RECENT NEWS
Philippines: Debt
Gross borrowings hit P1.4T in 1st half
The National Government's gross borrowings surged by almost a third to P1.42 trillion in the first half of the year, according to the Bureau of the Treasury (BTr). This marks a 32.9% increase from P1.07 trillion during the same period in the previous year. The domestic debt accounted for 74.25% of the total gross borrowings, with domestic debt increasing by 42.5% to P1.06 trillion. The Bureau of the Treasury raised funds through fixed-rate Treasury bonds, retail Treasury bonds, and Treasury bills. External borrowings increased by 11.3%, reaching P366.441 billion. In June alone, the National Government's gross borrowings rose by 13.9% to P166.487 billion. Headline inflation eased to 5.4% in June. The NG's outstanding debt stood at P14.15 trillion by end-June, up by 10.6% compared to the previous year. The debt-to-GDP ratio remained at 61%, unchanged from the first quarter but still above the 60% threshold recommended for manageable developing economies by multilateral lenders. The Department of Finance aims to bring the debt-to-GDP ratio below 60% by 2025. Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort attributes the increase in gross borrowings to elevated inflation and high-interest rates. The government plans to borrow P2.207 trillion this year, consisting of P1.654 trillion from domestic sources and P553.5 billion from external sources.
Source: BusinessWorld Online. (2023, August 28). Gross borrowings hit P1.4T in 1st half.
Gross borrowings hit P1.4T in 1st half
The National Government's gross borrowings surged by almost a third to P1.42 trillion in the first half of the year, according to the Bureau of the Treasury (BTr). This marks a 32.9% increase from P1.07 trillion during the same period in the previous year. The domestic debt accounted for 74.25% of the total gross borrowings, with domestic debt increasing by 42.5% to P1.06 trillion. The Bureau of the Treasury raised funds through fixed-rate Treasury bonds, retail Treasury bonds, and Treasury bills. External borrowings increased by 11.3%, reaching P366.441 billion. In June alone, the National Government's gross borrowings rose by 13.9% to P166.487 billion. Headline inflation eased to 5.4% in June. The NG's outstanding debt stood at P14.15 trillion by end-June, up by 10.6% compared to the previous year. The debt-to-GDP ratio remained at 61%, unchanged from the first quarter but still above the 60% threshold recommended for manageable developing economies by multilateral lenders. The Department of Finance aims to bring the debt-to-GDP ratio below 60% by 2025. Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort attributes the increase in gross borrowings to elevated inflation and high-interest rates. The government plans to borrow P2.207 trillion this year, consisting of P1.654 trillion from domestic sources and P553.5 billion from external sources.
Source: BusinessWorld Online. (2023, August 28). Gross borrowings hit P1.4T in 1st half.
Philippines: Inflation
Pump price hikes may affect inflation downtrend
The recent series of fuel price increases in August is likely to counteract or moderate the current downward trend in inflation, according to analysts. Oil price hikes, including significant increases in gasoline, diesel, and kerosene prices, are expected to impact overall inflation. Rising global crude oil prices, attributed to production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, have contributed to these increases. Economists predict that the rise in pump prices could result in a less substantial decrease in headline inflation. Despite July's headline inflation slowing to 4.7%, and transport inflation contracting by 4.7%, the average inflation for the first seven months of the year remained at 6.8%. The Bangko Sentral ng Pilipinas (BSP) adjusted its inflation forecasts for 2023 and 2024, citing wage hikes and higher global oil prices. Risks to the inflation outlook include storm-related damage to agriculture, increased rice prices, recent wage hikes, and potential currency depreciation against the dollar. Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted that the peso's depreciation could impact imported fuel and other goods' prices. China Banking Corp. Chief Economist Domini S. Velasquez emphasized the need for the BSP to be prepared to address potential financial market volatilities, considering the US Federal Reserve's hawkish statements. The possibility of US interest rate hikes could influence the BSP's policy decisions. US Federal Reserve Chair Jerome H. Powell's statements regarding interest rate adjustments were seen as balanced, indicating a readiness to hike or pause as necessary. ING Bank's Nicholas Antonio T. Mapa suggests that the BSP will remain dependent on data and open to various strategies, potentially raising rates if the US Federal Reserve continues its hikes. The BSP's next policy meeting is scheduled for September 21.
Source: BusinessWorld Online. (2023, August 28). Pump price hikes may affect inflation downtrend.
Pump price hikes may affect inflation downtrend
The recent series of fuel price increases in August is likely to counteract or moderate the current downward trend in inflation, according to analysts. Oil price hikes, including significant increases in gasoline, diesel, and kerosene prices, are expected to impact overall inflation. Rising global crude oil prices, attributed to production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, have contributed to these increases. Economists predict that the rise in pump prices could result in a less substantial decrease in headline inflation. Despite July's headline inflation slowing to 4.7%, and transport inflation contracting by 4.7%, the average inflation for the first seven months of the year remained at 6.8%. The Bangko Sentral ng Pilipinas (BSP) adjusted its inflation forecasts for 2023 and 2024, citing wage hikes and higher global oil prices. Risks to the inflation outlook include storm-related damage to agriculture, increased rice prices, recent wage hikes, and potential currency depreciation against the dollar. Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted that the peso's depreciation could impact imported fuel and other goods' prices. China Banking Corp. Chief Economist Domini S. Velasquez emphasized the need for the BSP to be prepared to address potential financial market volatilities, considering the US Federal Reserve's hawkish statements. The possibility of US interest rate hikes could influence the BSP's policy decisions. US Federal Reserve Chair Jerome H. Powell's statements regarding interest rate adjustments were seen as balanced, indicating a readiness to hike or pause as necessary. ING Bank's Nicholas Antonio T. Mapa suggests that the BSP will remain dependent on data and open to various strategies, potentially raising rates if the US Federal Reserve continues its hikes. The BSP's next policy meeting is scheduled for September 21.
Source: BusinessWorld Online. (2023, August 28). Pump price hikes may affect inflation downtrend.
Philippines: Inflation
Philippines most at risk from rising food, power prices
The Philippines has been identified as the most vulnerable among emerging Asian economies to rising food and energy prices, as indicated by the Nomura Food Vulnerability Index (NFVI). Among 110 countries analyzed, 50, including the Philippines, are exposed to food price surges. Emerging Asia, which includes the Philippines, is at risk due to its dependence on food and energy imports, which constitute a significant portion of consumption expenditures. There is a projected six-month lag between global food price inflation and consumer price index (CPI) food inflation in Asia. Nomura predicts that a 20% increase in food and energy prices by the year's end could lead to a 0.6% annualized GDP impact on current account balances for the Philippines and India. In the Philippines, food constitutes a substantial share of the CPI basket, particularly rice, accounting for over 34.8% of the basket. The country's net food imports are among the highest in the region, and the absence of subsidies for oil prices leads to an immediate pass-through to consumers. Given this vulnerability, the Bangko Sentral ng Pilipinas (BSP) might resume its rate-hiking cycle to address inflation risks.
Nomura also notes that the Philippine peso is susceptible to depreciation due to rising food and energy prices, as the country is a significant net energy and food importer. If food and energy prices increase by 20% by the year's end, the Philippines could experience further depreciation pressure, with its projected current account deficit reaching $17.8 billion or 4.1% of GDP. This pressure on the peso is exacerbated by the government's infrastructure projects and food importation initiatives, coupled with weakening external demand for exports.
Source: The Philippine Star. (2023, August 29). Philippines most at risk from rising food, power prices.
Philippines most at risk from rising food, power prices
The Philippines has been identified as the most vulnerable among emerging Asian economies to rising food and energy prices, as indicated by the Nomura Food Vulnerability Index (NFVI). Among 110 countries analyzed, 50, including the Philippines, are exposed to food price surges. Emerging Asia, which includes the Philippines, is at risk due to its dependence on food and energy imports, which constitute a significant portion of consumption expenditures. There is a projected six-month lag between global food price inflation and consumer price index (CPI) food inflation in Asia. Nomura predicts that a 20% increase in food and energy prices by the year's end could lead to a 0.6% annualized GDP impact on current account balances for the Philippines and India. In the Philippines, food constitutes a substantial share of the CPI basket, particularly rice, accounting for over 34.8% of the basket. The country's net food imports are among the highest in the region, and the absence of subsidies for oil prices leads to an immediate pass-through to consumers. Given this vulnerability, the Bangko Sentral ng Pilipinas (BSP) might resume its rate-hiking cycle to address inflation risks.
Nomura also notes that the Philippine peso is susceptible to depreciation due to rising food and energy prices, as the country is a significant net energy and food importer. If food and energy prices increase by 20% by the year's end, the Philippines could experience further depreciation pressure, with its projected current account deficit reaching $17.8 billion or 4.1% of GDP. This pressure on the peso is exacerbated by the government's infrastructure projects and food importation initiatives, coupled with weakening external demand for exports.
Source: The Philippine Star. (2023, August 29). Philippines most at risk from rising food, power prices.
Trade: BRICS
BRICS welcomes new members in push to reshuffle world order
The BRICS bloc, consisting of China, Brazil, Russia, India, and South Africa, has agreed to expand its membership for the first time in 13 years, welcoming Saudi Arabia, Iran, Ethiopia, Egypt, Argentina, and the United Arab Emirates. This move is intended to accelerate efforts to reshape the perceived outdated world order. BRICS leaders left room for future enlargement, aiming to create a more balanced global playing field. The expansion enhances BRICS' economic strength and aligns with its goal of championing the Global South. However, tensions may arise between members wanting to counterbalance the West and those maintaining ties with the US and Europe. The addition of these oil-producing nations signifies their desire to shift away from the US sphere and become more significant global players. Russia and Iran's inclusion emphasizes their united stance against sanctions and isolation, while China's ties to Ethiopia and South Africa's intention to amplify Africa's voice also influenced the selection. Although the expansion demonstrates BRICS' growing influence, internal divisions among members with varying economies and foreign policy goals have limited its impact on the global stage. While BRICS' ambitions, such as reducing dependency on the dollar, have faced challenges, the expansion indicates the bloc's ongoing strategy to challenge Western dominance. The inclusion of Iran, a historical rival of the US, underscores BRICS' geopolitical significance. Despite disagreements over the bloc's direction, leaders highlight the importance of bringing in countries that advance the cause of the developing world.
Source: Reuters. (2023, August 25). BRICS welcomes new members in push to reshuffle world order.
BRICS welcomes new members in push to reshuffle world order
The BRICS bloc, consisting of China, Brazil, Russia, India, and South Africa, has agreed to expand its membership for the first time in 13 years, welcoming Saudi Arabia, Iran, Ethiopia, Egypt, Argentina, and the United Arab Emirates. This move is intended to accelerate efforts to reshape the perceived outdated world order. BRICS leaders left room for future enlargement, aiming to create a more balanced global playing field. The expansion enhances BRICS' economic strength and aligns with its goal of championing the Global South. However, tensions may arise between members wanting to counterbalance the West and those maintaining ties with the US and Europe. The addition of these oil-producing nations signifies their desire to shift away from the US sphere and become more significant global players. Russia and Iran's inclusion emphasizes their united stance against sanctions and isolation, while China's ties to Ethiopia and South Africa's intention to amplify Africa's voice also influenced the selection. Although the expansion demonstrates BRICS' growing influence, internal divisions among members with varying economies and foreign policy goals have limited its impact on the global stage. While BRICS' ambitions, such as reducing dependency on the dollar, have faced challenges, the expansion indicates the bloc's ongoing strategy to challenge Western dominance. The inclusion of Iran, a historical rival of the US, underscores BRICS' geopolitical significance. Despite disagreements over the bloc's direction, leaders highlight the importance of bringing in countries that advance the cause of the developing world.
Source: Reuters. (2023, August 25). BRICS welcomes new members in push to reshuffle world order.
China: Growth
What China’s economic troubles mean for the world
China's economic struggles are having a global impact due to its role as a major driver of global growth. The country's slowing economic growth is affecting not only its own people, but also other nations. China's large consumption of commodities, including oil, copper, nickel, zinc, and iron ore, means that commodity exporters will be hit by its slowdown, impacting countries like Zambia and Australia. Weakness in China's demand is also affecting Germany and some Western companies that rely on China for significant revenues, such as Tesla and Qualcomm. Although China's struggles may bring pain to some regions, the impact is somewhat concentrated, given that sales to China constitute only a relatively small portion of business for most listed companies in the US, Europe, and Japan. China's slowdown coincides with better-than-expected growth in other parts of the world, particularly in the US. If China's economic situation worsens, it could have broader repercussions. A property meltdown or a worst-case scenario of economic growth falling significantly could lead to global asset price declines and currency fluctuations. China's potential turn inward could impact its overseas investments and loans, changing its approach to projects like the "Belt and Road Initiative." China's economic difficulties also influence how it's perceived globally. Rapid growth and overseas lending boosted China's reputation, especially in emerging economies. However, as China's economic challenges persist, the world's perception of China and its investments may change.
Source: The Economist. (2023, August 22). What China’s economic troubles mean for the world.
What China’s economic troubles mean for the world
China's economic struggles are having a global impact due to its role as a major driver of global growth. The country's slowing economic growth is affecting not only its own people, but also other nations. China's large consumption of commodities, including oil, copper, nickel, zinc, and iron ore, means that commodity exporters will be hit by its slowdown, impacting countries like Zambia and Australia. Weakness in China's demand is also affecting Germany and some Western companies that rely on China for significant revenues, such as Tesla and Qualcomm. Although China's struggles may bring pain to some regions, the impact is somewhat concentrated, given that sales to China constitute only a relatively small portion of business for most listed companies in the US, Europe, and Japan. China's slowdown coincides with better-than-expected growth in other parts of the world, particularly in the US. If China's economic situation worsens, it could have broader repercussions. A property meltdown or a worst-case scenario of economic growth falling significantly could lead to global asset price declines and currency fluctuations. China's potential turn inward could impact its overseas investments and loans, changing its approach to projects like the "Belt and Road Initiative." China's economic difficulties also influence how it's perceived globally. Rapid growth and overseas lending boosted China's reputation, especially in emerging economies. However, as China's economic challenges persist, the world's perception of China and its investments may change.
Source: The Economist. (2023, August 22). What China’s economic troubles mean for the world.
China: Growth
China’s economy is in desperate need of rescue
China's economy is grappling with a worrisome combination of challenges, including falling consumer prices, a significant decline in exports, and a struggling property sector that has contributed to weakened growth and eroded consumer confidence. These concerns have spurred discussions about the nation's aging workforce and its unemployed youth, leading to descriptions of China's economy as a "ticking time-bomb." The property market's decline has heightened fears of deflation and defaults, with reports of developers struggling to meet debt obligations. While potential solutions such as reducing interest rates and increasing infrastructure spending exist, there is skepticism about the political will to implement them effectively, given President Xi Jinping's emphasis on broader goals like technological autonomy and economic security over immediate growth. This confluence of factors has raised questions about China's economic trajectory, with ramifications that extend both domestically and internationally.
Source: The Economist. (2023, August 24). China’s economy is in desperate need of rescue.
China’s economy is in desperate need of rescue
China's economy is grappling with a worrisome combination of challenges, including falling consumer prices, a significant decline in exports, and a struggling property sector that has contributed to weakened growth and eroded consumer confidence. These concerns have spurred discussions about the nation's aging workforce and its unemployed youth, leading to descriptions of China's economy as a "ticking time-bomb." The property market's decline has heightened fears of deflation and defaults, with reports of developers struggling to meet debt obligations. While potential solutions such as reducing interest rates and increasing infrastructure spending exist, there is skepticism about the political will to implement them effectively, given President Xi Jinping's emphasis on broader goals like technological autonomy and economic security over immediate growth. This confluence of factors has raised questions about China's economic trajectory, with ramifications that extend both domestically and internationally.
Source: The Economist. (2023, August 24). China’s economy is in desperate need of rescue.
US: Labor Market
US labor market loses steam as job openings, resignations decline
US job openings fell to their lowest point in the past 2.5 years this July. This indicates a slowdown in the US labor market and bears significance for the Federal Reserve’s interest rate decisions. The Job Openings and Labor Turnover Survey (JOLTS) shows reduced job openings and a reduction in the number of people quitting their jobs. This suggests waning confidence in the labor market. In spite of this, the job market still rests at 1.51 job openings per unemployed person as of July, 2023. This shift in the US labor market appears to have been caused by firms reducing vacancies rather than increasing layoffs. This slowdown in the market appears to be aligned with projected slower job growth this August. Jerome Powell, the Federal Reserve’s Chair, stated that the Fed would be cautious with its approach to interest rates, with markets expecting them to maintain the same rate. The cooling of the labor market will likely bear influence on the Federal Reserve’s monetary policy, which will affect expectations regarding US economic growth and inflation.
Source: Reuters. (2023, August 30). US labor market loses steam as job openings, resignations decline.
US labor market loses steam as job openings, resignations decline
US job openings fell to their lowest point in the past 2.5 years this July. This indicates a slowdown in the US labor market and bears significance for the Federal Reserve’s interest rate decisions. The Job Openings and Labor Turnover Survey (JOLTS) shows reduced job openings and a reduction in the number of people quitting their jobs. This suggests waning confidence in the labor market. In spite of this, the job market still rests at 1.51 job openings per unemployed person as of July, 2023. This shift in the US labor market appears to have been caused by firms reducing vacancies rather than increasing layoffs. This slowdown in the market appears to be aligned with projected slower job growth this August. Jerome Powell, the Federal Reserve’s Chair, stated that the Fed would be cautious with its approach to interest rates, with markets expecting them to maintain the same rate. The cooling of the labor market will likely bear influence on the Federal Reserve’s monetary policy, which will affect expectations regarding US economic growth and inflation.
Source: Reuters. (2023, August 30). US labor market loses steam as job openings, resignations decline.
US: Bonds
High bond yields imperil America’s financial stability
Yields on ten-year US treasuries have grown from 3.8% in January to 4.2% at present. Adjusted for inflation expectations, these yields are the highest they have been since 2009. They are unlikely to fall given stronger US economic growth, 6%, and that the federal government will run a budget deficit equal to 6% of the US’ GDP. This is expected to put pressure on financial stability for various US markets. Rising interest rates coupled with the development of remote work have already pushed down prices in the commercial property market. Real estate prices are expected to fall, The Economist cites Capital Economics, which states by the end of 2024, commercial real estate prices should fall by 15%. The rise in interest rates also makes it difficult for firms to refinance debts they incurred during the pandemic that will come due in the period of 2023-2025. This problem could spread to the financial industry since several American lenders have provided credit to the real estate industry. The Economist also highlights how the problems faced by Silicon Valley Bank and First Republic Bank have not left the US economy. Deposits have grown by a weekly average of 0.02% within the past four months, as opposed to the 0.13% in the past 40 years. The higher yields from bonds puts pressure on low-interest bank accounts.
Source: The Economist. (2023, August 30). High bond yields imperil America’s financial stability.
High bond yields imperil America’s financial stability
Yields on ten-year US treasuries have grown from 3.8% in January to 4.2% at present. Adjusted for inflation expectations, these yields are the highest they have been since 2009. They are unlikely to fall given stronger US economic growth, 6%, and that the federal government will run a budget deficit equal to 6% of the US’ GDP. This is expected to put pressure on financial stability for various US markets. Rising interest rates coupled with the development of remote work have already pushed down prices in the commercial property market. Real estate prices are expected to fall, The Economist cites Capital Economics, which states by the end of 2024, commercial real estate prices should fall by 15%. The rise in interest rates also makes it difficult for firms to refinance debts they incurred during the pandemic that will come due in the period of 2023-2025. This problem could spread to the financial industry since several American lenders have provided credit to the real estate industry. The Economist also highlights how the problems faced by Silicon Valley Bank and First Republic Bank have not left the US economy. Deposits have grown by a weekly average of 0.02% within the past four months, as opposed to the 0.13% in the past 40 years. The higher yields from bonds puts pressure on low-interest bank accounts.
Source: The Economist. (2023, August 30). High bond yields imperil America’s financial stability.
India: Growth
India inflation to stay above 6% target until October at least -economists
India’s inflation rate will remain above the Reserve Bank of India’s 6% target until October at the least, according to a poll of economists. The high inflation is largely due to increasing prices of food commodities. Forecasts show median inflation to settle at around 5.5% for this year and 4.8% for next year, above the Reserve Bank of India’s 4% medium-term goal. The RBI ended a modest rate-hike cycle to tackle inflation earlier in the year, and it is not expected to take rates any higher—although polls show that rates will be kept at 6.50% for the rest of the fiscal year before experiencing any cuts. Rapid increases in price levels are taking place as the country gears up for the May 2024 elections—putting pressure on the current government, led by Prime Minister Narendra Modi, to address inflation woes. It remains to be seen how the government might grapple with the inflation problem in a year with less rainfall than usual, i.e., a ‘rainfall deficit’.
Source: Reuters. (2023, August 29). India inflation to stay above 6% target until October at least -economists.
India inflation to stay above 6% target until October at least -economists
India’s inflation rate will remain above the Reserve Bank of India’s 6% target until October at the least, according to a poll of economists. The high inflation is largely due to increasing prices of food commodities. Forecasts show median inflation to settle at around 5.5% for this year and 4.8% for next year, above the Reserve Bank of India’s 4% medium-term goal. The RBI ended a modest rate-hike cycle to tackle inflation earlier in the year, and it is not expected to take rates any higher—although polls show that rates will be kept at 6.50% for the rest of the fiscal year before experiencing any cuts. Rapid increases in price levels are taking place as the country gears up for the May 2024 elections—putting pressure on the current government, led by Prime Minister Narendra Modi, to address inflation woes. It remains to be seen how the government might grapple with the inflation problem in a year with less rainfall than usual, i.e., a ‘rainfall deficit’.
Source: Reuters. (2023, August 29). India inflation to stay above 6% target until October at least -economists.
US: Inflation
Fed Chair’s Message Is Clear: The Fight Against Inflation Isn’t Over
Fed Chair Jerome Powell thinks that inflation is still not fully under control and is prepared to raise interest rates should it be necessary. They are carefully reviewing economic data and results of past interest rate hikes on the economy to look out for lag effects. He has highlighted the need for inflation levels to get back down to the 2 percent goal.
Source: The New York Times. (2023, August 25). Fed Chair’s Message Is Clear: The Fight Against Inflation Isn’t Over.
Fed Chair’s Message Is Clear: The Fight Against Inflation Isn’t Over
Fed Chair Jerome Powell thinks that inflation is still not fully under control and is prepared to raise interest rates should it be necessary. They are carefully reviewing economic data and results of past interest rate hikes on the economy to look out for lag effects. He has highlighted the need for inflation levels to get back down to the 2 percent goal.
Source: The New York Times. (2023, August 25). Fed Chair’s Message Is Clear: The Fight Against Inflation Isn’t Over.
US: Growth
US economic growth trimmed on inventories; retains underlying momentum
The U.S. economy grew slower than expected in the second quarter because of liquidation of inventory by businesses, inflation pressures, and monetary policy rate hikes. There are also downward revisions to business spending. On the other hand, these are offsetted by the minor upgrade to consumer spending, inflation is cooling down, unemployment is at its lowest, and corporate profits are rebounding.
Source: Reuters. (2023, August 31). US economic growth trimmed on inventories; retains underlying momentum.
Contributors:
Natasha Amber Cabiltes
Edgar Desher Empeño
Jose Lorenzo Mercado
Brendan Emmanuel Miranda
Jacobe Joaquin Sevilla
US economic growth trimmed on inventories; retains underlying momentum
The U.S. economy grew slower than expected in the second quarter because of liquidation of inventory by businesses, inflation pressures, and monetary policy rate hikes. There are also downward revisions to business spending. On the other hand, these are offsetted by the minor upgrade to consumer spending, inflation is cooling down, unemployment is at its lowest, and corporate profits are rebounding.
Source: Reuters. (2023, August 31). US economic growth trimmed on inventories; retains underlying momentum.
Contributors:
Natasha Amber Cabiltes
Edgar Desher Empeño
Jose Lorenzo Mercado
Brendan Emmanuel Miranda
Jacobe Joaquin Sevilla