Silver lining
Arnel Mandal yields to China’s Jiang Haidong in wushu’s men’s şanda final for the country’s first silver medal medal in the 19th Asian Games as Alex Eala is full of adrenalin on her way to settling for bronze in women’s singles of tennis. Story on B7. Nonie Reyes (Canon Eos R6)
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‘Tracking dollar cycle is the first line of defense’
T
racking the global dollar cycle and financial disruptions, such as the collapse of Credit Suisse, allows governments to prevent crises from hurting their economies, according to the Bangko Sentral ng Pilipinas (BSP). In a presentation at the EagleWatch economic briefing on Thursday, BSP Governor Eli M. Remolona Jr. said the global dollar cycle has led to several crises, such as the Latin American crisis in the 1980s, which also affected the Philippines, as well as the Tequila crisis.
The cycle also caused the Asian Financial Crisis of 1997-1998, which counted among its victims the Philippines and other Asean economies, as well as the global financial crisis and the Euro debt crisis. “I think you have to worry about the global dollar cycle, its a real cycle, and it can lead to crises. Of course, you have to worry about disruptions, [collapse of] Credit Suisse and Silicon Valley Bank, and then you have to worry about inflation. And then, beyond just worrying, you have to build resilience at home,” Re-
molona said. “In building resilience, you don’t just strengthen our financial system, you also have to hold ample reserves,” he added. Remolona said, however, that the effects of disruptions or contagion caused by the likes of Credit Suisse, Silicon Valley Bank, and even the China Evergrande Group have been limited. “At the first sign of trouble, heightened risk aversion spreads quickly, leading to a sudden stop,” Remolona said in a slide presentation. “Slow-burn contagion works through common lenders
who have to repair their balance sheets.” On Thursday, Rizal Commercial Banking Corp. Chief Economist Michael Ricafort said the stock price crash of Evergrande may not have a direct impact on the Philippine economy. If there will be an impact, Ricafort said, this may happen through China’s stock, bond, and currency markets. He also said global and regional financial markets may have already factored in this disruption. See “Tracking,” A2
BusinessMirror A broader look at today’s business
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BSP KEEN ON SLASHING RESERVE RATIO IN 2024 T www.businessmirror.com.ph
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Friday, September 29, 2023 Vol. 18 No. 347
Develop innovation mindset, Pinoys told
By Cai U. Ordinario @caiordinario
he Bangko Sentral ng Pilipinas (BSP) is keen on cutting the reserve requirement ratio (RRR) next year, as the “old-school tool” could lead to a distortion of financial intermediation.
At the EagleWatch economic briefing on Thursday, BSP Governor Eli M. Remolona Jr. said the present RRR is currently at 9.5 percent and was still high by the region’s standards. “The reason we have such a high reserve requirement is when we were still very old school, it was a way to control money supply [but] nobody does that anymore. Right now it’s just a distortion in financial intermediation, it drives a wedge between lending rates and deposit rates unnecessarily,” Remolona explained. Remolona said “when the time is right” the BSP will cut the RRR further. This may happen in 2024 given that the BSP is keeping a hawkish stance and is expected to raise rates in November. “For 2023, its [RRR cut] off the table. Maybe the soonest will be 2024,” Remolona told reporters on the sidelines of the briefing. The last time the BSP cut the RRR was in June 2023, when it slashed it by as much as 250 basis points, bringing down the effective ratios across banks to a single digit, as it seeks to ensure “stable” domestic liquidity and credit conditions. This was the first RRR reduction made by the BSP since 2020, when it cut the ratio by 200 basis points to the present 12 percent.
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By Andrea E. San Juan
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@andreasanjuan
he Intellectual Property Office of the Philippines (IPOPHL) said Filipinos need to develop a mindset that “continuously” innovates to challenge the norm despite the improvement in the Philippines’s ranking in the 2023 Global Innovation Index (GII). The Philippines is one of the middle-income economies that posted a significant improvement in the GII ranking of the World Intellectual Property Organization (WIPO). “The improvement of the Philippine innovation ranking is a welcome development. But we have to continue being dissatisfied—dissatisfied not just in our current posture in the global innovation map but in the current way of things around us, whether products, solutions, systems, processes or practices,” IPOPHL Director General Rowel Barba said in a statement on Thursday.
Farmworkers skillfully wield sickles as they harvest palay on a roadside farm in Calauan, Laguna. Meanwhile, the cost of essential Filipino staples, including rice, continues to rise despite government efforts to implement price caps on rice. BERNARD TESTA
See “Develop,” A2
MARITIME TRADE SEEN GROWING BY 2.4% THIS YEAR By Lorenz S. Marasigan
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@lorenzmarasigan
LOBAL seaborne trade, which experienced a marginal contraction of 0.4 percent in 2022, is poised for a recovery in 2023, the United Nations Conference on Trade and Development (Unctad) said on Wednesday. According to its report titled “Review of Maritime Trade 2023,” the global shipping industry, though still grappling with challenges from the pandemic and disruptions in supply chains, is “showing resilience amidst shifting trade patterns.” The report said the industry underwent “significant challeng-
es,” including the lingering effects of the global supply chain crunch, a softening container shipping market, and the impact of the war in Ukraine on shipping patterns. Despite these, Unctad projects a 2.4-percent growth in maritime trade volume for 2023. Meanwhile, coming from a 3.7-percent decline in 2022, containerized trade is expected to grow by 1.2 percent this year and over 3 percent between 2024 and 2028, according to Unctad. This, however, is still below the long-term average growth rate of around 7 percent as observed in the previous 30 years. Furthermore, Unctad noted that container shipping may also be “grappling with overcapac-
ity,” leading carriers to employ strategies like vessel idling or even demolition to manage supply levels. It said the “most pressing challenge” that the industry is facing is the need to “transition towards decarbonization while sustaining economic growth.” “Undoubtedly, the key challenge for the sector is that the maritime industry must embark on a transformative journey towards decarbonization while sustaining economic growth. Balancing environmental sustainability, regulatory compliance and economic demands is vital for a prosperous, equitable and resilient maritime transport future,” the report read.
See “BSP,” A2
PESO exchange rates n US 56.9390 n japan 0.3809 n UK 69.1239 n HK 7.2810 n CHINA 7.7860 n singapore 41.5129 n australia 36.1620 n EU 59.8258 n KOREA 0.0421 n SAUDI arabia 15.1797 Source: BSP (September 28, 2023)