CARI Captures Issue 609: Economic indicators for the baseline projections for the Philippines, 2020 – 2025

World Bank sees the Philippines’ economy expanding by 6% in 2023
(08 June 2023) The World Bank has upgraded its growth forecasts for the Philippines for 2023, with the country expected to grow by 6.0% in 2023 before slowing down to 5.9% growth for 2024 and 2025. The World Bank had previously forecasted 5.4% growth in December 2022 and 5.6% growth in April 2023. This year’s growth will be supported by resilient domestic demand despite high inflation and tight financial conditions. The Philippines’ GDP rose by 6.4% year-on-year in the first quarter of 2023, with the Philippines’ government targeting 6% to 7% growth for the entire year. Downside risks to this year’s growth include the possibility of higher-than-expected global inflation, tighter global financial conditions, and an escalation of geopolitical tensions.

Inflation eases to 6.1% year-on-year in May 2023, supporting case for longer pause in rate hikes
(07 June 2023) Inflation eased to 6.1% year-on-year in May 2023, slower than the 6.6% growth recorded in April. Core inflation, which excludes volatile items such as fuel prices, retreated slightly to 7.7% in May, a slight decrease compared to the 7.9% growth recorded in April. Inflation had begun soaring in 2022 as a result of supply chain bottlenecks, fuel prices, a weak peso, and the Philippine economy’s full reopening. The Philippines’ central bank, the Bangko Sentral ng Pilipinas, hopes inflation will drop to within the 2% to 4% target range in 2023, with the bank expecting price growth to slow further in September or October. Year-to-date, inflation averaged 7.5%. Data from the Philippine Statistics Authority showed that prices of certain food products such as rice, vegetables and milk went down across the country in May.

Cross-border QR code payment system between Indonesia and Malaysia set up
(06 June 2023) Indonesia and Malaysia have set up a cross-border QR code payment system that settles payments in local currencies. This is part of an ASEAN initiative linking cross-border payment systems using QR codes to facilitate transactions within the regional bloc. The central banks of Malaysia and Indonesia, which are Bank Negara Malaysia and Bank Indonesia respectively, launched the two nations’ cross-border linkage in April 2023. Malaysia’s national QR code is DuitNow QR while Indonesia’s is Quick Response Code Indonesian Standard (QRIS). Bank Indonesia predicts that the initiative will create transaction costs savings of up to 30%. Since payments are denominated in local currencies, the settlements will not be impacted by the US Dollar exchange rate, thereby insulating the rupiah and ringgit financial systems from potential dollar shocks. The initiative could also allow micro, small, and medium-sized enterprises (MSMEs) to reach markets beyond their home countries.

Malaysia and Indonesia pledge to work together to fight against EU ‘discrimination’ against palm oil
(08 June 2023) Malaysia and Indonesia pledged to collaborate in fighting the European Union’s (EU) ‘discrimination’ against palm oil. Both Indonesia and Malaysia are the world’s largest palm oil producers, and have criticized a recently introduced deforestation regulation introduced in 2022 which prevents the sale to or within the EU of palm oil, soy, coffee, cocoa, rubber, timber and beef grown or raised on land deforested after 2020. Both Malaysia and Indonesia have labeled the new regulation as harmful to small farmers in their countries. There are about 400,000 small farmers in Malaysia and 40 million in Indonesia, respectively. In a joint statement, both countries called upon Brussels to “promptly address such discriminatory measures and work towards a fair and equitable resolution.”

Health tourism sector expected to generate more than US$370 million in revenue once fully recovered
(05 June 2023) Malaysia’s health tourism sector is expected to generate more than US$370 million in revenue once fully recovered. Medical tourists have started returning to Malaysia following the reopening of borders in April 2022. Malaysia’s healthcare travel industry achieved a 100% year-on-year increase in revenue in 2022. The industry recorded US$283 million in revenue in 2022, which is 76% of its pre-pandemic performance of US$370 million in 2019. Over the past decade, the healthcare travel industry brought in more than 10 million healthcare visitors. It has been noted that medical tourists generate four times the revenue compared to normal tourists, as the former also spend on accommodation, retail and food while seeking treatment in Malaysia.

Retail sales rose by 3.6% year-on-year in April 2023, rising for the third straight month
(05 June 2023) According to data released by the Department of Statistics, Singapore’s retail sales rose by 3.6% year-on-year in April 2023, cooling from the 4.5% increase in March and 12.6% increase in February. While retail sales rose for the third straight month, overall sales continued to decrease. The estimated total retail sales value in April was US$2.89 billion, with online retail sales making up an estimated 12%, lower than the 13% recorded in March. Retail sales grew year-on-year in April for most categories, with food and alcohol seeing the largest increase of 30.5% and cosmetics, toiletries and medical goods coming in second at 16.8%. Apparel and footwear also rose by 13% as consumers shopped for more clothes. Meanwhile, sales at petrol service stations dropped by 14.2%.

Viet Nam expects record coffee exports in 2023 due to soaring prices
(08 June 2023) Viet Nam expects record coffee exports in 2023 due to soaring prices due to global production falling short of demand amidst El Nino-induced extreme weather conditions. According to Fitch Solutions, the now-widely expected transition to El Nino conditions in the third quarter of 2023 is expected to negatively impact production in Viet Nam and Indonesia, both major robusta coffee producers. As well, other large producers like Brazil and Colombia will also be negatively impacted by drought. El Nino typically suppresses rainfall, with the average rainfall across Viet Nam expected to drop 25% to 50%. Viet Nam’s coffee exports in May jumped 28.5% to US$418 million, resulting in overall export earnings in the first five months of 2023 of over US$2 billion, up 1.3% year-on-year. In 2022, Viet Nam exported 1.7 million tonnes of coffee.

RCEP Monitor

Japan’s real wages dropped for 13th straight month in April 2023
(06 June 2023) According to labor ministry data, Japan’s average monthly wage dropped by 3.0% year-on-year in inflation-adjusted real terms in April 2023, marking the 13th straight month of decline. This was a significant rise from the 2.3% drop seen in March 2023. The data was released less than three months after labor unions and employers had agreed to the biggest pay increase in 30 years for the fiscal year that started in April, with base pay set for a raise of 2.1%. In nominal terms, Japanese workers’ average monthly wages increased by 1.0% year-on-year in April 2023. Headline inflation rose by 3.5% in April 2023, while inflation excluding fresh food and energy rose by 4.1%. Over the past year, wage rises have failed to keep pace with inflation.

Service sector activity expands at record pace in May 2023 due to recovery in overseas demand and rebounding tourism
(05 June 2023) Japan’s service sector activity expanded at a record pace in May 2023, attributed to a recovery in overseas demand and a rebound in foreign tourism due to pandemic restrictions being eased further. The final au Jibun Bank Japan Services purchasing managers’ index (PMI) rose to a seasonally adjusted 55.9 in May 2023 from the previous peak of 55.4 in April. This signaled expansion for a ninth straight month. Japanese firms have noted strong increases in demand, notably from overseas and inbound tourism. According to the S&P Global Market Intelligence, the upward trend is set to continue in the near and medium term. The number of foreign visitors to Japan climbed to a post-pandemic high of 2 million in April 2023. Service sector companies hired more workers for the fourth month in a row in May 2023, the rate of job creation the second fastest since September 2007. The composite PMI index, which combines manufacturing and services activity figures, advanced to 54.3 in May from 52.9 in April, the fastest pace since October 2013.

Australia’s economy grew at weakest pace in 18 months in first quarter of 2023
(08 June 2023) Australia’s economy grew at its weakest pace in 18 months in the first quarter of 2023 as high prices and rising interest rates sapped consumer spending. According to data from the Australian Bureau of Statistics, Australia’s economy expanded by 0.2% in the first quarter of 2023, easing from 0.5% growth in the fourth quarter of 2022. Annual growth came in at 2.3%. Domestic price growth slowed to 1.1% after a 1.4% rise in the fourth quarter of 2022. Meanwhile, household savings as a share of income shrank to 3.7%, the lowest level since 2008. Inflationary pressures have prompted the Reserve Bank of Australia (RBA) to raise its cash rate by 400 basis points since May 2022, taking it to an 11-year high of 4.1%.

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