| World Bank says gov’t off to a good start, but ... STRONGER ECONOMIC expansion could be achieved this year on the back of more private investments, but the government should be mindful of risks posed by rising food and oil prices, the World Bank said yesterday as it maintained its growth outlook for this year and the next. In its latest Philippines Quarterly Update released yesterday, the Washington-based lender kept its growth forecast for the Philippine economy at 5.0% in 2011 and 5.4% in 2012, unchanged from earlier readings announced last month. It pointed out, however, that economic growth "could be higher" if the investment climate continues to improve. "Strong private investment in the fourth quarter of 2010 and bullish business confidence" are signs that the government can attract more investments needed to "boost...growth and generate more jobs," World Bank Country Director Bert Hofman said in a statement posted on the World Bank Web site. The World Bank report said investments will become a "main" contributor to the economy this year, even as it pointed out that the benefit from the Aquino administration’s public-private partnership (PPP) projects will be felt only by 2012. Sought for comment, Socioeconomic Planning Secretary Cayetano W. Paderanga, Jr. said: "There are other investments made by the government, international lending institutions along with the private sector. And this should sustain growth." "But there has been no loss in continuity of the PPP [initiatives], as we have not stalled in pursuing projects," he said in a phone interview. World Bank senior economist Eric Le Borgne was quoted in the same statement as saying that addressing "corruption and weak governance," along with "more credit-rating upgrades," should boost investor confidence and attract more private investments. Mr. Paderanga concurred, noting the Aquino government’s focus on its anti-corruption drive and improved governance. The World Bank also cited continuing hikes in food and oil prices as growth risks. These price hikes are expected to drive inflation to 4.8%, at the upper end of the central bank’s 3-5% target range for 2011, it said in the report. The multilateral lender expects the Bangko Sentral ng Pilipinas (BSP) to tighten monetary policy in the second half of 2011 to control inflationary pressures. The Monetary Board did not touch policy rates when it met last February 10 but raised its inflation forecast for 2011 to 4.4% from 3.6%. The inflation forecast for 2012 was similarly adjusted to 3.5% from 3% previously. In a separate telephone interview, Mr. Le Borgne said the government can address rising food prices by increasing the domestic food stock and easing tariff on food imports. "One of the major things that the government can do is to increase food stock, such as rice stock, and welcoming more imports by adjusting tariff," he told BusinessWorld. For its part, the government "will try to make sure supplies of staple products are maintained," Mr. Paderanga said. University of the Philippines economist and former budget secretary Benjamin E. Diokno said via text that the oil price increases driven by unrest and uncertainties in the Middle East would be "beyond [the government’s] control." "It [geopolitical risk] has an impact on supply disruptions and rising oil prices. It also affects the incomes of present and potential OFWs (overseas Filipino workers)," he added. Mr. Diokno said that the government should address such risk through "more efficient use of oil" and "development of the domestic economy." At the same time, the World Bank noted that economic expansion seen in recent years has bypassed the poorest of the poor. Although real gross domestic product growth averaged 5.4% from 2003-2006 and 4.3% from 2006-2009, well above the country’s population growth rate, poverty incidence rose to 26.4% of the population in 2006 from 24.9% in 2003, the World Bank said in its report. That rate inched up further to 26.5% in 2009, it noted further. And while the government has started taking steps to try to bring the poorest households closer to the mainstream, Mr. Le Borgne said the full benefits of the government’s conditional cash transfer (CCT) program have yet to be seen. "It (the CCT) didn’t eradicate poverty because the program was small at the time," he added. The Aquino administration nearly doubled the program’s budget to P21.9 billion this year from P12 billion in 2010 in a bid to cover about 2.3 million poor households -- or about 60% of the total against just 26% by end-2010. The same report also noted that the current administration was able to slightly improve its finances by reining in "the initially spiraling" budget deficit. The government did this by restraining state spending "in the face of modest revenue improvements." This tack enabled the government to keep the 2010 deficit at P310 billion against a P325-billion target ceiling, according to preliminary data. But while the government "has set the stage for a moderate degree of fiscal consolidation...as the 2011 budget kick-starts important reforms in spending efficiency and transparency," the World Bank said it can go only so far with the current thrust to increase revenue collections by improving tax administration. "Given the large priority expenditure needs...administrative measures would have to be complemented by tax policy measures," the report read. "To keep with the government’s election pledge of no new taxes and tax increases in the first 18 months of the new administration, these could be introduced in 2012 and onwards." |
| U.S. Stocks Fall as Oil Rises to $100, Hewlett-Packard Tumbles U.S. stocks fell, dragging benchmark indexes to the biggest two-day drop in six months, as oil surged to $100 a barrel amid growing tensions in the Middle East and Hewlett-Packard Co.’s forecasts trailed analysts’ estimates. Hewlett-Packard, the largest computer maker, tumbled 9.6 percent. Ford Motor Co. sank 2.4 percent after announcing a recall of 144,000 pickup trucks and as a Supreme Court ruling opened the auto industry to new lawsuits over seatbelt design. Lowe’s Cos. slid 1 percent after forecasting profit that missed analyst estimates. Chevron Corp. rose 1.9 percent as oil climbed to a 28-month high amid escalating violence in Libya. The Standard & Poor’s 500 Index fell 0.6 percent to 1,307.40 as of 4 p.m. in New York and is down 2.7 percent over the last two days. The Dow Jones Industrial Average slid 107.01 points, or 0.9 percent, to 12,105.78 today. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, jumped 6.4 percent to 22.13, the highest since Nov. 30.
Benchmark 10-year securities rose earlier, pushing the yield to a three-week low on speculation a jump in crude oil prices over violent protests in Libya will slow the economic recovery. U.S. notes erased gains as the sale of five-year debt drew the lowest level of participation since November from a group of investors including foreign central banks. “It’s a bit surprising that there wasn’t stronger demand at the auction when the geopolitical platform indicates you probably want the safety of Treasuries,” said Bulent Baygun, head of interest-rate strategy in New York at BNP Paribas SA, one of the 20 primary dealers obligated to participate in government debt sales. “It’s perhaps the sentiment shared by a lot of other people.” Yields on current five-year notes gained three basis points, or 0.03 percentage point, to 2.17 percent at 4:13 p.m. in New York, according to BGCantor Market Data. The 2 percent security maturing in January 2016 dropped 5/32, or $1.56 per $1,000 face amount, to 99 7/32. At today’s auction, the five-year notes drew a yield of 2.190 percent, compared with the average forecast of 2.170 percent in a Bloomberg News survey of 6 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.69, compared with an average of 2.79 at the previous 10 sales. |
| Oil Touches $100 a Barrel for First Time in Two Years on Libya Oil surged to $100 a barrel in New York for the first time in two years as Libya’s violent uprising threatened to disrupt exports fromAfrica’s third-biggest supplier and spread to other Middle East oil producers. Futures climbed as much as 4.8 percent after heavy gunfire broke out in Tripoli again today, army units defected and a former aide to Libyan leader Muammar Qaddafi warned the spreading revolt may topple the regime within days. Oil pared gains on signals that Saudi Arabia and some other producers are willing to put more oil on the market if buyers demand it. “We’re crossing $100 because with the cut in Libyan output, the unrest in the Middle East is actually having an impact on oil supply,” said Phil Flynn, vice president of research at PFGBest in Chicago. “There’s concern that unrest will spread further, threatening Saudi Arabiaand other producers.” Crude for April delivery increased $2.68, or 2.8 percent, to settle at $98.10 a barrel on the New York Mercantile Exchange. Earlier, it touched $100, the highest level since Oct. 2, 2008. Futures are up 24 percent from a year ago. Prices rose from the settlement after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles gained 163,000 barrels to 345.8 million. April oil advanced $3.32, or 3.5 percent, to $98.74 a barrel in electronic trading at 4:32 p.m. Libya, which pumps 1.6 million barrels a day of oil, is the ninth-largest producer among the 12 members of the Organization of Petroleum Exporting Countries, sending most of its crude and fuels across the Mediterranean to Europe. The country has the largest reserves in Africa. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
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