‘No policy rate tweaks anymore for 2021’ By Tyrone Jasper C. Piad @Tyronepiad
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ITH the last two monetary policy meetings in 2021, the Bangko Sentral ng Pilipinas (BSP) is likely to maintain the interest rates for the rest of the year amid the manageable inflation level. BSP Governor Benjamin Diokno said in a TV interview on Monday that their accommodative monetary policy settings will stay until the end of the year. “It appears that there won’t be any policy rate adjustments between now and the end of the year,” he said. In the last monetary policy meeting, the Monetary Board kept the in-
terest rate on the overnight reverse repurchase facility at 2 percent. Overnight deposit and lending facilities were also untouched at 1.5 percent and 2.5 percent, respectively. This is in contrast with what is happening for some other central banks, which have decided to increase their interest rates. “They fear inflation and...they see their exchange rate deteriorating so fast. As a result, some of them have adjusted the policy rates,” Diokno said. He reiterated, however, that the country has a “hefty” gross international reserves amounting to $108 billion, in addition to inflow of overseas Filipino remittances, receipts
from the business-process outsourcing sector and exports. “We are fairly comfortable that we don’t need to raise interest rates at this time,” he said. In addition, Diokno maintained that the inflation this year is expected to average at 4.5 percent. This is seen to further ease to 3.3 percent and 3.2 percent in the next two years. “That is within our target band of 2-4 percent. That’s what we mean that it is transitory,” he said. Consumer prices in September eased to 4.8 percent from 4.9 percent a month earlier, bringing the average figure to 4.5 percent. The BSP chief, who shrugged off concerns over stagflation, said they
are also sticking with the economic growth forecast of 4 to 5 percent this year by the Development Budget Coordination Committee. “Stagflation means low growth and high unemployment. That is not within our prognosis,” he stressed. “The economy will pick up in the fourth quarter of this year. In fact, there may be some good numbers that will come out from third quarter,” he added. He said the GDP will continue to be supported by exports, imports, foreign direct investments and OFW remittances. The last two monetary policy meetings are scheduled in November and December.
SPENDING ON INFRA UP 60.2% TO P70.9B IN AUG
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Tuesday, October 19, 2021 Vol. 17 No. 11
P25.00 nationwide | 2 sections 20 pages |
Govt has no funds for firms’ 13th mo subsidy
By Bernadette D. Nicolas
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@BNicolasBM
TATE infrastructure spending in August surged by 60.2 percent year-on-year to P70.9 billion on the back of implementation of various projects.
Latest data from the Department of Budget and Management (DBM) showed the government disbursed more on infrastructure and other capital outlays in August this year compared to the same month in 2020 when it spent P44.3 billion. The pickup in infrastructure spending was also one of the main growth drivers of overall government spending during the month. Overall government spending in August hit P380.2 billion, rising by 34.2 percent from P283.3 billion in the same period a year ago. “Infrastructure and other capital expenditures will continue to drive government disbursements for the remaining months as payables for completed and partially completed infrastructure activities become due and demandable, alongside the regular operating expenditures of various line departments,” the DBM said in its report. Among the infrastructure projects that were implemented were various road infrastructure projects of the Department of Public Works and Highways such as construction/completion/repair/ rehabilitation/improvement of government buildings, access, bypass, and diversion roads, bridges, flood mitigation structures and drainage systems and aviation sector infrastructure projects of the Department of Transportation in particular the Tacloban, Kalibo, and Bukidnon Airport Projects. Apart from these, projects under the Revised AFP Modernization Program of the Department of National Defense; and capital outlay projects of State Universities and Colleges such as the Smart Campuses Program were also implemented. For January to August, state infrastructure spending also jumped by 44.6 percent to P570.4 billion from last year’s P394.5 billion. Mainly due to higher infrastructure spending, overall government spending also picked up by 10.9 percent to P2.96 trillion from P2.67 trillion in the same eight-month period in 2020.
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PEOPLE flock to the Manila Baywalk Dolomite Beach on Roxas Boulevard in Manila early Monday morning. The project was opened to the public on October 16, 2021, the same day the IATF placed Metro Manila under Covid-19 Alert Level 3. NONIE REYES
BEST TO PREPARE FOR CHINA FALLOUT–SALCEDA By Jovee Marie N. dela Cruz
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@joveemarie
HE Philippines’s economic managers should stay vigilant as China’s third quarter growth slowed to a disappointing 4.9 percent amid the debt crisis surrounding that country’s largest property developer Evergrande, the chairman of the House Committee on Ways and Means said on Monday. Albay Rep. Joey Sarte Salceda, an economist, said the Philippines should now have contingencies to insulate the country from spillover effects. “I don’t think we are headed for disaster, but it’s best to prepare,” he said in a statement. “ There are signs that the
situation with Evergrande is systemic. New construction in September slowed down for a sixth straight month in China, that country’s longest period of monthly declines since 2015. There is also another real-estate company that defaulted on its debts,” said Salceda. Although the Chinese economic authorities are trying to allay market fears, he said, “I would be on high alert, especially since many of our big conglomerates have exposure in the Chinese realestate market.” Salceda was referring to a liquidity crisis at China Evergrande Group, which has more than $300 billion in liabilities. The development has rocked global markets.
“Evergrande is not the only company in trouble. The South China-based luxury real-estate developer Fantasia Holdings also said it failed to make a $206-million US dollar bond payment two weeks ago. This is even when the company reported revenue of about $1.7 billion for the first six months of 2021, an 18.5-percent increase from a year earlier, and net profit of $23.7 million,” Salceda added. Earlier, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Evergrande’s default would have no direct impact on Philippine banks and the economy. “Philippine banks are largely domestic-oriented with cross border exposures or claims from
counterparties in other countries at 9.4 percent of total banking system assets,” he added.
Prepare early
ACCORDING to Salceda, the country’s experience with global systemic risks is that the “earlier it prepares, the better it performs.” “That’s what we did during the Global Financial Crisis. In January 2008, back when people were still debating whether there was a real recession, we already prepared a package of agriculture projects, front-loaded infrastructure, cash-for-work, and other programs to stimulate the Philippine economy and insulate it from any spillover effects from the West,” Salceda said. See “China fallout,” A2
HE government lacks funds to grant the proposed cash subsidy to help companies pay the 13th-month pay of their workers, according to the Department of Labor and Employment (DOLE). Labor Secretary Silvestre H. Bello III issued the statement after Vice President Leonor “Leni” Robredo urged the government at the weekend to give a stimulus package for micro, small and medium enterprises (MSME) so they could afford giving the 13thmonth benefits. As early as last year, Bello said they had requested the Department of Budget and Management (DBM) for a P60-billion budget to give a wage subsidy to firms heavily affected by the business disruptions caused by the Covid-19 pandemic. “But we were told the government cannot afford the budgetary requirements so we no longer reiterated our proposal for the wage subsidy for employers,” Bello said during a virtual press briefing on Monday. Instead of the wage subsidy, the government opted to extend “soft loans” to MSMEs to pay the 13th-month pay of their employees through the Small Business Corporation of the Department of Trade and Industry (DTI). For this year, DTI already announced it will initially allocate P200 million to once again provide a similar zero-interest loan to qualified establishments. Despite the onset of the pandemic last year, Bello said they did not get any mass reports of companies which failed to pay the 13th-month pay of their workers. “In fairness to the employers, in 2020, we did not get any complaints of non-payment for the 13th month. If there were, it may only be isolated cases,” Bello said. Earlier this month, some business leaders said many companies will have a hard time paying the mandated benefit under Presidential Decree 851 due to the prolonged disruptions caused by quarantine restrictions on their operations. Samuel P. Medenilla
See “Spending,” A2
PESO EXCHANGE RATES n US 50.6860
n JAPAN 0.4436 n UK 69.7338 n HK 6.5179 n CHINA 7.8754 n SINGAPORE 37.6093 n AUSTRALIA 36.5634 n EU 58.8160 n SAUDI ARABIA 13.5137
Source: BSP (October 18, 2021)