ECCP at Work

Ukraine-Russia conflict has little direct impact on PH trade: BSP**

The Ukraine-Russia conflict is expected to have a limited direct impact on the Philippines’ trade sector. According to BSP Department of Economic Research Managing Director Ronald Abenoja, the Philippines’ total exports to Russia in 2021 amounted to about USD120 million, or about 0.2 percent of its total exports, while the country’s exports to Ukraine totaled USD5 million. Philippine imports to Russia in the same year comprised 0.6 percent of its total imports, and for Ukraine, 0.1 percent, Abenoja said. Abenoja said the war’s bigger impact on the country to date is “probably the elevated prices of international commodities, particularly oil.”

Shift to Alert Level 1, in-person classes to boost employment**

“The Omicron surge caused a temporary decline in our employment levels. Now that we have contained the spread of the virus and shifted to alert level 1 in most parts of the country,  we look forward to an improvement in employment outcomes in the coming months,” NEDA Secretary Chua said. Since March 15, 2022, 70% of the economy has already shifted to alert level 1. This translates to an additional PHP10.8 billion per week of economic activity for the country and 195,000 less unemployed over the next quarter compared to alert level 2. Chua also underscored the need to reopen all schools in alert level 1 for face-to-face learning as this will provide a big boost to the economy, enable children to learn more, and allow more parents to go back to work.  

APEC finance officials focus on sustainability, digital economy

Finance and central bank deputies from the Asia-Pacific region convened to deliberate on policy recommendations to support the transition to sustainable finance and commit to more sustainable economic growth and digital economy. Under the 2022 Finance Ministers’ Process theme of "Advancing Digitalization, Achieving Sustainability", Asia-Pacific Economic Cooperation (APEC) member economies recognized the risk of climate change and the role of sustainable finance in achieving global targets to curb carbon emissions, as noted in a release issued by APEC Finance and Central Bank Deputies and received here on Thursday. APEC members also reflected on the opportunities and costs of adopting more ambitious measures and considered further integrating disaster risk financing into government budgets and a sustainable finance framework. Further, the vast growth on the digital front prompted APEC member economies to look into deepening the role of digital technologies for fiscal policy and in inclusive finance.

Infrastructure stays protected in PHL debt management plan

THE Department of Finance (DoF) said that the government’s plan to manage the national debt calls for its gradual reduction without scaling back the infrastructure spending that will enhance long-term productivity. The department’s Chief Economist Gil S. Beltran, in an economic bulletin on Saturday, said debt reduction efforts need to be focused on bringing down the debt-to-GDP ratio by narrowing the deficit. The DoF is preparing a fiscal consolidation plan to manage the government’s outstanding debt, which grew nearly 20% to P11.73 trillion at the end of 2021. This pushed the debt-to-GDP ratio to 60.5%. 

Institute for Leadership, Empowerment, and Democracy Executive Director Zy-za Nadine Suzara said last month that the government should avoid wasteful expenditure and instead focus on funding pandemic-response measures. She called budget priorities in 2022 “unfairly (weighted towards) infrastructure projects” while P250 billion in projects for education, health, and social services were to be funded via unprogrammed appropriations, which can only be financed from excess or new revenue.

BSP sees wider current account deficit in 2022, 2023

The Philippine central bank said on Friday it had revised its current account and balance of payments projections for this year to reflect the country’s improving growth prospects as well as the impact of Russia’s invasion of Ukraine. The country’s current account deficit is projected to reach $16.3 billion this year, or 3.8% of gross domestic product (GDP), the central bank said, wider than its previous forecast of $9.9 billion, or 2.3% of GDP, before slightly narrowing to a deficit equal to 3.7% of GDP in 2023. It also revised its estimate for the country’s balance of payments (BOP) position this year to a deficit of $4.3 billion, or 1.0% of GDP, a reversal from a surplus projection equal to 0.2% of GDP. For next year, the BOP is expected to remain in a deficit equal to 0.6% of GDP.

Philippines external debt hits $106.4 billion**

The foreign obligations of the Philippines went up by 8.1 percent to $106.43 billion last year as the national government borrowed more, including the emergency reserve fund from the IMF, to finance the country’s COVID-19 response measures. BSP Governor Diokno said the increase was due to net availments of $9.8 billion after the national government borrowed more from foreign creditors and the prior periods’ adjustments of $3.8 billion. The rise was partially offset by the increase in residents’ investments in debt papers issued offshore of $3.7 billion and negative foreign exchange revaluation of $2 billion as the US dollar strengthened against other currencies such as the Japanese yen and the euro.

Inflation seen rising

The country’s inflation is seen to temporarily rise in the coming months amid high global commodity prices, but is expected to return within the government’s target level, according to an international think tank. “We expect inflation to rise over the coming months, but probably not enough to worry the central bank,” said Gareth Leather, senior Asia economist at UK-based Capital Economics. While inflation held steady at three percent in February, Leather said it is likely to climb over the coming months on the back of steep increases in global commodity prices. “That said, the rise in inflation should prove temporary, and we expect it to drop back to within the central bank’s two to four percent target range by the end of the year,” Leather said in a weekly brief.

4-day workweek in gov’t eyed

THE Civil Service Commission (CSC) is looking at institutionalizing the four-day work week in government, said Commissioner Aileen Lizada. In fact, Lizada said government has been implementing the compressed work week arrangement since 2020 when President Duterte placed the country under national public health emergency due to the threat of the coronavirus disease (COVID-19). Lizada said the CSC also issued Memorandum Circular No. 18 on Oct. 15, 2020, which allowed government offices to adopt a four-day work week under alternative working schemes.

Duterte signs law allowing full foreign ownership in key sectors**

President Rodrigo R. Duterte on Monday signed a law that allows full foreign ownership in more public services such as telecommunications and domestic shipping, a move that would further liberalize the Philippine economy. Republic Act No. 11647, which amends the 85-year-old Public Service Act, excludes telecommunications, domestic shipping, railways and subways, airlines, expressways and tollways, and airports from the definition of a public utility. This means they will no longer be subject to the 40% foreign ownership cap for public utilities under the Constitution.

Shipping rates to increase by an average of 25%

Cargo shipping rates are set to increase by an average of 25 percent, as ship owners seek to cushion the impact of soaring fuel prices on their operations. In an interview on dzBB, Philippine Liner Shipping Association (PLSA) president Mark Matthew Parco said the planned rate increase would not require approval from the government as the industry is deregulated. Parco said shipping lines would have to negotiate directly with business owners and customers for their respective cargo rates.

Biz groups, companies encourage workers to return to office

Business and industry groups, along with the country’s biggest property firms, are encouraging employees from the “major segments of the Philippine economy” to return to their physical workspaces. The appeal to workers to return to office comes at a time of rising fuel costs and amid calls to implement a four-day workweek setup for employees to manage expenses. “We now look forward to heightened business activity, which will benefit the entire nation and spur its return to economic wellness,” the statement read.

DOF to next PH president: Keep infrastructure spending a priority

Infrastructure spending must remain a priority for the next President despite the need for fiscal consolidation or narrowing of the record debt and budget deficit wrought by bigger expenditures but weaker revenues amid the prolonged COVID-19 pandemic, the Department of Finance (DOF) said. President Duterte’s economic team led by the DOF will turn over to the next administration a fiscal consolidation plan, which may include new or higher taxes, spending cuts on non-priority sectors, and economic growth drivers to revert the budget deficit to pre-pandemic levels of about 3 percent of GDP while repaying debts. As such, the Neda board said the government needed to prioritize public investments in human capital — particularly education and health — as well as infrastructure to not only recover from the long-term scarring effect of COVID-19 but also generate “good” jobs and accelerate economic growth.

ADVOCACY CORNER

Signing of the Public Services Act amendmendments at the Malacañang Palace | Photo

The ECCP participated at the signing of the enrolled bill of the amendments to the Public Services Act at the Malacañan Palace on 21 March. The PSA amendments opens up the Philippine market to full ownership in the airlines, railways, and telecommunications sectors. Together with the Joint Foreign Chambers of the Philippines, the ECCP welcomes this economic policy development that promotes the country's competitiveness and economic recovery.

To know more about ECCP's policy advocacy priorities, visit eccp.com or email advocacy@eccp.com.

ECCP Aviation Committee Meeting | 21 March | Photo

The ECCP Aviation Committee had its first quarter committee meeting last 21 March 2022. During the session, Mr. Samuel David, Country Manager of International Air Transport Association (IATA), presented his insights on the Airline Commitment to Net Zero by 2050. Likewise, committee members exchanged their views on various committee advocacies, including the topics on the Philippine Transportation Safety Board (PTSB) bill and other legislative priorities of the committee; IATF guidelines and COVID-related protocols on inbound and outbound travels in the Philippines; updates on airports’ system on passengers’ safety, and DOT’s plan on revival of tourism industry. Participants also discussed the next steps and identified potential committee activities for 2022.