RECENT NEWS
Philippines: Electronics
PEDP electronics target may be tough, says SEIPI
The Philippine electronics industry may struggle to achieve its export target for this year due to global challenges, according to Danilo C. Lachica, president of the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. The export target of $53.7 billion for electronics in 2023 may be difficult to reach due to factors such as high power and logistics costs and geopolitical tensions. The overall export target for the Philippines in 2023 is set at $126.8 billion, with 42.4% expected to come from electronics and electrical exports. The local electronics sector aims for a 5% growth in electronics exports in 2023, despite a decline of 15.3% in the first quarter of this year. The benefits of the Regional Comprehensive Economic Partnership (RCEP) trade agreement are not expected to be felt immediately by the electronics sector. Mr. Lachica also expressed concerns about the lack of new investments, products, and technologies in the industry. “...I think the biggest concern for our industry is looking into why we are not getting the new investments, and products, and technologies,” he added.
Source: PEDP electronics target may be tough, says SEIPI (June 22 2023), BusinessWorld Online
PEDP electronics target may be tough, says SEIPI
The Philippine electronics industry may struggle to achieve its export target for this year due to global challenges, according to Danilo C. Lachica, president of the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. The export target of $53.7 billion for electronics in 2023 may be difficult to reach due to factors such as high power and logistics costs and geopolitical tensions. The overall export target for the Philippines in 2023 is set at $126.8 billion, with 42.4% expected to come from electronics and electrical exports. The local electronics sector aims for a 5% growth in electronics exports in 2023, despite a decline of 15.3% in the first quarter of this year. The benefits of the Regional Comprehensive Economic Partnership (RCEP) trade agreement are not expected to be felt immediately by the electronics sector. Mr. Lachica also expressed concerns about the lack of new investments, products, and technologies in the industry. “...I think the biggest concern for our industry is looking into why we are not getting the new investments, and products, and technologies,” he added.
Source: PEDP electronics target may be tough, says SEIPI (June 22 2023), BusinessWorld Online
Philippines: Competitiveness
PHL competitiveness ranking dips — report
The Philippines has dropped four spots in the annual global competitiveness report, ranking 52nd out of 64 economies in the 2023 World Competitiveness Yearbook by the International Institute for Management Development (IMD). The decline is attributed to factors such as global inflation, public health crises, and geopolitical concerns. The country's infrastructure, business efficiency, and government efficiency factors all experienced declines. The report suggests that improving infrastructure, involving the private sector, and implementing reforms in education, taxation, and public services could help enhance competitiveness. Despite the drop, the Philippines saw improvement in the economic performance factor. Denmark, Ireland, and Switzerland topped the competitiveness index globally, while Singapore, Taiwan, and Hong Kong were the most competitive economies in the Asia-Pacific region.
Source: PHL competitiveness ranking dips — report (June 20 2023), BusinessWorld Online
PHL competitiveness ranking dips — report
The Philippines has dropped four spots in the annual global competitiveness report, ranking 52nd out of 64 economies in the 2023 World Competitiveness Yearbook by the International Institute for Management Development (IMD). The decline is attributed to factors such as global inflation, public health crises, and geopolitical concerns. The country's infrastructure, business efficiency, and government efficiency factors all experienced declines. The report suggests that improving infrastructure, involving the private sector, and implementing reforms in education, taxation, and public services could help enhance competitiveness. Despite the drop, the Philippines saw improvement in the economic performance factor. Denmark, Ireland, and Switzerland topped the competitiveness index globally, while Singapore, Taiwan, and Hong Kong were the most competitive economies in the Asia-Pacific region.
Source: PHL competitiveness ranking dips — report (June 20 2023), BusinessWorld Online
Philippines: Balance of Payment
Balance of payment deficit narrows to $439M
The Philippines has made progress in addressing its balance of payment deficit, which has significantly contracted to $439 million. This encouraging development showcases the country's improved economic standing given a reduction in the outflow of foreign exchange relative to the inflow. The narrower deficit means greater stability in trade and financial activities, indicating effective management of international transactions. This positive trend augurs well for the Philippines' economic future, underscoring its commitment to maintaining a robust position in the global market.
Source:Balance of payment deficit narrows to $439M (June 21 2023), BusinessWorld Online
Balance of payment deficit narrows to $439M
The Philippines has made progress in addressing its balance of payment deficit, which has significantly contracted to $439 million. This encouraging development showcases the country's improved economic standing given a reduction in the outflow of foreign exchange relative to the inflow. The narrower deficit means greater stability in trade and financial activities, indicating effective management of international transactions. This positive trend augurs well for the Philippines' economic future, underscoring its commitment to maintaining a robust position in the global market.
Source:
Philippines: Agriculture
Agriculture sector’s GDP contribution continues to decline
The gross value added of the agricultural sector in the Philippines totaled PHP 1.78 trillion in 2022, making up 8.9% of the country’s total output in the said year against the 61.4% and 29.7% shares of the services and industry sectors, respectively, based on data from the Philippine Statistics Authority. The 8.9% share of the agricultural sector marked its lowest percent contribution in the last five years, with the contribution of the industry sector at a steady 29 to 30%, and the share of services rising from 59.4% in 2018.
Source: Agriculture sector remains lowest GDP contributor (June 20, 2023), MSN
Agriculture sector’s GDP contribution continues to decline
The gross value added of the agricultural sector in the Philippines totaled PHP 1.78 trillion in 2022, making up 8.9% of the country’s total output in the said year against the 61.4% and 29.7% shares of the services and industry sectors, respectively, based on data from the Philippine Statistics Authority. The 8.9% share of the agricultural sector marked its lowest percent contribution in the last five years, with the contribution of the industry sector at a steady 29 to 30%, and the share of services rising from 59.4% in 2018.
Source: Agriculture sector remains lowest GDP contributor (June 20, 2023), MSN
Philippines: Agriculture
Farm output subsidies in PHL regressive, says WB
The Philippines has one of the most regressive output subsidies, according to a report by the World Bank, with the country ranking first among 16 countries in terms of regressive output subsidies. The report examined whether poorer regions in a country received a larger share of output subsidies compared to their share of agricultural production value. According to the World Bank, shifting output subsidies from rice to maize would make output subsidies more spatially progressive, as rice production is responsible for causing harmful externalities such as water scarcity, salinization, and carbon dioxide emission. Furthermore, the report asserted that output subsidies targeted at maize production are directly more progressive, as these crops tend to be produced in poorer areas of the country.
Source: Farm output subsidies in PHL regressive, says WB (June 20, 2023), BusinessWorld Online
Farm output subsidies in PHL regressive, says WB
The Philippines has one of the most regressive output subsidies, according to a report by the World Bank, with the country ranking first among 16 countries in terms of regressive output subsidies. The report examined whether poorer regions in a country received a larger share of output subsidies compared to their share of agricultural production value. According to the World Bank, shifting output subsidies from rice to maize would make output subsidies more spatially progressive, as rice production is responsible for causing harmful externalities such as water scarcity, salinization, and carbon dioxide emission. Furthermore, the report asserted that output subsidies targeted at maize production are directly more progressive, as these crops tend to be produced in poorer areas of the country.
Source: Farm output subsidies in PHL regressive, says WB (June 20, 2023), BusinessWorld Online
ASEAN: Vietnam exports
Vietnam grapples with shrinking exports, power crunch
The Vietnamese economy is facing several challenges, such as declining exports and frequent power outages. Therefore, there are concerns that these challenges may affect the future of Vietnam as a manufacturing hub in Southeast Asia. Despite being one of Asia’s fastest-growing economies in years, Vietnam’s economic growth has slowed down. There are also declines in exports, imports, and manufacturing. In addition, Vietnam is concerned about declining demand for its products in key markets from foreign countries. Apart from these external risks, there are also domestic challenges such as energy shortages due to high temperatures and tight power supplies that are affecting business operations. Therefore, there is no clear indication that Vietnam has reached the bottom of its economic challenges as headwinds to its economic growth still continue to intensify.
Source: Vietnam grapples with shrinking exports, power crunch (June 14, 2023), Nikkei Asia
Vietnam grapples with shrinking exports, power crunch
The Vietnamese economy is facing several challenges, such as declining exports and frequent power outages. Therefore, there are concerns that these challenges may affect the future of Vietnam as a manufacturing hub in Southeast Asia. Despite being one of Asia’s fastest-growing economies in years, Vietnam’s economic growth has slowed down. There are also declines in exports, imports, and manufacturing. In addition, Vietnam is concerned about declining demand for its products in key markets from foreign countries. Apart from these external risks, there are also domestic challenges such as energy shortages due to high temperatures and tight power supplies that are affecting business operations. Therefore, there is no clear indication that Vietnam has reached the bottom of its economic challenges as headwinds to its economic growth still continue to intensify.
Source: Vietnam grapples with shrinking exports, power crunch (June 14, 2023), Nikkei Asia
China: Lending rates
China cuts benchmark lending rates as policy easing picks up
China has announced its first cut to benchmark lending rates in nearly a year, which signals a cautious monetary support to stimulate economic growth. The move reflects policymakers’ efforts to shift towards easing measures as concerns grow over the trajectory of China’s struggling economy. Despite the loosening of severe restrictions in China six months ago, its economy has not fully recovered. Trade headwinds and weakness in the property sector, which account for over a quarter of economic activity, have put pressure on growth. Thus, the People’s Bank of China has cut the medium-term lending facility affecting banking sector liquidity.
Source: China cuts benchmark lending rates as policy easing picks up (June 20, 2023), The Financial Times
China cuts benchmark lending rates as policy easing picks up
China has announced its first cut to benchmark lending rates in nearly a year, which signals a cautious monetary support to stimulate economic growth. The move reflects policymakers’ efforts to shift towards easing measures as concerns grow over the trajectory of China’s struggling economy. Despite the loosening of severe restrictions in China six months ago, its economy has not fully recovered. Trade headwinds and weakness in the property sector, which account for over a quarter of economic activity, have put pressure on growth. Thus, the People’s Bank of China has cut the medium-term lending facility affecting banking sector liquidity.
Source: China cuts benchmark lending rates as policy easing picks up (June 20, 2023), The Financial Times
China: Growth and Recovery
China’s Pivot on Stimulus Spurred by Fear That the Slowdown Could Get a Lot Worse
Although key indicators pointed towards a robust recovery for China in the beginning of the year amidst the junking of COVID-19 restrictions, confidence in the economy remained weak as reports of lower business confidence, a weakened property market, and high youth unemployment surfaced. Economists from Nomura have pegged China’s GDP growth to 5.1% for 2023, lower than the previous 5.5%. Economists have pointed toward the lack of confidence in the economy as a primary barrier to China’s economic recovery, which may render the effects of stimuli muted. Official surveys placed consumer confidence at 94.9 in March of this year, still lower than March 2019’s figure at 124.1. Although risking more speculative behavior in the economy, Beijing has implemented various monetary easing and fiscal stimulus policies such as cutting back policy rates and issuing treasury bonds worth $140 billion to fund new infrastructure.
Source: China’s Pivot on Stimulus Spurred by Fear That the Slowdown Could Get a Lot Worse - WSJ (June 16, 2023), The Wall Street Journal
China’s Pivot on Stimulus Spurred by Fear That the Slowdown Could Get a Lot Worse
Although key indicators pointed towards a robust recovery for China in the beginning of the year amidst the junking of COVID-19 restrictions, confidence in the economy remained weak as reports of lower business confidence, a weakened property market, and high youth unemployment surfaced. Economists from Nomura have pegged China’s GDP growth to 5.1% for 2023, lower than the previous 5.5%. Economists have pointed toward the lack of confidence in the economy as a primary barrier to China’s economic recovery, which may render the effects of stimuli muted. Official surveys placed consumer confidence at 94.9 in March of this year, still lower than March 2019’s figure at 124.1. Although risking more speculative behavior in the economy, Beijing has implemented various monetary easing and fiscal stimulus policies such as cutting back policy rates and issuing treasury bonds worth $140 billion to fund new infrastructure.
Source: China’s Pivot on Stimulus Spurred by Fear That the Slowdown Could Get a Lot Worse - WSJ (June 16, 2023), The Wall Street Journal
China: Deflation
China’s Inflation Problem? It Has None
China currently faces the risk of deflation as factory prices in the country have fallen to their lowest level in seven years whilst Chinese consumer prices faced minimal growth, 0.1% in April. Deflation will likely stunt Chinese growth and will be difficult to reverse. Chinese economists are recommending that interest rates be lowered, currency be depreciated, and that households and businesses should be incentivized by policy to spend. Potential Chinese deflation will likely make it cheaper to import Chinese goods. In this way, China would be exporting its deflation to the global economy and thereby alleviate the inflation observed in the global economy. In spite of this risk, economists expect that China will reach the 5% growth target in 2023. Other economists predict that deflation is unlikely and that in months to come the actions of policy makers and an improving labor market will lead to greater inflation.
Source: China’s Inflation Problem? It Has None (June 9, 2023), The Wall Street Journal
China’s Inflation Problem? It Has None
China currently faces the risk of deflation as factory prices in the country have fallen to their lowest level in seven years whilst Chinese consumer prices faced minimal growth, 0.1% in April. Deflation will likely stunt Chinese growth and will be difficult to reverse. Chinese economists are recommending that interest rates be lowered, currency be depreciated, and that households and businesses should be incentivized by policy to spend. Potential Chinese deflation will likely make it cheaper to import Chinese goods. In this way, China would be exporting its deflation to the global economy and thereby alleviate the inflation observed in the global economy. In spite of this risk, economists expect that China will reach the 5% growth target in 2023. Other economists predict that deflation is unlikely and that in months to come the actions of policy makers and an improving labor market will lead to greater inflation.
Source: China’s Inflation Problem? It Has None (June 9, 2023), The Wall Street Journal
World population
Global fertility has collapsed, with profound economic consequences
The global fertility rate is declining, which could lead to a shrinking population by the end of the century. In 2000, the world's fertility rate was 2.7 births per woman, but today it is 2.3 and falling. Even the largest economies, including the United States, China, and India, have fertility rates below the replacement rate. Aging populations are becoming a significant issue, not only in Japan and Italy but also in countries like Brazil, Mexico, and Thailand. By 2030, more than half of East and South-East Asia's population will be over 40. The implications of declining fertility rates include economic difficulties in supporting a growing number of pensioners, lower productivity due to fewer young workers, and a decrease in breakthrough innovations and creative problem-solving. The consequences of the baby bust include higher taxes, later retirements, lower returns for savers, potential government budget crises, reduced productivity growth, and missed opportunities for economic advancement. On the other hand, while low fertility rates can be seen as a crisis, it is important to recognize that they are often a result of positive factors such as increased wealth and improved choices for individuals.
Source: Global fertility has collapsed, with profound economic consequences (June 1 2023), The Economist
Global fertility has collapsed, with profound economic consequences
The global fertility rate is declining, which could lead to a shrinking population by the end of the century. In 2000, the world's fertility rate was 2.7 births per woman, but today it is 2.3 and falling. Even the largest economies, including the United States, China, and India, have fertility rates below the replacement rate. Aging populations are becoming a significant issue, not only in Japan and Italy but also in countries like Brazil, Mexico, and Thailand. By 2030, more than half of East and South-East Asia's population will be over 40. The implications of declining fertility rates include economic difficulties in supporting a growing number of pensioners, lower productivity due to fewer young workers, and a decrease in breakthrough innovations and creative problem-solving. The consequences of the baby bust include higher taxes, later retirements, lower returns for savers, potential government budget crises, reduced productivity growth, and missed opportunities for economic advancement. On the other hand, while low fertility rates can be seen as a crisis, it is important to recognize that they are often a result of positive factors such as increased wealth and improved choices for individuals.
Source: Global fertility has collapsed, with profound economic consequences (June 1 2023), The Economist
Inflation
Investors must prepare for sustained higher inflation
Global inflation remains a concern despite a decline in the United States. In the UK, wages and core prices rose by around 7%, while core inflation exceeded 5% in the US and the EU. Governments running large budget deficits add to inflationary pressures. Furthermore, disrupted supply chains and increased spending demands worsen the situation. Central banks face difficult choices with potential repercussions for financial markets due to the trade-off between growth and price stability. They may struggle to meet targets and could tolerate higher inflation of 3% to 4%. However, this would disrupt financial markets and damage central banks' reputations. Volatile inflation would harm companies, asset prices, and financial relationships. It could also affect borrowing costs, fund managers' fees, and pension purchasing power. Central banks face an excruciating dilemma, seeking to balance inflation and recession risks with uncertain outcomes.
Source: Investors must prepare for sustained higher inflation (June 22 2023), The Economist
Investors must prepare for sustained higher inflation
Global inflation remains a concern despite a decline in the United States. In the UK, wages and core prices rose by around 7%, while core inflation exceeded 5% in the US and the EU. Governments running large budget deficits add to inflationary pressures. Furthermore, disrupted supply chains and increased spending demands worsen the situation. Central banks face difficult choices with potential repercussions for financial markets due to the trade-off between growth and price stability. They may struggle to meet targets and could tolerate higher inflation of 3% to 4%. However, this would disrupt financial markets and damage central banks' reputations. Volatile inflation would harm companies, asset prices, and financial relationships. It could also affect borrowing costs, fund managers' fees, and pension purchasing power. Central banks face an excruciating dilemma, seeking to balance inflation and recession risks with uncertain outcomes.
Source: Investors must prepare for sustained higher inflation (June 22 2023), The Economist
India and US Diplomacy
What to Know About Modi’s Visit and U.S.-India Relations
The visit of Indian Prime Minister Narendra Modi to the United States is expected to improve the bilateral relationship between the two nations. It provides a valuable opportunity for both countries to enhance cooperation on important matters such as climate change, security, and trade. The US sees the 5th largest economy in the world as a possible economic and political ally within the region. President Joe Biden and Prime Minister Modi are expected to discuss key issues like the Quad alliance, regional stability, and the changing geopolitical landscape. This meeting holds strong significance as it aims to foster closer ties and address common challenges, highlighting the growing significance of the US-India partnership on the global stage.
Source: What to Know About Modi’s Visit and U.S.-India Relations (June 22 2023), The New York Times
What to Know About Modi’s Visit and U.S.-India Relations
The visit of Indian Prime Minister Narendra Modi to the United States is expected to improve the bilateral relationship between the two nations. It provides a valuable opportunity for both countries to enhance cooperation on important matters such as climate change, security, and trade. The US sees the 5th largest economy in the world as a possible economic and political ally within the region. President Joe Biden and Prime Minister Modi are expected to discuss key issues like the Quad alliance, regional stability, and the changing geopolitical landscape. This meeting holds strong significance as it aims to foster closer ties and address common challenges, highlighting the growing significance of the US-India partnership on the global stage.
Source: What to Know About Modi’s Visit and U.S.-India Relations (June 22 2023), The New York Times
Artificial intelligence
Generative A.I. Can Add $4.4 Trillion in Value to Global Economy, Study Says
A McKinsey Global Institute report on Generative artificial intelligence (Generative AI) suggests that Generative AI has the capacity to inject $4.4 trillion into the global economy annually. Generative AI, as represented by ChatGPT, can do so by cutting down 60 – 70% of the time used by employees and thus increasing their productivity. This kind of AI cuts down time by automating some of the employees’ tasks. McKinsey predicts in this report that 50% of all work will be carried out by automation in 2030 – 2060. The bulk of generative AI’s economic output will likely be done in automating jobs in the areas of customer operations, sales, software engineering, and research. This report was released within a similar time frame as Goldman Sachs’ which warns that Generative AI could displace workers in the future. David Autor, professor of economics at MIT, warns that any conclusions drawn regarding AI are probably premature due to the technology’s nascency and that current expectations are too optimistic.
Source: Generative A.I. Can Add $4.4 Trillion in Value to Global Economy, Study Says (June 14, 2023), The New York Times
Contributors:
Natasha Amber Cabiltes
Edgar Desher Empeño
Jose Lorenzo Mercado
Brendan Emmanuel Miranda
Jacobe Joaquin Sevilla
Generative A.I. Can Add $4.4 Trillion in Value to Global Economy, Study Says
A McKinsey Global Institute report on Generative artificial intelligence (Generative AI) suggests that Generative AI has the capacity to inject $4.4 trillion into the global economy annually. Generative AI, as represented by ChatGPT, can do so by cutting down 60 – 70% of the time used by employees and thus increasing their productivity. This kind of AI cuts down time by automating some of the employees’ tasks. McKinsey predicts in this report that 50% of all work will be carried out by automation in 2030 – 2060. The bulk of generative AI’s economic output will likely be done in automating jobs in the areas of customer operations, sales, software engineering, and research. This report was released within a similar time frame as Goldman Sachs’ which warns that Generative AI could displace workers in the future. David Autor, professor of economics at MIT, warns that any conclusions drawn regarding AI are probably premature due to the technology’s nascency and that current expectations are too optimistic.
Source: Generative A.I. Can Add $4.4 Trillion in Value to Global Economy, Study Says (June 14, 2023), The New York Times
Contributors:
Natasha Amber Cabiltes
Edgar Desher Empeño
Jose Lorenzo Mercado
Brendan Emmanuel Miranda
Jacobe Joaquin Sevilla