ECCP at Work

GSP a stepping stone to free trade

The Department of Trade and Industry (DTI) aims to maintain its eligibility in the EU Generalized System of Preferences Plus (GSP+) as it is its long-term ambition to resume the Philippines-EU free trade agreement (FTA) negotiations. According to the DTI, the GSP+ is merely a stepping stone toward the Philippines-EU FTA, which is the most significant and long-term mechanism in the Philippines' relationship with the EU. Secretary Alfredo Pascual also said that “There is a big opportunity for EU businesses to expand in the Philippines – not just to access our huge domestic market – but equally important, to use the Philippines as a base for manufacturing.” 

INFLATION TO FALL SOON: Diokno sees sustained growth in Q4 

According to Finance Secretary Benjamin Diokno, recent economic data indicates a strong economic performance in the Q4 of 2022. He stated that this is highly reflected by the decline in the unemployment rate, rising manufacturing output, increase in the capacity utilization rate, stabilization of the peso, and a drop in oil prices. Additionally, he also posits that inflation is expected to fall down in the first quarter of 2023 with the continuous decline of oil prices and peso appreciation, stating that “BSP (Bangko Sentral ng Pilipinas) projects inflation to average 5.8 percent this year, then slow down to the upper bound of the two to four percent target band in 2023, before it settles at the midpoint of the target band by 2024.” The DBCC stated that the projected peso-dollar exchange rate for 2023 and 2024 has increased as the peso continues to weaken due to increased global unpredictability and aggressive monetary policy tightening by the US Federal Reserve.

Jobless rate back to pre-pandemic level 

Philippine Statistics Authority (PSA) Undersecretary and National Statistician Claire Dennis S. Mapa announced that the unemployment rate dropped to 4.5% or a total of 2.241 million unemployed Filipinos in October, reaching the historically low level last reached in October 2019 before the coronavirus pandemic. PSA added that the average unemployment rate for the first 10 months of 2022 is 5.6%, lower than the 7.8% average in 2021. Data from PSA also reported a significant improvement in the underemployment rate last October of 14.2% from 15.4% in September, averaging 14.4% from January to October. The employment rate also rose to 95.5%. Despite these improvements, a dip in the labor force participation rate (LFPR) was observed at 64.2%, lower than September’s rate of 65.2%. On employment, Mr. Mapa said that an employed Filipino worked 40.2 hours a week in October with the service sector accounting for 59.2% and followed by the agriculture and industry at 22.5% and 18.3%, respectively. Senior Economist at ING Bank NV Manila Nicholas Antonio T. Mapa attributed the drop in the number of unemployed Filipinos to the strengthening economy's recovery.

Marcos says PH won’t go into recession

Despite the 8% inflation rate in November, President Ferdinand Marcos Jr. is confident that the country will not enter a recession citing the 4.5 unemployment rate in October. This is according to the PSA Labor Force Survey, which reports a slight increase in the employment rate in October to 95.5 from September, and the unemployment rate decreased to pre-pandemic levels. He also reiterated his commitment to increasing job opportunities for Filipinos while promising that his administration would make every effort to lessen the effects of inflation. 

OCTA survey: Soaring commodity prices most urgent concern of Filipinos

The recent OCTA survey in the fourth quarter of the year shows that the majority of Filipinos believe that the government must address the urgent national issue of high commodity prices, along with the concern of improving salaries and access to food security. Meanwhile, the concern for the government’s effort in controlling the spread of COVID-19 dropped to only 9% from 43% in 2021. In terms of personal concerns, most Filipinos said that health and wellness, secure livelihood, and good education are among the highest priorities while a decrease in the interest in securing a livelihood is observed because of continuous economic expansion.

DTI vows to resolve VAT issue by yearend

Department of Trade and Industry (DTI) Undersecretary Ceferino Rodolfo announced that the agency will address the investor complaints about the inconsistent value-added tax (VAT) exemption by coordinating with the Department of Finance before the end of the year. In particular, DTI Secretary Alfredo Pascual will focus on implementing rules and regulations of the Corporate Recovery and Tax Incentives for Enterprises Act and the revenue regulations of the Bureau of Internal Revenue. Additionally, the Senate is also set to discuss the ratification of the Regional Comprehensive Economic Partnership (RCEP). 

Ports utilization healthy; cargo traffic up

Philippine Ports Authority (PPA) spokesperson Eunice Samonte announced at the recent Laging Handa public briefing that the yard utilization at the ports is at 84.98 percent, ensuring that there is no port congestion and indicating that there is space to handle additional cargo. Recent improvements in trade are also observed as container traffic rose 7.16 percent from January to October this year. In light of the increasing scam-related reports, Ms. Samonte warns the passenger against the scams carried out by people or parties demanding "insurance" payments at PPA ports, noting insurance fees are already included in their fares. In addition, the PPA will also launch a Container Registry and Monitoring System, a system dedicated to real-time tracking of cargo shipments like balikbayan boxes. 

DENR: Metallic mineral production value promising

The Department of Environment and Natural Resources (DENR) is optimistic about the promising figures of the country’s metallic mineral production value as it increased by 29.21% from January to September 2022, as reported by the Mines and Geosciences Bureau (MGB). DENR Secretary Maria Antonia Yulo-Loyzaga said that the generated revenues “will also balance the environmental protection side for the mining industry.” Furthermore, the DENR will update the Small-Scale Mining Act by tapping big companies to improve the social protection and environmental protection side for small-scale miners. This mainly concerns 53 Minahang Bayans largely located in Cordillera Administrative Region and Davao Region.

Water sufficient till ’23

Metropolitan Waterworks and Sewerage System (MWSS) administrator Leonor Cleofas reported that there is a sufficient water supply through the following year to the Metro Manila residents due to the availability of additional water sources other than Angat Dam. The water supply source of Metro Manila is mainly from Angat Dam, covering 97% with 208.95 meters above sea level (masl) high-record as of 10 a.m. last December 7. While the official masl target is 210, MWSS wants to maximize up to 212 masl. National Water Resources Board reported that maintaining this will ensure no supply disruptions. Aside from this, the tunnel that connects to the Umiray river branching into the provinces of Aurora and Quezon also contributes to increasing the water supply for Metro Manila.

Energy firms beat expectations

Stockbroker Colfinancial.com said that the total earnings of power companies from the first nine months increased by 49% from last year which is mainly driven by the surge in Semirara Mining and Power Corp.’s earnings due to the rise in coal prices. Three out of five power companies that it monitored, namely Semirara, Manila Electric Co., and Aboitiz Power Corp., outperformed its set expectations. Colfinancial.com said that the January to September sales is already 4.4% higher than the 2019 data from the same months. Despite this, high coal prices and higher wholesale electricity spot market (WESM) prices are influenced by unprecedented outages and other technical issues. For the first nine months, Meralco gained a total profit of P19.6 billion because of gas plant investment in Singapore. On the other hand, Semirara has a P35.9 billion profit due to earnings from coal businesses; Aboitiz Power has a P18.3 billion profit driven by gains from various sources; and First Gen with an 8% drop in its profit at $194 million in earnings.

Philippine debt swells to P13.6 trillion in October

Data from the Bureau of the Treasury (BTr) shows that the government added P123.92 billion in new debt in October totaling a new record high of P13.64 trillion in October. The current administration further pushes for the Maharlika Wealth Fund as a resolution to the growing debt stock of the country with an estimated 14% increase from last year and 1.56% above the P13.43 trillion expected debt pile by the end of the year. Leonardo Lanzona, economist and professor at the Ateneo de Manila University, posited that this bill “places the country’s long-term security at risk,” and suggested that wealth tax should be imposed instead. Foundation for Economic Freedom president Calixto Chikiamco also noted that the proposed bill drains the central bank’s finances as trade and current account deficits are worsening in the country. In addition, the total domestic debt at P9.36 trillion slightly inched up by 0.59 percent on a monthly basis because of the P55.83 billion net issuance of government securities. Currently, the country’s external obligations also increased by 1.64 percent to P4.29 trillion month-on-month and surged by nearly 22.3 percent from P3.5 trillion in the same period last year. This will exceed the central bank’s reserves for the first time in 11 years by the end of the year, stated by the Bank of the Philippine Islands lead economist Jun Neri. Meanwhile, total debt-guaranteed obligations decreased by 2.69 percent to P386.53 billion due to the net repayment of domestic guarantees amounting to P7.3 billion and the impact of currency fluctuation.

Tax reform package 4 may yield P25 billion more revenues

The House of Representatives recently approved House Bill 4339, formerly known as the Passive Income and Financial Intermediary Taxation Act (PIFITA) on the third reading. This tax reform package is expected to provide a total of P25 billion in additional revenues over the next six years. Finance Secretary Benjamin Dioknosaid that the proposed bill aims to reform numerous tax rates and empower revenue administration, making our tax system internationally competitive. Some of the provisions include a decrease in the number of tax rates on passive income and financial intermediaries; imposition of a 20% final tax on interest income; imposition of a 5% single gross receipt tax rate to banks, quasi-banks, and other non-bank financial intermediaries; setting a 15% standard tax rates on interest, royalties, dividends, and capital gains, among others. 

PHL improves in 2022 global talent ranking 

With an overall score of 41.10, the Philippines ranked 54th out of 63 economies, moving three spots from the 57th spot (out of 64) in 2021, according to the Institute for Management Development (IMD) World Competitiveness Center 2022 report. In addition, the Philippines is also ranked 35th in readiness, from 47th in 2021 while maintaining its 62nd ranking for investment and development and 43rd rank for appeal. Jose Caballero, the IMD World Competitiveness Center Senior Economist, said that the improvement in the performance of the Philippines is mainly driven by the availability of skilled labor and the competent performance of the university education. While the country ranks 15th in collecting personal income tax, the Philippines ranks low on the Programme for International Student Assessment (PISA) by the Organization for Economic Co-operation and Development (OECD), brain drain, and attracting and retaining talent.