South Korea’s economy is expected to suffer its first annual contraction since the 1990s as a result of the coronavirus, the central bank forecast Thursday as it cut interest rates to a record low.
The world’s 12th-largest economy will shrink 0.2 percent, the Bank of Korea (BOK) predicted a dramatic downgrade from the 2.1-percent growth it had forecast in February.
The BOK cut its key interest rate by 25 basis points to 0.5 percent, joining other central banks moving to try to stem the impact of the pandemic, which analysts say threatens to cause a global recession.
“The growth of the domestic economy has slowed significantly” due to the coronavirus, and is expected to be sluggish and unpredictable in the future, the central bank said in a statement.
“The employment situation has deteriorated,” it added, with many in the service sector losing jobs, while “exports fell significantly”.
It is the second rate cut in three months, after a surprise 50-basis-point reduction to 0.75 percent in March.
The South is highly trade-dependent and saw its worst economic performance in more than a decade in the first quarter as the epidemic struck.
Gross domestic product shrank 1.4 percent year-on-year during the January to March period, its biggest decline since the fourth quarter of 2008 during the global financial crisis.
The International Monetary Fund (IMF) has forecast the world economy will contract three percent this year, saying it is expected to “experience its worst recession since the Great Depression” over the pandemic.
The IMF has predicted the South Korean economy will shrink 1.2 percent in 2020.
DTI sees close to 5.1 percent unemployment rate by end 2020
The Department of Trade and Industry is seeing close to 5.1 percent unemployment rate by the end of 2020, as the Inter-Agency Task Force (IATF) is into reopening the economy safely.
“We’re seeing our unemployment rate going down from the worst rate of 17.7 percent last April to 10 percent in July. We hope to get back closer to our pre-pandemic 5.1%-level before yearend,” Trade Secretary Ramon Lopez said in his report to the members of Franchise Asia Philippines (FAP) Monday.
Lopez said that in the 3-run surveys in three periods done by the department to over 2,000 MSMEs nationwide, it showed that 38 percent of companies were closed and about 50 percent partially operating during the height of the ECQ last April-May.
“This went down to 11 percent (from 38 percent) in June-July, and to 6 percent in August-September as we were reopening the economy,” according to Lopez.
He also noted that the country’s manufacturing climbed back closer to the benchmark 50 index, up to 49.7 in June, from its record-low of 31.6 in April.
“The Philippines has always been posting 50 indexes. Above 50 suggests an increase in manufacturing activities and below 50 suggests a contraction—so we are about to surpass the 50 indexes. This reflected a recovery in our manufacturing indices as we eased down the community quarantine in several regions across the country. Furthermore, our Output Index has been climbing from 10.2 last April to 51.1 last June,” said Lopez.
The DTI chief also relayed that exports that declined by 49% in April, has now recovered to just -9 percent in July this year.
“We are hoping to recover to positive growth territory by yearend, in the same way, that they have been posting positive growth rates in 2019, as well as in January and February before the lockdown this year. We are one of the few countries that have been posting positive growth last year and early this year prior to the pandemic
Lopez also hopes that the reported recovery momentum will lead our country towards full recovery by early next year.
“Remember that we were the second-fastest growing economy in the region before the pandemic, ranging consistently at 6-7.5% GDP growth, low unemployment rate, lower poverty rate, Investment grade and ranking high, Top 6 on financial and fiscal stability among many countries. We were already there before, and we can be back at those growth planes again,” according to Lopez.
Meralco settles P19-M fine over ‘bill shocks’
Revocation of GSP+ to aggravate situation of low-income sectors
The European Chamber of Commerce (ECC) has aired its concern over the European Union Parliament’s threat to revoke the Philippines export tariff incentives, as it will aggravate the situation of low-income sectors, its members, and the country’s economic situation.
In an interview, ECC President Nabil Francis emphasized that his group strongly calls for the retention of the Generalized Scheme of Preferences (GSP+) grant in the Philippines, threatened to be withdrawn by the European Parliament in a resolution last 17 September mainly because of the deteriorating human rights violations happening in the Philippines.
“The EU is among the largest trading partners of the Philippines. The year after qualifying for the GSP+, Filipino exports to the EU expanded by 27 percent according to the Department of Trade and Industry (DTI). The removal of the GSP+ will put at risk thousands of jobs generated in both the agriculture and manufacturing sectors,” according to Mr. Nabil, who governs more than 200 predominantly European businesses venturing in the country for years.
The ECC reiterated that the EU’s mull revocation of the country’s tariff benefits in the midst of a pandemic will also exacerbate the economic situation of the country.
“The International Trade Centre has estimated that the total export and import loss of the Philippines from its EU trading partners could reach $300 million and $175 million, respectively, due to COVID-19 supply chain disruptions,” Francis told the Daily Tribune.
The ECC in its July survey said 91.8 percent of its members have significantly been affected by the pandemic, and cancellation of the GSP+ rating will add another burden to its members.
“The Chamber’s membership roster widely varies in terms of industry and company size. A considerable number of them are GSP+ beneficiaries. Among the top Philippine exports under the EU GSP+ to the EU are agricultural oil products, electrical machinery, processed meat & fish, optical products, processed vegetables, and fruits and nuts,” Francis emphasized.
He added that the revocation of the GSP+ in the midst of a pandemic will surely aggravate the situation of low-income sectors, and the country by and large.
“Furthermore, current investor confidence among the European-Philippine business community remains dampened due to the uncertain business landscape in the country as revealed in a recent study conducted by the ECCP,” according to Francis.
On its 17 September decision, the EU legislative assembly ruled “given the seriousness of the human rights violations in the country, calls on the European Commission, in the absence of any substantial improvement and willingness to cooperate on the part of the Philippine authorities, to immediately initiate the procedure which could lead to the temporary withdrawal of GSP+ preferences.”
The GSP+ status of the Philippines covers 6,274 locally-made products, including those manufactured by the micro, small and medium enterprises (MSMEs).
Last Friday, 18 September, Malacanang, through Spokesman Harry Roque, berated EU’s Parliament move and even provoked the EU to go on with its economic sanctions, even as the country continues to grapple with the coronavirus pandemic which plunged the economy into a recession, the worst in three decades.
Labor group to Palace: Resolve issues with EU parliament
In a statement, workers group Associated Labor Unions-Trade Union Congress of the Philippines (ALU-TUCP) called on the Philippine government to address the resolution of the European Union Parliament that calls for a review of the tariff incentives extended to the country’s export products in the light of the allegations on abuses on human and labor rights, environmental protection and good governance.
“We urge the government to take the right action and take more steps in addressing the issues raised by the resolution. We have workers and their families behind every products being sold in the EU market, if the Philippine government fails to make the right response to the resolution we will lose the market which result to more unemployment and to loss of business opportunities, ” said Gerard R. Seno, ALU National Executive Vice President.
It can be recalled that in a news briefing Friday, a fuming Presidential Spokesman Harry Roque dared the EU to go on with its economic sanctions, even as the country continues to grapple with the coronavirus pandemic which plunged the economy into a recession which was the worst in three decades.
“If they want to add to the burden of the Filipino nation during this pandemic, so be it. We will accept that as history repeating itself. Let’s stop these discussions,” Roque said.
The labor group vice president maintained that the Philippines has been enjoying since 25 December 2014 a zero tariff on 6,274 products to the EU market to help the country develop, provided it improves its compliance to human and labor rights, environmental protection and good governance standards.
Seno revealed some of these products which enjoy no tariff includes pineapples, mangoes, tuna, vegetables, nuts, coffee, cacao and garments, footwear, pearls, precious metals and selected furniture.
The group noted that based on the Department of Trade and Industry (DTI) records, in 2014, the then granting of GSP+ tariff-free export increase Philippine exports to the EU by 35 percent and created 200,000 more jobs.
“If the revocation of the GSP+ privilege is completed, we will lose these jobs,” the group stated.
“Sana wag na maging proud. Tingnan kung ano pa ang pagkukulang natin at gawin ang tamang response to satisfy or meet the requirements of the EU GSP+,” Tanjusay told the Daily Tribune.
Asked for his comment regarding the Palace’ statement, Trade Secretary Ramon Lopez said he will not comment anymore since he already issued statement regarding the matter.
“So far, we are able to explain objectively the Philippines side on issues that are raised and we dont see any reason why our GSP+ privilege will be withdrawn. It is precisely helping address poverty and attendant social and economic issues, and helping MSMEs in many parts of the country, by allowing greater EU market access for Philippine products,” Lopez told reporters, Friday.
Regulations on virtual-only banks needed amid contactless era
Bangko Sentral ng Pilipinas fully supports the bill that seeks to establish a separate regulatory authority for virtual-only banks.
Governor Benjamin Diokno said the central bank welcomes House Bill (HB) 5913, or the Virtual Banking Act, as “the creation of a regulatory framework for digital banks promotes a level playing field by allowing new entrants to credibly compete with existing banks, as well as prevents regulatory arbitrage.”
“This will reinforce the provisions of the General Banking Law with respect to the proposal of the BSP which introduces digital banks as a new bank classification, distinct from the existing categories of banks, i.e., universal and commercial banks (U/KBs), thrift banks (TBs), rural banks (RBs), cooperative banks, and Islamic banks,” Diokno stated in a letter to the House of Representatives and bill author Albay Representative Joey Salceda.
Under the proposal, which also gained the support of the Cebu Bankers Club, virtual-only banks will be a separate classification of banks and will be encouraged to pursue financial inclusion initiatives.
HB 5913 also outlines the minimum macro-prudential standards for virtual-only banks, and opens the virtual banking sector to some degree of foreign ownership. It is expected to attract some of the financial technology know-hows of other countries and ensure adequate capital.
The bill may also incorporate measures to further develop financial technology to help modernize payment systems in the country.
The BSP assured regulatory “sandboxes” are in place to help financial technology companies thrive.
Regulatory sandboxing is a practice of piloting a new sector or technology within a limited scope to protect the wider economy from the risks of the novel sector.
Swedish retailer H&M bounces back into profit
Swedish clothing giant Hennes and Mauritz (H&M) bounced back into profit last quarter despite many of its stores remaining closed due to coronavirus restrictions, sending its share price surging Tuesday.
H&M had tumbled into a loss in its March-May quarter when, like many other non-essential retailers, lockdowns forced it to close shops.
And while sales for the June-August quarter were still down 19 percent from last year to 50.9 billion Swedish kronor (4.9 billion euros, $5.8 billion), a move towards higher value collections, less discounting, and cost-cutting helped it turn a profit, the company said in a preliminary earnings statement.
The preliminary pre-tax profit of approximately 2.0 billion kronor was much more than the 250 million expected by analysts, sending H&M shares climbing by more than 10 percent in morning trading in Stockholm.
The group is to publish its complete third quarter results on October 1.
UK unemployment climbs to 4.1% on virus fallout
Britain’s unemployment rate jumped above four percent in July on economic fallout from the coronavirus pandemic, official data showed on Tuesday.
The rate grew to 4.1 percent in the three months to the end of July from 3.9 percent the previous quarter, the Office for National Statistics said in a statement.
The number of people claiming jobless benefits stood at 2.7 million in August, up almost 121 percent since March when Britain went into lockdown over the virus.
SoftBank Group selling Arm to NVIDIA for up to $40 billion
SoftBank bought Arm in 2016 for $32 billion in a deal that left investors cold and saw the conglomerate’s stock plunge sharply.
Analysts at the time said SoftBank had paid too much for the firm and the purchase revived concerns about the Japanese company’s balance sheet.
Amir Anvarzadeh, senior market strategist at Asymmetric Advisors in Singapore, said Arm had been “underperforming”, making the sale more attractive for SoftBank.
But he said the acquisition was “going to raise some eyebrows” in the semiconductor industry because so many of NVIDIA’s competitors work with Arm’s designs.
“They will need some guarantees… otherwise Arm may lose business or face lawsuits,” he said.
NVIDIA said in a statement that under the deal it will pay SoftBank $21.5 billion in common stock and $12 billion in case, $2 billion of which will be payable at signing.
SoftBank may receive up to another $5 billion in cash or stock, dependent on Arm’s performance.
And NVIDIA will also issue $1.5 billion in equity to Arm employees, for a deal worth a total of up to $40 billion.
SoftBank said it felt Arm would perform better in combination with NVIDIA and the sale would “contribute to an increase in our company’s value for shareholders”.
It said the deal would give it a combined total of 6.7-8.1 percent in NVIDIA’s outstanding shares, but insisted that would not make the US firm a subsidiary or affiliate.
“Our belief in the power of Arm’s technology and its potential remains unchanged, and we, as a strategic major shareholder in NVIDIA, will be committed to Arm’s long-term success,” SoftBank added.
NVIDIA said the acquisition would help “create the premier computing company for the age of artificial intelligence”.
It said Arm would retain its name and remain in Cambridge in the UK, where a new global centre for excellence in AI will be set up.
The sale, which comes as SoftBank engages in a massive push to boost its cash reserves, renewed speculation about the firm’s future plans.
Bloomberg News, citing unnamed people familiar with the matter, said senior SoftBank executives planned to revisit a management buyout, which had previously met with internal opposition.
The report said the discussions were at an early stage and might not result in the firm going private, but reflected pressure from those who feel SoftBank would be subject to less scrutiny if it were not publicly listed.
But Anvarzadeh was skeptical, noting that SoftBank has been buying back stock, raising its share price, which would be counterproductive if it was planning a management buyout.
It would be “kind of a waste of money. You’re selling your best assets and keep buying back shares,” he told AFP.
PPA launches contract tracing app, ticket vending machine
THE Philippine Ports Authority (PPA) will start utilizing the contact tracing application (app) next week, while the test-run for its automated ticket vending scheme to commence Sunday, 13 September, all interventions aimed to help control the increase of the coronavirus disease 2019 (Covid-19) infections in the country.
In a virtual presser Saturday, PPA General Manager Jay Daniel Santiago said they will start the use of Traze Contact Tracing App by next week to all PPA-governed ports.
“Port passengers are no longer needed to accomplish a health declaration form upon entry. We will use the app for that and it is already ready for download in the Apple and Google play store,” according to Santiago.
Traze contact tracing app was developed by Cosmotech Philippines Inc., and co-developed by the PPA, according to Santiago.
Meanwhile, the test run of its automated ticket vending machine in the Ports of Batangas and Calapan will roll-out 13, September.
“We develop these ticket vending machines to avoid passengers having physical contact with our ticket sellers. From there, we will check its efficiency when it comes to reduction of risks of contracting the virus,” Santiago explained.
He said safety health protocols, such as one-meter physical distance, no-mask, no face-shield, no-entry policy, hand washing corners and cargo disinfection are still in effect in all PPA-operated ports.