RECENT NEWS
Philippines: Inflation
Inflation further decelerates in June
The inflation rate in the Philippines has decelerated for the fifth consecutive month in June to 5.4%. The figure is the slowest since the 4.9% rate in April 2022. The drop in inflation can be attributed to the reduced prices of essential items like food, utilities, and transportation. The government's proactive approach in tackling supply chain challenges and in implementing strategies to curb inflation has played a significant role in this decline. These positive developments point towards a promising economic stability for the country and offer some relief to consumers. So far, the Bangko Sentral ng Pilipinas, keen to reduce inflation within the 2-4% target, has maintained its key policy rate at 6.25%, indicating a possible break to assess the impacts of its continuous aggressive rate hikes over the past months.
Source: Inflation further decelerates in June (July 6 2023), BusinessWorld Online
Inflation further decelerates in June
The inflation rate in the Philippines has decelerated for the fifth consecutive month in June to 5.4%. The figure is the slowest since the 4.9% rate in April 2022. The drop in inflation can be attributed to the reduced prices of essential items like food, utilities, and transportation. The government's proactive approach in tackling supply chain challenges and in implementing strategies to curb inflation has played a significant role in this decline. These positive developments point towards a promising economic stability for the country and offer some relief to consumers. So far, the Bangko Sentral ng Pilipinas, keen to reduce inflation within the 2-4% target, has maintained its key policy rate at 6.25%, indicating a possible break to assess the impacts of its continuous aggressive rate hikes over the past months.
Source: Inflation further decelerates in June (July 6 2023), BusinessWorld Online
Philippines: Current account deficit
Current account deficit seen narrowing in 2023
The Philippines’ current account deficit is seen to decrease to 4% from 4.4% in 2022 due to declining imports and softer prices. BMI Country Risk & Industry Research attributes the widening deficit in the first quarter to an increase in the trade in goods deficit. The research firm anticipates weak demand for Philippine-made goods throughout the year, leading to a projected decrease in exports as a share of GDP from 24.3% in 2022 to 23.4% in the current year. This outlook is based on the assumption of lukewarm global growth for the remainder of the year. BMI expects the global economy to expand by 2.2% in 2023, down from the 3.1% growth recorded last year.
Source: Current account deficit seen narrowing in 2023 (July 5 2023), BusinessWorld Online
Current account deficit seen narrowing in 2023
The Philippines’ current account deficit is seen to decrease to 4% from 4.4% in 2022 due to declining imports and softer prices. BMI Country Risk & Industry Research attributes the widening deficit in the first quarter to an increase in the trade in goods deficit. The research firm anticipates weak demand for Philippine-made goods throughout the year, leading to a projected decrease in exports as a share of GDP from 24.3% in 2022 to 23.4% in the current year. This outlook is based on the assumption of lukewarm global growth for the remainder of the year. BMI expects the global economy to expand by 2.2% in 2023, down from the 3.1% growth recorded last year.
Source: Current account deficit seen narrowing in 2023 (July 5 2023), BusinessWorld Online
Philippines: Trade
PHL trade facilitation score improved — UN
The Philippines has improved its score in the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) index of trade facilitation. The country achieved an implementation rate of 87.1% in the UN Global Survey on Digital and Sustainable Trade Facilitation, up from 86.02% in 2021. The survey assesses progress in trade facilitation measures, including transparency, formalities, institutional arrangements and cooperation, paperless trade, and cross-border paperless trade. In Southeast Asia, the Philippines ranked second alongside Indonesia and Malaysia, behind Singapore. It outperformed countries such as Thailand, Cambodia, Brunei, Vietnam, Laos, Myanmar, and Timor-Leste. Notably, the Philippines scored 100% in transparency and formalities, indicating full implementation of trade measures in these areas. However, its lowest score was in cross-border paperless trade, where it partially implements the relevant measures.
Source: PHL trade facilitation score improved — UN (July 6 2023), BusinessWorld Online
PHL trade facilitation score improved — UN
The Philippines has improved its score in the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) index of trade facilitation. The country achieved an implementation rate of 87.1% in the UN Global Survey on Digital and Sustainable Trade Facilitation, up from 86.02% in 2021. The survey assesses progress in trade facilitation measures, including transparency, formalities, institutional arrangements and cooperation, paperless trade, and cross-border paperless trade. In Southeast Asia, the Philippines ranked second alongside Indonesia and Malaysia, behind Singapore. It outperformed countries such as Thailand, Cambodia, Brunei, Vietnam, Laos, Myanmar, and Timor-Leste. Notably, the Philippines scored 100% in transparency and formalities, indicating full implementation of trade measures in these areas. However, its lowest score was in cross-border paperless trade, where it partially implements the relevant measures.
Source: PHL trade facilitation score improved — UN (July 6 2023), BusinessWorld Online
Philippines: Agriculture
Bio-fertilizer use eyed to aid corn farmers
The Department of Agriculture (DA) in the Philippines has introduced a new initiative to distribute bio-fertilizers to corn farmers. The goal is to support local corn production, increase farmers' income, and reduce the cost of production. The DA recognizes the rising cost of inorganic fertilizers and aims to provide a more affordable alternative to meet the nutrient requirements of corn crops. Bio-fertilizers contain beneficial organisms that improve nutrient uptake, enhance root systems, provide resistance to pests and diseases, and improve soil condition. The new guidelines aim to reduce the use of inorganic fertilizers and promote the use of bio-fertilizers through extension activities and training. Registered farmers will receive ready-to-use bio-fertilizers based on the area to be planted and recommended application rates. Distribution will be facilitated through corn cluster organizations, and individual farmers without cluster affiliation will be assisted by local government agricultural extension workers. The DA and local government units will assess corn production performance and monitor the distribution and utilization of bio-fertilizers.
Source: Bio-fertilizer use eyed to aid corn farmers (July 3 2023), Philippine Daily Inquirer
Bio-fertilizer use eyed to aid corn farmers
The Department of Agriculture (DA) in the Philippines has introduced a new initiative to distribute bio-fertilizers to corn farmers. The goal is to support local corn production, increase farmers' income, and reduce the cost of production. The DA recognizes the rising cost of inorganic fertilizers and aims to provide a more affordable alternative to meet the nutrient requirements of corn crops. Bio-fertilizers contain beneficial organisms that improve nutrient uptake, enhance root systems, provide resistance to pests and diseases, and improve soil condition. The new guidelines aim to reduce the use of inorganic fertilizers and promote the use of bio-fertilizers through extension activities and training. Registered farmers will receive ready-to-use bio-fertilizers based on the area to be planted and recommended application rates. Distribution will be facilitated through corn cluster organizations, and individual farmers without cluster affiliation will be assisted by local government agricultural extension workers. The DA and local government units will assess corn production performance and monitor the distribution and utilization of bio-fertilizers.
Source: Bio-fertilizer use eyed to aid corn farmers (July 3 2023), Philippine Daily Inquirer
Global Inflation
The fight over inflation in America and Europe
The battle against inflation in the American and European economies continues, as both headline and core inflation display different trends. While headline inflation has been decreasing slowly, core inflation is on the rise due to sticky inflation factors. Given the 2% inflation target, the heads of both the Federal Reserve and the European Central Bank, as indicated by Christine Lagarde, are considering raising interest rates in the near future. They cite three key reasons for this decision. First, there is a need to address "greedflation," where companies take advantage of high demand and exploit profit opportunities. Second, there has been an increase in consumer spending on goods, food, and services such as restaurants and entertainment. Lastly, although the labor market has made some progress in rebalancing with a decline in job vacancies, recent data suggest a slowdown in this process. Some economists estimate that achieving the desired inflation target would require the unemployment rate to surpass a specific threshold for a sustained period.
Source: The fight over inflation in America and Europe (July 5 2023), The Economist
The fight over inflation in America and Europe
The battle against inflation in the American and European economies continues, as both headline and core inflation display different trends. While headline inflation has been decreasing slowly, core inflation is on the rise due to sticky inflation factors. Given the 2% inflation target, the heads of both the Federal Reserve and the European Central Bank, as indicated by Christine Lagarde, are considering raising interest rates in the near future. They cite three key reasons for this decision. First, there is a need to address "greedflation," where companies take advantage of high demand and exploit profit opportunities. Second, there has been an increase in consumer spending on goods, food, and services such as restaurants and entertainment. Lastly, although the labor market has made some progress in rebalancing with a decline in job vacancies, recent data suggest a slowdown in this process. Some economists estimate that achieving the desired inflation target would require the unemployment rate to surpass a specific threshold for a sustained period.
Source: The fight over inflation in America and Europe (July 5 2023), The Economist
Climate change
The world needs more battery metals. Time to mine the seabed
In 2021, road transportation accounted for 16% of global energy-related emissions, releasing approximately 6 billion tonnes of carbon dioxide. To mitigate climate change, countries must shift away from internal combustion engines and adopt battery-powered electric vehicles. However, this transition necessitates mining unprecedented amounts of metals like nickel, which is crucial for battery energy storage. The International Energy Agency estimates that around 80 million tonnes of nickel must be mined by 2040 to meet climate targets, approaching the 100 million tonnes of unmined global reserves. Seabed mining in the Clarion-Clipperton Zone (CCZ) in the Pacific Ocean, containing an abundant 340 million tonnes of nickel, could provide a solution. Yet, the International Seabed Authority (ISA) has struggled to establish mining regulations due to bureaucratic obstacles and concerns from conservationists. Despite the arguments against seabed mining, closer examination suggests that many environmental risks are exaggerated. The carbon emissions released during mining in the CCZ would be negligible, and the sediment disturbance would be less severe than claimed. While the impact on unknown organisms in the CCZ is a valid concern, the biomass and ecosystem disruption would be minimal compared to traditional land mining, such as in Indonesia. Given the urgent need for nickel and the environmental damage caused by land mining, it is crucial to expedite the establishment of seabed mining regulations and closely monitor its impact. The reward would be a cooler planet and the preservation of a greater abundance of life.
Source: The world needs more battery metals. Time to mine the seabed (July 6 2023), The Economist
The world needs more battery metals. Time to mine the seabed
In 2021, road transportation accounted for 16% of global energy-related emissions, releasing approximately 6 billion tonnes of carbon dioxide. To mitigate climate change, countries must shift away from internal combustion engines and adopt battery-powered electric vehicles. However, this transition necessitates mining unprecedented amounts of metals like nickel, which is crucial for battery energy storage. The International Energy Agency estimates that around 80 million tonnes of nickel must be mined by 2040 to meet climate targets, approaching the 100 million tonnes of unmined global reserves. Seabed mining in the Clarion-Clipperton Zone (CCZ) in the Pacific Ocean, containing an abundant 340 million tonnes of nickel, could provide a solution. Yet, the International Seabed Authority (ISA) has struggled to establish mining regulations due to bureaucratic obstacles and concerns from conservationists. Despite the arguments against seabed mining, closer examination suggests that many environmental risks are exaggerated. The carbon emissions released during mining in the CCZ would be negligible, and the sediment disturbance would be less severe than claimed. While the impact on unknown organisms in the CCZ is a valid concern, the biomass and ecosystem disruption would be minimal compared to traditional land mining, such as in Indonesia. Given the urgent need for nickel and the environmental damage caused by land mining, it is crucial to expedite the establishment of seabed mining regulations and closely monitor its impact. The reward would be a cooler planet and the preservation of a greater abundance of life.
Source: The world needs more battery metals. Time to mine the seabed (July 6 2023), The Economist
Climate change
Can a viable industry emerge from the hydrogen shakeout?
Hydrogen has gained significant attention as a potential clean fuel source, attracting substantial investments and government support for decarbonization efforts. However, concerns about an investment bubble similar to past experiences have emerged. While there are signs of excess and some setbacks, the demand for clean hydrogen in emissions-intensive industries such as cement and long-haul transport, where electrification alone is challenging, remains strong. Governments' subsidies and market forces are shaping the industry's development, although caution is necessary to prevent misallocation of funds. The cost of producing clean hydrogen from renewable sources is still high, but industry experts predict a potential decline by 2030. The sector's focus has shifted to supplying clean hydrogen to sectors already using dirty hydrogen, such as ammonia production. Policy support from rich countries, including Europe and the United States, further bolsters the industry's prospects. Nonetheless, challenges remain, including regulatory hurdles and the need for careful investment to avoid funding ineffective applications. Overall, the hydrogen industry shows promise but requires realistic expectations and a longer-term perspective to fulfill its potential as a key component of the energy transition.
Source: Can a viable industry emerge from the hydrogen shakeout? (July 3 2023), The Economist
Can a viable industry emerge from the hydrogen shakeout?
Hydrogen has gained significant attention as a potential clean fuel source, attracting substantial investments and government support for decarbonization efforts. However, concerns about an investment bubble similar to past experiences have emerged. While there are signs of excess and some setbacks, the demand for clean hydrogen in emissions-intensive industries such as cement and long-haul transport, where electrification alone is challenging, remains strong. Governments' subsidies and market forces are shaping the industry's development, although caution is necessary to prevent misallocation of funds. The cost of producing clean hydrogen from renewable sources is still high, but industry experts predict a potential decline by 2030. The sector's focus has shifted to supplying clean hydrogen to sectors already using dirty hydrogen, such as ammonia production. Policy support from rich countries, including Europe and the United States, further bolsters the industry's prospects. Nonetheless, challenges remain, including regulatory hurdles and the need for careful investment to avoid funding ineffective applications. Overall, the hydrogen industry shows promise but requires realistic expectations and a longer-term perspective to fulfill its potential as a key component of the energy transition.
Source: Can a viable industry emerge from the hydrogen shakeout? (July 3 2023), The Economist
China
China’s Economy Shows New Signs of Weakness
China's manufacturing sector continued to decline through June, while the nonmanufacturing sector also weakened. The decline in new orders and employment in both sectors indicates a worsening job shortage, especially among the youth. China's economic recovery remains uncertain despite the relaxation of COVID-19 restrictions—it faces a ballooning debt burden, high youth unemployment, and a struggling real estate market. The country's role as the world's factory floor is also being eroded as more manufacturers diversify their supply chains due to persistent political tensions, with global demand for goods cooling and the domestic rebound driven by consumer spending losing momentum. The decline of the manufacturing sector is made evident by the manufacturing purchasing managers index (PMI) at 49 in June, still indicating contraction. Meanwhile, the manufacturing employment index contracted for the fourth straight month. Despite efforts by policymakers to boost global trade, demand from overseas continues to decline. The services sector, a key driver of China's recovery, also weakened in June. The weakness raises doubts about the effectiveness of recent expansionary monetary measures and suggests the need for concrete support to prevent a self-reinforcing downturn in demand. While China is expected to achieve its annual growth target of around 5%, economists warn that without timely support, the challenges may impact long-term growth potential.
Source: China’s Economy Shows New Signs of Weakness (June 30, 2023), The Wall Street Journal
China’s Economy Shows New Signs of Weakness
China's manufacturing sector continued to decline through June, while the nonmanufacturing sector also weakened. The decline in new orders and employment in both sectors indicates a worsening job shortage, especially among the youth. China's economic recovery remains uncertain despite the relaxation of COVID-19 restrictions—it faces a ballooning debt burden, high youth unemployment, and a struggling real estate market. The country's role as the world's factory floor is also being eroded as more manufacturers diversify their supply chains due to persistent political tensions, with global demand for goods cooling and the domestic rebound driven by consumer spending losing momentum. The decline of the manufacturing sector is made evident by the manufacturing purchasing managers index (PMI) at 49 in June, still indicating contraction. Meanwhile, the manufacturing employment index contracted for the fourth straight month. Despite efforts by policymakers to boost global trade, demand from overseas continues to decline. The services sector, a key driver of China's recovery, also weakened in June. The weakness raises doubts about the effectiveness of recent expansionary monetary measures and suggests the need for concrete support to prevent a self-reinforcing downturn in demand. While China is expected to achieve its annual growth target of around 5%, economists warn that without timely support, the challenges may impact long-term growth potential.
Source: China’s Economy Shows New Signs of Weakness (June 30, 2023), The Wall Street Journal
China
In its tech war with America, China brings out the big guns
China is responding to recent American trade restrictions laid out against Chinese tech companies. The Biden administration has recently been implementing restrictions on Chinese access to American technology for Artificial Intelligence and has been pressuring its European allies to reduce their sales for chip making equipment to China. China will limit exporting gallium and germanium, two metals key in semiconductor manufacturing, in response to American technology restrictions. This ban risks disrupting the production of not just semiconductors, but also solar panels, electric vehicles, and weapons. It will also likely obstruct the development of semiconductor technologies. However, it is possible that the Chinese government may not be as restrictive with the sale of these metals. The Chinese government will restrict exports by requiring Chinese exporting firms to acquire licenses from the state. If China were not to give these liberally, it would reduce the sales of Chinese metal exporting firms.
Source: In its tech war with America, China brings out the big guns (July 4 2023), The Economist
Contributors:
Natasha Amber Cabiltes
Edgar Desher Empeño
Jose Lorenzo Mercado
Brendan Emmanuel Miranda
Jacobe Joaquin Sevilla
In its tech war with America, China brings out the big guns
China is responding to recent American trade restrictions laid out against Chinese tech companies. The Biden administration has recently been implementing restrictions on Chinese access to American technology for Artificial Intelligence and has been pressuring its European allies to reduce their sales for chip making equipment to China. China will limit exporting gallium and germanium, two metals key in semiconductor manufacturing, in response to American technology restrictions. This ban risks disrupting the production of not just semiconductors, but also solar panels, electric vehicles, and weapons. It will also likely obstruct the development of semiconductor technologies. However, it is possible that the Chinese government may not be as restrictive with the sale of these metals. The Chinese government will restrict exports by requiring Chinese exporting firms to acquire licenses from the state. If China were not to give these liberally, it would reduce the sales of Chinese metal exporting firms.
Source: In its tech war with America, China brings out the big guns (July 4 2023), The Economist
Contributors:
Natasha Amber Cabiltes
Edgar Desher Empeño
Jose Lorenzo Mercado
Brendan Emmanuel Miranda
Jacobe Joaquin Sevilla