RECENT NEWS
Philippines: GDP Growth
Philippines' GDP growth slowed to 4.3% in Q2 on lower spending
Philippine GDP growth reached 4.3% in Q2. This is lower than the 7.5% growth in Q2 of 2022 and the 6.4% growth of Q1, 2023. It is likely that the rise in commodity prices and interest rate hikes caused consumer spending to shrink from 8.5% in 2022 to 5.5% in 2023. July’s inflation was 4.7%. This remains higher than the government’s target of 2-4%. Nicholas Mapa of ING stated that the slump in economic activity was caused by reduced “revenge spending” and reduced government spending. NEDA secretary Arsenio Balicasan stated that the slump in growth was only for a short-run observation. He stated that the Philippine target of 6-7% GDP growth for 2023 would be achievable with the government’s ‘Build Better More’ infrastructure spending plan.
Source: Nikkei Asia (2023, August 10). Philippines' GDP growth slowed to 4.3% in Q2 on lower spending.
Philippines' GDP growth slowed to 4.3% in Q2 on lower spending
Philippine GDP growth reached 4.3% in Q2. This is lower than the 7.5% growth in Q2 of 2022 and the 6.4% growth of Q1, 2023. It is likely that the rise in commodity prices and interest rate hikes caused consumer spending to shrink from 8.5% in 2022 to 5.5% in 2023. July’s inflation was 4.7%. This remains higher than the government’s target of 2-4%. Nicholas Mapa of ING stated that the slump in economic activity was caused by reduced “revenge spending” and reduced government spending. NEDA secretary Arsenio Balicasan stated that the slump in growth was only for a short-run observation. He stated that the Philippine target of 6-7% GDP growth for 2023 would be achievable with the government’s ‘Build Better More’ infrastructure spending plan.
Source: Nikkei Asia (2023, August 10). Philippines' GDP growth slowed to 4.3% in Q2 on lower spending.
Philippines: Policy Rate
Central bank of Philippines keeps policy rate steady at 6.25%
Bangko Sentral ng Pilipinas (BSP) kept its benchmark interest rate unchanged at 6.25% for the third consecutive meeting, citing the need to balance supporting economic growth with controlling inflation. Despite the risks leaning towards higher inflation, BSP Governor Eli Remolona acknowledged the challenging economic growth outlook. The decision follows recent data revealing the slowest annual economic growth rate in almost 12 years for the second quarter, attributed to reduced government spending and weaker domestic demand. Moreover, BSP’s updated consumer price forecasts anticipate higher inflation for this year and the next, reflecting the impact of rising global oil prices. While inflation cooled for six consecutive months, the rate remained at 4.7%, above the central bank's 2% to 4% comfort range. Remolona stated that the BSP is prepared to resume tightening when necessary, asserting that the current rate level is not significantly elevated and would not hinder growth.
Source: Nikkei Asia (2023, August 17). Central bank of Philippines keeps policy rate steady at 6.25%.
Central bank of Philippines keeps policy rate steady at 6.25%
Bangko Sentral ng Pilipinas (BSP) kept its benchmark interest rate unchanged at 6.25% for the third consecutive meeting, citing the need to balance supporting economic growth with controlling inflation. Despite the risks leaning towards higher inflation, BSP Governor Eli Remolona acknowledged the challenging economic growth outlook. The decision follows recent data revealing the slowest annual economic growth rate in almost 12 years for the second quarter, attributed to reduced government spending and weaker domestic demand. Moreover, BSP’s updated consumer price forecasts anticipate higher inflation for this year and the next, reflecting the impact of rising global oil prices. While inflation cooled for six consecutive months, the rate remained at 4.7%, above the central bank's 2% to 4% comfort range. Remolona stated that the BSP is prepared to resume tightening when necessary, asserting that the current rate level is not significantly elevated and would not hinder growth.
Source: Nikkei Asia (2023, August 17). Central bank of Philippines keeps policy rate steady at 6.25%.
India: Ban on Rice Exports
India must abandon protectionism
India’s protectionism proves to be a barrier if it wants to become an economic powerhouse, even though it possesses advantages like a young population and substantial Western investments. Prime Minister Narendra Modi's "Make in India" initiative has reversed decades of trade liberalization in the 1990s and 2000s. The government's goal of curbing imports, particularly from China, to enhance security and create jobs is proving to be counterproductive. This approach resulted in a decrease in the value added by manufacturing and an inability to emulate China's successful economic growth driven by integration into global supply chains through free trade. It could emulate South Korea's strategy, which prioritized global competitiveness over self-sufficiency and embraced imports for high-quality inputs.
Source: The Economist (2023, August 17). India must abandon protectionism.
India must abandon protectionism
India’s protectionism proves to be a barrier if it wants to become an economic powerhouse, even though it possesses advantages like a young population and substantial Western investments. Prime Minister Narendra Modi's "Make in India" initiative has reversed decades of trade liberalization in the 1990s and 2000s. The government's goal of curbing imports, particularly from China, to enhance security and create jobs is proving to be counterproductive. This approach resulted in a decrease in the value added by manufacturing and an inability to emulate China's successful economic growth driven by integration into global supply chains through free trade. It could emulate South Korea's strategy, which prioritized global competitiveness over self-sufficiency and embraced imports for high-quality inputs.
Source: The Economist (2023, August 17). India must abandon protectionism.
Russia: Currency woes
Russia will struggle to cope with a sinking rouble
The Russian rouble is at its cheapest since the invasion of Ukraine, making it the worst performing currency in the world this year. It is worse than the Argentine peso, Venezuelan bolivar, and Turkish lira, which all have faced staggering inflation rates for years. The central bank of Russia is expected to raise interest rates to protect the currency from further devaluation. Among are reasons for the currency’s collapse: capital outflow, trade sanctions, and isolation from the international monetary system. All of these resulted in the slump of exports, especially oil and natural gas, reducing its current-account surplus by 86%. The government is planning to ensure that capital does not outflow by imposing stronger capital controls and by direct intervention in currency markets.
Source: The Economist (2023, August 17). Russia will struggle to cope with a sinking rouble.
Russia will struggle to cope with a sinking rouble
The Russian rouble is at its cheapest since the invasion of Ukraine, making it the worst performing currency in the world this year. It is worse than the Argentine peso, Venezuelan bolivar, and Turkish lira, which all have faced staggering inflation rates for years. The central bank of Russia is expected to raise interest rates to protect the currency from further devaluation. Among are reasons for the currency’s collapse: capital outflow, trade sanctions, and isolation from the international monetary system. All of these resulted in the slump of exports, especially oil and natural gas, reducing its current-account surplus by 86%. The government is planning to ensure that capital does not outflow by imposing stronger capital controls and by direct intervention in currency markets.
Source: The Economist (2023, August 17). Russia will struggle to cope with a sinking rouble.
Thailand: Rice exports
India's rice export ban brings chaos to Thai market
The rice trading landscape in Thailand, the world's second-largest rice exporter, has turned tumultuous due to India's recent ban on rice exports, sparking panic buying and speculative hoarding that are depleting market supply and reducing available rice for export. Consequently, Thai domestic milled prices surged causing the global price of rice to spike to an 11-year high. Despite the absence of plans by the Thai government to impose export restrictions, exporters remain cautious due to supply uncertainties. Thailand typically produces 20 million tons of milled rice, exporting half while consuming the remainder domestically. However, India's export ban has induced concerns about stock depletion and prompted importers to explore alternative sources such as Thailand. This hoarding-driven price increase might render Thai rice less competitive, and the El Nino dry weather pattern is anticipated to further limit harvests, thwarting the country's ability to boost rice exports in the next few years. Thailand's usually ample rice supply, fueled by monsoon rains and irrigation, faces jeopardy from reduced rainfall during critical growth months, potentially impacting yields. The decline in water levels at major reservoirs due to El Nino could exacerbate irrigation and offseason planting challenges. While precise production figures remain unavailable, the Ministry of Agriculture has predicted a diminished crop for 2023 and 2024.
Source: Nikkei Asia (2023, August 17). India’s rice export ban brings chaos to Thai market.
India's rice export ban brings chaos to Thai market
The rice trading landscape in Thailand, the world's second-largest rice exporter, has turned tumultuous due to India's recent ban on rice exports, sparking panic buying and speculative hoarding that are depleting market supply and reducing available rice for export. Consequently, Thai domestic milled prices surged causing the global price of rice to spike to an 11-year high. Despite the absence of plans by the Thai government to impose export restrictions, exporters remain cautious due to supply uncertainties. Thailand typically produces 20 million tons of milled rice, exporting half while consuming the remainder domestically. However, India's export ban has induced concerns about stock depletion and prompted importers to explore alternative sources such as Thailand. This hoarding-driven price increase might render Thai rice less competitive, and the El Nino dry weather pattern is anticipated to further limit harvests, thwarting the country's ability to boost rice exports in the next few years. Thailand's usually ample rice supply, fueled by monsoon rains and irrigation, faces jeopardy from reduced rainfall during critical growth months, potentially impacting yields. The decline in water levels at major reservoirs due to El Nino could exacerbate irrigation and offseason planting challenges. While precise production figures remain unavailable, the Ministry of Agriculture has predicted a diminished crop for 2023 and 2024.
Source: Nikkei Asia (2023, August 17). India’s rice export ban brings chaos to Thai market.
Germany: Slow economic growth
The German economy: from European leader to laggard
Times are tough for Europe’s largest economy. Coming from one of the most robust economic conditions in the 2010s, largely unscathed by the Euro crisis, Germany has been experiencing one of its slowest economic growth due to rising interest rates, China's slow recovery, high gas prices, and low wages. The government is thinking of solutions like helping businesses and making green buildings. But things might stay tough for a while. Germany's success hid its problems, like slow bureaucracy. They need to adapt to changes in the world but aren't good at it. This is a big contrast to when they improved in the past.
Source: The Economist (2023, August 17). The German economy: from European leader to laggard.
The German economy: from European leader to laggard
Times are tough for Europe’s largest economy. Coming from one of the most robust economic conditions in the 2010s, largely unscathed by the Euro crisis, Germany has been experiencing one of its slowest economic growth due to rising interest rates, China's slow recovery, high gas prices, and low wages. The government is thinking of solutions like helping businesses and making green buildings. But things might stay tough for a while. Germany's success hid its problems, like slow bureaucracy. They need to adapt to changes in the world but aren't good at it. This is a big contrast to when they improved in the past.
Source: The Economist (2023, August 17). The German economy: from European leader to laggard.
China: Deflation
Will the rest of the world feel China’s deflation pain?
Latest developments in China’s post-COVID recovery see emerging signs of deflation—with consumer prices falling by 0.3 percent in July. Although the country is experiencing a continued slowdown in growth, partly caused by structural issues in the labor and property markets, inflation should not be a concern for the rest of the world, according to economists. Deflation is likely temporary—although consumer prices fell, core inflation rose by 0.8 percent in July. Much of the deflation can be attributed to the price of pork, which has been persistently declining over the past year and has failed to rise at the pace it did in 2022 when it rose sharply because of COVID-19 restrictions. Furthermore, inflation is not as contagious as it seems—much of the world, except for China, has seen rapid increases in prices over the past couple of years. Falling prices in China may benefit Europe through falling costs of imports and less competition for natural gas.
Source: The Financial Times (2023, August 17). Will the rest of the world feel China’s deflation pain?
Will the rest of the world feel China’s deflation pain?
Latest developments in China’s post-COVID recovery see emerging signs of deflation—with consumer prices falling by 0.3 percent in July. Although the country is experiencing a continued slowdown in growth, partly caused by structural issues in the labor and property markets, inflation should not be a concern for the rest of the world, according to economists. Deflation is likely temporary—although consumer prices fell, core inflation rose by 0.8 percent in July. Much of the deflation can be attributed to the price of pork, which has been persistently declining over the past year and has failed to rise at the pace it did in 2022 when it rose sharply because of COVID-19 restrictions. Furthermore, inflation is not as contagious as it seems—much of the world, except for China, has seen rapid increases in prices over the past couple of years. Falling prices in China may benefit Europe through falling costs of imports and less competition for natural gas.
Source: The Financial Times (2023, August 17). Will the rest of the world feel China’s deflation pain?
China: Shortage of crops
China flood hits rice, corn crops; trigger food inflation worries
Floods have damaged Chinese corn and rice crops in its northern grain producing regions. The current extent of this damage is unclear, however, up to 4-5 million metric tons of its corn have likely been damaged. Typhoon Doksuri caused these floods and it is likely that tropical storm Khanun may cause further damage. Rice prices grew by 20% after India announced its rice export ban. China’s imports were already expected to grow from 18 million tonnes in 2022 to 23 million tonnes in 2023. The damage to China’s rice production has already created expectations of food inflation, even if China likely has enough of a supply to prevent it from drastically growing its rice imports. Fitch Ratings, for example, has already announced its expectations for food inflation.
Source: Reuters (2023, August 11). China flood hits rice, corn crops; trigger food inflation worries.
Contributors:
Natasha Amber Cabiltes
Edgar Desher Empeño
Jose Lorenzo Mercado
Brendan Emmanuel Miranda
Jacobe Joaquin Sevilla
China flood hits rice, corn crops; trigger food inflation worries
Floods have damaged Chinese corn and rice crops in its northern grain producing regions. The current extent of this damage is unclear, however, up to 4-5 million metric tons of its corn have likely been damaged. Typhoon Doksuri caused these floods and it is likely that tropical storm Khanun may cause further damage. Rice prices grew by 20% after India announced its rice export ban. China’s imports were already expected to grow from 18 million tonnes in 2022 to 23 million tonnes in 2023. The damage to China’s rice production has already created expectations of food inflation, even if China likely has enough of a supply to prevent it from drastically growing its rice imports. Fitch Ratings, for example, has already announced its expectations for food inflation.
Source: Reuters (2023, August 11). China flood hits rice, corn crops; trigger food inflation worries.
Contributors:
Natasha Amber Cabiltes
Edgar Desher Empeño
Jose Lorenzo Mercado
Brendan Emmanuel Miranda
Jacobe Joaquin Sevilla