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The Philippines’ ranking jumped nine spots in a global index on economic freedom due to higher scores in trade freedom and property rights, according to the Canada-based think tank Fraser Institute.

The country placed 59^th out of 165 economies in the conservative think tank’s Economic Freedom of the World index which uses 2022 data. Its ranking improved from 68^th place in the previous index which used 2021 data.

This was the Philippines’ highest placement since it ranked 57^th in 2016.

The country received a score of 7.01 out of 10, a tad higher than the revised 6.93 in 2021. Its latest score was higher than the global average of 6.56.

Among Asia-Pacific jurisdictions, the Philippines lagged behind Hong Kong (8.58), Singapore (8.55), New Zealand (8.39), Australia (7.98), Japan (7.90), Taiwan (7.71), Malaysia (7.56), and South Korea (7.52).

However, the Philippines was ahead of Brunei Darussalam (6.99), Indonesia (6.96), Thailand (6.94), Mongolia (6.86), Cambodia (6.85), Vietnam (6.23), China (6.14), Papua New Guinea (6.02), Fiji (5.99), Laos (5.86), Timor-Leste (5.77), and Myanmar (4.54).

The Philippines had its highest score in the sound money category with 9.04, ranking 11^th out of the 164 other countries. But it was down from 9.51 in 2021.

The country — yet again — performed worst in legal system and property rights with a score of 4.51, slightly higher than 2021’s 4.49.

The Philippine score in size of government declined to 7.83 from 7.91 in 2021. Among subcategories, it scored 8.83 in government investment and 6.91 in government consumption.

“The lesson from this is clear: a small fiscal size of government is insufficient to ensure prosperity,” Fraser Institute said. “The other areas of economic freedom — the rule of law and property rights, sound money, trade openness, and limited regulations — are also required.”

Manila’s score in the freedom to trade internationally category rose to 7.14 from 6.53 in 2021.

Its score in regulation slipped to 6.51 from 6.62 in 2021. Among sub-categories, the Philippines had its lowest score at 4.59 in business regulation and the highest score at 8.27 in credit market.

Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University, said fiscal consolidation remains a key problem for the government’s economic policy.

It leads to “too much intervention in the markets,” he said in a Facebook Messenger chat.

Finance Secretary Ralph G. Recto in September said the Marcos government was on track with its medium-term fiscal consolidation program even as its debt remained at a record high due to pandemic-related loans.

“There is limited participation from the private sector as much of the economic growth is due to government spending,” Mr. Lanzona said. “Instead of the government spending directly, they should create the environment that allows greater public sector participation.”

Hong Kong topped the economic freedom index, followed by Singapore, Switzerland, New Zealand, the United States, Denmark, Ireland, Canada, Australia, and Luxembourg.

At the bottom of the list was Venezuela, followed by Zimbabwe, Sudan, Syria, Algeria, Myanmar, Argentina, Iran, Libya and Yemen.

The think tank said Ukraine (-0.94) and Moldova (-0.63) — the two nations that have either been invaded (Ukraine) or threatened militarily — saw the largest declines in ratings between 2021 and 2022.

The rating for Russia was also down (-0.30). “It may be obvious to point out, but war is very bad for economic freedom,” the think tank said.

Another important development in the index was the declining condition of Hong Kong, whose rating fell “precipitously” to 8.58 in 2022 from 9.05 in 2018.

“This is nearly half a standard deviation decline in just four years,” it said. “Thus, we continue to sound the alarm bell about signs of declining economic — and other — freedoms in Hong Kong.”

Sonny A. Africa, executive director of IBON Foundation, said the conservative index’s metrics “come from a narrow prioritization” of market freedoms and property rights, which “don’t align with a broader and more inclusive understanding of economic well-being and development.”

“This is why the so-called economic freedom scores are so inconsistent with the economic realities faced by the majority of Filipinos who remain poor and marginalized,” he said via Messenger chat.

Mr. Africa said the government’s fiscal consolidation was “evident in the distribution of the country’s declining score in size of government.”

“The relatively high score in government investment reflects the persistent emphasis on corporate-friendly infrastructure and pork barrel hard projects, while the lower government consumption reflects insufficient social services and safety nets,” he said.

“The increase in the score in the freedom to trade internationally category merely reflects continued liberalization that has worked so much against domestic agricultural and industrial development for decades,” he added.

Mr. Africa said the country’s nine-notch improvement in the index was “inconsistent” with important social indicators on a trajectory of decline.

The number of self-rated poor Filipino families has increased to 16.3 million or 59% of total families in September, while the number of households without savings rose to 19.2 million or 71% of total households in the third quarter, Mr. Africa explained, citing data from the Social Weather Stations and the central bank.

While the Philippines was ahead of Indonesia, Thailand, Vietnam, Laos, and Myanmar in the index, it has “much worse food insecurity than all these,” he said.

Mr. Africa cited a United Nations Food and Agriculture Organization report indicating that the Philippines has 44.1% of its total population suffering moderate or severe food insecurity, “which is more than the food insecurity of Indonesia (4.9%), Thailand (7.2%), Vietnam (10.8%), Laos (36.3%), and Myanmar (32%).”

“The Fraser Institute’s index focuses narrowly on market-oriented indicators such as trade freedom, property rights, and business regulation which are presumed to improve the economy,” Mr. Africa said. “In practice, these measures favor a deregulated economy that benefits large corporations and wealthy individuals at the expense of broader social development outcomes.”

In the report, the Fraser Institute noted that high-income industrial economies generally rank quite high for legal system and property rights, sound money, and freedom to trade internationally.

Their ratings were lower, however, for the size of government and regulation. – Kyle Aristophere T. Atienza, Reporter

Cash remittances from overseas Filipino workers (OFW) rose by an annual 3.2% in August, the Bangko Sentral ng Pilipinas (BSP) said.

Data from the central bank showed that cash remittances grew by 3.2% to USD 2.89 billion from USD 2.8 billion a year ago.

“The growth in cash remittances in August 2024 was due to the growth in receipts from land- and sea-based workers,” the BSP said in a statement.

Remittances from land-based workers increased by 3.9% year on year to USD 2.28 billion, while money sent by sea-based workers inched up by 0.7% to USD 603.216 million.

Month on month, cash remittances slipped from USD 3.08 billion posted in July.

Personal remittances, which include inflows in kind, increased by 3.3% to USD 3.2 billion in August from USD 3.1 billion a year earlier.

“The expansion in personal remittances in August 2024 was due to higher remittances from land-based workers with work contracts of one year or more and sea- and land-based workers with work contracts of less than one year,” the central bank said.

Remittances from workers with contracts of one year or more went up by 3.7% to USD 2.47 billion, while money sent home by workers with contracts of less than a year edged higher by 1.4% to USD 670 million.

EIGHT-MONTH PERIOD
In the January-August period, cash remittances expanded by 2.9% to USD 22.22 billion from USD 21.58 billion a year earlier.

“The growth in cash remittances from the United States, Saudi Arabia, United Arab Emirates and Singapore contributed mainly to the increase in remittances in January-August 2024,” the BSP said.

The United States accounted for nearly half or 41.3% of overall remittances in the first eight months. It was followed by Singapore (7%), Saudi Arabia (6.1%), the United Kingdom (4.9%) and Japan (4.8%).

Other sources of remittances were the United Arab Emirates (4.2%), Canada (3.5%), Qatar (2.9%), Taiwan (2.7%) and South Korea (2.6%).

Meanwhile, personal remittances increased by 3% to USD 24.74 billion as of end-August from $24.01 billion a year ago.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the steady growth in remittances is a “good signal” for the economy.

“Philippine remittances from overseas workers have consistently been the fourth largest in the world after India, Mexico and China, amounting to more than USD 40 billion per year — a sign of resilience — and has always been a bright spot for the Philippine economy for many years,” he said in a Viber message.

Mr. Ricafort noted that the stronger peso in August also contributed to the lower remittances on a month-on-month basis.

“For the month of August, the US dollar-peso exchange rate declined, mostly at PHP 56-57 levels, versus the PHP 58 levels in July 2024 that somewhat reduced the peso equivalent of OFW remittances and effectively partly increased the year-on-year growth in OFW remittances in recent months.”

The peso strengthened to PHP 56.111 a dollar on Aug. 30 from its close of PHP 58.365 on July 31.

Mr. Ricafort said he expects continued single-digit growth in remittances in the coming months amid the “normalization of spending by households for both essentials and nonessentials.”

The upcoming holiday season is also seen to drive remittance growth.

“Remittances are expected to increase during the holiday season after increased deployment of workers contributed [to the August growth],” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said.

The central bank expects cash remittances to grow by 3% this year. – Luisa Maria Jacinta C. Jocson, Reporter

Further volatility in oil prices and potential price adjustments could threaten the inflation downtrend and derail the Bangko Sentral ng Pilipinas’ (BSP) easing cycle, analysts said.

“If the latest fuel price volatility continues to depend on what is happening in Gaza and the rest of the Middle East, we might be looking at some potentially disruptive oil price adjustments,” GlobalSource Research Country Analyst Diwa C. Guinigundo said in a Viber message.

Oil prices shot up after Iran launched a missile attack on Israel in early October. Prices have since slid after Israel signaled it was not planning to attack Iranian nuclear or oil targets.

Pump prices on Tuesday jumped for a fourth straight week for gasoline, and a third straight week for diesel and kerosene as global crude oil prices continued to rise amid heightened tensions in the Middle East. Fuel retailers raised gasoline prices by PHP 2.65 per liter, diesel by PHP 2.70 per liter and kerosene by PHP 2.60 per liter.

“I believe the BSP’s (inflation) forecasts are anchored on a global fuel price of at least USD 100 per barrel of oil,” Mr. Guinigundo, a former BSP deputy governor, said.

“If this critical level is tipped, and tipped long, there is a likelihood higher global oil prices could affect the supply side, dislodge inflation expectations and risk breaching the inflation target for the next four months,” he added.

The central bank sees inflation averaging 3.4% this year and 3.1% in 2025.

Mr. Guinigundo said the oil price spikes would not necessarily stoke inflation but warned that prolonged or larger adjustments could be inflationary.

“It’s one of those regular adjustments of fuel prices to reflect global prices, among others. If not sustained over a longer period, and at significant measure, higher fuel price adjustments will not significantly affect inflation and its path.”

The latest Development Budget Coordination Committee (DBCC) assumptions show that Dubai crude oil will likely range from USD 70 to USD 85 per barrel this year.

The BSP in its latest Monetary Policy Report predicted a scenario where inflation could breach the 2-4% target if Dubai crude prices breach USD 90 per barrel in 2025 and above USD 100 per barrel in 2026.

Leonardo A. Lanzona, Jr., an economics professor at the Ateneo de Manila University, also flagged a possible inflation spike with the hefty oil price adjustment.

“The oil price hike will certainly impact inflation. The surprising decrease in inflation in the last few weeks has nothing to do with any reforms the government purportedly implemented,” he said in an e-mail.

Mr. Lanzona said the country might be “vulnerable to the inflation resurgence and greater geopolitical tensions expected in the coming weeks.”

Headline inflation slowed to 1.9% in September from 3.3% in August. This was the slowest since 1.6% in May 2020.

This brought nine-month inflation to 3.4%, matching the central bank’s full-year forecast.

BSP Governor Eli M. Remolona, Jr. earlier said inflation remains on a “target-consistent path.”

Mr. Guinigundo said the central bank might need to be cautious about aggressively reducing rates.

“This, plus the possible weakening of the peso on account of general monetary easing in the region, could make monetary authorities think twice before easing by an amount greater than 25 basis points (bps),” he said.

The Monetary Board is set to meet on Oct. 16 for its policy review.

A BusinessWorld poll conducted last week showed that 16 of 19 analysts expect the Monetary Board to reduce rates by 25 bps, which would bring the target reverse repurchase rate to 6% from 6.25%.

“Again, the future decision of the BSP will remain data-dependent—what the actual inflation is telling us, and the prognosis in the next two years,” he added.

Mr. Remolona earlier said the central bank would likely opt for 25-bp rate cuts over 50 bps. — Luisa Maria Jacinta C. Jocson

A small committee tasked by the House of Representatives to propose changes to the 2025 General Appropriations bill has increased funding for social services, food security and social safety nets by PHP 292.23 billion, in the face of weak economic growth that could go below the government’s target through next year.

In a statement on Tuesday, House Appropriations Committee Chairman and Ako Bicol Party-list Rep. Elizaldy S. Co said the additional allocation is on top of the PHP 591.8 billion already set aside for cash assistance to poor families.

“The additional funding is crucial for supporting those in need,” he said.

The House last month approved the PHP 6.352-trillion national budget for 2025. The Senate is conducting hearings on the proposed budget.

Mr. Co said the small committee had approved an additional PHP 39.8 billion for Assistance to Individuals in Crisis Situations (AICS), and another PHP 39.8 billion for the Ayuda sa Kapos ang Kita Program (AKAP). Next year’s budget for AKAP, which provides cash assistance to people earning PHP 21,000 or less monthly, has surged 206% from the PHP 13 billion allocated for 2024.

The committee also set aside PHP 3.4 billion for the state’s sustainable livelihood program for low-income families.

Appropriations Committee Senior Vice-Chairman and Marikina Rep. Stella Luz A. Quimbo said the Labor department would receive an extra PHP 20.28-billion funding for the Tulong Panghanapbuhay sa Ating Disadvantaged/Displaced Workers and the Government Internship Program.

The committee also allocated an additional PHP 30.01 billion to provide scholarships for underprivileged students pursuing higher education. The funds will be evenly distributed between the Commission on Higher Education’s Tertiary Education Subsidy and Tulong Dunong programs.

The House panel approved an additional PHP 7 billion for the Department of Education to build new school facilities and repair existing ones.

Meanwhile, the Armed Forces of the Philippines (AFP) will get an additional PHP 8.44 billion to boost the subsistence allowances of military personnel. Upon approval, the daily subsistence for soldiers will rise by 67% to PHP 250.

Amid increasing tensions in the South China Sea, the panel allotted PHP 3.2 billion for the AFP to finalize the airport expansion on Pag-asa Island and to develop a shelter port in Lawak, Palawan.

To bolster food security, the committee has realigned PHP 30 billion for the Department of Agriculture’s initiatives, including the Philippine Irrigation Network Piping System, solar-powered irrigation systems and cold storage projects.

The National Irrigation Administration will also receive an extra PHP 44 billion to establish pump irrigation and solar-driven pump irrigation projects.

The House committee also allotted an additional PHP 56.87 billion for the Department of Health’s programs such as health facility enhancement, medical assistance for indigent patients and improvement of specialty and legacy hospitals.

An additional PHP 1 billion has been allocated for the upgrade of the University of the Philippines-Philippine General Hospital.

The remaining PHP 8.43 billion, according to Mr. Co’s office, will be distributed across several sectors, such as to university service centers, vehicle acquisition for local governments, skill development programs and for tourism market development.

Additional funds will also support intelligence, marine research and security programs of the Department of Transportation, and the rehabilitation of the Cultural Center of the Philippines main building.

IMPLEMENTATION ISSUES

University of the Philippines School of Labor and Industrial Relations Assistant Professor Benjamin B. Velasco said the issue is about the implementation of social safety nets.

“It is coursed through politicians and thus becomes entangled in the patronage systems of local and dynastic politics,” he said in a Facebook Messenger chat, adding that incumbent politicians could distribute these AKAP and AICS funds to their constituents.

“We should find a way to disburse aid without the beneficiaries being identified by politicians,” he added, noting that one way to do this is through a national database of indigents, informal workers and migrant families as the pool of legitimate beneficiaries.

Mr. Velasco said increasing social programs could also boost the economy because the money will end up in the hands of consumers.

Federation of Free Workers President Jose Sonny G. Matula also called for an evaluation of those social assistance programs.

“While these programs may provide short-term relief, we need to focus on strengthening and expanding unemployment insurance under the Social Security System and Government Service Insurance System and enhancing training and reskilling programs for displaced or jobless workers to ensure long-term, sustainable support,” he said in a Viber message.

However, Leonardo A. Lanzona, Jr., an economics professor at the Ateneo de Manila University, said the move to increase the budget allocation for social services could stoke inflation.

“It can actually just increase inflation since these are not related to production. Just like in a carnival, when owners know that people have money, they will just raise prices,” he said in a Facebook Messenger chat.

“In the end, people just remain dependent on these dole-outs, thus enhancing the dynasty,” he added.

Economic managers are targeting 6-7% growth this year, and 6.5-7.5% growth in 2025.

The Philippine economy grew by 6% in the first half, as high inflation and elevated interest rates dampened consumption. 

To meet the lower end of the target, GDP expansion should average 6% for the remainder of the year.

Third-quarter economic data will be released on Nov. 7.

Meanwhile, Teodoro C. Mendoza  a retired agronomy professor at the University of the Philippines Los Baños, said instead of investing in production, the government should just buy the products of farmers.

“Buy the farmers’ rice at PHP 25 per kilogram, and they will be happy. They will be motivated to produce more rice,” he said in a telephone call, noting the solar irrigation systems he saw in the past years were not entirely successful.

The House of Representatives might have violated a Philippine Constitution provision disallowing amendments on bills passed on final reading, analysts earlier told BusinessWorld. This could open the House to potential lawsuits that could derail the government’s spending plan next year.

Congressmen approved House Bill (HB) No. 10800, the General Appropriations bill, on final reading last month. The House adopted committee amendments to the spending plan during plenary deliberations while deferring proposed individual reallocations to a later date to meet its self-imposed September deadline.

“No amendment… shall be allowed” after a measure’s last reading, according to Sec. 26 of the 1987 Charter. – Chloe Mari A. Hufana, Reporter

The Philippines is the least exposed to China’s economy, potentially limiting the impact of the latter’s stimulus measures, Nomura Global Markets Research said.

“Among the various uncertainties surrounding Asia’s economic outlook — US economic strength, US elections, the speed of Fed rate cuts and geopolitical tensions — China’s recent stimulus blitz is the latest addition,” it said in a report.

The report said that the Philippines and India are the least exposed within the region amid its “weak trade and investment linkages with China.”

Based on Nomura’s exposure scorecard, the Philippines has the least exposure to China’s economy with a score of 19. The scorecard assesses the potential transmission of exposure to exports, commodities, investment, and financial markets.

This is compared with India (35), Japan (54), Indonesia (79), South Korea (85), Thailand (108), Hong Kong (117) and Singapore (179). Meanwhile, Australia was seen to have the most exposure to China with a score of 190.

“The Philippines has the lowest exposure, more so in recent years, in part because, in our view, geopolitical tensions have limited foreign direct investment (FDI) inflows from China and supply chain re-orientation benefits,” it added.

Tensions between the Philippines and China have worsened in the past year as Beijing continues to block resupply missions at Second Thomas Shoal, where Manila has a handful of soldiers stationed at a World War II-era ship that it grounded in 1999 to bolster its sea claim.

In terms of monetary policy, Nomura said China’s growth outlook will weigh the most on Singapore.

“For Bank Indonesia and Bangko Sentral ng Pilipinas, which have already started their easing cycles, we expect they will remain measured in their approach and will weigh other external factors that impact FX (foreign exchange) stability, such as the Fed and geopolitical risks, more heavily than China’s growth prospects,” it said.

In August, the central bank began its easing cycle with a 25-basis-point cut. The Monetary Board is set to meet on Wednesday (Oct. 16) for its next policy review.

Nomura noted ties between China and the rest of the region have weakened in the last few years.

“China matters, but the spillovers from China to the rest of Asia have weakened over the last decade, due to a fall in Asia’s export share to China,” it said, adding that tourist arrivals from China have also dropped across Asia.

Since Sept. 24, China has announced monetary policy easing and liquidity support for equity markets. China on Saturday pledged to “significantly increase” debt to boost economic activity but lacked details on the size and timing.

Nomura sees China’s gross domestic product (GDP) growth at 4.6% this year, before slowing to 4% in 2025.

The proposed stimulus measures by China will not necessarily lead to inflationary pressures for the region, it said.

“Any China stimulus is typically seen as inflationary for Asia. However, if China stimulus is aimed more at the supply side, such as more incentives or loan support for manufacturing, this can exacerbate existing overcapacity issues over time,” Nomura said.

Nomura noted Asia’s exports to China are most sensitive to China’s property construction investment, followed by China’s retail consumption.

“If Beijing announces faster construction of infrastructure projects, then Asia may benefit less, but if fiscal stimulus is announced for property and this propels property investment higher, it could broaden Asia’s exports recovery and lift commodity prices,” it said.

Nomura said it is unclear if China’s current stimulus measures will lead to a sustained economic recovery, but noted there will be market and currency spillovers.

“In the short term, our equity strategists note that there is a possibility of further rotation, as investors fund their reallocations to China to more neutral weightings by cutting back on India, ASEAN (Association of Southeast Asian Nations) and even Korea,” it said.

The report was authored by Nomura research analysts Euben Paracuelles, Sonal Varma, Andrew Ticehurst, Jeong Woo Park, Si Yung Toh, Aurodeep Nandi, Charnon Boonnuch, Nabila Amani and Yiru Chen. — Luisa Maria Jacinta C. Jocson