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Nation at a Glance — (03/07/19)

News stories from across the nation. Visit www.bworldonline.com (section: The Nation) to read more national and regional news from the Philippines.
Nation at a Glance — (03/07/19)

In Memory of Governor Nesting

Delivered by then Bangko Sentral ng Pilipinas Officer-in-Charge Maria Almasara Cyd N. Tuaño-Amador on Feb. 26

My dear colleagues:

News of the Governor’s passing away on Saturday has left us deeply saddened. We wanted to reach out to his family and to pay our respects. We wanted to be able to say our personal goodbyes to him. We also wanted some comfort as members of the BSP community that he had ably guided and led since July two years ago.

I am also sure that your own relatives and friends have offered you words of sympathy… and your hearts are bursting with the desire to share these sentiments with Team BSP. This is because the BSP is not only a place where you work. This is because the BSP is part of your family, and because Governor Nesting was the head of our work family.

We will all be able to do so on Thursday afternoon, when our Governor makes his last visit to his beloved BSP. The schedule of visits has been posted in the iKnow, but Thursday is our very own day as a community to gather around our Governor and salute him.

As we remember Governor Nesting today, let us not ask how he died; instead let us ask how he lived.

Let me borrow some words from Summer Sandercox. The poem goes like this:

Not what did he gain, but what did he give?

These are the units to measure the worth

Of a man as a man, regardless of birth.

Not, what was his church, nor what was his creed?

But had he befriended those really in need?

Was he ever ready, with word of good cheer,

To bring back a smile, to banish a tear?

Not what did the sketch in the newspaper say,

But how many were sorry when he passed away.

Very thoughtful words indeed.

So how do we remember his life?

Governor Nesting was a man in constant motion. He had big plans for the BSP to make us future ready. He had a reform agenda that covered the full breadth of the BSP’s responsibilities: price stability, financial stability, a safe, reliable and inclusive payments system and advocacies including financial inclusion, economic and financial learning, and consumer protection.

His plate was always full of responsibilities and his time was gold. But he was never too busy to share his time with his family, his friends, his staff at the Office of the Governor, and of course his One Team BSP.

Governor Nesting was a man who took great comfort from his faith and his beloved family. He was a loyal and dependable friend who carefully tended the friendships that he had formed through the years. Many of us have been blessed with his gift of friendship. We take comfort from it. We are richer because of it.

He was a witty man and an intellectual… with a wonderful ability to articulate his ideas and thoughts… not in fancy words or technical jargon. He was able to break down difficult concepts into plain and easy-to-understand language so the messaging is clear and concise. The mark of a truly wise man.

Invariably, the testimonials that we have been receiving from people sharing about their times with him speak of a humble man. A wise man has said: if you are good, you don’t have to shout. Governor Nesting was good… and he never had to shout. Humility is a rare trait these days… and we are blessed that we had a leader who exemplified this virtue.

On a lighter note, I was told that Governor Nesting was happiest during quiet family moments when he could relax with his beloved dogs by his side. He also loved Mr. Bean movies… who doesn’t? Not many of you may know this…but Gov. Nesting had a playful side… some would say a very sharp sense of humor… and he can laugh as loud — sometimes even louder — than any one of us!

Governor Nesting was man who was full of optimism. He was optimistic that he can bring out the best in each one of us, and he challenged us to do better in whatever task we have been assigned to do. He was optimistic that he can bring the BSP to greater heights as a globally recognized central bank, building on the foundations that had earlier been laid by his predecessors. He was optimistic that his Continuity Plus Plus agenda will promote institutional stability while serving as a rallying point for future-ready Filipino central bankers. His optimism is brave. His optimism is brave and strong because it rests not on wishful hopes but on the conviction that the BSP’s reform agenda is realizable because the organization he led is strong, it is resilient, it is agile and it is capable.

We applaud the legacy of Governor Nesting in prudently formulating and implementing monetary policy to safeguard price stability. We applaud him for leading the financial industry through prudent and forward-looking reforms and for being a vanguard in the digitalization of the payments system in the country. We bask in these achievements because he had always — always — generously said that it is One Team BSP that has made these possible.

Colleagues, as we move forward — with the seasoned and thoughtful guidance of the members of the Monetary Board and the dedication and expertise of the BSP management team, our beloved institution will continue to build on the headway that had been made by Governor Nesting. We are in for exciting — and challenging — times as the amendments to the BSP Charter — which were signed into law just this month — have granted the BSP with greater flexibility in the discharge of its mandated responsibilities.

Governor, you will be greatly missed. But your legacy lives on in every one of us.

Thank you Governor for sharing your life with us. God speed Gov. Nesting!

Let us now offer a moment of silence as we honor the memory… the years of public service… of servant leadership… and the vision of our Governor, Governor Nestor A. Espenilla, Jr.

A banker to remember

The late Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr., who passed away last month after battling tongue cancer, practically devoted his entire professional career to the central bank.

After fulfilling his academic requirements a semester early, and graduated magna cum laude with a bachelor’s degree in business economics from the University of the Philippines, no less, he wasted no time applying for a central bank post.

“No private sector applications for me. In 1981, I ended up in my dream first job — at the Central Bank of the Philippines,” Mr. Espenilla said at an alumni homecoming in late 2017. He was hired as an external debt analyst.

For most of his career, he led a life in relative obscurity as a central bank employee, gradually climbing the organizational ladder. He held a number of positions through the years and worked in different departments.

In 2005, he was installed as deputy governor of the Supervision and Examination Sector, the central bank post he held the longest. The division, which was recently renamed Financial Supervision Sector, has the critical task of regulating banks and other financial institutions supervised by the central bank.

During his 12-year tenure, he addressed himself to banking supervision, capital market development, credit policy and financial inclusion.

He also implemented risk-based and proportionate regulations that enabled institutions under BSP’s jurisdiction to innovate business models and adopt digital financial services, as well as supported regulations promoting financial inclusion and consumer protection.

But it was only in 2017, when President Rodrigo R. Duterte named him the new BSP governor, succeeding Amando M. Tetangco, Jr., who occupied that position for more than a decade, that Mr. Espenilla rose to great public prominence.

In his speech at BSP’s 24th anniversary celebration, Mr. Tetangco spoke highly of his successor. “I have worked closely with him and I can tell you that Gov. Nesting is a top-notch central banker and a man of integrity, who has what it takes to excel as the BSP’s new leader,” he said.

At an alumni homecoming mentioned earlier, Mr. Espenilla said of his appointment, “My dream was to join the central bank. Thirty-six years after, I was appointed BSP governor. Imagine how thrilled, and how terrified, I was!”

Mr. Espenilla embarked on a “Continuity Plus Plus” initiative, under which major reforms concerning monetary and financial policies and organizational structure were made.

In a statement, BSP said, “During his tenure, the amendments to the BSP charter were finally passed, strengthening the capability of the central bank to deliver its mandate to promote price and financial stability and to foster a safe, efficient and inclusive payment system.”

Mr. Espenilla also led the digitalization of the retail payment system to make the broader financial system more inclusive and efficient.

At the central bank’s silver anniversary last year, the late governor said, “As I close, I recall my mission as head of team BSP. It is not only to deliver on our mandates today. Rather, it is to build capabilities to address challenges and develop skills needed to conduct our mission given likely scenarios, ready to respond where it matters, when it matters. This is the rationale for the bold organizational changes we have embraced thus far. These changes are meant to make the institution and its key officers more agile and resilient, ready too, as individuals and as an organization, to navigate the future.”

Deputy Governor Maria Almasara Cyd Tuaño-Amador, who was chosen to be the officer-in-charge of BSP shortly after Mr. Espenilla’s demise, described the late governor as a man in constant motion.

“He had big plans for the BSP to make us future-ready. He had a reform agenda that covered the full breadth of the BSP’s responsibilities: price stability, financial stability, a safe, reliable and inclusive payments system and advocacies including financial inclusion, economic and financial learning, and consumer protection.”

She also remembered him for his optimism that he could bring the bank to greater heights as a globally recognized central bank and that his “Continuity Plus Plus” agenda would promote institutional stability and serve as a rallying point for future Filipino central bankers.

“His optimism is brave and strong because it rests not on wishful hopes but on the conviction that the BSP’s reform agenda is realizable because the organization he led is strong, it is resilient, it is agile and it is capable,” she said.

Near the end of her speech honoring the memory of Mr. Espenilla at BSP, Ms. Tuaño-Amador further commended the late governor for the prudence with which he formulated and implemented monetary policy to ensure price stability, for leading the financial industry through prudent and forward-looking reforms, and for acting as vanguard in the digitalization of the payments system in the country.

“We bask in these achievements because he had always, always, generously said that it is One Team BSP that has made these possible,” she said.

A champion of financial inclusion

When he first took office as Bangko Sentral ng Pilipinas’ (BSP) Governor in May 2017, Nestor A. Espenilla, Jr. vowed to push for general policy continuity under a plan of action dubbed, “Continuity++.” At the time, the Philippine economy was at the peak of its years-long bull run, with strong government and consumer consumption, as well as a good investor outlook putting the country among the best-performing economies in the world.

“It’s all about continuing what we have been doing in the constant surveillance of the monetary and financial system to make sure it is resilient and stable,” Mr. Espenilla said following his appointment as BSP chief.

He made good on his promises. Under his leadership, the BSP continued to support the Philippines’ economic growth through constant vigilance over the monetary and financial system. At the same time, Mr. Espenilla spearheaded major reforms covering Philippine monetary and financial policies, including the digitalization of the country’s retail payment system for a more inclusive and efficient financial system.

After the news of his passing broke, many of his contemporaries in government and the financial industry hailed Mr. Espenilla as one of the country’s foremost champions of the pursuit of financial inclusion. Not only did his initiatives toward bringing the Philippine banking system to the digital age made it more accessible for ordinary Filipino, but they also fueled economic growth through the promotion and development of emerging financial technologies.

“Fintech innovations can also help drive financial inclusion as access and usage of financial services continue to be limited,” Mr. Espenilla once said. “An important part of this solution is digital enablement.”

Digital initiatives, according to the BSP, could help the growth of Filipinos’ Personal Equity and Retirement Account (PERA), the voluntary retirement accounts comprising personal savings and investments launched to promote capital market development as well as the value of savings among Filipinos. Such initiatives would also benefit women and speed up economic growth by improving the efficiency and productivity of consumers.

“[Digitalization] provides the convenience of being able to do banking and financial services from home. Even if you’re taking care of your family, you’ll be able to do banking,” he said.

“The fact that liquidity cycles to the economy more quickly creates efficiency and productivity and that’s going to help economic growth. So, in fact, studies show that economic growth rises as the economy becomes more digitalized,” he added.

In his duty, Mr. Espenilla led policies to increase incomes by strengthening the banking sector and developing the domestic capital market, working with major players like the Asian Development Bank to make financial services and literacy available to all Filipinos, and to modernize the payment system as a means to safely and securely distribute the benefits.

 Of these initiatives, many are ongoing efforts to develop the domestic bond market, to bring modern, efficient, accessible banking to rural underserved areas.

“Mr. Espenilla’s leadership in BSP’s pursuit of financial sector development and inclusion will remain an inspiration to all of us working to expand access to financial services for the poor and smaller enterprises, a key challenge in Asia,” ADB President Takehiko Nakao said.

“We look forward to continuing our support to his vision — a Philippines with strong, sustained growth and where no one is left behind,” he added. — Bjorn Biel M. Beltran

An accomplished husband and father

It is commendable to see a successful man who doesn’t only excel at work but also at home. As many remember former Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. as a committed public servant, people closest to him will remember him as a devoted husband and father.

The “homegrown” central banker who worked for BSP for 36 years is survived by his wife Maria Teresita Festin Espenilla, daughter Jacqueline Joyce, son-in-law Ben Baltazar, sons Nikko Nestor and Leonardo Nestor, and grandchild Zev Eron.

Mrs. Espenilla, or Tess, works for the United States Agency for International Development (USAID) as a microfinance specialist. Mr. Espenilla was seen as a devoted husband when he reportedly “requested banking reporters who usually call on him every Friday to interview him [early] for their Monday stories,” as he seemingly sought to reserve quality time for his wife.

Known to many as “Nesting,” the former governor was also highly appreciated by his children, whom speaker and behavioral economist Rose Fres Fausto quoted in her recent tribute to Mr. Espenilla published on her Web site FQMom.com.

The intelligent genes of the couple must have been inherited by their children, who took courses in law, architecture and engineering.

Jacqueline, or Jackie, the eldest and only daughter, is a Harvard law graduate. One of her fond memories with her father is him going to the market on weekends to buy ingredients for a meal he will cook for them. All three children agree that their dad is the better cook.

Jackie also remembers her father as a mentor to many people. “Mentor in the sense that if they had an idea or a thought, or potential that he saw in them, he went out of his way to make sure that they reached that full potential, whether it be connecting them to the correct people, or finding opportunities for them for training or something like that,” she explained in another news report. “And it comes back to him in many forms. These individuals become committed or dedicated also to the platforms he wanted to advance….”

Recalling his father’s cooking, Nikko, the eldest son, said, “He was very meticulous with the choice of meat that he would buy then he would slow cook his specialty bulalo.”

Mr. Espenilla’s youngest, Nesty, remembers his father during their bonding time through bowling. “It started when I was still a little boy and I had to hold the ball with two hands,” Nesty shared. “That activity with him went on into my adult life.”

The former governor, who fought tongue cancer, was still able to be a grandfather to the son of Jackie and Ben, Zev, whom he described as a healthy baby.

He also loved dogs, regularly walking around the family’s five pooches.

While Mr. Espenilla will be remembered as an exemplary chief of the BSP, he will indeed be cherished as a loving head of his family.

Remembering BSP Governor Nestor A. Espenilla, Jr.

Testimonials

BMAP joins the rest of the banking industry in honoring the memory of an upstanding leader, Governor Nestor Espenilla, Jr. He was Gov. Nesting to most of us, a champion of inclusivity, of making banking services more accessible to every Filipino.

He collaborated closely with industry associations like BMAP to push for his advocacies such as financial inclusion and electronic payments. He made an impact in the lives especially of the unbanked and underserved.

Bank Marketing Association of the Philippines

The Monetary Board Resolution of Condolence read by Monetary Board Member and Department of Finance (DoF) Secretary Carlos G. Dominguez during the necrological services held at the BSP last Feb. 28:

Resolution of condolence. The Monetary Board of the Bangko Sentral ng Pilipinas. Noting that Governor Nestor A. Espenilla, Jr. passed away on the 23rd of February 2019.

Recalling that he served the BSP with unwavering dedication and excellence for 38 years since joining the Bangko Sentral in 1981.

Mindful that he implemented ground-breaking policies on banking supervision, capital market development, credit policy, financial inclusion and consumer protection; institutionalized risk-based and proportionate regulations, which enabled BSP-supervised institutions to innovate business models and adopt digital financial services; and championed an efficient, interoperable, and consumer-friendly digital payment system.

Acknowledging that he pioneered major reforms under the Continuity Plus Plus theme, driven by progressive and market-friendly policies, to ensure low and stable inflation; safe and sound financial system; and a secure and efficient payment system.

Recognizing that he pursued bold, financial sector reforms for a more efficient, flexible and inclusive financial system.

Stressing that he promoted financial education and consumer protection, and sustained the development and implementation of trailblazing policies that provided an enabling regulatory and operational environment, including National Retail Payment System, the digitalization of payment systems as a means of democratizing financial services.

Achievements which earned him global recognition. Emphasizing that he concurrently served as Chairman of the Anti-Money Laundering Council and Philippine International Convention Center, the Financial Sector Forum, and the Financial Stability Coordination Council; and assumed leadership responsibilities, such as being the Chairman of the Basel Consultative Group Work Stream on Financial Inclusion, Governor of the International Monetary Fund, and alternate Governor for the World Bank and Asian Development Bank. Underscoring that he espoused employees-centered Human Resource policies that will benefit BSP employees well beyond his term of office.

And desiring to share with the bereaved family of the late Governor Nestor A. Espenilla, Jr. the grief brought by his death, we have agreed to express its sincere condolences to the family of the late Governor Nestor A. Espenilla, Jr.. Done at the Bangko Sentral ng Pilipinas Assembly Hall, City of Manila, this 28th day of February 2019.

Signed by the Honourable Juan D. de Zuñiga, Jr., Acting Chairman of the Monetary Board; Honourable Felipe M. Medalla, member of the Monetary Board; Honourable Peter B. Favila, member of the Monetary Board; Honourable Antonio S. Abacan, member of the Monetary Board; Honourable Bruce J. Tolentino, member of the Monetary Board; Honourable Maria Almasara Cyd N. Tuaño-Amador, Officer-in-Charge of the BSP; and myself, Carlos G. Dominguez, member of the Monetary Board.

Bangko Sentral ng Pilipinas

The Chamber of Thrift Banks deeply mourns the passing of Governor Nestor Espenilla, Jr. We honor him for his dedicated public service, his continued push for banking reforms, his strong support for the important role of thrift banks, and his advocacy for greater financial inclusion through digitalization.

He was a skillful regulator, sincere, always willing to listen and engage with us on vital issues that would greatly impact the industry, changing the status quo if necessary. To him, BSP regulations should not be a hindrance to a progressive and dynamic thrift banking industry as it fulfills its mandate of providing credit to micro, small and medium-scale enterprises, consumers and housing, and thereby contribute to the growth of the Philippine economy.

The consumer was always his foremost concern, thus he collaborated with CTB and other sectors of the industry on having a simplified and standardized bank-borrower loan mortgage agreement adopted by all banks. Now known as the Unified Loan & Mortgage Agreement (ULAMA), this document upholds consumer protection by affording consumers ease in comparison of terms and conditions across the different players in the industry.

His enabling regulations on financial inclusion, such as allowing banks to set up branch-lite offices anywhere in the country, effectively extended full banking services to unbanked and underserved areas. CTB member banks responded immediately to this initiative by setting up their own branch lites and addressing the issues that hinder the unbanked from entering the formal banking sector.

In response to Gov. Espenilla’s unceasing and passionate call for banks to get seriously involved in BSP’s National Retail Payments System, another tool for promoting financial inclusion, CTB membership in the Philippine Payments System continues to grow, providing electronic fund transfer facilities thru PESONet and InstaPay.

He was instrumental for setting CTB’s collaboration with FinTech companies such as FintQ as a means to accelerate digitalization in the industry. Governor Nesting was indeed a “champion of the unbanked and underserved.” CTB continues to acknowledge his legacy through the collective efforts of its 47 member thrift banks who have embraced his enabling regulations on financial inclusion and digitalization.

Gov. Espenilla will be greatly missed. His achievements will remain as a marker of his outstanding contribution to the national economy and the banking industry.

Chamber of Thrift Banks

As finance practitioners and financial officers of our respective member firms, we believe that BSP Governor Nestor Espenilla (or Nesting, as we fondly call him) brought a sense of stability to the banking sector that was very reassuring to our respective boards, management, and investors.

When President Duterte was looking for a replacement for former BSP Governor Say Tetangco, a highly respected and awarded central bank governor, he found him in Nesting Espenilla. The President chose a man with 38 years of central banking experience who was also very highly regarded and greatly respected in the business community. When Say Tetangco stepped down, we thought it would be very difficult to find a person with equal competence and gravitas to replace him. Nesting Espenilla was that person.

Nesting was an inspirational leader who was a staunch advocate of the digital payment system, which is the beginning of the revolution the banking sector must go through as the digital world takes over. Nesting championed strong risk management and strict adherence to regulatory and financial inclusion in a more responsive banking system through good governance, proper risk management, greater financial disclosure and increased capitalization, resulting in a banking system that is the best capitalized and with the best balance sheet in the region. He was open to new ideas and doing new things. He welcomed change.

Nesting was a true professional who stood firm on his principles, even when under fire from political and special interests to accommodate them. He maintained the independence a central banker must have. Some people demand respect, Nesting earned it by proving himself in the professional, honest job he did.

Those who were close to Nesting know that he was a very humble man, in spite of being a very intelligent, knowledgeable and skilled central banker. Moreover, he had a very strong sense of humor.

He should not have left us so early in his life, but he had. The banking community is the lesser because of it.

Our hearts go out to Tess and their children, Jacqueline, Nikko, and Leonardo, son-in-law Ben, and grandchild Zev Eron. They have lost a devoted husband, loving father, great man and dear friend.

Financial Executives Institute of the Philippines

We pay tribute to an exemplary and transformational leader and a known “regulator-disruptor” who made economic inclusion his mantra. He had the passion and dedication to bring about meaningful change to the unbanked and underserved Filipinos through enabling regulations and policies.

Letting innovations thrive was one of his legacies, allowing FinTechs and similar players to provide alternative and affordable access to financial services. He made digital as a tool to harness efficiencies, collaboration and interoperability in the industry.

You will be missed.

RIP BSP Governor Nesting Espenilla, Jr.

Salamat po.

Lito Villanueva

Chairman, FinTechAlliance.ph

Managing Director, FINTQnologies Corp.

It is with profound sadness that I learned the passing of Bangko Sentral ng Pilipinas (BSP) Governor and Anti-Money Laundering Council (AMLC) Chairman Nestor “Nesting” A. Espenilla, Jr. AMLC is composed of only three members: the governor of the BSP, the chairman of the Securities and Exchange Commission (SEC), and the insurance commissioner. Under the AMLC law, the three members must act unanimously on all decision-making. An objection by one member aborts a proposed action. The AMLC meets every three weeks at the BSP Governor’s office.

Governor Nesting had been resolute in improving the operations of the AMLC and in pushing for the improvement of its regulations. He had always been methodical and clear during our council deliberations. During his watch as chairman of the AMLC, Gov. Nesting pushed for the increase in AMLC manpower and improvement of the manpower capacity of the AMLC Secretariat.

Under his leadership, the AMLC continued to pursue major reforms in strengthening the country’s defenses against illegal money to ensure the stability of the entire Philippine financial system. 

On behalf of the Insurance Commission, I want to express my condolences to Nesting’s family and to acknowledge with gratitude his contribution to our country.

We remember Governor Nesting who had been a supportive partner of the commission in our advocacy for financial inclusion, consumer protection and financial stability.

We also join Governor Nesting’s family, friends and colleagues in celebrating the life of Governor Nesting — humble and soft-spoken, but bold and brave.

Governor Nesting would have been a brilliant lawyer had he continued with his law degree. But we are very lucky to have a hardworking career central banker who dedicated his life to the banking industry. 

Nesting began his career at the BSP in 1981 and steadily rose through the ranks until he was eventually appointed as governor of the BSP in May 2017 by President Rodrigo Roa Duterte. He concurrently served as chairman of the AMLC and the Financial Stability Coordination Council.

Today, let us remember his commitment to public service as we pray for his family during this difficult time.

Dennis B. Funa

Insurance Commissioner and AMLC Member

It is a sad day for the country and the financial services industry with the passing of Gov. Nestor A. Espenilla, Jr. — humble public servant, progressive central banker, and relentless champion of financial inclusion. His legacy lives on in every effort that we all do to serve the unbanked, uncarded and underserved Filipinos with digital financial services.

Paalam and rest in peace, Gov.

Our prayers and condolences to his family and to everyone at the BSP.

Orlando Vea

President and CEO, Voyager/PayMaya Philippines/FINTQnologies

Chairman, Philippine eMoney Association (PEMA)

Inflation back on track at one-year low

By Christine Joyce S. Castañeda
Senior Researcher
INFLATION eased for the fourth straight month and on to target in February to post the lowest reading in 12 months, helped by milder increases in the prices of food and beverages, the Philippine Statistics Authority (PSA) reported on Tuesday.
Preliminary PSA data showed inflation last month at 3.8%, slower than January’s 4.4% and matching February 2018’s pace.
Headline inflation rates in the Philippines (Ferbruary, 2019)
The February reading was lower than the 4.1% estimate median in BusinessWorld’s poll of 13 economists late last week. The latest figure also fell within the 3.7-4.5% estimate which the Bangko Sentral ng Pilipinas’ (BSP) Department of Economic Research gave for the month.
The better-than-expected pace marked the fourth straight month of deceleration from the nine-year 6.7% peak recorded in September and October last year.
The preliminary result brought the year-to-date average to 4.1% — still above the BSP’s 2-4% target band and 3.1% forecast average for the year, which compares to 2018’s 5.2%.
Core inflation, which strips volatile prices of food and energy items, clocked 3.9% last month slower than January’s 4.4% albeit faster than the 3% in the same period last year.
The latest inflation figure, however, will not necessarily lead to monetary policy easing when the Bangko Sentral ng Pilipinas (BSP) Monetary Board conducts its second policy review on March 21, Deputy Governor Diwa C. Guinigundo told reporters in a mobile phone message after data were released. It maintained policy in its first 2019 review on Feb. 7.
The data showed lower increments in the heavily weighted food and non-alcoholic beverages at 4.7% last month from 5.6% in January and 4.8% in February 2018.
Food-alone inflation eased to 4.2% versus the previous month’s 5.1% and 4.8% a year ago.
With the exception of education and communication, the rest of the subindices posted slower upticks during the month as well.
Economists attributed the better-than-expected reading to the slower increase in the prices of food and non-alcoholic beverages.
“The basket-heavy food index, the bane of 2018 inflation, helped keep price gains in check in 2019…With [food and non-alcoholic beverages] inflation at 4.7% from 5.6% in January, the headline print slid as well, this time back within target after almost a year,” said Nicholas Antonio T. Mapa, senior economist at ING Bank N.V. Manila.
“Food prices are now tamer given improved weather and supply conditions while the waning effects after the tax on sugar drinks fade on non-alcoholic drinks.”
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc. (UnionBank), likewise cited the prices of food items as the main drivers of inflation’s slowdown, in particular, the prices of rice and corn.
The rice and corn indices in February stood at 2.9% and -0.3%, respectively, compared to 4.7% and 0.9% in January.
With the exception of fish, whose inflation rate steadied at 7.8%, the rest of the food items recorded slower annual mark-ups.
“With inflation now back within target, we expect the BSP to factor this in as the inflation path forecasted by the BSP continues to pan out,” ING’s Mr. Mapa said.
“If this trend continues, this could give the central bank the leeway to ease back on policy by way of RRR [reserve requirement ratio] cuts as early as [the first quarter] and a possible policy rate cut by May.”
In a report, economist Noelan Arbis at HSBC Global Research, said: “We expect monetary accommodation to first come in the form of RRR cuts,” adding that he expects “a 100-[basis point] cut in banks’ RRR in the second quarter.”
On the other hand, economists Mustafa Arif and Sanjay Mathur of ANZ Research said in a report that they expect the BSP to keep rates unchanged in its next meeting.
REDUCTION OF INTEREST RATES PREMATURE?
Despite market expectations of loosening monetary policy, BSP’s Mr. Guinigundo said that the lower-than-expected inflation will not necessarily trigger interest rate cuts or reduce bank’s required reserves.
“We continue to consider our current monetary settings as appropriate given the emerging risks both here and abroad. However, the Monetary Board will be meeting this month precisely to review the stance of monetary policy given the expected new data that would be available from now until the next meeting against the backdrop of a softening global economy,” he told reporters.
“It may be premature to talk about a possible reduction in either the policy rate or the RRR [reserve requirement ratio] at this time considering that the year-to-date inflation remains above the target of 2-4%. More important, our latest forecasts for the next two years are anchored on the current policy rate of 4.75%,” he added.
“But these policy issues will remain on the table. Timing is the crucial issue.”
In a separate statement, the central bank said: “The latest inflation outturn is consistent with the BSP’s expectation of the continued easing of price pressures.”
“Inflation will likely settle within the target range in 2019 and 2020 as previous monetary and non-monetary policy actions work their way through the economy. The recent enactment of the rice tariffication act will further temper rice prices in the near term and help raise long-run productivity in the agricultural sector. The BSP continues to keep a close watch over price developments in the country and shall consider all relevant information at its next monetary policy meeting on [March 21, 2019] to ensure that the monetary policy stance remains consistent with the BSP’s primary mandate of safeguarding price stability.”
OUTLOOK
In a joint statement, the Department of Finance, National Economic and Development Authority and the Department of Budget and Management said that inflation is starting to become more manageable.
“With these developments, we are optimistic that the downward path of inflation will continue for the rest of the year. This will be backed by the recent enactment of the Rice Industry Modernization Act (Republic Act No. 11203), which is expected to bring down rice prices and cut inflation by 0.5-0.7 percentage point this year and 0.3-0.4 percentage point next year,” the statement read.
The rice tariffication law, which liberalizes the import process for the staple while taking away the role in importing of the National Food Authority, took effect yesterday.
“We must ensure that the change to a rice tariff regime — from government-led to market-led — is seamless and fast,” the statement further read.
The country’s economic managers flagged the expected onset of El Niño, which could last until June.
All in all, economists expect inflation to continue its deceleration in the coming months.
“Inflation will continue to trend lower and remain within target, barring any supply-side shock from El Niño and or oil price shock,” said ING’s Mr. Mapa.
“The rice tariffication law will help ensure that the food basket sees less volatile price movements as we can import to augment local supplies.”
Similarly, UnionBank’s Mr. Asuncion anticipates inflation to continue to decline, especially as food price increases slow further.
“With global oil prices expected to decline further in the longer-term due to supply issues and US shale production, local headline inflation is expected to thread the government’s target of 2-4%,” he said.
HSBC’s Mr. Arbis expected headline figure to be “closer to the target midpoint” in the second quarter and fall below the 3% mark in the third quarter, averaging 3.3% for the year. — with Melissa Luz T. Lopez

Headline inflation rates in the Philippines (Ferbruary, 2019)

INFLATION eased for the fourth straight month and on to target in February to post the lowest reading in 12 months, helped by milder increases in the prices of food and beverages, the Philippine Statistics Authority (PSA) reported on Tuesday. Read the full story.
Headline inflation rates in the Philippines (Ferbruary, 2019)

Financial industry awaits Diokno’s first signals

By Melissa Luz T. Lopez
Senior Reporter
THE COUNTRY’S financial sector awaits clear cues from newly appointed Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno, with expectations that his outsider view will make monetary policy more supportive of the state’s growth goals by way of lower interest rates.
Malacañang made the surprise announcement on Monday night, naming the two-time Budget secretary as head of the central bank and chairman of the policy-setting Monetary Board.
Mr. Diokno, 70, has been sitting as part of President Rodrigo R. Duterte’s economic team since assuming office mid-2016. He holds a doctorate degree in economics and has been professor emeritus at the University of the Philippines Diliman. His career was spent mostly in the academe and in government, having served as budget undersecretary under former Pres. Corazon C. Aquino and later on, as budget chief of former Pres. Joseph E. Estrada.
Observers generally took the news as a surprise, given that Mr. Diokno wasn’t among the names floated to replace the late Gov. Nestor A. Espenilla, Jr. who passed away on Feb. 23 after battling tongue cancer for over a year.
Mr. Diokno will serve Mr. Espenilla’s remaining term until July 2023. He is yet to take his oath as BSP governor as of press time, although Executive Secretary Salvador S. Medialdea said that the appointment took effect yesterday.
‘EVIDENCE-BASED’
Pressed for comments about his term at the BSP, Mr. Diokno said it was “too early to make any policy statement” for now.
“Policy statements will be evidence-based and it should be the outcome of deliberations by the seven-man Monetary Board,” Mr. Diokno said in a mobile phone message.
In a statement, the Bankers Association of the Philippines said it was “optimistic” about Mr. Diokno’s leadership given his “reformist” image.
Alfonso L. Salcedo, Jr., president and chief executive officer at Security Bank Corp., said Mr. Diokno’s appointment was “not expected,” but that the new BSP chief is “competent and smart.”
Prior to this, there were calls to appoint a career central bank official to succeed Mr. Espenilla to follow tradition at the BSP.
The last “outsider” who took the governor’s seat was Rafael Carlos B. Buenaventura in 1999, who was then the president of a private bank.
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said markets seek assurance about policy continuity at the central bank.
“The last Governor Espenilla talked about ‘Continuity++,’ and the markets took it well. It would be good to be in line with this particular focus at the start,” Mr. Asuncion said.
“If the markets sense that it seems that ‘Continuity++’ will stay and in fact be upgraded further, I think, we will be fine moving forward.”
Several economists took Mr. Diokno’s appointment as a sign of more “pro-growth” measures from the central bank, given his vast experience on the fiscal front.
“Since being appointed, Gov. Diokno has already noted that the BSP’s monetary policies must be ‘in sync’ with fiscal policy, in addition to its considerations for inflation and financial stability. Given the Duterte administration’s expansionary fiscal policy stance, this signals a bias for more monetary accommodation from the new governor,” said Noelan Arbis, economist at HSBC Global Research.
BDO Unibank, Inc. chief market strategist Jonathan L. Ravelas added that the Mr. Diokno’s solid grasp of the economy will allow him to “fine-tune” policies to push growth beyond six percent, adding that he is a “good communicator and advocate of transparency.”
“After all, he is the chief architect of Build, Build, Build… He has to play the balancing act,” Mr. Ravelas said when sought for comment.
Mr. Diokno led the shift to a cash-based budgeting scheme designed to speed up public spending and delivery of projects and services. State disbursements also beat the P3.37-trillion program for 2018, leading to a wider budget gap equivalent to 3.2% of gross domestic product.
At the BSP, Mr. Diokno will inherit benchmark interest rates at a decade-high 4.25-5.25%, as inflation cools from a nine-yea peak of 6.7% in September and October 2018.
He also faces clamor from thew banking industry for further cuts in the reserve requirement ratio, a move that will unleash billions of pesos to the system and bring down the cost of money.
“With the price goal seemingly in hand, it may be time for the BSP to consider possibly reducing the reserve requirement ratio in the near term and eventually lower policy rates to help chase the 7-8% growth target,” said Nicholas Antonio T. Mapa, senior economist at ING Bank NV Manila. — with Karl Angelo N. Vidal

Jan. factory output down for 2nd straight month

By Mark T. Amoguis
Researcher
FACTORY output posted its second consecutive month of decline in January, the Philippine Statistics Authority (PSA) reported on Tuesday.
Preliminary results of the PSA’s latest Monthly Integrated Survey of Selected Industries showed its volume of production index contracting by 4.1% year on year in January versus the December’s revised 11.9% decline and the 10.8% growth logged in January 2018.
The PSA reported that production of 12 out of the 20 major industry groups fell, namely: furniture and fixtures (-31.1%), basic metals (-12%), machinery except electrical (-8.3%), food manufacturing (-4.3%), chemical products (-4.1%), non-metallic mineral products (-8.6%), fabricated metal products (-9.3%), footwear and wearing apparel (-3.3%), printing (-8.3%), miscellaneous manufactures (-3.6%), tobacco products (-1%), as well as wood and wood products (-3%).
In comparison, the Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) was 52.3 that month, slightly lower than December 2018’s 53.2, but higher than January 2018’s 51.7. A PMI reading above 50 signals improvement in business conditions from the preceding month, while a score below that point indicates deterioration.
Average capacity utilization — the extent by which industry resources are used in the production of goods — was estimated at 84.3%. Eleven of the 20 sectors registered capacity utilization rates of at least 80%.
“Manufacturing growth outturn in January 2019 showed a moderate improvement coming from December 2018. Nevertheless, with our recent progress in agricultural policy, we can expect manufacturing to recover further,” a press statement of the National Economic and Development Authority quoted its director-general, Socioeconomic Planning Secretary Ernesto M. Pernia, as saying.
Mr. Pernia noted the recent enactment of Republic Act No. 11203 — which is expected to cut retail prices of rice as it replaced quantitative restrictions with a tariff scheme when it took effect yesterday — may provide opportunities for factory expansion.
Meanwhile, Rizal Commercial Banking Corp. (RCBC) economist Michael L. Ricafort attributed manufacturing’s continued decline to higher base effects, spillover effects of higher inflation last year, as well as external factors such as the slower economic growth in developed economies and the ongoing US-China trade war that contributed to the decline in the country’s manufactured goods exports.
“With the easing trend of both inflation and interest rates, some manufacturers may find it more prudent to wait for borrowing costs to go down further… before borrowing more aggressively to fund new manufacturing facilities… Thus, this may have also led to the latest contraction in manufacturing,” Mr. Ricafort said.
For Federation of Philippine Industries (FPI) Chairman Jesus L. Arranza, the decline can be attributed to workforce shortage that led to a decline in the factory’s production output.
“There is a slowdown in production because it is so hard to get people…” Mr. Arranza said.
“This will be remedied, I’m sure. It cannot be a prolonged agony… This is just temporary,” he added.
“I’m confident that manufacturing will be more aggressive in the next few months. I don’t think it will have some problems.”
RCBC’s Mr. Ricafort shared this view, saying that the sector could pick up in the coming months on the back of easing inflation, lower interest rates, improving economic conditions abroad and “greater clarity” on the proposed rationalization of fiscal incentives that may have caused some foreign firms to put their expansion plans in the country on hold.
“Any further increase in the government’s spending — especially on major infrastructure projects — will lead to greater demand for allied/related manufacturing industries, especially those related to construction and construction-related inputs,” he added.
For NEDA’s Mr. Pernia, the government will have to pursue measures in order to attract investments and reduce the cost of expanding production capacity for existing firms. These include full implementation of the Ease of Doing Business-Efficient Government Service Delivery Act of 2018, the passage of the amendment to the Public Service Act that would foster competition in telecommunications, transportation and logistics, the proposed amendment to the Foreign Investments Act of 1991 that seeks to lower employment threshold to 15 direct employees from 50 for foreigners investing $100,000 in order to set up shop in the Philippines, and the amendments to the Retail Trade Liberalization Law that would ease equity and capitalization requirements.
“These measures are vital considering that manufacturing is expected to be dampened by less optimistic business and consumer outlook in the first quarter of the year. Higher domestic oil prices, rising adjustment in electricity rates and weather disturbances are expected to exert upward price pressures on the cost of inputs,” Mr. Pernia said.

Metro Pacific core profit jumps 7% to P15.1 billion

METRO Pacific Investments Corp.’s (MPIC) water business includes investments in Maynilad Water Services, Inc. and MetroPac Water Investments Corp.

By Arra B. Francia, Reporter
INFRASTRUCTURE conglomerate Metro Pacific Investments Corp. (MPIC) delivered a seven percent increase in core profit for 2018, thanks to its expanded power portfolio and steady volume from its toll roads and water units.
In a presentation on Tuesday, MPIC reported a core net income of P15.1 billion, higher than the P14.1 billion it posted in 2017.
“This growth was due to the increase in operating income, an increase of 10%, and this breaks down into contributions from each of our subsidiaries,” MPIC President and Chief Executive Officer Jose Ma. K. Lim said in a press briefing in Makati on Tuesday.
The power business accounted for the bulk of MPIC’s operating income at 55% or P10.8 billion, followed by toll roads which provided 23% or P4.4 billion. Water provided 19% or P3.8 billion, and the hospitals group generated 4% or P771 million.
On the other hand, the rail, logistics, and systems group incurred a net loss of P248 million.
Mr. Lim noted the power unit grew by 15% due to the increase in ownership in Beacon Electric Asset Holdings, Inc. to 45.5% from 41.2% in June 2017, giving them the benefit of full-year recognition for the larger stake.
Manila Electric Company (Meralco) booked a core profit of P22.4 billion, due to a 5% uptick in energy sales and slightly lower tariffs. The positive performance helped offset the 15% decline in Global Business Power Corp.’s core net income to P2.5 billion, dragged by depreciation costs for one of Panay Energy Development Corp.’s plants.
For the toll roads unit, core net income went up by 13% to P4.5 billion after Metro Pacific Tollways Corp. (MPTC) saw a system-wide vehicle entries record of 916,886 per day across its toll roads in the Philippines, Indonesia, Thailand, and Vietnam.
In the Philippines alone, average daily vehicle entries climbed by 7% to 478,315 across the North Luzon Expressway, Cavite Expressway, and Subic-Clark-Tarlac Expressway.
MPTC is currently waiting for the resolution of tariff adjustments, ranging from 20-48% on different parts of its network.
Meanwhile, MPIC’s water business, composed mostly of Maynilad Water Services, Inc., contributed P3.8 billion to the company’s core net income, thanks to higher volumes and a combination of basic and inflation-linked tariff increases during the period.
Maynilad saw a 5% rise in core net income to P7.7 billion. However, the company has yet to see the resolution of two related arbitration awards. This includes the case against Metropolitan Waterworks and Sewerage System on the treatment of corporate income tax as an expense recovered through tariffs, as well as its claim against the government to recover foregone revenues due to delays in increasing tariffs.
The hospital unit through Metro Pacific Hospital Holdings, Inc posted a 15% core net income increase to P2.4 billion, after out-patient visits rose by 8% to 3.32 million people.
Light Rail Manila Corp. provided P394 million to the conglomerate’s core profit, while logistics unit, Metropac Movers, Inc. made no contributions as it is currently focusing on ramping up its warehousing projects to increase its customer base.
MPIC did not give a profit guidance for 2019. But sought for an outlook this year, MPIC Chief Finance Officer David J. Nicol said he sees all units sustaining their volume growth in 2019 except for power.
“In terms of power, overall we had a good year last year. The start of this year is looking a bit quieter, although it’s early days. But we will be below the 5% full-year (volume) growth last year,” Mr. Nicol said during the press briefing.
“Toll roads, we see it sustaining (growth). The hospitals, rails, water are sustaining (growth). The only area that is soft is power.”
MPIC is one of three Philippine units of Hong Kong-based First Pacific Co. Ltd., the others being PLDT, Inc. and Philex Mining Corp. Hastings Holdings, Inc. — a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc. — maintains interest in BusinessWorld through the Philippine Star Group, which it controls.
Shares in MPIC jumped 2.63% or 12 centavos to close at P4.69 each at the stock exchange on Tuesday.

PHL’s 4G availability improves — report

By Denise A. Valdez, Reporter
A RECENT report said the availability of fourth generation (4G) network in the Philippines is getting better, but while video experience, broadband speed and latency experience has also shown improvement, these still lag behind the rest of the world.
The latest Mobile Network Experience Report of wireless coverage mapping firm OpenSignal showed Smart Communications, Inc. and Globe Telecom, Inc. both successfully expanded in more locations in the country, increasing the chances of finding a long term evolution (LTE) connection to 70% of the time.
The report covered 270,433 devices from Nov. 1, 2018 to Jan. 29, 2019 with total measurements reaching 933.2 million.
Smart Communications, Inc. is now closing the gap with Globe Telecom, Inc. in terms of 4G availability in the country, scoring 70.8% next to Globe’s 71.7%. Comparing to the same period in 2017, Globe’s 4G availability score then was at 55.3%, and Smart was at 40%.
“The rapid rise in their scores in just two years shows that their LTE services are maturing as more consumers have access to 4G services more often,” OpenSignal said.
“We found that the increasing 4G availability we’re tracking in the country as a whole is amplified in urban areas. In Cebu, Davao and Manila all three operators had 4G availability scores at least 10 percentage points higher than their national averages,” it added.
In terms of video experience, Smart beat Globe with a score of 44.4 against 28.4 (out of 100), which puts it in the “fair” range (40-55) against Globe’s “poor” score (0-40).
“Video experience in the Philippines is definitely in need of improvement,” OpenSignal said, adding that even the country’s top provider Smart “needs to gain a lot of ground” to bump up its rating to “good” or “very good.”
Both providers also improved their average download speeds. Smart jumped to 9.0 megabits per second (Mbps) from 7.5 Mbps in OpenSignal’s August 2018 report. Globe also moved up to 5.5 Mbps from 5.0 Mbps previously.
“Mobile broadband speeds are improving in the Philippines, though average connections are still well below most of the developed world,” OpenSignal said.
It added that it is not the improvement of their network connections that has been driving the two companies’ network speed, but their expanded 4G availability.
“[T]he big boost in Download Speed Experience isn’t the result of more powerful network connections…. Rather, Globe and Smart’s improved 4G availability is causing overall download speeds to rise. While the speed of 4G connections may not have changed, our users on Filipino networks are finding those connections more often,” it said.
Latency experience, or the lag time to transmit a command, also put Smart on top of Globe with an average response time of 69.4 milliseconds versus 74.6 milliseconds.
In a statement, Smart said it continues to ramp up its rollout of LTE and LTE-advanced network with a budget of $5 billion from 2016 to 2020. PLDT, Inc.’s wireless unit added that it is increasing its fiber broadband service to support its mobile network expansion.
Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a stake in BusinessWorld through the Philippine Star Group, which it controls.

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