banking finance

2021 ECQ to hit GDP target: Dominguez

April 17, 2021

THE latest surge in coronavirus disease (Covid-19) infections is expected to result to below-target growth for the Philippine economy this year, Finance Secretary Carlos G. Dominguez III. “Well, I think it’s going to be lower than what we expected. This surge in the contagion, which is incidentally happening in Brazil, Canada, France, and Turkey, and other places is certainly not good for the economy,” he said in an interview over Bloomberg TV on Tuesday.      He estimates the latest lockdown to cost the economy “one half of 1 percent.”      Economic managers have set a growth target, as measured by gross domestic product (GDP), of between 6.5 and 7.5 percent this year.      The country is registering a surge in new cases since March this year, with the new record-high registered last April 2 at 15,310 infections.      The government has initially set a week-long enhanced community quarantine (ECQ) for the National Capital Region (NCR) and four nearby provinces-- Bulacan, Rizal, Cavite, and Laguna-- collectively called NCR Plus from March 29-April 4 but extended this for another week, or until April 11, to address the rising infections.      Dominguez pointed out that despite this development, the death rate in the country remains below those of Western countries at 12 deaths per 100,000 individuals compared to over 150 deaths per 100,000 individuals in other countries.      “We are coping with this surge and the best way we thought to do it was to have a curtailment of activities especially in the Metro Manila area for at least two weeks,” he said.      The country has imposed movement restrictions since mid-March 2020 but these have been eased following the drop in the number of infections to allow a recovery in domestic activity.      Last year, the whole of Luzon, which accounts for around 70 percent of GDP, was placed under ECQ from March 17 until end-April, with the movement restriction in NCR extended until end-May.      Other areas around the country were also placed in various levels of movement restrictions to contain the spread of the virus.      Because of the quarantine measures, domestic output registered a -9.5 percent print last year, with the second quarter figure posting a decades-long contraction of -16.9 percent.      Meanwhile, Dominguez said the government continues to have fiscal leeway despite the financing for Covid-related programs since last year.      Last year, the government extended P5,000 to P8,000 cash aid to around 18 million low-income households and to workers belonging to sectors greatly affected by the quarantine measures.      For this year’s ECQ, the government is using the P23 billion untapped allocation under the Bayanihan 2 law as subsidy for around 80 percent of the population in the NCR Plus.      To provide a boost in domestic economic activity last year, the Bangko Sentral ng Pilipinas (BSP) injected an equivalent of nearly P2 trillion in the financial system through, among others, the total of 200 basis points cut in the central bank’s key policy rates and up to 200 basis points reduction in banks’ reserve requirement ratio.      BSP also extended P840 billion worth of liquidity boost to the national government last year through a P300 billion short-term repurchase deal and a P540-billion cash advance. Both of which have been redeemed and repaid last year.      Last December, BSP’s policy-making Monetary Board (MB) approved another P540 billion provisional advance to the national government to help in the government’s recovery programs.      Dominguez discounted another move to further tap the central bank for liquidity boost this year.      “We will probably look to wind it down sometime late this year or early next year, depending on the situation,” he added. (PNA)

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DBP extends P6.13-B loan to Covid-hit businesses

April 17, 2021

THE Development Bank of the Philippines (DBP) has extended P6.13 billion in loans to enterprises badly hit by the economic shock of the coronavirus disease 2019 (Covid-19) pandemic and earmarked interest subsidies amounting to P27.13 million to local government units (LGUs) last year in line with its goal to help keep the productive sectors of the economy afloat during this global crisis.      DBP president and chief executive officer Emmanuel Herbosa said that to provide the bank with additional resources to help fund these efforts and the country’s economic recovery program starting this year, it plans to issue a $300-million bond by mid-2021, along with the second tranche of its sustainability bonds sometime in November.      “These will not only provide the bank with the necessary liquidity to fuel the country’s economic recovery efforts but will also aid in the development of the Philippine capital markets moving forward,” Herbosa said in his presentation of DBP’s 2021 plans to Finance Secretary Carlos Dominguez III.      As part of DBP’s innovative financing solutions, Herbosa said it is also planning to develop an LGU credit rating system together with the Department of Finance (DOF)-attached Bureau of Local Government Finance (BLGF) and the International Finance Corporation (IFC) in support of the development of a bond market for LGUs.      “Agri-Agra compliant bonds are also on the horizon as this will be timely upon the passage of the amendments to the Agri-Agra Law in support of the development of agriculture and agrarian reform,” he said.      Herbosa said DBP is also eyeing the development of an alternative trading system “in the near future” to anticipate the growth of the Philippine finance market.      “Our finance market is maturing and more financial solutions are needed. The bank is in a good position to pioneer a system of exchange for new market securities,” he added.      Herbosa said that last year, the P6.13 billion in loans under the bank’s Rehabilitation Support Program on Severe Events (RESPONSE) program were approved for 25 private and public institutions to help sustain their operations during the pandemic and disbursement is already at P701.4 billion.      Five LGUs with a total loan amount of P450 million were the beneficiaries in 2020 of the bank’s Assistance for Economic and Social Development (ASENSO) program and seven LGUs were provided financing assistance in the form of interest subsidies earmarked amounting to P27.13 million, he said.      Herbosa said DBP also granted a 60-day moratorium period for 627 of its loan accounts amounting to P130 billion in compliance with the provisions of Republic Act 11494, or the Bayanihan To Recover As One Act (Bayanihan 2).      On top of assisting cash-strapped local governments during the pandemic, Herbosa said DBP is also supporting climate-crisis adaptation initiatives at the local level, which include the waste-to-energy projects that it expects to develop with LGU partners starting this year. Herbosa said this project will be financed by funds raised by the DBP, through its highly successful Asean (Association of Southeast Asian Nations) Sustainability Bond issuance, which surpassed its P5-billion target and accumulated a total of P21 billion in 2020.      This was preceded in 2019 by a similar issuance of P18 billion in sustainability bonds, which was only the second of its kind in the Philippines at the time, he added.      This year, DBP will step up implementation of its RESPONSE and ASENSO programs to continue supporting industries and enterprises that have been gravely affected by the pandemic, Herbosa said.      “We have adopted this year a revised theme of ‘Strengthen Organizational Resilience’ to put stress on strengthening our internal capability to continue the development and rehabilitation initiatives for the country, post-pandemic,” he said.      To assist in this effort, DBP will fully operationalize this year its six new Provincial Lending Centers in support of the targeted 7-percent growth on its loan portfolio to reach P451.06 billion by year-end, Herbosa said.      “This growth duly considers DBP’s commitment under Bayanihan 2 to actively assist borrowers from micro, small, and medium enterprises (MSMEs) even as we keep our focus on supporting the infrastructure needs of the country,” he said. (PR)

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Moody’s revises PH banking sector outlook to stable

April 15, 2021

MOODY’S Investors Service has changed its outlook on the Philippines’ banking system from negative to stable, citing its forecast of a mild recovery for the domestic economy this year which supports the sector.       “However, asset risks remain high because of a prolonged curtailment of business activity, a high unemployment rate, and weak consumer sentiment,” it said in a report dated April 13, 2021.       It forecasts a 7-percent growth for the Philippine economy this year, within the government’s 6.5-7.5 percent target.       Moody’s expects the banking environment to be stable as the government eases movement restrictions.      It said fiscal support is also expected to boost the recovery bid and back consumer spending and investment.      “However, a resurgence in infection rates and a reinstatement of some social-distancing measures will slow the economic recovery in (the) first half of 2021,” it said.      The credit rater expects non-performing loans (NPLs) to rise this year, adding that social distancing measures will contribute to the debt repayment capacity of borrowers, particularly the retail borrowers and small and medium enterprises (SMEs).      However, Moody’s said the systemic risk is higher from corporate borrowers since “bank’s loans are heavily concentrated on them”.      Amidst these risks, Moody’s said Philippine banks’ “capital buffers will remain sufficient” but credit expansion is forecast to remain below pre-pandemic levels.      “As a result, rated Philippine banks will maintain sufficient capital buffers,” it said.      The banking sector’s profitability is also seen to remain stable after banks allocated significant loan loss provisions in 2020, it added. (PNA)

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Remittances, improved external demand to buoy recovery

April 7, 2021

GROWTH of money being sent home by overseas Filipino workers (OFWs) and improvement of external demand are expected to boost the domestic economy’s recovery this year.       However, Fitch Solutions Country Risks and Industry Research reduced its growth projection for the country this year from 7.6 percent to 5.8 percent on the expected hit from the enhanced community quarantine (ECQ).       The ECQ status in Metro Manila, Bulacan, Cavite, Laguna, and Rizal set from March 29 until April 4 was extended for another week to April 11 amid surge of coronavirus disease 2019 (Covid-19) cases.       Fitch Solutions said another unfavorable factor in the economy’s recovery is the slow vaccination rollout.       In a report released Monday, the unit of Fitch Group cited signs of gradual economic activity such as the above 50 level of the Manufacturing Purchasing Managers’ Index (PMI), which was unchanged at 52.5 last February against the previous month “indicating a gradual improvement in activity.”       As of last March, the PMI index stood at 52.2 based on the report of the IHS Markit.       An index of above 50 indicates expansion while a figure of below 50 shows otherwise.       “Indeed, respondents noted supportive demand dynamics and increased inventory building on a more positive outlook,” Fitch Solutions said.       The report also said external demand has been improving, partially due to the Covid-19 vaccination program in other countries.       Similarly, OFWs remittances continue to remain resilient, it added.       The report said while the January 2021 inflows declined by 1.7 percent year-on-year, it is 1.8 percent higher than the January 2019 pre-pandemic level.      “We believe that overall remittance flows will begin to gradually rebound as growth picks up globally, particularly on the back of a recovery in the US and the Middle East on the back of rising oil prices, which together accounted for 57.4 percent of remittances in 2019,” it said.       It added while lockdowns in Europe and tightening credit growth in China threaten the broader recovery in global demand as vaccination rollouts progress, “we expect growth to prove strong, boosting the outlook for exports which we forecast to grow 9.5 percent, following a 16.7 percent contraction in 2020.”      “As such, the external backdrop should continue to provide support to the economy in 2021,” it said.       However, the report said implementation of the two-week ECQ will slightly dampen growth prospects given the expected slide in domestic consumption and investment, factors that the domestic economy are highly vulnerable to.  (PNA)

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PH external debt ratios lower on prudent policy

April 7, 2021

THE Philippine government’s improved debt guidelines have resulted in the drop of the country’s external debt ratios compared to around two decades ago, the Department of Finance (DOF) said.      In an economic bulletin, the DOF said the proportion of the country’s foreign debt to gross national income (GNI) rose to 25.2 percent as of end-2020 compared to 20.2 percent in the previous year due to higher government liabilities.      However, last year’s figure was significantly lower at 30.9 percentage points than the 56.1 percent in 2000, or when the country was recovering from the impact of the Asian financial crisis.      Amidst the year-on-year uptick, the DOF said the country’s latest external debt ratio is better than the 28.95 percent average among six Asian countries in 2019 based on World Bank (WB) data.      WB data show that 2019 external debt as a percentage of GNI of China is 14.77 percent; Indonesia, 19.74 percent; Philippines, 20.19 percent; Thailand, 34.42 percent; India, 37.03 percent; and Vietnam, 47.56 percent.      The DOF said the Philippines’ prudent debt policy has enabled the country to strengthen its defenses against external shocks like the coronavirus disease 2019 (Covid-19) pandemic.      “This is one of the reasons for the strong confidence of investors in the Philippine economy. Nevertheless, we must continue to prudently manage our fiscal situation and continue to observe fiscal responsibility,” it added. (PNA)

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Targeted spending crucial to economic recovery

April 5, 2021

GOVERNMENTS, including those of the Association of Southeast Asian Nations (Asean), need more targeted spending to boost the recovery of their economies from the pandemic.      Li Lian Ong, ASEAN+3 Macroeconomic Research Office (AMRO) group head and lead specialist, said the greater focus should be on “the segments that will drive and sustain growth going forward”, among others.      “They need to avoid artificially supporting firms that are no longer economically viable… an alternative is to provide support to workers while they upskill to meet demand in the other more in-demand sectors,” she said in a virtual briefing during the release of the Asean+3 Regional Economic Outlook (AREO) Wednesday.       In her presentation, Ong said economic recovery remains shrouded by uncertainties because of pandemic-related risks.      AMRO projects a 6.7-percent growth for ASEAN+3, which comprises 10-member bloc Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam plus China, Japan, and Korea, this year.      However, it forecasts a growth moderation to 4.9 percent in 2022.      For one, AMRO sees a  6.9-percent growth for the Philippine economy this year but it projects further growth acceleration to 7.9 percent next year.      Ong said pandemic-related risks are important to be looked into in the short-term because “we cannot really see the economic recovery until the virus is under control.”      “So what is going to be important now is targeted containment that is decisive, effective, and proactive,” she added.      During the same briefing, Marthe Memoracion Hinojales, AMRO economist and AREO lead author, forecasts global value chains (GVCs) to focus more “on resilience and not just efficiency,” which she said, “is a prime characteristic of GVCs until we were hit by back-to-back shocks.”      She projects the ASEAN+3 to be a prime destination of GVCs post-pandemic because of improvements in the infrastructure and labor sectors.      “It (Asean+3) is a good candidate for those seeking to diversify for resilience,” she added.      Along with the geographical part of this issue is the importance of technology and its overall stake in the value chain.      “Users have become comfortable with the technology that was accelerated by the pandemic,” she added. (PNA)

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