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ADB trims 2023 Philippine GDP growth outlook to 5.7%; inflation steady at 6.2%

ADB cuts PHL growth outlook to 5.7%

THE ASIAN Development Bank (ADB) cut its gross domestic product (GDP) growth forecast for the Philippines this year, as elevated inflation dampens consumer spending.

In its latest Development Outlook report, the ADB trimmed its GDP growth outlook to 5.7% this year from the 6% projection it gave in April.

If realized, this would be below the government’s 6-7% target for this year, and slower than the 7.6% GDP expansion in 2022.

“We have downgraded our (Philippine growth) forecast for this year mainly due to the weakening in domestic demand,” ADB Senior Regional Cooperation Officer for Southeast Asia Dulce Zara said in a webinar discussing the report on Wednesday.

She noted last year’s economic performance reflected the reopening of the economy, strong pent-up demand and election-related spending.

“Spending, investments were also high (last year). This year, they have gone down. Another factor is the decline in exports. That’s the reason for the downgrade,” she said.

The Philippine economy expanded by 4.3% in April to June, the slowest growth in over two years, amid weak household consumption and a contraction in government spending.

The ADB’s 2023 growth forecast for the Philippines is still the second fastest among Southeast Asian economies, after Vietnam (5.8%) and ahead of Cambodia (5.3%), Indonesia (5%) and Malaysia (4.5%).

This is also higher than the 4.6% GDP growth projection for Southeast Asia, which was slightly lower than the previous forecast of 4.7%.

“The Philippines’ growth story remains strong despite an expected moderation in 2023. Public investment and private spending fueled by low unemployment rate, sustained increase in remittances from Filipinos overseas, and buoyant services including tourism will support growth,” ADB Philippines Country Director Pavit Ramachandran said in a statement.

For 2024, the ADB expects the Philippines to now be the fastest-growing economy in Southeast Asia with a 6.2% GDP growth projection. This after the ADB downgraded its growth forecast for Vietnam to 6% from 6.8% previously.

“Private consumption and investment will continue to underpin growth. A moderation in inflationary pressures next year bodes well for domestic demand,” the multilateral lender said.

Public expenditure and infrastructure spending are expected to pick up in 2024.

“Moving forward, prospects remain positive for the Philippines. We are looking at investments from the government given its pipeline of infrastructure projects and as well as continued consumer spending, which is the main driver of growth for the Philippines,” Ms. Zara said.

The ADB cited several risks to the Philippine growth outlook such as the expected slowdown in major economies, rising geopolitical tensions, and elevated global commodity prices.

“An intensified and prolonged El Niño, other severe weather disturbances, and a continuation of the Russian invasion of Ukraine could elevate inflationary pressures,” it added.

At the same time, ADB maintained its inflation outlook at 6.2% this year and 4% next year, which are both at the higher end of the Bangko Sentral ng Pilipinas’ (BSP) 2-4% annual target range.

Both forecasts are above the BSP’s average inflation projections of 5.6% for this year, and 3.3% for 2024.

At 6.2%, Philippine inflation is projected to be the third-fastest in Southeast Asia this year, following Laos (28%) and Myanmar (14%).

In 2024, the Philippines is still expected to see the third-fastest inflation, after Cambodia and Vietnam.

“Inflation is expected to soften, though the onset of El Niño and elevated global commodity prices may slow the pace of deceleration,” the ADB said.

The multilateral institution said the El Niño weather phenomenon will likely hurt the upcoming harvest, particularly in Southeast Asia.

“This could dent food security and raise inflation in net rice-importing countries, such as Bangladesh, Bhutan, Maldives, Nepal, and the Philippines,” it said.

Ms. Zara said that agriculture production in countries like the Philippines, Indonesia, Myanmar and Thailand will likely be the most impacted by El Niño-induced dry spells and droughts.

“Although inflation has moderated in the first seven months of the year, food inflation remains elevated, above 5% for Laos, the Philippines, Singapore and Malaysia. Reduced agri output both domestic and globally will be harmful for these economies,” she added.

Meanwhile, second-round effects stemming from higher transport fares and wage adjustments may also impact Philippine inflation this year.

“The government is considering extending the period for the reduced tariffs for some food items including rice which are due to expire by December 2023, to keep inflation contained,” the ADB said.

As core inflation eases, the ADB noted the BSP would likely keep policy rates steady before considering cutting them in 2024.

The BSP hiked the key policy rate by 425 basis points (bps) to 6.25% from May 2022 to March 2023.

The Monetary Board will likely hold interest rates steady for a fourth straight meeting on Thursday, as expected by 14 of 17 analysts in a BusinessWorld poll last week.

Meanwhile, economic growth in developing Asia this year will be slightly lower than previously expected as the weakness in China’s property sector and El Niño-related risks cloud regional prospects, the ADB said.

Updating its regional economic outlook, the ADB trimmed its 2023 growth forecast for developing Asia to 4.7% from 4.8% projected in July.

But the growth forecast for next year for the grouping, which consists of 46 economies in the Asia-Pacific and excludes Japan, Australia and New Zealand, was revised slightly upwards to 4.8% from 4.7% previously.

“We see resilient growth in the region really based on pretty strong domestic consumption and investment, and despite reduced external demand, which is a dampener on export-driven growth,” Mr. Park said.

The ADB tempered its growth forecasts for East Asia, South Asia, and Southeast Asia this year, with China and India expected to grow 4.9% and 6.3%, respectively, slightly lower than the July growth projections of 5% and 6.4%.

China’s property crisis “poses a downside risk and could hold back regional growth,” the ADB said in its report.

The Manila-based lender maintained its 2024 growth forecasts for China and India at 4.5% and 6.7% respectively.

While growth has so far been robust and inflation pressures are receding in developing Asia, Mr. Park said governments need to be vigilant against the many challenges the region faces, including food security.

Inflation in developing Asia is forecast to ease to 3.6% this year from 4.4% last year, and continue to slow to 3.5% in 2024, giving central banks policy space, but the ADB said interest rate hiking and easing cycles will vary going forward. — Luisa Maria Jacinta C. Jocson with Reuters

#ADB #cuts #PHL #growth #outlook

Peso weakens as ADB cuts PHL growth forecast

THE PESO depreciated against the dollar on Wednesday after the Asian Development Bank (ADB) cut its economic growth forecast for the Philippines this year.

The local currency closed at P56.81 versus the dollar on Wednesday, weakening by 5.50 centavos from Tuesday’s P56.755 finish, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Wednesday’s session at P56.70 per dollar, which was also its intraday best. Its weakest showing was at P56.824 against the greenback.

Dollars traded went down to $835.5 million on Wednesday from $1.17 billion on Tuesday.

The peso declined on Wednesday as the ADB slashed its growth forecast for the country, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

In its latest Asian Development Outlook report, the ADB trimmed its Philippine gross domestic product (GDP) growth forecast for this year to 5.7% from the 6% estimate it gave in April.

This is below the government’s 6-7% growth target.

The peso also depreciated due to a stronger dollar and global crude oil prices recently, Mr. Ricafort said.

“The peso depreciated due to some market caution ahead of the Federal Reserve policy decision overnight,” a trader added in an e-mail.

The Fed was set to announce its latest policy decision overnight after a two-day meeting.

The US central bank raised borrowing costs by 25 basis points (bps) in July, bringing its target rate to a range between 5.25% and 5.5%.

It has hiked rates by a cumulative 525 bps since it began its tightening cycle in March last year.

For Thursday, the trader said the peso could weaken further as the market will stay on the sidelines ahead of the Bangko Sentral ng Pilipinas’ own policy decision.

Both the trader and Mr. Ricafort see the peso ranging from P56.70 to P56.90 per dollar on Thursday. — AMCS

#Peso #weakens #ADB #cuts #PHL #growth #forecast

China’s property crisis weighs on developing Asia’s 2023 growth outlook – ADB

China’s property crisis weighs on developing Asia’s 2023 growth outlook – ADB

MANILA – Economic growth in developing Asia this year will be slightly lower than previously expected as the weakness in China’s property sector and El Niño-related risks cloud regional prospects, the Asian Development Bank (ADB) said on Wednesday.

Updating its regional economic outlook, the ADB trimmed its 2023 growth forecast for developing Asia to 4.7%, from 4.8% projected in July.

But the growth forecast for next year for the grouping, which consists of 46 economies in the Asia-Pacific and excludes Japan, Australia and New Zealand, was revised slightly upwards to 4.8% from 4.7% previously.

“We see resilient growth in the region really based on pretty strong domestic consumption and investment, and despite reduced external demand, which is a dampener on export-driven growth,” Albert Park, ADB’s chief economist, told a press conference.

The ADB tempered its growth forecasts for East Asia, South Asia, and Southeast Asia this year, with China and India expected to grow 4.9% and 6.3%, respectively, slightly lower than the July growth projections of 5.0% and 6.4%.

China’s property crisis “poses a downside risk and could hold back regional growth,” the ADB said in its report.

The Manila-based lender maintained its 2024 growth forecasts for China and India at 4.5% and 6.7% respectively.

While growth has so far been robust and inflation pressures are receding in developing Asia, Park said governments need to be vigilant against the many challenges the region faces, including food security.

Inflation in developing Asia is forecast to ease to 3.6% this year from 4.4% last year, and continue to slow to 3.5% in 2024, giving central banks policy space, but the ADB said interest rate hiking and easing cycles will vary going forward. — Reuters

#Chinas #property #crisis #weighs #developing #Asias #growth #outlook #ADB

Lopez holding firm bullish on sustained growth  

Lopez holding firm bullish on sustained growth  

FIRST Philippine Holdings Corp. (FPH) is bullish that the company will be able to sustain its growth in the remaining part of the year on the back of its businesses’ improved performance.

FPH President and Chief Operating Officer Francis Giles B. Puno said he sees momentum for the Lopez-led company’s units, adding that they are “performing as expected.”

“Generally, I would say that the outlook is positive,” Mr. Puno said on the sidelines of the recent Management Association of the Philippines (MAP) International CEO Conference in Taguig City.

“[For] our power generation business, the demand is already back to pre-pandemic levels. Then you have real estate. Rockwell Land Corp. is doing really well. We have new locators in our industrial park and the demand for high-efficiency transformers is still there for the utilities,” he added. 

Mr. Puno said the company’s growth drivers for the remaining months of the year include its core businesses in the real estate, power, and construction sectors.

FPH’s subsidiaries include First Gen Corp., Batangas Cogeneration Corp., First Philec Inc., Rockwell Land, and First Balfour, Inc. The company is also in a joint venture with Japanese conglomerate Sumitomo Corp. for the First Philippine Industrial Park economic zone in Batangas. 

“Our growth drivers are the core businesses. More capacity on the power side. Hopefully, the momentum on real estate will continue, not only in Rockwell business but also in the industrial park, and then the construction business because there’s a lot of infrastructure that should be constructed,” Mr. Puno said, adding that he was “hoping that we get more contracts.”

In the first half, FPH’s net income attributable to equity holders of the parent rose 29% to P8.1 billion after recording higher revenues. 

The conglomerate’s consolidated revenues rose 7% to P84.1 billion on the back of higher electricity sales and higher contracts and services.

On Tuesday, shares of FPH at the local bourse dropped 40 centavos or 0.63% to finish at P62.60 apiece. — Revin Mikhael D. Ochave

#Lopez #holding #firm #bullish #sustained #growth

AI could unlock growth opportunities for PHL

AI could unlock growth opportunities for PHL

By Luisa Maria Jacinta C. Jocson, Reporter

THE PHILIPPINES should take advantage of the shift to artificial intelligence (AI) technologies, which is expected to generate growth opportunities for many industries, analysts said.

Moody’s Investors Service said in a Sept. 6 report that AI and other transformative technologies have the potential to “reshape entire industries” and “drive the emergence of new sectors, possibly in content generation, mobility, education, or healthcare fields.”

New technologies, it said, will boost growth by increasing productivity through task automation, process optimization, and enhanced decision making.

However, Moody’s also noted that AI may displace industries and workers and may increase inequalities due to the potential demand for high-skilled workers.

The Philippines ranked 54th out of 181 countries in a 2022 Government AI Readiness Index by Oxford Insights.

Ria Ysabelle Flora, Aboitiz Data Innovation Head of Power Solutions, said increased AI adoption would benefit a number of industries and sectors, such as finance, in the Philippines.

“With the help of tech and AI, banks that used to work on decades-old systems now are slowly realizing the importance of overcoming their technical debt,” she said in a Viber message.

Ms. Flora said engineering-centric industries such as energy and manufacturing are also seen to gain through business process optimization brought by AI.

“I see a lot of value potential in AI coming into the energy sector,” she added.

AI is also expected to bring more opportunities for growth in the Information Technology and Business Process Management (IT-BPM) industry.

IT and Business Process Association of the Philippines (IBPAP) President Jack Madrid said that generative AI (GenAI) holds exciting potential for customer service.

Full-scale implementation of GenAI could boost productivity by 50% or even more, he said, citing studies.

“In contrast to traditional AI, which relies on rule-based systems or standard machine learning algorithms, GenAI goes further by understanding context, creating coherent and contextually appropriate responses, and handling customer inquiries more effectively,” he said in an e-mail.

“It can decode complex customer questions, discerning nuanced intent, sentiment, and context, leading to accurate and relevant responses. By leveraging customer data, GenAI provides personalized answers and suggestions, enhancing the customer experience with tailored solutions,” he added.

Mr. Madrid said that GenAI can make the workforce more productive by automating repetitive tasks and allow them to focus on more judgment-sensitive activities.

“GenAI will create demand for people adept at leveraging AI technologies to drive innovation and growth. As the demand for AI applications and customization grows, the need for skilled AI prompt engineers becomes more crucial,” he added.

Mr. Madrid said that it will be crucial for the IT-BPM sector to harness GenAI. “By embracing this cutting-edge technology, we not only propel our IT-BPM industry to new heights of efficiency and innovation but also fortify the nation’s position as a beacon of progress in the digital age.”

AI is seen to boost Philippine growth by 12% in 2030, equivalent to $92 billion, according to a report by EDBI and Kearney.

Economist Intelligence Unit analyst Laveena Iyer said the launch of ChatGPT in November 2022 spurred an intense debate about how AI will affect and benefit businesses and consumers.

“Many companies are already using forms of AI or machine learning for various purposes, from automation of manual processes to predicting and fulfilling customer demand,” Ms. Iyer said in an e-mail.

She said the benefits of leveraging AI would depend on the pace of adoption, a country’s digital infrastructure and regulatory framework.

The consumer goods sector, particularly e-commerce, would also gain from AI technologies, she added.

Ms. Iyer noted that retail companies are using AI for predictive analysis and use geolocation data to refine transparency in their supply chains.

“In the Philippines, online retail sales grew sharply owing to the pandemic, and we expect it to account for more than 9% of total retail sales market by 2027 (from less than 3% of the overall market in the pre-pandemic period). We could expect some of the major market players to adopt AI as they go ahead, if they haven’t already,” she added.

Senti AI Founder and Chief Executive Officer Ralph Vincent J. Regalado said that it is “inevitable” that technologies will change the ways people work, regardless of the industry.

“AI is meant to help people and businesses become more efficient and that should translate to better productivity, better output, and of course, increased returns that will reflect on a macroeconomic scale,” he said in a Viber message.

While the Philippines isn’t at the forefront of tech adoption, Mr. Regalado said the government’s push for digital transformation and the private sector’s interest in AI solutions is a “good sign.”

Industries that are customer facing, he said, could also benefit from AI solutions, like conversational AI or data analytics.

“The way I see it, those that would benefit the most from emerging technologies are not sectors, but specific organizations that have identified a use case where they can apply these technologies,” he added.

Adopting AI technologies will ultimately lead to adjustment in business operations and the overall economy, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

This would require “fine-tuning some functions to adapt to AI, a technology that could be further harnessed to further boost efficiency and overall productivity of businesses, education, and other institutions such as government functions,” Mr. Ricafort said.

According to Aboitiz Data Innovation’s Ms. Flora, the biggest risk is believing that AI can “solve anything.”

“Technology for technology’s sake is very dangerous because it retrofits solutions to problems that may be deeply entangled with other exogenous factors,” she said.

Ms. Flora said that many firms are eager to utilize ChatGPT and other similar technologies to deploy as chatbots, hoping these would increase sales.

“However, marketers and executives often forget that these models and technologies would only be effective if the rest of their sales pipeline is efficient and ready to accommodate the possible surge of sales leads,” she added.

For his part, IBPAP’s Mr. Madrid said the disruption from GenAI should not be underestimated.

“There is a consensus that it may lead to substantial workforce reductions in certain industries and job roles, necessitating large-scale reskilling initiatives to address changing talent needs,” he said.

Mr. Madrid said that studies suggest that graphic designers, journalists, photographers, social media influencers, authors, educators, and linguists may experience significant changes due to AI.

There is also the risk of displacing low-skilled workers and jobs.

“There could be job displacements, especially if it’s a low-level and repetitive kind of job that can be automated. But again, workers at risk of displacement should be upskilled to take on new jobs created due to AI adoption,” Senti AI’s Mr. Regalado said.

Workers and businesses would need to adjust to these changes.

“Some jobs may be considered obsolete if it can be done by AI, but those displaced workers should be trained to do new jobs created by the changing business landscape,” he added.

Mr. Madrid said that upskilling the workforce will be key to adapting to new roles and meeting evolving demands.

“In this new era, GenAI will not merely automate tasks but also assist in equipping the workforce with new skills,” he added.

Mr. Regalado said that public and private sectors should ensure that the right policies and regulations are in place to be ready for AI adoption.

“Do we have enough regulations in place to make sure our data is secure, and that AI will be used for good? Do we have the infrastructure to support tech adoption? Does our workforce have the digital literacy and skill to keep up with the changing demands of the business landscape? These are the things we have to fix if we want the Philippines to reap the full benefits of AI,” he added.

Data privacy is also at risk with the increased use of AI. “AI relies heavily on data. A lot of it, and most likely, very sensitive as well. Organizations have to make sure that they have very secure data storage to avoid any breaches. Another risk is that the models used may exhibit bias if it was not trained properly, or if it was not fed the right kind of data,” Mr. Regalado said.

He noted organizations should make sure to do a risk assessment before adopting AI.

Terry L. Ridon, a public investment analyst and convenor of think tank InfraWatch PH, said that AI technology cannot fully replace the high-level analytical and custom work of professionals.

“While the disruption that may be caused by AI is concerning, particularly on the prospect of massive job loss, unless it is able to fully replicate the best attributes of employees at all levels of employment, the humans are here to stay,” he said in an e-mail.

Mr. Ridon said that AI models can provide big data confirmation of professional-created analysis at best, but it will still be limited to the breadth of information inputted to the model.

“Corporates, particularly public-facing firms, should also determine the role of AI in managing its customer service experience, as many consumers will still opt to be able to speak or chat with an actual person to immediately resolve their concerns,” he said.

AI models can also make errors, and clients may harbor negative sentiment due to the lack of accountability in the mistakes of AI models, Mr. Ridon said.

“The best attributes (of humans) are not just their capacity to churn out information to end users, it includes the ability to process and analyze complex information, the ability to take responsibility for all decisions and action, and most importantly, the ability to empathize with others,” he added.

#unlock #growth #opportunities #PHL

Price growth of NCR construction materials eases in August

By Bernadette Therese M. Gadon, Researcher

BULK prices of construction materials in the capital region decreased by 5.7% year on year in August, the Philippine Statistics Authority (PSA) reported on Friday.

Analysts attributed this to favorable base effects, the global economic slowdown, and the high-interest rate environment.

Preliminary data from the construction materials wholesale price index (CMWPI) in the National Capital Region (NCR) showed that prices were lower compared to the 7% figure in August last year. In July, CMWPI increased by a revised 5.7% annually.

This was the slowest growth in more than a year, or since the 5.2% recorded in February 2022.

Year to date, CMWPI averaged 7.1%.

Commodities that saw slower year-on-year growth rates were fuels and lubricants (-6.6% this year compared to 30.3% a year ago), PVC pipes (-5.1% from 9.8%), and reinforcing and structural steel (3.5% from 10.7%).

Meanwhile, G.I. sheet registered a growth of 12.8% to 16.4% in August this year, up from 3.6% a year ago.

Following that were painting works (10.3% from 7.1%) and doors, jambs, and steel casement (5.1% from 2.2%).

Out of the 17 commodities monitored by the statistics agency, 10 saw slower growth.

Retail prices, tracked by the PSA’s construction materials retail price index (CMRPI), also decreased by 1.4% year on year, down from 6.9%.

This was the slowest growth recorded in more than two years, matching the 1.4% figure from July 2021, and the slowest since the 1.2% in June 2021.

Over the first eight months of the year, CMRPI averaged 3.1%.

The following commodities recorded slower growth rates: miscellaneous construction (-0.7% in August 2023, down from 10.9% in August 2022), tinsmithry (2.9% from 9%), and plumbing (0.4% from 7.5%).

The easing trend seen in the past few months as world prices of most base metals slipped on the risk of US economic slowdown and softer economic data seen in China also contributed to slower price inflation of construction, according to Rizal Commercial Banking Corp. chief economist Michael L. Ricafort.

“Higher interest rates in the US/globally and locally, after the aggressive Fed rate hikes… effectively increased borrowing/financing costs, thereby leading the slower investments and demand for construction materials,” he said in an e-mail.

The weak outlook on the real estate sector also dampened demand for construction materials, according to China Banking Corp. (China Bank) chief economist Domini S. Velasquez,

“Moving forward, however, we may see an uptick in wholesale prices due to the continued increase in global oil prices, which will likely be passed through to retail prices,” she said in a Viber message.

In the coming months, Mr. Ricafort said that the dollar-peso exchange rate may affect import costs on construction materials; however, the continued increase in infrastructure spending, which accounts for at least 5-6% of gross domestic product (GDP), could support demand for construction materials for the rest of the year.

To recall, second-quarter GDP eased further to 4.3% from 6.4% in the first quarter and from 7.5% in the same quarter a year ago due to government underspending and a lack of election-related spending.

Slower global economic growth likewise dragged down the country’s economic performance.

However, the latest data from the Department of Budget and Management showed infrastructure expenditures reached P507.2 billion in the first half of the year, above the P483.1 billion spending program planned for the period.

“The further reopening of the economy towards greater normalcy, with the final lifting of the COVID state of public health emergency since July 22, 2023, could lead to some pick up in construction and other business/economic activities, thereby could also support demand for construction materials,” Mr. Ricafort said.

“Dry weather due to El Nino conditions expected in [the fourth quarter] will also boost construction activity. On the other hand, downward pressure on prices will likely still come from weak real estate demand from high-interest rates,” China Bank’s Ms. Velasquez said.

#Price #growth #NCR #construction #materials #eases #August

Credit growth further slows in July

Credit growth further slows in July

By Keisha B. Ta-asan, Reporter

CREDIT GROWTH slowed for a fourth straight month in July, as high interest rates took its toll, Bangko Sentral ng Pilipinas (BSP) data showed.

Data from the BSP showed outstanding loans of universal and commercial banks, net of reverse repurchase (RRP) placements with the central bank, rose by 7.7% to P11 trillion in July, from P10.21 trillion a year earlier.

The 7.7% bank lending growth in July was slower than 7.8% in June, and the 11.9% expansion in July 2022. It was also the weakest increase since April.

China Banking Corp. Chief Economist Domini S. Velasquez said the slower credit growth reflects the cumulative impact of the aggressive monetary policy tightening of the central bank.

The BSP hiked borrowing costs by 425 basis points from May 2022 to March 2023 to curb inflation, bringing the key policy rate to a near 16-year high of 6.25%.

“This is compounded by a slowdown of economic activities, with spending moderating from the highs of revenge spending post-pandemic,” Ms. Velasquez said.

Philippine gross domestic product (GDP) expanded by a slower-than-expected 4.3% in the second quarter, as household consumption growth slowed. For the first six months, GDP growth averaged 5.3%, still below the government’s 6-7% target this year.

Security Bank Corp. Chief Economist Robert Dan J. Roces said consumers and businesses are more cautious in borrowing as inflation remains elevated and interest rates remain high.

Inflation eased to 4.7% in July but marked the 16th straight month that inflation exceeded the BSP’s 2-4% target band. For the first seven months, inflation averaged 6.8%.

“Additionally, anticipation of future monetary policy shifts by the BSP, with the stance of a hawkish hold, could influence borrowing decisions,” Mr. Roces said.

The BSP has kept policy rates unchanged for a third meeting in August. However, stubborn inflation has increased pressure on the central bank to maintain its hawkish stance.

BSP data showed outstanding loans to residents, net of RRPs, expanded by 7.8% to P10.69 trillion in July, from P9.92 trillion in the same month last year. The pace of annual expansion was a tad lower from 7.9% in June.

Borrowings for productive activities jumped by 6.2% to P9.54 trillion in July from P8.98 trillion a year ago. This was slower than the 6.3% growth in June.

Borrowings increased for sectors such as information and communication (10.8%); electricity, gas, steam and air-conditioning supply (10.5%); wholesale and retail trade, and repair of motor vehicles and motorcycles (9.4%); as well as real estate activities (5%).

However, annual declines were seen in loans for professional, scientific and technical activities (-12.5%); education (-7.6%); and arts, entertainment and recreation (-0.8%).

“On a positive note, consumer lending continues to hold up with growth still in the 20% rates, consistent with previous months. Consumer loans continue to buck the trend, remaining robust amidst a period of high interest rates,” Ms. Velasquez said.

Consumer credit jumped by 22.6% to P1.15 trillion from P934.7 billion a year ago. However, consumer loan growth was slightly slower than the 23.7% growth in June.

Double-digit increases were seen for credit card loans (29.8%) and salary-based general purpose consumption loans (24.4%), while motor vehicle loans rose by 8.7%.

Outstanding loans to nonresidents jumped by 6.2% in July, faster than 4.8% in June.

“Moving forward, if the BSP maintains its stance and inflation remains high, we might observe a continued moderation in loan growth. Elevated inflation can deter borrowing, as it erodes the real value of money and can make both consumers and businesses hesitant to take on new debt,” Mr. Roces said.

BSP Governor Eli M. Remolona, Jr. earlier said the central bank still has space for further policy tightening this year, as risks to the inflation outlook are on the upside.

Ms. Velasquez said bank lending may continue to moderate in the coming months until the BSP starts to loosen monetary policy.

“We have not yet likely felt the full effect of tightening due to the lag of monetary policy transmission (about 12 months),” she said.

Mr. Remolona earlier said a rate cut is not on the table, at least not at the Monetary Board’s Sept. 21 meeting.

#Credit #growth #slows #July

AMRO trims 2023 PHL growth outlook

AMRO trims 2023 PHL growth outlook

PHILIPPINE gross domestic product (GDP) growth is likely to fall slightly below the government’s target this year, the ASEAN+3 Macroeconomic Research Office (AMRO) said.

“The Philippines’ economic growth is projected to moderate to 5.9% in 2023 due to high base effects and weaker external demand, before edging up to 6.5% in 2024 as external demand recovers,” AMRO Group Head and Principal Economist Runchana Pongsaparn said in a statement on Tuesday.

Mr. Pongsaparn was part of the AMRO team that visited Manila from Aug. 29 to Sept. 8. for its annual consultation.

“Meanwhile, domestic demand is expected to remain robust supported by continued improvement in labor market conditions, lower inflation, robust overseas remittances, and higher government infrastructure spending,” he said.

The think tank’s latest 2023 GDP forecast is lower than the 6.2% it gave in its Regional Economic Outlook Report in July. It also falls below the government’s 6-7% GDP target.

AMRO kept its Philippine growth forecast for 2024 unchanged at 6.5% amid an expected recovery in external demand. This is at the lower end of the government’s 6.5-8% target for next year.

The think tank noted the Philippine economy continued to show strong growth momentum in the first half of 2023. Philippine GDP expanded by a weaker-than-expected 4.3% in the second quarter, bringing the first semester growth to 5.3%.

“Growth was supported by resilient domestic demand with a strong recovery in the labor market despite weaker external demand. Notwithstanding a widening current account deficit, external position remains sound with sufficient international reserve buffer and low external debt,” AMRO said.

AMRO also said Philippine full-year inflation will likely settle at 5.5% this year before slowing further to 3.8% in 2024.

“Despite some moderation, inflationary pressure will likely remain elevated as reflected in the high level of core inflation, due to a positive output gap and the second-round effects induced by increases in the minimum wages and expectations of persistently high inflation,” it added.

Meanwhile, AMRO flagged risks to the Philippines’ growth outlook such as elevated inflation, local supply shocks, an economic slowdown in major trading partners and global financial market volatility.

“The long-term growth potential is largely affected by the scarring effects of the pandemic, the pace of infrastructure development, geopolitical risks, and the economic losses from natural disasters, which are being exacerbated by climate change,” it said.

Among AMRO’s policy recommendations to boost growth include upskilling the workforce, implementation of policies to attract investments and promote exports of goods and services. The government can also improve the Philippines’ competitiveness through infrastructure investment and digitalization, it added.

For the medium and long term, AMRO said “fiscal policy should balance between restoring fiscal buffer and supporting sustainable growth and development.”

The think tank said close coordination between regulators will be crucial in identifying and mitigating financial stability risks that may arise from nonfinancial firms.

“Meanwhile, the authorities should continue to improve the liquidity management framework, develop the bond and repo markets, and continue to expand financial inclusion, to enhance the system’s resilience to shocks and promote market activities,” it added. — Luisa Maria Jacinta C. Jocson

#AMRO #trims #PHL #growth #outlook

Most CEOs still confident of revenue growth in the next 12 months — survey

MAJORITY of Philippine chief executive officers (CEOs) are still confident about their revenue growth prospects in the next 12 months despite threats from elevated inflation and economic uncertainty, a survey showed.

Results of the survey conducted by PwC Philippines in partnership with Management Association of the Philippines (MAP) showed that 79% of 157 CEOs are optimistic that their companies will post revenue growth in the next 12 months.

However, this is slightly lower than last year’s survey which showed a peak in optimism among CEOs. Last year, 87% of the 119 CEO respondents said that they are confident of topline growth in the next 12 months.

This year’s survey showed 39% of CEOs are “very confident” of revenue growth, compared to 43% last year.

Meanwhile, 88% of the CEOs said that they are confident that their company will see revenue growth in the next three years. This is slightly lower than the 89% seen in the previous survey.

“We were expecting everything to normalize but it didn’t happen… Inflation actually peaked in the second half of last year and that was after we ran the survey. So, it contributed to some of the losses this year,” Trissy M. Rogacion, deals and corporate partner of PwC, said at a briefing.

Mary Jade T. Roxas-Divinagracia, PwC deals & corporate finance managing partner, said the survey results might have been affected by base effect.

“Last year, we were coming from 2021 where they might have lower revenues. So, therefore, one could only expect that from a very low base there is no way to go but up,” she said.

The survey also showed 83% of the CEOs said that they are confident about their industry’s prospects for the next 12 months.

“However, businesses face threats from inflation, macroeconomic instability, cyber risks, and supply chain constraints. To address these challenges, CEOs are reducing operating costs, diversifying product/service offerings, investing in upskilling their workforce, and deploying technology in their operations,” PwC said in a statement.

The survey showed 39% of CEOs believe their companies will be “highly exposed” to inflation in the next 12 months, and 51% said they are “slightly exposed.”

Inflation is expected to remain elevated this year, amid rising prices of food and fuel.

Meanwhile, Ms. Rogacion said the government’s performance may have contributed to the CEOs’ high level of optimism.

According to the CEOs, the government is currently “performing well” in forging relationships with other nations (64%), pushing for infrastructure development (62%) and promoting foreign investments (46%).

However, only 3% of the CEOs said that the government is currently performing well in fighting corruption. Last year’s survey showed that 67% of the 119 CEOs said that they see corruption to delay the economy’s recovery.

“The government’s support is crucial in ensuring that businesses continue to thrive amid the challenges,” said Roderick M. Danao, chairman and senior partner of Isla Lipana & Co. and PwC, adding that the government’s performance could still be improved.

Of the 157 CEOs, 89% said that improving the ease of doing business could boost collaborations with other countries.

Around 83% of the CEOs surveyed said their companies have recovered from the impact of the coronavirus disease 2019 (COVID-19) pandemic.

“Last year, our report was also optimistic, but the CEOs back then said that there are still uncertainties. In fact, 52% of the respondents last year said that the Philippines will need around two years to recover from the pandemic,” Ms. Rogacion said.

This year, 62% of CEOs expect revenue growth from pre-pandemic levels, versus only 42% in the 2022 survey. This is mainly due to the full reopening of the economy, lifting of travel restrictions and normalizing consumer demand.

“According to the CEOs, factors that helped drive growth include full reopening of the economy during the year, lifting of all travel restrictions, improved supply chain conditions and normalizing consumer demand,” said Ms. Rogacion.

Although most of the CEOs showed optimism and are expecting growth, Ms. Rogacion said 17% of the CEOs said that they have yet to recover from the impact of the pandemic.

The survey also showed 22% of the CEOs said that they are expecting this year’s revenues to be lower than pre-pandemic levels.

According to the survey, 41% of the CEOs expect their company to only be economically viable for up to six years if they continue running on their current path.

“One of the initiatives that these companies identified that can help them remain viable is diversification,” said Ms. Rogacion.

The survey showed that top initiatives that they are planning to revisit in the next 12 months are: entering a new territory outside the Philippines (28%), entering a new industry (26%), and completing a domestic merger or acquisition (20%).

“To help support these initiatives, most CEOs said that they are looking to invest in relocating their company operations in response to climate risks, deploying technology and automating processes and systems,” said Ms. Rogacion.

Asked what they consider as a priority investment in the next twelve months, 75% of the CEOs said that they are looking to invest in upskilling the company’s workforce in priority areas. — Justine Irish D. Tabile

#CEOs #confident #revenue #growth #months #survey