BusinessMirror January 10, 2023 by BusinessMirror

Asia-Pacific nations seen hiking rates till mid-2023 By Cai U. Ordinario @caiordinario

ITH inflation expected to remain a concern in Asia and the Pacific, Moody’s Analytics expects monetary authorities in the region to continue raising interest rates until the middle of 2023. In its Asia Pacific Economic Preview, Moody’s Analytics said many countries in the region, including the Philippines, Indonesia, and Thailand, saw higher prices which indicates that prices could remain elevated in the first few months of the year. Core inf lation, excluding food and energy prices, in Asia and the Pacific also remains el-

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evated. In the Philippines, core inflation accelerated to 6.9 percent; Indonesia, 3.4 percent; and Thailand, 3.2 percent. “We see central banks in the region hiking rates into the middle of the year. In addition to elevated inflation, ongoing rate hikes by the US Federal Reserve will put pressure on central banks to raise interest rates to prevent interest rate differentials from widening,” Moody’s Analytics said. Commodity prices may remain elevated because of supply chain disruptions caused by the Russian invasion of Ukraine. However, Moody’s Analytics noted that the supply shocks have already eased in recent

months. Contributing to higher prices are extreme weather conditions that would make commodities like food more expensive. “Supply chain disruptions last year have caused consumer prices to skyrocket, and inflation will remain a concern in the early parts of this year,” Moody’s Analytics said. “Food prices, however, have the potential to remain high because of extreme weather conditions and elevated costs of labour and input material,” it added. Earlier, local economists have proposed a number of measures, including going after smugglers and hoarders as well as raising

real wages, to rein in inflation and stimulate the economy this year. In an email to BusinessMirror, former Dean of the University of the Philippines School of Labor and Industrial Relations Rene Ofreneo said the recent spike in inflation can be contained if the government will run after smugglers and hoarders. Ofreneo said disruptions caused by the Russia-Ukraine war are expected to continue, as well as the US-China trade tensions, albeit at a lesser degree. These are among the factors that will make trade an important area for the government to focus on this year. See “Asia-Pacific,” A2

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Tuesday, January 10, 2023

Vol. 18 No. 87

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FEAST OF THE BLACK NAZARENE At least 100,000 Black Nazarene devotees trooped to the Minor Basilica of the Black Nazarene in Quiapo, Manila, on Monday, January 9, 2023, its feast day. Manila Archbishop Jose Cardinal Advincula celebrated the Misa Mayor. ROY DOMINGO

By Jasper Emmanuel Y. Arcalas

@jearcalas

HE national government announced on Monday that it will borrow at least $500 million by selling US dollar bonds with tenors of 5.5 years, 10.5 years and 25 years, marking the second dollar-denominated bond offering under the Marcos Jr. administration.

The Philippines returned to the international market through its multi-tranche dollar-denominated bond offering that was assigned a “senior unsecured” Baa2 rating by international credit watcher Moody’s Investor Service. Moody’s said the latest dollar bonds issued by the Philippines will be ranked “pari passu” with the country’s “current and future senior unsecured external debt obligations.” Moody’s added that the Baa2 issuer rating for the Philippines takes into consideration the coun-

try’s “high potential” growth and a “moderate” government burden as compared to that of its peers. The credit watcher added that the Philippines also has a “strong” external position “to meet forthcoming cross-border payment obligations and weather capital flow volatility.” “Structural credit challenges include low per capita income and some constraints to the quality of institutions, which stand in contrast to strong policy effectiveness,” Moody’s said. See “Manila,” A2

PESO EXCHANGE RATES n US 55.6810

GOVT WILL PRIORITIZE BIG-TICKET TRANSPORT PROJECTS–MARCOS By Samuel P. Medenilla @sam_medenilla

RESIDENT Ferdinand R. Marcos Jr. on Monday said more big-ticket transportation projects are already in the works as part of government efforts to “revive” the country’s rail industry and boost the economy. During the start of the tunneling work for the Metro Manila Subway Project (MMSP) in Valenzuela City, Marcos said his administration will prioritize the construction of similar projects. “We will continue to invest in and improve our transportation systems as well as pursue more projects in the years to come, so that Filipinos can gain greater access to places of work, commerce, recreation, and other vital areas,” he said.

“Having an effective and efficient transportation system will have multiplier effects on employment, the economy, [and] our society; it will bring comfort, convenience, [and] an easier life for all,” he added.

Challenges

DUBBED as the “crown jewel of the mass transit system” by the Department of Transportation (DOTr), the 33-kilometer MMSP is the first underground railway system, which will connect eight cities from Valenzuela City to the Ninoy Aquino International Airport (NAIA) in Pasay City. Preparations for the P448.4billion project started as early as during the previous administration. It is being financed by the Japanese government and the Japan International Cooperation Agency (JICA). See “Govt,” A2

Peso bulls face disappointment as headwinds for currency mount

HE Philippine peso will struggle to repeat its strong yearend performance as overseas remittances fade and the nation’s current-account deficit weighs. Money sent home by overseas workers typically drops after the year-end holidays, while the central bank forecast last month that the current-account gap for 2023 will be similar to the $20.5 billion seen last year. With the dollar showing strength, risk-sensitive currencies like the peso will come under pressure. “There could be some seasonal healthy upward correction in the US dollar/peso in the first quarter as the increase in holiday spending is already done and over with,” said Michael Ricafort, chief economist at Rizal Commercial Banking Corp. in Manila. The pair may range from 55.50-56.50 this quarter, he said. Traders will be monitoring data this week on the trade balance, which feeds into the nation’s current account, with economists expecting the deficit to widen by

almost a third to $4.5 billion for November. The median forecast of analysts surveyed by Bloomberg shows the Philippine currency will weaken slightly to 56.3 versus the dollar by the end of March. The peso ended Friday at 55.640 versus the dollar, and had posted a 5.1-percent gain in the fourth quarter, its best advance since 2010. Still, that was less than half the rallies for Asia’s best-performing currencies, the South Korean won and the Japanese yen in that period. Remittances in 2021 had peaked at almost $3 billion in December, before dropping to $2.7 billion the following month. The latest available data show cash sent back from overseas workers had touched $2.9 billion in October 2022.

Technical limits

TECHNICALLY, two key levels of resistance for the peso, around its 200-day moving average and its July high, have converged and are acting to rein in the Asian currency.

n JAPAN 0.4220 n UK 67.3517 n HK 7.1326 n CHINA 8.1602 n SINGAPORE 41.7211 n AUSTRALIA 38.2807 n EU 59.2613 n KOREA 0.0444 n SAUDI ARABIA 14.8167

See “Peso,” A2

Source: BSP (January 9, 2023)