May 02, 2023
ECCP at Work
The Organisation for Economic Co-operation and Development (OECD) expects the Philippine economy to expand by 5.7% this year, slightly below the government’s target. “Exports may slow in 2023 due to the global economic slowdown, and tighter monetary conditions to cope with high inflationary pressures may pose a challenge for private consumption and investment growth,” the OECD said in its Economic Outlook for Southeast Asia, China, and India report. The OECD’s gross domestic product (GDP) growth forecast for the Philippines is below the government’s 6-7% target this year. It is also slower than the 7.6% GDP expansion in 2022.
As the Philippines experiences an uptick in COVID-19 cases, the government might consider making the wearing of face masks mandatory again if recommended by health authorities, according to President Marcos. “Although the rate of increase is becoming huge, our baseline is just low, so hopefully... We’re still going to be able to do it,” Marcos said. “So we’ll look at it. Let us see if there is guidance from the IATF (Inter-Agency Task Force for the Management of Emerging Infectious Diseases), if there is guidance from the DOH (Department of Health)... I hope we don’t have to, but we might, but I hope not,” he added.
The Bureau of Internal Revenue (BIR) has issued a regulation clarifying the local purchases of registered business enterprises subject to the 12 percent value-added tax (VAT). Under BIR Revenue Regulations 3-2023, local purchases relating to janitorial services, security services, financial services, consultancy services as well as marketing and promotion are not covered by the zero-VAT rating. Likewise, the issuance also clarified that services rendered for administrative operations such as human resources, legal, and accounting are not considered directly and exclusively used in the registered project or activity of a registered export enterprise and are not covered by the zero-VAT rating.
The government ramped up its infrastructure spending from January to February by nearly 40 percent to reach P113 billion on higher disbursements for rail projects, the Department of Budget and Management (DBM) said. Based on the latest national government disbursement performance report of the DBM, state infrastructure expenditure and other capital outlays went up by 36 percent to P113 billion in the first two months of the year, from P83 billion in the same period last year. The DBM said the infrastructure spending performance for the two-month period was attributed to the higher disbursements recorded by the Department of Public Works and Highways (DPWH) and the Department of Transportation (DOTr).
President Ferdinand R. Marcos Jr. said the government is "working conscientiously" to provide opportunities that will uplift the living and social conditions of Filipino workers and their families. As the nation celebrates Labor Day, Marcos paid tribute to the workers by describing them as "essential to the sustenance of our soaring economy". "That is why we strive to address the cares and concerns of our workers as well as provide them with better opportunities so that they are capacitated to their full potential as active participants in nation-building," Marcos said. "On behalf of our grateful Filipino people, I laud our workforce for their unwavering service and sacrifice in their respective fields and also for their significant contribution in our country's development," he added.
The government is onboarding farmers and other agricultural producers as the Bangko Sentral ng Pilipinas (BSP) continues to ramp up initiatives for its Digital Payments Transformation Roadmap. The Bangko Sentral ng Pilipinas (BSP) has signed a memorandum of agreement with the Department of Agriculture-Regional Field Office-Cordillera Administrative Region (DA-RFO-CAR) to onboard farmers and other agricultural players to the Paleng-QR Ph Plus program. The program promotes QR (quick response) technology as a convenient, safe, and efficient payment solution to build the collective financial resilience of more Filipinos and help them maximize economic opportunities through their inclusion in the formal financial system.
Better infrastructure planning is needed to prepare for potential “fiscal surprises,” analysts said. The World Bank in a recent report said developing countries must improve infrastructure governance to address fiscal surprises, as rising debt levels, higher borrowing costs, and tighter financial conditions have impacted their ability to fulfill infrastructure needs. “An elaborate research and study are needed to identify or determine what are these ‘surprises’ as our economic situations, such as our handling of inflation, differ from other countries’ situations,” Antonio A. Ligon, a law and business professor at De La Salle University, said.
The Philippine Economic Zone Authority (Peza) has cheered the decision from the Bureau of Internal Revenue (BIR) to clarify the rules on the zero-VAT (value-added tax) incentives for registered businesses, saying that move will boost investor confidence in the country. Peza Director General Tereso Panga lauded President Marcos for prompting the concerned agencies to correct the previous administration’s issuances that limited the grant of incentives to qualified projects and activities of registered business enterprises.
Airline companies in the Philippines are backing a P100-billion proposal to upgrade the Ninoy Aquino International Airport (NAIA), noting that this project will raise the flight capacity of the gateway. The representatives said that “initiatives to upgrade airport facilities and infrastructure will always be welcome, as these will increase airport capacity, lead to more efficient airport and airline operations, and enhance overall customer experience.”
Starting June 2, the Philippines will have wider access and implement its free trade commitments with 14 countries in the Asia-Pacific region under RCEP. The Department of Foreign Affairs announced the date of entry into force of the Philippine implementation of RCEP. The date was set after Philippine Permanent Representative to the ASEAN Hjayceelyn Quintana formally deposited the instrument of ratification of RCEP with the Asean Secretariat in Jakarta on April 27. The handing over of the instrument of ratification is the final step to put the RCEP into effect.
The National Irrigation Administration (NIA) is optimistic that it will surpass its previous achievements in irrigating more farmlands in the upcoming season, an official said over the weekend. “Projected Programmed Area for calendar year 2024 dry crop is 1.21 million for both National Irrigation Systems [NIS] and Communal Irrigation Systems [CIS],” NIA Acting Administrator Eddie Guillen said. He also said that water delivery expected for an early start of August 25, 2023 and a later start of April 14, 2024.
The Department of Transportation (DOTr) is establishing a technical working group (TWG) to look into the P100-billion proposal submitted by some of the country’s largest conglomerates to renovate and upgrade the Ninoy Aquino International Airport (NAIA). Transportation Secretary Jaime Bautista said that the body would evaluate the unsolicited proposal submitted by the Manila International Airport Consortium (MIAC). However, the DOTr chief made no assurance that MIAC’s offer would be approved anytime soon given the immensity of the project.
E-Commerce is here to stay as online trade is seen to sustain growth post-pandemic, according to the Philippine E-Commerce Association (PECA). “We did not see any decreasing growth of the industry. It will keep on increasing from 2023 [and beyond],” PECA Cofounder and President Jere Von Basa said. Since the Covid-19 crisis started late 2019, the e-commerce vertical has seen a “dramatic” rise due to movement restrictions and lockdown enforcements. This, in turn, has made the Philippines the third in Southeast Asia, next only to Indonesia and Vietnam, with the highest e-commerce growth rate.
The Department of Transportation (DOTr) has ordered the Manila International Airport Authority (Miaa) to conduct a “full electrical audit” of the Ninoy Aquino International Airport (Naia), following the power outage on 01 May, a disruption where sabotage has not been ruled out. Transportation Secretary Jaime B. Bautista said the airport is due for an audit, and this time, he is ordering a “full audit” instead of the usual periodic review. “We are talking about a full electrical audit of Terminal 3, which started operations in 2009 and underwent electrical audit in 2017. Not all recommendations were implemented and since then the capacity of Terminal 3 increased,” he said.
The Securities and Exchange Commission (SEC) has released the implementing rules and regulations of Republic Act 11765, or the Financial Products and Services Consumer Protection Act, which seeks to have stronger regulation and enforcement against investment frauds and abuses. The IRR covers all financial products and services, and financial service providers under the SEC’s jurisdiction. These financial products and services include credit, securities and investments. Digital financial products or services that pertain to the broad range of financial services accessed and delivered through digital channels are also within the IRR’s coverage.
The guidelines by the Bureau of Internal Revenue (BIR) on the value-added tax (VAT) zero-rating of goods and services directly used by locators will encourage locators to source more from the local market instead of importing, according to the Philippine Economic Zone Authority (PEZA). “With the revised guidelines, this will encourage locators to localize their outsourcing of goods and services,” PEZA Director General Tereso O. Panga told reporters last Monday. “This will increase value-adding in the country and facilitate the integration of local suppliers of goods and services into the [economic] zone value chain.” According to Panga, given the wider coverage of allowable goods and services for VAT zero rating, registered business enterprises (RBEs) will be encouraged to source more from the local market instead of importing inputs from other countries to sustain their operations.
Department of Science and Technology Secretary Renato U. Solidum highlighted the importance of science and technology and its application in developing a comprehensive insurance policy in disaster-prone areas and in the face of extreme events triggered by climate change. The DOST chief cited the need “to scale up the widest possible cooperation and multilateral collaboration for climate action and disaster resilience and to use technology and innovations to safeguard the country’s economic gains, while saving lives in times of disasters.”
Inflation likely stayed above seven percent in April, way above the two to four percent target set by the Bangko Sentral ng Pilipinas (BSP), according to economists. ANZ Research chief economist Sanjay Mathur, economist Debalika Sarkar, and senior strategist Irene Cheung said inflation last month further eased to 7.3 percent from a six-month low of 7.6 percent in March. The authors said the BSP has already signaled a possible pause of its tightening cycle if the inflation print shows a continued downtrend.
The government is inviting interested firms to bid for the P6 billion Cancer Center public-private partnership (PPP) project. In an advisory, the PPP Center said the University of the Philippines – Philippine General Hospital (UP-PGH) is inviting interested parties to qualify and bid for the Cancer Center project under a 30-year build-transfer-operate PPP. “Bidding is open to all interested parties, whether local or foreign, subject to conditions for qualification under the bidding documents, the Constitution, Republic Act 6957, as amended by RA 7718 (Build-Operate-Transfer Law) and its Revised 2022 Implementing Rules and Regulations, and other applicable laws and jurisprudence,” the PPP Center said.