Blindsided economic team backs rice price cap By Jasper Emmanuel Y. Arcalas @jearcalas
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HE economic team of the Marcos Jr. administration is throwing its “full support” behind the state’s mandated price ceiling on rice, even if the measure was not subjected to their scrutiny prior to imposition. In two separate statements, the Department of Finance (DOF) and the Department of Budget and Management (DBM) emphasized that they are in “favor” of the price ceiling on rice to address the surge in local prices. Finance Secretary Benjamin E. Diokno described the price ceiling measure as an “essential stop-gap measure” to address the rise in do-
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mestic rice prices. “We agree with the President that implementing a price cap on rice is the most prudent course of action at the moment to achieve two critical objectives: stabilizing rice prices and extending immediate support to our fellow countrymen,” Diokno said on Monday. Budget Secretary Amenah F. Pangandaman concurred with Diokno, adding that the present market conditions “warrant a special mitigating measure” like price ceiling. “In an ideal scenario, we can let the market dictate prices. However, as Neda [National Economic and Development Authority] noted, we are now faced with extraordinary factors
that we have to consider,” Pangandaman said on Monday.
Economic team blindsided
THE statements were issued a few days after Diokno revealed that the economic team was not consulted about the imposition of the rice price ceiling. Diokno said the economic team was taken aback when President Marcos Jr. issued Executive Order 39 imposing a price ceiling on regular-milled and well-milled rice sold in the domestic market. At the time that Marcos issued the EO, Diokno together with Pangandaman and Socioeconomic Planning Secretary Arsenio M. Balisacan were in
Tokyo, Japan for the 14th PhilippinesJapan High-Level Joint Committee Meeting on Infrastructure Development and Economic Cooperation. However, the power of the President to impose a mandated price ceiling does not require any prior consultation with his economic team. Under the Price Act, the President can implement the measure upon the recommendation of an implementing agency of the law or the Price Coordinating Council. The implementing agencies of the Price Act are the Department of Agriculture (DA), concurrently headed by Marcos himself, and the Department of Trade and Industry (DTI). See “Blindsided,” A2
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FDI FLOWS DOWN 20.4% IN FIRST SEMESTER—BSP w
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By Cai U. Ordinario
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Fight vs high inflation not over, says ANZ Research
@caiordinario
HE country’s weak economic growth prospects and global uncertainties led to a 20.4-percent contraction in Foreign Direct Investments (FDIs) in the first semester of the year, according to the Bangko Sentral ng Pilipinas (BSP).
Data showed FDI net inflows decreased to $3.9 billion in the January to June period this year from the $4.9-billion net inflows recorded in the same period in 2022. In June 2023, net FDI was at $484 million, a 3.9-percent decline from the $503-million net inflows in the same month last year. “The slowdown in FDI may be due largely to investor concerns over weak growth prospects amid persistent global uncertainties,” BSP said in a statement on Monday. In the first semester, net investments in equity capital (other than reinvestments of earnings) contracted 7.3 percent to $744 million while reinvestment of earnings contracted 11.2 percent to $459 million. The data also showed that when it came to net debt instruments, this declined 24.6 percent to $2.71 billion in the January to June period of 2023. In June, BSP said the decline in FDI was due to the recorded declines in non-residents’ net investments in equity capital (other than reinvestments of earnings) by 11.8 percent to $111 million in 2023 from $126 million last year. The data also showed that in terms of reinvestment of earnings, there was a decline of 26.8 percent to $89 million in June 2023 from US$122 million in June last year. Net investments in debt instruments, however, increased by 11 percent to $283 million in June 2023 from $255 million in June 2022. “Bulk of the equity capital placements in June 2023 were sourced primarily from Japan, the United States, and Singapore. See “FDI,” A2
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SILENT HOPE Amid the pall cast by persistently high inflation and the strain on household budgets from surging commodity prices, Santa Claus seems to signal a quiet yet hopeful presence from a stockroom window in Tagaytay City. In the Philippines, where the Christmas season begins as early as September, this cherished celebration takes on even greater significance as families navigate economic challenges, making spending decisions more deliberate and meaningful. NONIE REYES
PHL CEOs SEE RISKS, BUT UPBEAT ON INDUSTRY PROSPECTS By Andrea E. San Juan @andreasanjuan
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T least 83 percent of Chief Executive Officers (CEOs) surveyed in the Philippines said they are confident in their industry prospects for the next 12 months, according to the Philippine CEO Survey 2023 conducted by PwC Philippines in collaboration with the Management Association of the Philippines (MAP). Based on the survey, 83 percent of the 157 CEOs who answered the online survey expressed optimism about their industry prospects for 2023. However, businesses face threats from inflation, macroeconomic instability, cyber risks, and supply
chain constraints. The survey had 39 percent of the CEOs saying they believe their company will be highly exposed to the threat of inflation in the next 12 months; 35 percent said they will be highly exposed to supply chain constraints; and 31 percent said they will be highly exposed to macroeconomic volatility. Moving forward, businesses have their respective strategies to mitigate potential economic challenges and volatility in 2023. For one, 42 percent of the CEOs said their companies are considering raising prices of products and services in the next 12 months; 39 percent intend to diversify their product/service offering; while 28 percent plan
to reduce operating costs. Currently, 54 percent of the CEOs are already reducing operating costs to cushion the impact of potential economic challenges and 49 percent are already diversifying their products/service offering. Despite these potential economic threats, 79 percent of the CEOs expressed confidence that their company will experience revenue growth in the next 12 months, while 87 percent said they are confident their company will experience revenue growth in the next three years.
Key growth drivers
MEANWHILE, the CEOs said that infrastructure development, domestic consumption, and the (business process outsourcing) BPO and
services sector will be the “key growth drivers” of the Philippine economy in the next 12 months. The survey showed that 59 percent of the CEOs said infrastructure development will be a key growth driver; 59 percent said domestic consumption would spur the country’s economic growth; while 38 percent said the BPO and services sector would drive the Philippine economy. The executives were asked to evaluate the Philippine government, and 64 percent of the CEOs said the government is forging stronger relationships with other nations; 62 percent said the government is performing well in the area of infrastructure development and 46 percent said it is See “PHL,” A2
HE country’s fight against high inflation is not yet over and this will lead the Bangko Sentral ng Pilipinas (BSP) to delay any move to cut key interest rates to 2024, according to Australia and New Zealand Banking Group’s think tank. In its latest Philippine Insight, ANZ Research said rising food and energy prices are reversing the country’s progress in cooling inflation. The rice price ceiling recently imposed by the President may also only yield temporary relief for consumers as this can stoke inflation or create shortages. “ The Philippines’ inf lation battle is not yet over. Even if rice price caps alleviate some pressure and second-round effects are not accounted for, full-year 2023 inflation is likely to exceed our current baseline forecast of 5.3 percent,” ANZ Research said. “We are therefore revising our 2023 average inflation forecast to 6 percent from 5.3 percent previously. Our 2024 inflation forecast also now stands at 3.5 percent versus 3 percent previously,” it added. Given this, it is unlikely that the BSP will start reducing interest rates this year. ANZ Research said it expects the BSP to maintain policy rates at 6.25 percent until the end of the year. The think tank said this is because inflation is expected to average above 4 percent until the end of the year. The BSP’s inflation target is between 2 and 4 percent. “The reversal in the softening trend of inflation will also have a bearing on monetary policy. Indeed, the BSP has often reiterated that it is ready to act should inflationary pressures intensify,” ANZ Research said. “For now, we maintain the view that the BSP will hold the policy rate at 6.25 percent and that a cut is unlikely even in 2024. Our earlier view was the BSP would be able to start cutting the policy rate from the second quarter of 2024,” it added. See “Inflation,” A2
PESO EXCHANGE RATES n US 56.6590 n JAPAN 0.3860 n UK 70.6991 n HK 7.2266 n CHINA 7.7140 n SINGAPORE 41.5206 n AUSTRALIA 36.1541 n EU 60.7215 n KOREA 0.0424 n SAUDI ARABIA 15.1059 Source: BSP (September 11, 2023)