RECENT NEWS
Philippines: Maharlika Investment Fund
Senate approves bill creating the Maharlika fund
The Philippine Senate has approved the Maharlika Investment Fund (MIF) bill which seeks to establish a sovereign wealth fund in the Philippines. The approved bill requires the Land Bank of the Philippines, the Development Bank of the Philippines, and the national government to contribute to the initial capital of the MIF. The Bangko Sentral ng Pilipinas (BSP) is also required to contribute 100% of its dividends to the MIF. In response to public backlash, the approved bill explicitly prohibits pension funds from contributing to the fund. The MIF is expected to start its operation by the end of this year.
Source:
Senate approves bill creating the Maharlika fund (May 31, 2023), BusinessWorld;
Maharlika fund expected to start operations by year’s end — DoF (June 5, 2023), BusinessWorld
Senate approves bill creating the Maharlika fund
The Philippine Senate has approved the Maharlika Investment Fund (MIF) bill which seeks to establish a sovereign wealth fund in the Philippines. The approved bill requires the Land Bank of the Philippines, the Development Bank of the Philippines, and the national government to contribute to the initial capital of the MIF. The Bangko Sentral ng Pilipinas (BSP) is also required to contribute 100% of its dividends to the MIF. In response to public backlash, the approved bill explicitly prohibits pension funds from contributing to the fund. The MIF is expected to start its operation by the end of this year.
Source:
Senate approves bill creating the Maharlika fund (May 31, 2023), BusinessWorld;
Maharlika fund expected to start operations by year’s end — DoF (June 5, 2023), BusinessWorld
Philippines: Maharlika Investment Fund
No issues with Maharlika Investment Fund—Medalla; Landbank health at risk from sovereign wealth fund—economists
The Bangko Sentral ng Pilipinas (BSP) has expressed no concerns with the current version of the bill establishing the Maharlika Investment Fund (MIF), stating that it is more of a development fund rather than a sovereign wealth fund. The BSP Governor emphasized that the bill has undergone extensive discussions and will have good governance principles. The BSP's requirement to contribute 100% of its dividends to the fund for the first two years is not seen as an issue due to the strong balance sheet of the central bank. After the initial two years, the BSP's contribution will be reduced to 50%, with the remaining 50% going towards the capitalization of the BSP. The MIF will also receive capital from other sources such as Land Bank of the Philippines, Development Bank of the Philippines, and proceeds from the privatization and transfer of government assets. Economists, however, are concerned about the potential impact on LANDBANK's financial strength and credit ratings due to its participation in the fund. They argue that lawmakers should have considered Fitch Ratings' warning about the bank's capitalization ratios and the risk of losing public trust when government financial institutions are involved. The bill is expected to be approved soon, and the fund aims to have a strategic focus on investments aligned with national priorities, such as climate change.
Source:
No issues with Maharlika Investment Fund — Medalla (May 30, 2023), BusinessWorld Online;
LANDBANK health at risk from sovereign wealth fund — economists (June 8, 2023), BusinessWorld Online
No issues with Maharlika Investment Fund—Medalla; Landbank health at risk from sovereign wealth fund—economists
The Bangko Sentral ng Pilipinas (BSP) has expressed no concerns with the current version of the bill establishing the Maharlika Investment Fund (MIF), stating that it is more of a development fund rather than a sovereign wealth fund. The BSP Governor emphasized that the bill has undergone extensive discussions and will have good governance principles. The BSP's requirement to contribute 100% of its dividends to the fund for the first two years is not seen as an issue due to the strong balance sheet of the central bank. After the initial two years, the BSP's contribution will be reduced to 50%, with the remaining 50% going towards the capitalization of the BSP. The MIF will also receive capital from other sources such as Land Bank of the Philippines, Development Bank of the Philippines, and proceeds from the privatization and transfer of government assets. Economists, however, are concerned about the potential impact on LANDBANK's financial strength and credit ratings due to its participation in the fund. They argue that lawmakers should have considered Fitch Ratings' warning about the bank's capitalization ratios and the risk of losing public trust when government financial institutions are involved. The bill is expected to be approved soon, and the fund aims to have a strategic focus on investments aligned with national priorities, such as climate change.
Source:
No issues with Maharlika Investment Fund — Medalla (May 30, 2023), BusinessWorld Online;
LANDBANK health at risk from sovereign wealth fund — economists (June 8, 2023), BusinessWorld Online
Philippines: Inflation
May inflation rate slides down to 6.1%
The Philippine Statistics Authority (2023) reported that the inflation rate in May slid down to 6.1% from 6.6% the previous month. Core inflation, which excludes selected food and energy items deemed to be volatile, dropped slightly to 7.7% from 7.9%. The downward trend was attributed to the decline in prices of transport, food and non-alcoholic beverages, and restaurant and accommodation services. Lower food prices were seen in fish, meat and dairy products.
Source: Summary inflation report consumer price index: May 2023. Philippine Statistics Authority (May 2023)
May inflation rate slides down to 6.1%
The Philippine Statistics Authority (2023) reported that the inflation rate in May slid down to 6.1% from 6.6% the previous month. Core inflation, which excludes selected food and energy items deemed to be volatile, dropped slightly to 7.7% from 7.9%. The downward trend was attributed to the decline in prices of transport, food and non-alcoholic beverages, and restaurant and accommodation services. Lower food prices were seen in fish, meat and dairy products.
Source: Summary inflation report consumer price index: May 2023. Philippine Statistics Authority (May 2023)
Philippines: Prices in NCR
NCR retail price growth slows to 9-month low in April
The retail price growth in Metro Manila reached a nine-month low in April. The slowdown in April was attributed to the accelerated price decline of mineral fuels, lubricants, and related materials, which contracted by 8.4% year-on-year, compared to a 2.9% decline in March. Additionally, the food index, which has a significant weight in the basket of goods, contributed to downward pressure as food price growth eased to 10.6% in April, down from 11.1% in March. However, it remained higher than the 3.6% growth recorded in the same period last year.
Source: NCR retail price growth slows to 9-month low in April (June 7, 2023), BusinessWorld
NCR retail price growth slows to 9-month low in April
The retail price growth in Metro Manila reached a nine-month low in April. The slowdown in April was attributed to the accelerated price decline of mineral fuels, lubricants, and related materials, which contracted by 8.4% year-on-year, compared to a 2.9% decline in March. Additionally, the food index, which has a significant weight in the basket of goods, contributed to downward pressure as food price growth eased to 10.6% in April, down from 11.1% in March. However, it remained higher than the 3.6% growth recorded in the same period last year.
Source: NCR retail price growth slows to 9-month low in April (June 7, 2023), BusinessWorld
Vietnam
Vietnam aims to cut annual rice exports by 44% to 4m tonnes by 2030
Vietnam aims to decrease its rice exports to 4 million tons per year by 2023, which is a significant reduction from the 7.1 million tons exported in 2022. The aim of this plan is to prioritize the export of high-quality rice, to ensure domestic food security, protect the environment, and adapt to climate change. Moreover, to reduce reliance on a single market, Vietnam plans to diversify its rice export markets. By 2025, Vietnam aims to export 60% of its rice production to Asian markets, 22% to Africa, 7% to American markets, 4% to the Middle East, and 3% to Europe. While Vietnam has seen a 40.7% increase in rice exports in the first four months of 2023 in comparison to the same period last year, some traders remain doubtful about the feasibility of the government’s strategy as rice production is ultimately determined by market supply and demand.
Source: Vietnam aims to cut annual rice exports by 44% to 4m tonnes by 2030 (May 27, 2023), Nikkei Asia
Vietnam aims to cut annual rice exports by 44% to 4m tonnes by 2030
Vietnam aims to decrease its rice exports to 4 million tons per year by 2023, which is a significant reduction from the 7.1 million tons exported in 2022. The aim of this plan is to prioritize the export of high-quality rice, to ensure domestic food security, protect the environment, and adapt to climate change. Moreover, to reduce reliance on a single market, Vietnam plans to diversify its rice export markets. By 2025, Vietnam aims to export 60% of its rice production to Asian markets, 22% to Africa, 7% to American markets, 4% to the Middle East, and 3% to Europe. While Vietnam has seen a 40.7% increase in rice exports in the first four months of 2023 in comparison to the same period last year, some traders remain doubtful about the feasibility of the government’s strategy as rice production is ultimately determined by market supply and demand.
Source: Vietnam aims to cut annual rice exports by 44% to 4m tonnes by 2030 (May 27, 2023), Nikkei Asia
Climate change
What does the perfect carbon price look like?
The best method to tackle climate change, according to most economists, is by putting a price on greenhouse gas emissions. This approach is efficient, fair, and encourages decarbonization efforts. Currently, there are 73 carbon-pricing schemes worldwide, covering 23% of global emissions. However, some economists on the center-left argue that these schemes are not aggressive enough and disproportionately burden the poor. They suggest that carbon prices should be higher and that the revenue generated should be used to support the less privileged. Studies have shown that carbon pricing can effectively reduce emissions without negatively impacting economic growth or employment. To make carbon pricing more effective and acceptable, it is recommended to compare and learn from different approaches, such as national carbon taxes, which can be accompanied by targeted tax cuts for the poor. The revenue generated from carbon pricing schemes can help address both the insufficiency of current measures and the concern about their impact on disadvantaged populations.
Source: What does the perfect carbon price look like? (June 1 2023), The Economist
What does the perfect carbon price look like?
The best method to tackle climate change, according to most economists, is by putting a price on greenhouse gas emissions. This approach is efficient, fair, and encourages decarbonization efforts. Currently, there are 73 carbon-pricing schemes worldwide, covering 23% of global emissions. However, some economists on the center-left argue that these schemes are not aggressive enough and disproportionately burden the poor. They suggest that carbon prices should be higher and that the revenue generated should be used to support the less privileged. Studies have shown that carbon pricing can effectively reduce emissions without negatively impacting economic growth or employment. To make carbon pricing more effective and acceptable, it is recommended to compare and learn from different approaches, such as national carbon taxes, which can be accompanied by targeted tax cuts for the poor. The revenue generated from carbon pricing schemes can help address both the insufficiency of current measures and the concern about their impact on disadvantaged populations.
Source: What does the perfect carbon price look like? (June 1 2023), The Economist
China
Why China’s government might struggle to revive its economy
China's post-COVID economic recovery is not as strong as anticipated, leading to concerns about a potential "double dip" recession. Economic data for April fell short of expectations, causing China's stocks, government bond yields, and currency to decline. May's data, including purchasing-managers indices (PMIs), indicated slower growth in services and continued contraction in manufacturing. The decline in prices manufacturers pay for inputs and charge for outputs is hurting industrial profits and hindering manufacturing investment, raising fears of deflation. The combination of weak growth and falling inflation suggests a need for easier monetary policy and looser fiscal measures. Some investors worry that the government is not sufficiently concerned about the situation, but analysts expect policy adjustments such as reserve requirement cuts and increased credit for infrastructure investment. However, larger-scale responses face obstacles, as cutting interest rates could impact bank profitability, transferring more money to local governments risks mismanagement, and direct cash distribution to households requires time to implement. Overall, China's options for stimulating the economy have become more limited over time.
Source: Why China’s government might struggle to revive its economy (June 1 2023), The Economist
Why China’s government might struggle to revive its economy
China's post-COVID economic recovery is not as strong as anticipated, leading to concerns about a potential "double dip" recession. Economic data for April fell short of expectations, causing China's stocks, government bond yields, and currency to decline. May's data, including purchasing-managers indices (PMIs), indicated slower growth in services and continued contraction in manufacturing. The decline in prices manufacturers pay for inputs and charge for outputs is hurting industrial profits and hindering manufacturing investment, raising fears of deflation. The combination of weak growth and falling inflation suggests a need for easier monetary policy and looser fiscal measures. Some investors worry that the government is not sufficiently concerned about the situation, but analysts expect policy adjustments such as reserve requirement cuts and increased credit for infrastructure investment. However, larger-scale responses face obstacles, as cutting interest rates could impact bank profitability, transferring more money to local governments risks mismanagement, and direct cash distribution to households requires time to implement. Overall, China's options for stimulating the economy have become more limited over time.
Source: Why China’s government might struggle to revive its economy (June 1 2023), The Economist
Philippines: Export plan
Marcos approves export industry blueprint
President Ferdinand R. Marcos Jr. has approved the Philippine Export Development Plan, which aims to address challenges faced by the export industry. The plan includes industry-level interventions and company-level support to develop reliable and innovative exporters. The move comes after the Philippines ratified the Regional Comprehensive Economic Partnership (RCEP), which took effect in June. The plan seeks to enhance production capabilities, develop a strong export ecosystem, and increase the country's presence in the global market. Priority industry clusters identified include industrial machinery and transport, technology, media and telecommunications, health and life sciences, and modern basic needs of a resilient economy. While critics have raised concerns about increased reliance on imports from China, the government believes RCEP will provide opportunities for the Philippine export sector by reducing tariffs and enhancing competitiveness with other countries in the region.
Source: Marcos approves export industry blueprint (June 7 2023), BusinessWorld Online
Marcos approves export industry blueprint
President Ferdinand R. Marcos Jr. has approved the Philippine Export Development Plan, which aims to address challenges faced by the export industry. The plan includes industry-level interventions and company-level support to develop reliable and innovative exporters. The move comes after the Philippines ratified the Regional Comprehensive Economic Partnership (RCEP), which took effect in June. The plan seeks to enhance production capabilities, develop a strong export ecosystem, and increase the country's presence in the global market. Priority industry clusters identified include industrial machinery and transport, technology, media and telecommunications, health and life sciences, and modern basic needs of a resilient economy. While critics have raised concerns about increased reliance on imports from China, the government believes RCEP will provide opportunities for the Philippine export sector by reducing tariffs and enhancing competitiveness with other countries in the region.
Source: Marcos approves export industry blueprint (June 7 2023), BusinessWorld Online
Energy Prices
Saudi Output Cut to Boost Oil Prices Could Be Costly
Saudi Arabia, a major country of the Organization of the Petroleum Exporting Countries and their allies (OPEC+), has announced that it will be lowering its oil production by July 2023. This is occurring concurrently with an existing OPEC+ agreement to reduce oil production until 2024. This price is 18% lower than when OPEC+ agreed to begin cuts in oil production in October 2022. Saudi Arabia in particular will be reducing oil production from 10 million barrels per day (bpd) to 9 million bpd to stabilize oil prices and to deter existing speculation that the price of oil will continue to fall. Saudi Arabia needs Brent Crude’s price to rise to US$80 per barrel to balance its budget given its expansionary fiscal policy plans. This is expected to create an oil deficit in the oil market. The International Energy Agency stated that without the new Saudi oil cuts, the deficit would be 1.9 million barrels per day by quarter three of this year. These new Saudi cuts are expected to grow this deficit to 3 million barrels per day.
Source: Saudi Output Cut to Boost Oil Prices Could Be Costly (June 5, 2023), Wall Street Journal
Contributors:
Natasha Amber Cabiltes
Mitzie Irene Conchada
Edgar Desher Empeño
Jose Lorenzo Mercado
Brendan Emmanuel Miranda
Jacobe Joaquin Sevilla
Saudi Output Cut to Boost Oil Prices Could Be Costly
Saudi Arabia, a major country of the Organization of the Petroleum Exporting Countries and their allies (OPEC+), has announced that it will be lowering its oil production by July 2023. This is occurring concurrently with an existing OPEC+ agreement to reduce oil production until 2024. This price is 18% lower than when OPEC+ agreed to begin cuts in oil production in October 2022. Saudi Arabia in particular will be reducing oil production from 10 million barrels per day (bpd) to 9 million bpd to stabilize oil prices and to deter existing speculation that the price of oil will continue to fall. Saudi Arabia needs Brent Crude’s price to rise to US$80 per barrel to balance its budget given its expansionary fiscal policy plans. This is expected to create an oil deficit in the oil market. The International Energy Agency stated that without the new Saudi oil cuts, the deficit would be 1.9 million barrels per day by quarter three of this year. These new Saudi cuts are expected to grow this deficit to 3 million barrels per day.
Source: Saudi Output Cut to Boost Oil Prices Could Be Costly (June 5, 2023), Wall Street Journal
Contributors:
Natasha Amber Cabiltes
Mitzie Irene Conchada
Edgar Desher Empeño
Jose Lorenzo Mercado
Brendan Emmanuel Miranda
Jacobe Joaquin Sevilla