Philippines faces economic headwinds – PCCI

Middle East conflict, higher interest rates

MANILA, Philippines — While it hopes for more economic activity in the remaining months of the year, the Philippine Chamber of Commerce and Industry (PCCI) acknowledged the headwinds for the Philippine economy such as the tensions in the Middle East as well as potential interest rate hikes.

During a press briefing at the Philippine Business Conference and Expo yesterday, PCCI president George Barcelon expressed hope that the ongoing Middle East conflict would not aggravate, considering its significance as a hub for oil-producing nation.

“And lately, Saudi Arabia has cut back their oil production because of softer demand. We have experienced a price adjustment only last week. But with what has happened,we might see again, an increase in higher oil prices that would lead to higher fuel prices. And this of course, is a concern of government priorities to mitigate inflation,” Barcelon said.

“There’s also the concern that the US Federal Reserve may adjust interest rates. And I’ve read in the paper[newspaper] that BSP (Bangko Sentral ng Pilipinas) is contemplating because our peso has devalued somewhat and if we don’t mirror the increase of interest rates abroad, the peso might be devaluing further,” Barcelon said.

Earlier this week, BSP Governor Eli Remolona Jr said he was not ruling out a 25-basis point rate hike next month as inflation accelerated for the second straight month, to hit a five-month high of 6.1 percent in September from 5.3 percent in August.

Despite the headwinds, Barcelon said they remain hopeful of the remaining months of the year, when consumers tend to spend more during the Christmas season.

“We’re starting to hear Christmas songs over the radio and that in many ways perks up the spirit of the consumer and we’d like to be positive and think that for the next two months or so, the sluggishness of the economy in the last quarter can be negated,” Barcelon said.

In the second quarter of the year, the Philippine economy grew by 4.3 percent, slower than the 6.4 percent in the previous quarter, and 7.5 percent in the second quarter last year. This brought average economic growth in the first semester to 5.3 percent.

For his part, PCCI vice president for industry affairs Ferdinand Ferrer shared that economic activity in the remaining months is likely to be driven by overseas Filipino workers (OFW) remittances.

“So we will probably see $13 to $14 billion in the last quarter of this year, which will stir economic activity,” noting that the higher remittances is in time for the Christmas season.

Latest BSP data showed that OFW remittances released reached $20.91 billion from January to July, about $585 million higher than the year-ago level of $20.33 billion.

Meanwhile, Barcelon shared that the private sector and the Securities and Exchange Commission (SEC) are happy to sit down and come to a compromise regarding the proposed hike in SEC fees and charges.

“We can see the point of SEC that they have not increased the charges ever since 2014. But having said that, one of the concerns of the business sector is that the increase is quite high,” Barcelon said.

Business groups bucked the proposed adjustments to SEC fees and charges, particularly the creation of bonded indebtedness, where the SEC is proposing to charge corporate issuers one-fourth of the one percent of the total indebtedness as well as the proposal to impose a fee on the total transactions cleared and settled in the previous year by the Securities Clearing Corp. of the Philippines (SCCP) and Philippine Depository Trust Corp. (PDTC) in the amount of 0.1 basis point and 0.05 basis point, respectively.

The business group said the move to increase fees goes against the initiatives of the government to attract investors.