ECCP at Work

ECCP Featured News Articles | March 29, 2022

March 29, 2022

ECCP Online

ECCP at Work

Economic think tanks: PH inflation risks intensifying

Just like the Bangko Sentral ng Pilipinas (BSP), economic think tanks watching the Philippines have flagged intensifying inflation risks, but they’re still divided on when to raise rates to cool upward price pressure. “As inflation rises back above 4 percent in coming months amid a strong reopening impulse to activity, we continue to expect the BSP to start tightening monetary policy in the second half of the year, with a 25-basis point (bp) hike each in third and fourth quarters of 2022,” Goldman Sachs Economics Research said in a report. While the BSP kept the policy rate at a record-low 2 percent last Thursday (March 24), it raised its headline inflation forecast for 2022 to an average of 4.3 percent, above its 2 to 4 percent target band of manageable price hikes amid expensive oil and other food commodities—a global spillover impact of Vladimir Putin’s campaign to destroy Ukraine.

Omicron dampened firms’ bullishness in Q1

Business confidence in the first quarter of 2022 remained bullish, but less so due to the surge in COVID-19 infections involving the Omicron variant, according to the Bangko Sentral ng Pilipinas (BSP).The latest BSP quarterly Business Expectations Survey was conducted from Jan. 21 to March 4. Results show that the overall confidence index waned to 32.9 percent in the current quarter from 37.9 percent in the previous period. “The lower positive index resulted from the combined effects of a decrease in the percentage of optimists and an increase in the percentage of pessimists,” the BSP said. “The respondents’ less buoyant outlook was largely affected by the resurgence of cases from the new Omicron variant and the consequent reimposition of stricter quarantine restrictions in many areas at the beginning of the year,” it added.

‘Significant number’ of BPO workers poised to resign

A “significant number” of employees of some business process outsourcing (BPO) companies are ready to resign if the work-from-home setup will not be extended. This was based on the discussions the Alliance of Call Center Workers (ACW) had with some of its members, as the Fiscal Incentives Review Board (FIRB) recently rejected appeals to extend remote-work arrangements currently enjoyed by workers of information technology-business process management (IT-BPM) companies in economic zones beyond March 31. This means that workers should work on-site beginning April 1 or else IT-BPM companies will lose their incentives such as tax breaks.

Government infrastructure spending rises 31% to P895 billion in 2021

The government resumed the faster pace of its infrastructure expenses last year with nearly P900 billion spent on public works, made possible by the easing of quarantine restrictions nationwide. According to the Department of Budget and Management (DBM), infrastructure spending spiked by 31 percent to P895.1 billion in 2021 from P681.5 billion in 2020. The DBM said infrastructure disbursements during the period exceeded what the government allocated, reaching P761.2 billion. The DBM attributed the recovery in infrastructure spending to the lower base in 2020 due to the cancellation of some projects. The government had to postpone public works at the onset of the pandemic to pour its resources on social interventions.

Short-term measures eyed to tame inflation

The Bangko Sentral ng Pilipinas (BSP) has urged Malacañang to pursue several initiatives, including expanding social interventions and trimming import duties, to tame inflation in the short term. BSP Governor Benjamin Diokno said the central bank finds no reason yet to hike interest rates to hold off inflationary pressures caused by rising oil prices due to Russia’s invasion of Ukraine. He said the BSP can only pull the trigger on a rate hike when second-round effects coming from the demand side, including minimum wage and transport fare increases, begin to influence inflation. For the meantime, Diokno said, the executive branch should increase fuel subsidies for drivers of public utility vehicles to increase their cash pool against fuel rate spikes. Also, the government should widen the options for promotional discounts from oil firms to mitigate the impact of price surges. Diokno said increases in generation charges should also be staggered and government offices should minimize their power consumption to save on electricity. He urged the Department of Agriculture (DA) to extend fertilizer vouchers to affected farmers and to bolster fertilizer supply by negotiating with producing countries.

Manila needs better public transport – ADB

The country’s capital and other urban cities need to provide quality public transportation to improve livability and not just construct roads that would eventually contribute to congestion, the Asian Development Bank (ADB) said. In a recent report, the Manila-based multilateral bank  said urban areas in the region, such as Manila, need to offer more and better public transport options to cut traffic jams and pollution. ADB Transport Sector Group chief James Leather said that merely constructing roads is not the solution, as this will encourage a downward spiral of increased purchases and use of private vehicles, which eventually cause more congestion.

Int’l travel full recovery seen by 2024

International travel to the Philippines will return to pre-2019 levels by 2024, according to Roberto Alabado III, DOT undersecretary. Alabama told a forum hosted by the Canadian Chamber of Commerce over the weekend, the DOT is working on sustaining the interest of new and niche markets while introducing new products that meet the tourist’s change in preference in traveling. Alabado said DOT is luring tourists from Asean after noting there are more Thais and Vietnamese going to the Philippines than Filipinos going to Thailand and Vietnam. He added the Philippines is also looking at Malaysia, Indonesia and the Middle East as the Philippines positions itself as a Muslim-friendly destination. “We are espousing halal tourism…We can provide the needs of our Muslim brothers and sisters in the Asean region when they come visit,” he said. Alabado said the DOT is also pushing for the development of more ports for cruise tourism over the next decade.

MC to allow hybrid work

The Philippine Economic Zone Authority (PEZA) is poised to issue a memorandum circular (MC) that would allow information technology-business process management (IT-BPM) companies to implement work-from-home (WFH) and hybrid work arrangements by up to 70 percent before the mandate for them to go back on site by April 1. Plaza said the MC will come out this week or before March 31 , the deadline in which WFH was allowed by the Fiscal Incentives and Review Board (FIRB). Comments on the MC from the legal offices of PEZA and the Board of Investments (BOI) are being integrated.

Moody’s Analytics: Stronger PH growth at risk from high inflation, weaker peso

The global economic fallout from Russia’s invasion of Ukraine would not only jack up inflation in the Philippines but also weaken the peso as a result of more expensive imports despite a rosier outlook for the domestic economy, think tank Moody’s Analytics said. In a report on Monday (March 28), Moody’s Analytics chief Asia-Pacific economist Steven Cochrane said its updated 2022 gross domestic product (GDP) growth forecast of 6.4 percent for the Philippines was “slightly stronger than the February forecast, although this is due to stronger-than-anticipated growth in the fourth quarter of 2021 that now launches the 2022 forecast from a higher level.” While higher than the previous 6.2-percent GDP growth estimate, Moody’s Analytics’ latest projection remained below the government’s 7 to 9 percent target.

High inflation ‘back with vengeance,’ says Diokno

Quickening growth in prices will prompt the Bangko Sentral ng Pilipinas (BSP) to finally raise policy rates by a total of 75 basis points (bps) this year, but still not until the second semester, according to Fitch Solutions. BSP Governor Benjamin Diokno acknowledged that high inflation was indeed “back with a vengeance,” but said growth in prices in the Philippines was “more manageable” compared to some other countries. Diokno said the average forecast among private sector watchers puts inflation at 3.8 percent which, though higher than the previous average forecast, was still within the government’s target range of 2 percent to 4 percent.

Relaxed mobility restrictions to spur Natl ID registration, processing–PSA

The Philippine Statistics Authority (PSA) is confident that less stringent mobility restrictions currently in place would encourage more Filipinos to register for a National ID.

As of March 16, some 60.48 million Filipinos completed the PhilSys Step 2 Registration, which involves capturing biometric information, such as fingerprints, iris, and front-facing photographs at registration centers. PSA Undersecretary Dennis S. Mapa, National Statistician and Civil Registrar General, said more Filipinos will be able to register to PhilSys and allow PSA to meet this year’s target on time.

“Despite the previous challenges posed by Covid-19 during the early implementation of the PhilSys program, the PSA achieved its targets successfully. We thank our partners and the millions of Filipinos for their cooperation despite the limitations brought about by the pandemic. With their continued support, the PSA is confident that we will be able to register more Filipinos in the next months,” Mapa said. In February, Mapa told the BusinessMirror that the PSA is targeting to register the demographic and biometric of 92 million by the end of 2022. The PSA aims to distribute National ID cards to 31.3 million Filipinos by year-end.

Boosters to avert lockdown

Presidential adviser for entrepreneurship Joey Concepcion yesterday said the feared waning immunity of Filipinos against the new coronavirus disease 2019 (COVID-19) should be addressed through higher booster takeup to avoid lockdown by the second half of the year. Another lockdown, he said, would derail the momentum of business recovery. Concepcion told the Laging Handa public briefing yesterday the Philippines could be in a precarious situation by the second semester if it does not reach at least 70 to 80 percent level of booster coverage.

PEZA firms told to go back on site

Trade Secretary Ramon Lopez, chairman of the Philippine Economic Zone Authority (PEZA) board, yesterday said enterprises registered with PEZA will have to comply with the order to resume 100-percent onsite operations by April 1. In a statement, Lopez reiterated provisions of PEZA Law as well as of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act require all registered business enterprises (RBEs) to operate within the ecozones and that the decision of the Fiscal Incentive Review Board to allow 90- percent work-from-home until March 31 was a temporary measure under the CREATE Act.

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