. Yet these were largely due to one-off factors, partly driven by the timing of Easter. Core inflation in the euro zone, which strips out more volatile items such as energy and food, remains well below the central bank’s target of just under 2 percent.

The outlook also remains uncertain. In Italy the government, including finance minister Giovanni Tria, seized at the news that the country had resumed growth to say that this proved the “solidity” its economy. But the prolonged weakness of internal demand, alongside a deeply uncertain fiscal outlook, are a reminder that Rome remains the sick man of the euro zone — and a cause of concern for its partners. The German economy, while much stronger than Italy’s, is also a big question mark, as its manufacturing sector continues to stutter.

In exactly six months, a new president will take office at the ECB. The mild improvements in the euro-zone economy might be enough for Draghi to breathe a small sigh of relief as he comes close to his exit at the end of October. They should be in no way sufficient to calm down his successor, whoever he or she might be.

BLOOMBERG

Discovering the gray market

May 1, 2019 | 7:31 pm

By Tony Samson

MARKETERS are now paying attention to the growing “gray market.” As a marginalized group, old people with lots of money (OPLOM) may not qualify for party-list inclusion. In the 2015 census, the age group of those over 65 years old comprise only 5% of the population. The wealthy segment of seniors can embarrass their cohort age group, such as old people supported by their offspring (OPSBTO) who may have a better chance of party list representation, with a sprightlier acronym like: Just Old Leftovers and Grandparents Society (JOLOGS).

There are challenges for marketers targeting the OPLOMs. Their closets and garages are already full. It’s a market that already has all it needs or wants. So, they no longer buy suits and jackets on impulse, unless they had a liposuction done or survived a debilitating affliction to evolve into the retailers dream for “wardrobe makeover.”

How do OPLOMs spend their still considerable disposable income?

They buy expensive treats. And they don’t bother to take photos as they have little motivation to post anything on their social media, except chats — have you already seen the Avengers? Purchased experiences include traveling in comfort, flying business and checking in at a nice hotel which serves flaky croissants in their buffet breakfasts. Fine dining that does not require waiting in line is an item in the to-do list.

In a wonderful ad from a budget airline, the billboard features a tag — just because you’re old doesn’t mean you don’t want to try new adventures. The photo is of an unaccompanied senior who looks fit in his tank top, on a beach. Yes, that captures the spirit.

Wellness at an advanced age is distinct from illness, which can also eat up the disposable income, even with insurance and what it does not cover. This classification doesn’t include gym (too much sweat) but pampering that is supposed to reward age. Body scrubs, hot oil scalp massage, and coffee and cakes are trivial pursuits worth considering. There is too the no-longer-fashionable ballroom dancing session that comes with a regular dance instructor. More au courant is yoga, pole dancing, or, for the less nimble, taichi — push the mountain; part the clouds.

Downsizing lifestyles for empty-nesters can involve moving to a smaller space. To unburden the clients from paying for all sorts of support staff like gardeners and pool cleaners, the big house can be sold. This is called monetizing the assets — let’s enjoy the money while we can. Ancillary services here include property swaps and trade-ins, as well as storing or selling of surplus house accessories like furniture and art works. The latter is fueling a growing art auction market.

Banks look at high net worth individuals, like OPLOMs, for wealth management. A financial adviser with empathy for clients who repeat themselves is a prized talent for banks. They defend their customers from elderly abuse to which they may be subjected by relatives and caregivers — is that thing I signed a gate pass or the deed of sale for my proprietary club membership?

“Gray market” has another meaning, referring to market activities that are under the GDP radar, but not necessarily illegal. It’s the “black market”, a darker shade of gray, that is off-limits. Transactions in the gray market may not issue receipts and are conducted mostly in cash. Such activities comprise a whole range of services from pet grooming to online sale of cookies.

The gray-to-gray market refers to oldies availing themselves of services in the gray sector. This may entail inter-generational activities, such as an old male accompanied by a much younger female, who is referred to in confectionary terms, such as “eye candy” which is sugar-free. It is a term used for an attractive human accessory applicable to both genders. The expiry date is usually years away.

Curiously, eye candy only refers to an escort accompanying a very much older companion. Attractive and same-age pairs (two eye candies) are called a power couple with their names abbreviated and fused together like a shop that serves iced cappuccino — Jejune? For Jeff and June.

With the growing gray market, restaurants that hope to attract this niche are advised to keep the music low, explain the menu twice, and keep the draft from the aircon aimed at the empty spaces.

Tony Samson is Chairman and CEO, TOUCH xda

ar.samson@yahoo.com

Performance projections for ASEAN, select major Asian economies

May 1, 2019 | 6:00 am

THE PHILIPPINES will remain “resilient” with the rest of Southeast Asia and the region’s three major neighbors in the north, “heightened global risks and stronger external headwinds” notwithstanding, with the country’s economic growth picking up this year and the next, according to latest assessments the ASEAN+3 Macroeconomic Research Office (AMRO) released early this morning. Read the full story.

AMRO expects PHL economic growth to pick up

May 1, 2019 | 6:00 am

The ASEAN+3 Regional Economic Outlook (AREO) 2019, titled “Building Capacity and Connectivity for the New Economy”, put AMRO’s projection for Philippine gross domestic product (GDP) expansion at 6.4% this year — retained from the last estimate in February under the group’s 2018 Annual Consultation Report on the country which in turn was bumped up from the 6.3% penned in the January update of last year’s AREO — and 6.6% next year from the three-year-low 6.2% in 2018.

AMRO — initially formed as a company in April 2011 and transformed into an international organization in February 2016 — conducts macroeconomic surveillance and supports implementation of the Chiang Mai Initiative Multilateralization currency swap arrangement which the 10 members of the Association of Southeast Asian Nations (ASEAN), as well as China, Japan and South Korea (ASEAN+3) adopted to help avert any financial crunch.

Its latest projections compare to projections of two credit raters as well as multilateral lenders and international organizations that slashed estimates in the face of the delayed mid-April enactment of the Philippines’ 2019 national budget and external factors like simmering Sino-US trade tensions. Specifically, latest GDP growth projections are 6.2% for Fitch Ratings; 6.3% for S&P Global Ratings; 6.4% for the World Bank and the Asian Development Bank, as well as 6.5% for the International Monetary Fund, as well as by the UN Department of Economic and Social Affairs, the UN Conference on Trade and Development and the five UN regional commissions including the United Nations Economic and Social Commission for Asia and the Pacific.

The inter-agency Development Budget Coordination Committee in mid-March slashed its 2019 GDP growth assumption to 6-7% from 7-8% originally as the government operated on a reenacted budget, and some state economic managers have said the government will be hard-pressed to catch up with the state spending program this year.

Under AMRO’s latest GDP growth projections, the Philippines will be outpaced by Vietnam but will still be better off than ASEAN’s three other major economies (Malaysia, Singapore and Thailand), even China, as well as the ASEAN+3 region as a whole for both 2019 and 2020.

AMRO also sees headline inflation slowing to a flat three percent this year and next — in line with central bank forecasts for the same years — from 2018’s 5.2% that was a near-decade peak.

In its latest assessment, the group said “[e]conomic growth is expected to gradually recover on the back of buoyant domestic demand and will likely expand by 6.4% in 2019, albeit with the balance of risks to growth tilted to the downside.”

AMRO noted that “buffers remain adequate” even as the country’s “external position has weakened” as the current account deficit widened to an equivalent of 2.4% of GDP in 2018. Latest central bank data show gross international reserves rising for the fifth straight month to $83.199 billion last month, the biggest amount in nearly two-and-a-half years and “more than sufficient to cover the country’s gross external financing needs.”

“Monetary conditions have tightened, but credit continues to expand,” the group noted in its latest report, adding that “[c]redit growth is anticipated to remain elevated, but as real borrowing cost starts to rise, it is likely to moderate.”

“Major risks” to the Philippine economy, the group noted, “are mostly short-term ones”, citing “escalating global trade tensions, still-”elevated inflation” amid “uncertainty from global oil prices” as well as “[r]apid credit growth over the past several years [that] could give rise to financial vulnerabilities.”

“Overall,” it said, “risks appear to be moderating.” — Reicelene Joy N. Ignacio

S&P upgrades Philippine debt rating

May 1, 2019 | 12:33 am

By Bettina Faye V. Roc
Associate Editor

S&P GLOBAL RATINGS has raised the Philippines’ credit rating by a notch, citing above-average growth and strong external and fiscal position which have boosted the country’s economic profile.

The debt watcher on Tuesday raised the country’s long-term sovereign credit rating to “BBB+” from “BBB,” bringing it a step closer to bagging a single “A” grade.

S&P assigned a “stable” outlook to the rating, which means it expects to maintain its grade in the next six months to two years as the economy is likely to remain strong over the medium term.

S&P also affirmed its “A-2” short-term rating on the country but revised the transfer and convertibility assessment higher to “A-” from “BBB+”.

The credit rater’s latest action puts its assessment of the Philippines a step higher than those of its peers. Fitch Ratings and Moody’s Investors Service affirmed their “BBB” and “Baa2” ratings — a notch above the minimum investment grade — on the country in December and July last year, respectively, with corresponding “stable” outlooks.

“We raised the rating to reflect the Philippines’ strong economic growth trajectory, which we expect to continue to drive constructive development outcomes and underpin broader credit metrics over the medium term. The rating is also supported by solid government fiscal accounts, low public indebtedness, and the economy’s sound external settings,” S&P said in a statement on Tuesday.

The credit rater said supportive policies and an improving investment climate has helped the Philippines achieve “consistently above-average economic growth” — which it expects to continue as long as the country stays the course.

S&P forecasts annual gross domestic product (GDP) growth at 6.3% this year, keeping the Philippines as one of the fastest-growing economies in the region. It also sees the economy expanding by 6.5% in 2020, 6.6% in 2021, and 6.7% in 2022, reflecting its view of sustained growth on the back of private consumption and investment growth.

“The economy’s constructive trajectory should be underpinned by strong household and company balance sheets, continued income growth, sizeable inward remittance flows, and an adequately performing financial system,” it said.

The debt watcher noted the decline in the country’s unemployment rate as well as economic and fiscal policies that have resulted in “manageable” fiscal deficits and improved spending and revenues, citing in particular the government’s Comprehensive Tax Reform Program as an effective measure as it aims to keep finances sustainable while funding the government’s “aggressive” infrastructure spending.

WATCHING
Looking ahead, S&P expects general government deficits to remain stable, which will lead to a gradual decline in its debt burden.

For this year, it expects a below-program fiscal deficit of 1.8% of GDP following delays in the passage of the 2019 national budget. It warned that a repeat of this episode could be credit negative for the country.

S&P also flagged inadequate infrastructure as a key constraint to the economy, along with volatile export markets.

“[W]e continue to view as imperative the closure of infrastructure gaps and improvements in the business climate through greater political stability and regulatory reforms, in order for the Philippine economy to continue to expand at or near its long-term potential growth rate,” S&P said.

Meanwhile, the country’s external position, supported by remittances and services exports, will remain a key rating strength, with the debt watcher noting that its rising current account deficit, amid overheating concerns, is “largely investment driven.”

S&P, however, noted that a component of the government’s tax reform program which looks to rationalize incentives while reducing the corporate income tax rate may affect investor sentiment and be a risk to foreign direct investments.

On the other hand, the debt watcher said the Bangko Sentral ng Pilipinas’ (BSP) actions are “broadly neutral” to its ratings as the regulator’s effectiveness is expected to be intact over the medium term, supported by amendments to the BSP Charter passed earlier this year and “the employment of market-based monetary instruments, and the gradual reduction of its reliance on reserve requirement ratios.”

“We consider that a deeper and more diversified financial and capital market would further improve the effectiveness of policy transmission and facilitate improved credit metrics,” S&P said.

The debt watcher said it may raise its ratings on the Philippines over the next two years if the government “makes significant further achievements in its fiscal reform program, or if the country’s external position improves such that its status as a net external creditor becomes more secure over the long term.”

Meanwhile, a significant slowdown in GDP growth or higher-than-expected general government debt could lead to a cut in its credit rating.

Economic managers said S&P’s latest rating action affirms the country’s sustained economic performance, as well as policy and structural reforms that will continue to boost its prospects.

“S&P Global’s credit rating upgrade for the Philippines by one notch higher to “BBB+” is an undeniable tribute to President [Rodrigo R.] Duterte’s unwavering commitment to bold reforms and sound economic policies as embodied in the 10-point Socioeconomic Agenda of the administration and his strong political will to get these tough initiatives done at the soonest,” Finance Secretary Carlos G. Dominguez III was quoted as saying in a statement from the government’s Investor Relations Office (IRO).

BSP Governor Benjamin E. Diokno said S&P’s rating upgrade is a recognition of sound economic management, prudent monetary policy, and strong financial sector supervision.

“Over the years, the BSP has remained committed to its price and financial stability mandates, providing an enabling environment for the economy to flourish. Armed with a new charter that strengthens its ability to carry out its primary mandate of price stability and supervise the banking sector, the BSP will continue to lend support to the economic development goals of the country,” Mr. Diokno said in the same IRO statement.

National Treasurer Rosalia V. De Leon said the government remains committed to fiscal discipline even as it continues to invest in infrastructure and social services.

BSP Deputy Governor Diwa C. Guinigundo said in a text message that the upgrade “would bring more interest among foreign investors to participate in the growth process and in the end further establish and strengthen the upward trajectory of the Philippine economy.”

“The biggest challenge to us is to pursue sustainability: sustainability of policy and institutional reforms, growth and public finance. We also need to address the current account shortfall due to large merchandise trade deficit and ensure that inflation returns to the target range of 2-4%. With splendid record, I am sure we can do it,” Mr. Guinigundo said.

Inflation could have eased further in April — central bank

May 1, 2019 | 12:32 am

THE OVERALL INCREASE in prices of widely used goods could have eased for the sixth straight month to a 20-month low in April as a continued decline in rice prices and the peso’s appreciation offset upward pressures from higher fuel and electricity costs, the Bangko Sentral ng Pilipinas (BSP) Department of Economic Research (DER) said in a statement to journalists on Tuesday.

“The BSP Department of Economic Research projects April 2019 inflation to settle within the 2.7-3.5% range” when the Philippine Statistics Authority (PSA) reports official data on May 7, according to a statement e-mailed to reporters.

“Higher domestic oil prices and the slight upward adjustment in electricity rates are seen to provide upward price pressures for the month”, although “these pressures may be partly offset by the continued decline in rice prices and by peso appreciation”.

Bills of the Manila Electric Co. — the country’s biggest electricity distributor — rose for the third straight month in April, by P0.0633 per kilowatt hour (/kWh) to P10.5594/kWh from P10.4961/kWh in March.

Energy department data also show that, as of April 30, year-to-date fuel adjustments at the pump amounted to net increases of P8.80/liter for gasoline, P6.20/liter for diesel and P4.95/liter for kerosene.

And in a press briefing last Monday, Trade Secretary Ramon M. Lopez said rice now retails for about P34-38 per kilogram (/kg) from as high as about P50/kg a year ago, while PSA data show retail price of regular milled rice easing by 0.9% to P39.55/kg in the first week of April from P39.91/kg a year ago, while that of well-milled rice edged up by 0.34% to P43.87/kg from P43.72/kg in the same comparative periods.

Rice accounts for 9.59% of the theoretical basket of goods used by a typical household that is the basis for computing year-on-year price changes, while liquid fuel, solid fuel, gasoline and electricity contribute 0.13%, 1.22%, 1.28% and 4.8%, respectively.

“Moving forward, the BSP will continue to closely monitor evolving price trends and will undertake necessary measures towards its commitment to price stability,” the BSP-DES said.

In an e-mail, Nicholas Antonio T. Mapa, senior economist at ING Bank NV-Manila, noted that “[t]he April print will mark the third month that inflation will be back within target as supply chains continue to normalize after the 2018 episode, which saw inflation breach the upper end of the BSP’s target band.”

“Given the supply-side nature of last year’s breach, inflation has plunged back to earth quickly with the latest BSP inflation forecast at 3.0% for both 2019 and 2020. Meanwhile, inflation expectations remain well anchored with the latest BSP survey among private sector forecasters pointing to inflation settling at 3.3% for the year,” Mr. Mapa said.

“BSP has vowed to remain data-dependent in its actions and will have three months’ worth of within-target inflation prints to consider. Furthermore, given the forward-looking nature of inflation targeting, inflation expectations and forecasts both point to inflation remaining within target for the next two years. Given BSP Governor (Benjamin E.) Diokno’s recent remarks hinting at a rate cut and RRR (reserve requirement ratio) reduction within the year, we expect that we are getting closer to the central bank finally reversing its ultra-aggressive stance of yesteryear.”

LOWER-INCOME HOUSEHOLDS
Inflation, as experienced by low-income households, was lower in March driven mainly by the easing price increase in food and beverages, the PSA reported on Tuesday.

The March inflation turnout for goods and services used by households at the bottom 30% income segment stood at 4.6%, slower than the year-on-year price increase of five percent in February.

That compared to a 3.3% headline inflation experienced nationwide by the average household in March, even as the consumer price index (CPI) used in measuring headline inflation has 2012 as the base year while the CPI for the bottom 30% income households uses 2000 prices.

The CPI for the bottom 30% income segment has a heavier weighting for the food, beverages and tobacco sub-index to reflect the poor’s consumption patterns.

The food, beverages and tobacco sub-index rose 4.9% year on year from 5.6% in February. Food alone logged a 4.3% growth versus the preceding month’s five percent.

The cost of utilities, consisting of fuel, light and water, accelerated to 4.2% in March from February’s 2.7%. Faster increases were also recorded in clothing (three percent from 2.9%) and services (3.7% from 3.5%).

Housing and repairs were steady at 4.3% as well as the “miscellaneous” sub-index at 2.4%.

Inflation experienced by poor households in the National Capital Region was recorded at 2.3% in March, slower than the 2.9% posted in February. Those that are outside of Metro Manila also experienced a slower inflation trend at 4.6% from five percent.

In an e-mailed reply to questions, University of Asia and the Pacific economist Cid L. Terosa said that the prices of rice and other agricultural products “were relatively stable” in March.

“This contributed significantly to the slowdown in the index for food, beverages and tobacco,” Mr. Terosa said.

“We cannot discount the fact, however, that the base year effect was evident given the high inflation rate [of 5.8%] in March 2018.”

In a separate e-mail, Union Bank of the Philippines, Inc. chief economist Ruben Carlo O. Asuncion said that the inflation experienced by the low-income households “somehow mimics” headline inflation.

“It should be noted that headline inflation has been on a slowdown this 2019. Thus, a slowdown of the bottom 30 inflation is not far behind. In fact, I suspect that the slowdown in this particular population segment is faster…” Mr. Asuncion said. — Reicelene Joy N. Ignacio with MAM

Economic managers give ‘conservative’ estimates for Q1 GDP expansion

May 1, 2019 | 12:31 am

By Charmaine A. Tadalan
Reporter

PHILIPPINE ECONOMIC GROWTH can be expected to have steadied at slightly “above six percent” last quarter, two state economic managers said separately when sought for estimates on January-March gross domestic product (GDP) expansion that will be reported on May 9.

Socioeconomic Planning Secretary Ernesto M. Pernia said he expects first-quarter GDP growth at “above six percent” while Trade and Industry Secretary Ramon M. Lopez gave a 6.2-6.4% range.

Philippine GDP has been growing by a slower rate of at least six percent since the fourth quarter of 2017 (6.6%), clocking in at 6.5%, 6.2%, six percent and 6.3% in last year’s first to fourth quarters, respectively. The government last March reduced its 2019 GDP growth target to 6-7% from 7-8% originally in the face of delayed budget enactment, which was slashed by P95.3 billion to P3.662 trillion when it was signed into law four months late in mid-April.

“Lower inflation motivated more spending of people, households and election-related spending,” Mr. Pernia told reporters on the sidelines of the Sustainable Development Goals web site launch in Pasig City on Tuesday.

“The bigger happening was the lowering of the inflation from 6.7% [in September and October last year] to 3.3% [in March] and hopefully even lower.”

Asked if first-quarter growth could have been faster than that of the preceding three months, Mr. Pernia replied: “hopefully, yes.”

On Monday, Mr. Lopez said he chose to be “conservative” in his first-quarter GDP growth expectation.

“I’ll be conservative, I think… close to maybe 6.2-6.4%,” Mr. Lopez told BusinessWorld on the sidelines of a Rice Traders Forum in Intramuros, Manila.

“Maganda naman ang sectors like infrastructure, ‘Build, Build, Build,’ manufacturing [did relatively well],” he said.

“Kaya conservative kasi nga first quarter na-delay ‘yung budget kaya conservative na ‘yung 6.4%”

A senior official of the National Economic and Development Authority (NEDA), which Mr. Pernia heads as director-general, cited the impact of El Niño-induced dry spell among the factors that has begun weighing on growth.

“With respect to agriculture, it’s still the El Niño, but of course that will be mitigated by how well the sector has prepared and we take it has,” NEDA Undersecretary Rosemarie G. Edillon said in a telephone interview on Monday.

“With respect to industry and services [components of GDP], ang naging problema natin was the reenacted budget, pero ang mitigating factor dun is the campaign-related activities [ahead of the May 13 mid-term elections].”

SEC eyes five-year grace period for higher float

May 1, 2019 | 12:30 am

THE SECURITIES and Exchange Commission (SEC) is looking at giving listed firms five years to comply with the planned increase in minimum public ownership (MPO), a senior regulatory official told reporters on Tuesday.

“We’ll probably allow a five-year compliance period. The idea is, rather than try to catch the market… ang thinking is give them sufficient time kasi may concerns on market volatility,” SEC Commissioner Ephyro Luis B. Amatong told reporters on the sidelines of the Sustainable Finance Dialogue Forum in Makati on Tuesday.

The corporate regulator has long been planning to raise the MPO to 20% from 10% currently, a floor that has been in place since 2011. Its initial plan was to gradually raise the minimum public float to 15%, before the full target of 20%.

Mr. Amatong noted “[t]here will be many companies that will have to issue in order to comply with the 20%, some of them very big companies. So ’yun ’yung pinag-uusapan na approach (so that’s the approach we’re looking at).”

In a 2017 briefing, the SEC said that 68 out of 264 publicly listed firms had a public float lower than 20%. Of these, 39 companies had an MPO of less than 15%.

The same presentation showed that the stock exchange can raise more than P130 billion should the firms comply with the 20% MPO. That estimate was based on stock prices at a time when the PSE index was trading at the 7,800 level — the same level it is moving in now.

Despite talks of implementing the five-year compliance period, Mr. Amatong declined to give a timetable on the release the final rules.

He said the corporate regulator will first have to issue the revised guidelines for Real Estate Investment Trusts, or REITs, within this quarter.

The commission initially targeted to implement the plan by 2020.

So far, it has already required firms seeking to conduct an initial public offering to comply with the 20% MPO through a memorandum released in November 2017.

The only company that was affected by the new rule was DM Wenceslao & Associates, Inc., which was the sole firm to have braved the stock market in 2018 amid market volatility. — Arra B. Francia

Cebu Pacific cancels more flights

May 1, 2019 | 12:07 am

By Denise A. Valdez, Reporter

CEBU PACIFIC on Tuesday said it is canceling around ten flights a day this month, as part of efforts to streamline its operations.

“For the month of May, Cebu Pacific will be reducing approximately 10 flights a day out of a daily operations of 400 flights. Cebu Pacific is currently reviewing adjustments required for June and beyond,” Cebu Air, Inc., operator of the budget carrier, said in a disclosure to the stock exchange.

On Monday evening, the Gokongwei-led airline said 58 round-trip flights until May 10 will be canceled. This is in addition to the 23 flight cancellations from April 28 to 30 earlier announced.

“Over the past few days, Cebu Pacific has seen an unprecedented level of disruption to its operations, and its passengers are experiencing extended delays and some on-the-spot cancellations. To create space in its schedule for operational recovery, minimize rolling delays and give passengers the chance to make alternate travel plans, Cebu Pacific has to temporarily reduce the number of its flights given the current operating conditions, particularly in its Manila hub,” it said.

Among the canceled flights are those linking Manila to Cebu, Dumaguete, Davao, Puerto Princesa, Tuguegarao, Bacolod, Iloilo, Caticlan, Butuan, Zamboanga, Bohol, Legazpi, Cagayan de Oro, Roxas, Ozamiz and General Santos. Flights linking Zamboanga to Cebu and Tawi-Tawi are also affected.

Asked if Cebu Pacific may face sanctions because of these flight cancellations, the Civil Aeronautics Board (CAB) said it may be too early to tell at this point as it has not received a full report of the situation.

“It’s too early to tell, because we’re still in the process of inquiring into the circumstances surrounding the cancellations. Like for example, they adverted to certain conditions in the airport, and we need specifics. So we asked them to detail those circumstances, then we are going to validate them, whether they are valid or not. And it’s only then that we could take action on whether they should be sanctioned or not,” CAB Executive Director Carmelo L. Arcilla told BusinessWorld in a phone call Tuesday.

But the Manila International Airport Authority (MIAA), operator of the Ninoy Aquino International Airport (NAIA), expressed support for Cebu Pacific.

“If this is what it takes to address their operational constraints, so be it. We believe all factors were carefully considered by Cebu Pacific in reaching a decision as crucial as this,” MIAA General Manager Ed V. Monreal said in a statement Tuesday.

In exchange for the inconvenience, Cebu Pacific said passengers affected by the flight cancellations will be given a round-trip travel voucher that may be used to book an alternative flight.

Following Cebu Pacific’s rationalization efforts, flag carrier Philippine Airlines (PAL) said it will not be following the same initiative for its operations.

“In response to numerous queries from the public and our passengers, Philippine Airlines wishes to provide assurance that we are operating our full regular schedule of flights for both domestic and international route networks. Our flights and airport operations remain normal at our hubs in Manila, Cebu, Clark and Davao,” it said in a statement Tuesday.

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