HONG KONG and Shanghai Banking Corp. (HSBC) believes that the Philippines may continue to accommodate more foreign exchange inflows, shrugging off concerns over asset price bubbles.

While some Asian countries may already be facing threats of potential asset price bubbles, the Philippines still has a large room for additional foreign capital inflows, said Tony Cripps, HSBC president and chief executive officer for the Philippines.

He added that compared with the amount of foreign capital entering other emerging Asian markets, those flowing into the Philippines are still too small to cause concern over property inflation.

"The country can accommodate more foreign inflows and investments," Cripps said.

According to Junie Veloso, HSBC senior vice president and head of corporate banking, property prices in the Philippines has so far remained relatively stable over the past year or two.

Any increase in property prices in the Philippines over the past year has so far been much slower than the rise in property prices in other developing Asian countries, such as China, he added.

"Clearly, the view on the Philippines is positive. Property prices are still relatively cheaper [than in other Asian markets]," Veloso explained.

The bank officials were reacting to questions asked of them on whether the Philippines could be under threat from an asset price bubble, which economists said were already forming in other developing Asian countries.

Concerns over property inflation in Asia has been rising due to the surge in foreign capital to this part of the globe. The increase in inflows was credited to the anemic economic performance of the United States and other industrial countries in Europe, the usual preferred investment sites. Most investors now turn to the East for income opportunities.

The Philippines has benefited from improved investor appetite for instruments issued in Asia, registering higher inflows of foreign portfolio investments this year.

Data from the Bangko Sentral ng Pilipinas showed that foreign "hot money" inflows in the first seven months of the year reached $701 million, up by over 160 percent from only $265 million in the same period a year ago.

Gross inflows reached $5 billion, up from only $3.6 billion in the same period last year. Bulk of these inflows were placed in equities, thus providing capital support to publicly listed firms in the country.

The government earlier reported that the real estate sector grew by 7.1 percent in the first half from a year ago, a swing from the 0.9-percent contraction registered in the same period last year.

Economic managers said the growth of the real estate sector partly contributed to the expansion of the overall economy, which in the first half registered a surprising growth of 7.9 percent, the highest in over three decades.

AMONG VARIOUS cities in Asia, Manila has emerged as one of the best value-for-money investment destinations due to its relatively low wage rates, liberalized economy, and wealth of talent, according to a recent Japan External Trade Organization (Jetro) survey.

The survey conducted in January included 29 major cities in Asia, including China's Shanghai and Shenzhen.

Based on the results, Manila's average minimum wage rate of $130 a month was more competitive than Shanghai's $141 and Shenzhen's $139 a month. These two cities had seen wages go up due to the increasing demand and growing competition for human resources.

Compared with other regions in China, where monthly salaries ranged from $117-$141, wages in Manila were still relatively low, especially considering the quality of the workforce.

Its competitive wage level was not the only thing that Manila had going for it, the Jetro survey showed.

Manila was also considered one of the best value-for-money investment locations because of its generally liberalized economy and overall lower operational costs.

The Jetro survey was conducted by the agency's overseas offices, in cooperation with various Japanese chambers of commerce and industry, government agencies, and relevant companies in each Asian country.

According to Jetro's 2010 Global Trade and Investment Report, Japanese firms were increasing their overseas investments, as earnings from overseas units, particularly those in Asia Pacific, continue to grow.

Data from the consolidated financial statements of 887 listed Japanese firms with overseas operations, their overseas units accounted for 35 percent of sales and 43.5 percent of operating profit.

MANILA, Philippines - Foreign businessmen said they expect the Philippine economy to grow by seven percent to eight percent this year because of renewed investment confidence.

In a press conference, American Chamber of Commerce in the Philippines (AmCham) executive director Robert Sears said that the new administration has sparked renewed interest in the country although actual investments may come in next year.

He noted that there is real interest in the Philippines but concrete evidence of change must be seen before multinational firms decide to infuse money into the country.

Sears said that there will be renewed interest in the Philippines especially from US-based firms after President Aquino visits the United States in September. "The US visit is good for US-Philippines trade relations. Americans are looking at the Philippines once again."

For his part, John D. Forbes, AmCham Legislative Committee Chair said that multinational firms are looking at the cost of doing business. He noted that regionalization and international partnerships have made it possible for firms to produce products in one location.

According to Forbes, the removal of tariff barriers has made it easier for firms to produce in one country only because there is minimal tax for imported goods.

"Multinational firms are now consolidating their operations and as a result some factories may be closed," Forbes noted.

He said businessmen are looking at three things before opting to invest further in the country. These are the incentives given by the government, the high cost of electricity here and the exorbitant minimum wage in the Philippines.

The minimum wage in the Philippines is the highest when compared to its South East Asian neighbors. It is six times higher than the minimum wage in Vietnam. Worse, the Philippines has twice as many paid holidays when compared to other ASEAN countries, Forbes said.

The World Competitiveness Yearbook (WCY) showed that business executives in the Philippines are among the most insecure that their investments here will transfer to other countries.

The WCY survey was done in 56 countries wherein the Philippines ranked 53 in the relocation threat of production category.

"Our business executives are most insecure that their production facility will relocate to other countries," Asian Institute of Management (AIM) Policy Center Executive Director Lourdes A. Sereno said. "We are not attracting new investments and whatever businesses that remain are threatening to leave," she noted.

Sereno said that this is a serious concern because business executives in the country are very insecure that local operations will not continue.

WHILE THE bloody hostage-taking incident on Monday may take its toll on the country's tourism sector, the central bank said the incident was not likely to stir the capital markets.

It said foreign portfolio inflows, which have been boosting the peso since the start of the year, would likely be sustained.

"That was a very unfortunate incident but an isolated event, and the markets will see through that and it should not have a significant effect on the market in general," said Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr.

The hostage-taking, which involved mostly Hong Kong nationals who were on a holiday tour in Manila, came amid rising investment inflow to the Philippines and other Asian countries given their favorable economic performance.

The peso is hovering in the 45-to-a-dollar territory and is expected to close the year at the same level, which is stronger than last year's average of about 47 to $1.

The central bank has attributed this to the improving sentiment on emerging markets in Asia given that they are again expected this year to outpace growth of industrialized countries in the West.

Officials said the slow recovery of the US and European economies from last year's recession prompted investors to seek investment opportunities in Asia, where interest rates are higher and where risks are no longer seen to be much more than in the industrialized economies.

Earlier, the BSP reported that net inflow of foreign "hot money" in the first seven months of the year hit $701 million, up more than 160 percent from only $265 million in the same period last year.

Gross inflow amounted to $5 billion, up from only $3.6 billion in the same period a year ago. Of the $5 billion, $3.4 billion were used to buy equities in the local stock market.

The BSP said equity investments were mostly in the property, telecommunications, holdings and utilities sectors.

Following the hostage drama, which lasted about 10 hours and ended in the death of eight foreign hostages, doubts were raised on the ability of the peso to sustain its relatively strong level.

Tetangco, however, said the perceived security risks in the Philippines were not expected to dampen the appetite for securities issued from the country.

On Monday, the peso closed at 45.06 against the dollar, down slightly from Friday's finish of 45.01.

Market players said the peso's staying in the 45:$1 mark was consistent with the relative strength of other major Asian currencies, which are being supported by inflows to emerging markets in Asia.

Malaca�ang confirmed on Saturday that investors' confidence in the country is at an all time high due to renewed confidence of local and international businessmen on the new administration.

Presidential Communications Development and Strategic Planning (PCDSP) Secretary Ricky Carandang said that following the Midyear Economic Briefing earlier this week, the President's economic team was able to talk to a group of investors who signified interest in doing business in the country.

"I can confirm na very excited sila sa mga nagyayari dito sa Pilipinas [I can confirm that they are very excited on the developments in the country]," Carandang said. "They want to come in looking for opportunities: in infrastructure, BPO (Business Process Outsourcing), and many other areas."

Carandang said investors are looking at what steps the Aquino administration will be doing to encourage more businessmen to invest in the country, adding that they expressed hopes that they will not change the rules for business and create a level-playing field.

He said the Aquino administration has the assurance of the business community that they can expect these from the Philippine government, adding that President Aquino will be encouraging more investors to cash in on the country when he goes to the United States on an official business trip in September.

"We are open for business, we know what you need, we know the rules and we'll put them in place, and we will follow them and you can do business in the Philippines, the rules will not change," Carandang said.

It will be recalled that even before the assumption of the new administration, foreign envoys had already expressed hope that there will be more foreign investments in the country, citing measures to make the country an even more attractive place to do business, including by curbing corruption and investing in infrastructure.

MANILA, Philippines�Talk about good timing.

President Benigno Aquino III vowed to make the Philippines �a predictable and consistent place for investment� a day after a top local tycoon made a pitch to buy the Philippine Amusement and Gaming Corp. (Pagcor) for $10 billion on behalf of a group of Malaysian businessmen.

In his keynote address at the 43rd founding anniversary of the Association of Southeast Asian Nations (ASEAN) Monday, Mr. Aquino said he envisioned the Philippines becoming a country �that would be known for honoring contracts and giving due protection to foreign investors.�

The President came to the Department of Foreign Affairs and met with Foreign Secretary Alberto Romulo and the diplomatic representatives of the ASEAN countries.

Attract investors

Mr. Aquino vowed to transform the Philippines, saying that �an exemplar, as well as exponent, of the rule of law�including international law�is a country attractive to investments. A Philippines that harmonizes its national interest with its international responsibilities is a nation that can earn, and maintain, its dignity and self-respect whether on a bilateral or multilateral level.

Predictable, consistent

�We can achieve this by making sure our country is a predictable and consistent place for investment. The security and well-being of Filipinos throughout the world will be best protected if our country enjoys international amity. That amity will be fostered by our ability to honor contracts and give due protection to investors,� he said.

Mr. Aquino said his administration also planned to �be more conscious of our commitment to fostering improved ties with our ASEAN neighbors. We will be a good neighbor, a productive partner and a consensus-builder as we work toward our common goals.�

Romulo handed the President a framed copy of the ASEAN Charter in Filipino. Mr. Aquino said copies of the charter would be made available to all pubic libraries nationwide.

MANILA, Philippines - Real estate, housing, and global tourism are the sectors which deserve immediate attention since they offer the best prospects for immediate returns to the rest of the economy and the millions of people who need jobs and better income, President Aquino said.

This as he urged government to be clear and forthright in locating and classifying the lands that are best used for residential development and other requirements of rapidly urbanizing communities.

In his keynote address during the opening of the Philippine Real Estate Festival 2010, Aquino emphasized that national agencies and local governments will have to be more prompt, more dedicated and competent, and more honest and transparent in approving development plans and in processing and releasing the necessary permits, clearances, and licenses.

�Just as importantly, we will have to be more creative and enterprising in sourcing funds that can be made available to both the builders and buyers of homes,� the President stressed.

He said it is a primary concern for those in government to provide opportunities for decent and stable livelihood for as many of its people as possible.

Of equal concern, Aquino added is the need to increase income in a sustained manner for all the active players in the national economy. These include the national and local governments, business and industry, and the individual income earners.

He pointed out government looks at global tourism and real estate development as veritable sunrise industries for the national economy, noting that these industries are genuine engines of economic growth because of their multiplier effect on a host of other industries and businesses at the national and community levels.

�The industry rules of thumb tell us that, for every house that is constructed, more than half a dozen jobs are created. For the basic housing materials and the fixtures that are installed in every home, business is, in turn, generated for scores of other industries and occupations. So, it is with tourism. Each quality tourist visitor opens up at least three or four job opportunities and spurs an inflow of several hundred dollars to our economy,� the President said.

�New jobs. Additional income. Multiply these by the hundreds of thousands, and even millions, and we can visualize the economic growth that is pump primed by housing production and tourism businesses,� he emphasized.

According to the President, conventional estimates place the housing backlog in our country at a low of 3.7 million to as much as more than six million housing units.

�Just imagine the number of people that would be assured of employment were to pursue with single-minded purpose the production of housing units well over the annual outputs that our developers and the housing agencies have been able to register thus far. I am told that our best year was when we produced some 200,000 units in one year. At that pace, it would take us more than an entire generation to whittle down the housing backlog. Clearly, we have to do better than that,� he said.

Aquino said that as part of government�s overall efforts to create a new environment for doing business in this country, no effort should be spared to ensure the highest levels of efficiency and integrity among officials and personnel of the concerned agencies.

�Our target will primarily be every resident family, especially the Filipino family, who does not yet have a home it can call its own. Secondarily, it will include all those in search of a community where they can establish their residence and place of work as the anchor for their own personal quest for a better life,� he said.

He emphasized that the same mindset and degree of resolve must be applied to the development of infrastructure and facilities and amenities for global tourism.

Starting with the airports and seaports, he said the entry and exit points into and from the country must be clean, adequate, efficient, and friendly at all times.

�Transport and communication systems to and in their destinations of choice must be available, convenient, and modern. Accommodations for board and lodging must be safe and secure as well as comfortable and hospitable. Programs for eco-tourism, leisure, culture, and personal wellness must be faithful to our own unique ecology and identity as a nation, even as these are packaged for global acceptance and patronage. Local hosts and tour guides must be well trained and properly accredited to serve as worthy ambassadors for our host communities,� he said.

Aquino added that government�s target will be quality tourists, �meaning people who genuinely wish to discover and experience who we are as a people and what our country is as a piece of paradise and as a member of the international community. These are the travelers, vacationers, and retirees who are disposed to stay a little longer and spend a little more.�

�It is a simple goal that requires more than simplistic solutions. It calls for the best that all of us can offer � in government as well as in the private sector,� the President emphasized.

THE INTERNATIONAL Monetary Fund revised its growth forecast for the Philippines for 2010 to 6 percent from 3.6 percent given the strong recovery in Asia.

In an update of its World Economic Outlook (WEO) report, the IMF said Asia�s strong recovery from the global financial crisis continued in the first half of 2010, despite renewed tension in global financial markets.

For all of Asia, the multilateral lender also revised upward its 2010 growth forecast to about 7.5 percent from the 7 percent that was expected in April.

Last June, the the Cabinet-level Development Budget Coordination Committee revised upward the 2010 gross domestic product (GDP) growth target to between 5 and 6 percent.

The DBCC said the change in target was due to the 7.3-percent growth posted in January-March, which was the highest first quarter growth recorded in three decades.

Based on the new target range, GDP is expected to grow to P8.53 trillion at current prices this year.

Based on the previous target of between 2.6 percent to 3.6 percent, the economic output�s value would reach between P8.34 trillion and P8.5 trillion.

MANILA, Philippines -The Bangko Sentral ng Pilipinas (BSP) said that consumers will continue to enjoy lower money transfer and remittance costs due to heightened competition between banks and companies that offer money transfer and remittance services.

BSP Deputy Governor Nestor Espenilla Jr. said in an interview with reporters that companies that offer money transfer and remittances services have been forced to lower their fees in light of the strong competition from banks that offer similar services as well as providers of mobile banking services.

�Companies were forced to lower their rates because of competition with banks and mobile banking,� Espenilla stressed.

He pointed out that the central bank no longer needs to step in and intervene in the sector as competition has forced companies engaged in the money transfer and remittance business to lower their fees.

�That is why we don�t want to regulate and impose price cap. Rather than price cap, let competition come in,� he added.

To date, the BSP said there are about eight million users of mobile banking in the Philippines boosting the central bank�s efforts to provide financial services in rural and hard to reach areas at a lower cost and higher efficiency.

These users of electronic money (e-money) transact through Smart Money of PLDT-controlled Smart Communications and G-cash of Ayala-controlled Globe Telecom in the Philippines. He said the number of banks offering mobile banking for microfinance operations has reached 49 rural banks from none before 2005.

Espenilla earlier said some banks even lowered their interest rates on microfinance loans for clients who use text-a-payment platform by 50 basis points on monthly rates.

�Technology extends outreach of microfinance and banking services to a large number of bankable but un-banked especially those in rural and hard to reach areas at lower costs and higher efficiency,� he explained.

The mobile phone industry in the Philippines serves all income groups especially low income groups. More than 75 percent of the population have mobile phones.

More consumers, particularly families of overseas Filipino workers (OFWs), are starting to appreciate the use of electronic transactions. e-transactions involve the payment of goods purchased and services rendered but could also be a conduit for the money sent home by Filipinos working abroad.

The BSP has already issued a regulation covering e-money wherein entities already providing or wanting to provide an e-money service must register with the central bank as an electronic money issuer (EMI).

EMIs include banks, non-bank financial institutions and money transfer agents. Those qualified as EMI include stock corporations with a minimum paid-up capital of P100 million. e-money is also not considered a bank deposit and is not covered by the deposit insurance provided by the Philippine Deposit Insurance Corp. (PDIC).

The guidelines also limit the maximum amount that can be loaded to any e-money instrument at P100,000 a month.

Earlier, the BSP�s Monetary Board agreed to waive the fees imposed on banks that use the Philippine Payments and Settlements System (Philpass) remit system for six months as part of efforts to reduce the cost of sending money by overseas Filipino workers (OFWs).

�The Monetary Board has approved the waiver for six months of fees for banks servicing overseas Filipinos transacting through Philpass. This will help enable banks to lower their remittance fees,� Tetangco stressed.

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has agreed to waive the fees imposed on banks that use the Philippine Payments and Settlements System (Philpass) remit system as part of efforts to reduce the cost of sending money by overseas Filipino workers (OFWs).

BSP Governor Amando Tetangco Jr. told reporters that the central bank�s Monetary Board approved the lifting of the imposition of fees on banks that service OFW remittances through the central bank�s facility for six months.

�The Monetary Board has approved the waiver for six months of fees for banks servicing overseas Filipinos transacting through Philpass. This will help enable banks to lower their remittance fees,� Tetangco stressed.

OFWs and their beneficiaries are expected to enjoy lower remittance fees starting this quarter with the complete operation of the Philpass remit system resulting in savings of between P100 and P500 per transaction.

The system would reduce the charges to P50 for each remittance transaction as the current system charges between P150 and P550 per transaction.

OFW families are expected to save at least P92 million to as high as P922 million due to the faster and cheaper delivery of remittances to the beneficiaries at a lower rate.

The system also eliminates the need for courier services by commercial banks for the mode of fund transfer involving credit-to-other banks once the project becomes operational.

The Philpass Remit System involves the use of the BSP-Philpass as the local clearing house for the transfer of remittances from a local bank to another bank where the OFW beneficiary maintains an account.

The project is one of the initiatives undertaken by the BSP in coordination with the Association of Bank Remittance Officers, Inc. (ABROI) through a memorandum of agreement (MOA) last December.

The BSP said the full implementation of the project was originally scheduled in the first quarter of the year but only one bank has been able to migrate to the new system since the signing of the MOA.

According to the BSP, other member banks would be coming on stream once they resolve the remaining issues on hardware and system connectivity.

Other ABROI members expect to complete their migration to the new system only by end-May or end-June while two banks have indicated that they could comply only by end-September this year.

Last year, remittances went up by 5.4 percent to a new record level of $17.348 billion last year from $16.426 billion and exceeded the revised four percent growth forecast set by the central bank due to the steady growth of OFW remittances to the sustained demand for skilled Filipino workers overseas, particularly engineers, medical practitioners, and teachers.

The BSP recently upgraded its growth forecast for the amount of money sent home by overseas Filipinos to eight percent instead of six percent due to the strong demand for Filipino skilled workers.

So far, OFW remittances went up by 6.6 percent to $5.86 billion in the first four months of the year from $5.49 billion in the same period last year.

MANILA, Philippines - Investors are now looking at the Philippines as a viable investment destination when compared to its Southeast Asian neighbors, the Bank of Tokyo Mitsubishi UFJ said.

In an interview, Trade Undersecretary Elmer C. Hernandez said Singapore-based Takashi Muraoka, Bank of Tokyo deputy chief executive officer for Asia, visited him to report that investors are bullish on the Philippines.

�He informed me that investors are concentrating on Indonesia and the Philippines right now,� Hernandez said.

Hernandez said they expect more investments from Japan because Japanese firms are seriously considering expanding in Asia.

Hernandez said the political turmoil in Bangkok has resulted in a number of firms reconsidering their decision to infuse money in Thailand.

On Vietnam, Hernandez said the problem has been manpower. �The attrition rate in that country has been high because there is a limited supply of a good work force,� he said. With that, although the production cost in Vietnam is lower, the high turnover of employees means that the training cost for workers is high.

�The Philippines has a quality work force and the turn over rate is manageable,� Hernandez noted.

Hernandez likewise said that the problems the Philippines is experiencing does not bother potential foreign investors. However, he said the investors would like to know how the government is addressing the problem. �Now investors would like to know how the new administration will further enhance the Philippines as a good investment destination,� Hernandez said.

Top international investment banks Goldman Sachs, JP Morgan, and Barclays have turned bullish on the Philippines after the country registered a better than expected 7.3 percent growth in the first quarter (January-March) of 2010.

The economic expansion was led by consumer spending, exports and remittances from overseas workers.

Consumer spending, which accounts for about 70 percent of the economy, rose 5.9 percent last quarter from a year earlier, according to today�s report. Exports surged 28.1 percent in peso terms. Remittances from the more than 8 million Filipinos living overseas gained 11.3 percent in peso terms.

�The [first quarter of 2010 performance] confirms that the recovery process is firmly underway and we expect it to continue to get support from the two engines of flows�stable remittances and growing IT [information technology] service exports,� Goldman Sachs said.

JP Morgan�s growth outlook improved to 6.8 percent this year, revised from its earlier economic growth forecast of 4.5 percent.

London-based Barclays Capital also revised its growth forecast for the country from 5% to 6% this year.

Capital Economics, a global investment and securities research firm said that growth is likely to rise to 5.5 percent this year, higher than its previous forecast of 4.5 percent. It expects growth to be sustained on the back of robust dollar remittances from overseas Filipinos.

The National Statistical Coordination Board reported that with the Philippine economy expanding by 7.3 percent in the first quarter of the year, it was the highest quarterly growth recorded since the 8.3 percent-growth registered in the second quarter of 2007.

The 7.3 percent gross domestic product growth is a marked improvement from the 0.5 percent recorded in the first quarter of 2009 and is above the National Economic and Development Authority�s growth forecast for the period of 2.9 percent to 3.9 percent.

MANILA, Philippines - International credit rating agency Moody�s Investors Service has given the Philippines a stable outlook on its Ba3 rating, saying that the prospects for the economy remain good.

At the same time, however, Moody�s said there are still a number of challenges that the country is facing, particularly on the fiscal side.

In a statement issued yesterday, Moody�s assistant vice president and analyst Christian De Guzman noted that the economy was one of the few countries in the Southeast Asian region to avoid year-on-year contractions during the global economic recession.

The Ba3 sovereign credit rating � which is three notches below investment grade � is also supported by the country�s �fortified external payments position,� De Guzman said.

The Philippine economy, as measured by gross domestic product (GDP), grew by 0.9 percent last year, slower than the 3.8-percent growth in 2008. This year, the government expects the economy to grow anywhere from 2.6 percent to 3.6 percent although analysts said actual growth could be higher because of election spending.

De Guzman also said the country�s high level of gross international reserves has helped insulate the Philippines from external shocks.

�The country�s historically high level of official foreign exchange reserves has been bolstered by the resilience evident in remittances from the large numbers of Filipino workers overseas; this situation has helped buffer the economy and government finances from external shocks and has greatly supported its exchange rate stability,� de Guzman said.

The country�s gross international reserves hit $46 billion in February from $45.5 billion in January, latest data from the Bangko Sentral ng Pilipinas (BSP) showed.

Furthermore, de Guzman said continued remittance inflows from overseas Filipinos and receipts from business-process outsourcing companies would continue to support the country�s current account and this would also fuel private consumption.

However, he also said the government needs to focus on fixing the country�s fragile fiscal position.

�There remains a dearth of investment spending relative to its rating and regional peers, thereby underpinning the importance of fiscal reform to generate higher revenues. That would enable adequate public investments and ultimately higher rates of potential growth,� Moody�s said.

The government�s budget deficit is expected to hit P293 billion this year from P298.5 billion last year. In February, the budget gap hit P33.2 billion, slightly higher than the P29- billion deficit recorded during the same month last year, according to the latest data from the Department of Finance (DOF).

the 1997 Asian financial crisis. Moody�s last rating action on the Philippines was taken in July last year when it upgraded the sovereign bond rating to Ba3, from B1, marking the first upgrade since Finance Undersecretary Gil Beltran welcomed the action of Moody�s.

�We welcome the favorable rating given by Moody�s. We look forward to better ratings by improving on certain things that they notice in their assessment,� Beltran said.

Higher credit ratings cut the government�s cost of borrowing, making it easier for the government to borrow from commercial and local lenders. In January, the government sold $1.5 billion in dollar debt and another $1.1 billion worth of Samurai bonds in February.

Money sent home by overseas Filipino workers (OFWs) to grow by 8 percent this year, higher than the Bangko Sentral ng Pilipinas' (BSP) forecast of 6 percent, Moody's Investors Service said.

The higher than expected growth in remittances, Moody's said can be attributed to shift in the composition of OFWs towards higher skilled and higher paid occupations, such as those in the healthcare industry.

The shift from lower-wage occupations like those in construction, the credit rating firm said is one of the reasons for the resilience in remittances during the crisis last year.

�Such positions [in the healthcare industry] typically feature greater job security than lower-wage occupations,� Moody's said.

OFW remittances defied expectations at the onset of the crisis of a large fall by recording full-year growth of 5.6 percent last year.

The global economic recovery and rising confidence in the Philippine economy pushed the foreign portfolio investments in the first quarter of 2010 to $389 million, exceeding the full-year figure recorded in 2009.

�For the first three months, it is higher than the whole of 2009,� Bangko Sentral Assistant Gov. Ma. Cyd Tuano Amador told reporters in a news briefing Thursday.

Bangko Sentral Deputy Gov. Diwa Guinigundo said the figure was five times greater than the year-ago investment level.

Data from the Bangko Sentral showed that foreign portfolio investments reached $389.36 billion as of March 12, up from just $75.53 million a year ago.

With the strong foreign portfolio investments, Guinigundo hinted that Bangko Sentral might revised upward its balance of payments surplus target this year from a range of $3 billion to $4 billion.

�We can recalibrate our projection to reflect actual developments,� Guinigundo said, adding that the revision of the forecast would be made in April.

Guinigundo noted that �the global economic recovery is gaining more traction while the domestic economy and financial markets continue to show significant improvement.�

Bangko Sentral, in its Fourth Quarter 2009 BoP report, said the current account surplus reached $8.6 billion in 2009, equivalent to 5.3 percent of the gross domestic product.

�The more-than-two fold increase over the $3.6-billion surplus recorded in 2008 was brought about by the favorable performance of all the components of the current account, except the income account,� said Rosabel Guerrero, director of Bangko Sentral�s Department of Economic Statistics.

The balance of payments also reflected a surplus of $5.849 billion as of December, up from just $89- million a year ago.

These surpluses were recorded despite an $8.9 billion deficit in foreign trade.

Guerrero said remittances, exports from business process outsourcing, foreign direct investments and foreign portfolio investments led to stronger balance of payments position.

�Net current transfers receipts rose year-on-year by 4.7 percent to $16 billion,� Bangko Sentral said.

This was led by a 5.6-percent increase in remittances to $17.3 billion last year.

The value of goods imported by the Philippines in January surged 30 percent from a year-earlier--its strongest monthly growth in more than seven years, extending a recovery that started in November that could underpin the performance of the export sector as well as the broader economy in the months ahead.

The National Statistics Office said Thursday imports in January increased to $4.26 billion from $3.27 billion a year earlier, buoyed by increased purchases of electronics, oil products and cereals. The January figure was also higher by 9.4 percent from $3.89 billion in December.

With exports for January earlier reported at $3.58 billion, a trade deficit of $682 million was recorded for the month, narrower than the $759 million posted in the year-earlier period.

Electronics imports, which accounted for one-third of purchases in January, rose 2.2 percent on year to $1.34 billion and were 8.6 percent higher from a month earlier.

Imports from the US, the country's main import source in January, declined 1.4 percent on year to $570 million. Imports from Singapore, largely oil products, rose 61 percent on year to $540 million, while imports from Japan reached $491.8 million, up 38.5 percent from a year earlier.

The Philippines projects exports to expand between 7 percent and 9 percent this year and imports to increase between 13 percent and 15 percent.

"Imports bounced up strongly driven by the turn in domestic demand, reflected in rising imports of capital and consumer goods," said Prakriti Sofat, regional economist with Barclays Capital.

"Going ahead we believe that imports will continue to rise and exports should remain underpinned as well given improved external demand, with key support coming from the turnaround in the global electronics cycle," she added.

The country started to register expansion in monthly imports only in November, following 12 months of contraction amid the global economic downturn kicked off by the collapse of investment bank Lehman Brothers in September 2008.

Exports have been on an upward trend since November, reflecting a recovery in the global electronics market. Electronic products are the Philippines' largest export item, and imported electronic products are primarily reprocessed by semiconductor and other electronics exporters.

Jose Vistan, research director at AB Capital Securities, said the sharp increase in January imports could be attributed in part to the low base in the previous year. Imports in January last year contracted around 35 percent from a year earlier.

"This is a combination of a low base, coupled with recovery in exports, which is very dependent on imports," Vistan said. (Dow Jones)

The Board of Investments and the Philippine Economic Zone Authority registered combined investment commitments of P29.95 billion in the first two months of the year, up 107 percent from P14.45 billion year-on-year.

Trade Undersecretary and investments board managing head Elmer Hernandez told reporters over the weekend that the BoI approved commitments of P9.92 billion in January and February, up 233 percent from P2.97 billion on year. Peza registered P20.04 billion worth of investment pledges, up 75 percent from P11.47 billion on year.

Hernandez said combined BoI and Peza pledges from foreign investments surged 671 percent to P14.58 billion from P1.89 billion on year. Local investors committed P15.38 billion in the two-month period, up 22 percent from P12.56 billion.

The two agencies registered 99 new projects from 96 last year, with employment prospects rising 29 percent to 20,837 from 16,156.

The manufacturing sector received investments of P14.70 billion from just P1.29 billion on year.

Investment pledges in real estate, including mass housing and industrial estate fell 15 percent to P9.05 billion from P10.62 billion on year.

Power projects jumped to P5.31 billion from P140 million last year.

Japanese companies led the bulk of registered investments in the first two months with P7.12 billion, followed by Singapore at P4.83 billion and the United States at P1.18 billion.

The biggest investments were led by the manufacture of flip-chip LAN grid array, green film auto voltaic panel, and power generation and wind projects.

The biggest power generation project is located in Nabas, Aklan worth P2.55 billion while the largest wind project is in Sual, Pangasinan worth P2.54 billion. Both projects were registered by Petro Energy Resources Corp.

MANILA, Philippines - Money sent home by overseas Filipino workers (OFWs) hit a new monthly record high of $1.567 billion in December, enabling the Bangko Sentral ng Pilipinas (BSP) to register a stronger-than-expected growth in remittances for the whole of 2009.

Data released by the BSP yesterday showed that OFW remittances surged by 11.4 percent in December, or $160 million more than the $1.407 billion registered in December of 2008. The amount eclipsed the previous monthly record high of $1.531 billion registered in October 2009.

For the whole of 2009, BSP officer-in-charge Diwa Guinigundo said remittances went up by 5.4 percent to a new record high of $17.348 billion from $16.426 billion in 2008 and exceeded the revised four percent growth forecast set by the BSP for 2009.

�The 2009 level exceeded the BSP�s forecast of $17.1 billion remittance flows or a four percent growth for the year,� Guinigundo stressed.

Major sources of remittances included the US, Canada, Saudi Arabia, United Kingdom, Japan, Singapore, United Arab Emirates, Italy, and Germany.

Guinigundo pointed out that the remittance level accounted for about 10.8 percent of the country�s gross domestic product (GDP) that expanded by 0.9 percent last year from 3.8 percent in 2008.

�Remittances remained resilient amid the recent global financial crisis, providing strong support to domestic demand,� he added.

The BSP official attributed the steady growth of OFW remittances to the sustained demand for skilled Filipino workers overseas particularly engineers, medical practitioners, and teachers.

According to him, the stronger-than-expected growth could also be traced to the decision of the Philippine government to conduct bilateral talks with host countries that continue to open up new employment opportunities abroad for Filipinos and to facilitate the hiring of displaced workers who were affected by the global economic difficulties.

Guinigundo said also noted the continued expansion of remittance transfer facilities that has helped capture a large share of the global remittance market.

�The steady remittance flows from overseas Filipinos were underpinned by the continued expansion of bank and non-bank service providers� international and domestic market coverage to capture a larger share of the global remittance market as well as the introduction of innovative products and services that cater to remitters� specific needs,� he added.

Commercial banks� established tie-ups, remittance centers, correspondent banks, and branches or representative offices abroad increased to 4,192 as of 2009 from 3,015 as of 2008.

Data from the Philippine Overseas Employment Administration (POEA) showed that the government processed about 41.6 percent or 221,548 of the total job orders that reached 532,214 last year. These jobs comprised mainly of service, production as well as professional, technical, and related job categories in Saudi Arabia, Qatar, UAE, Kuwait, and Hong Kong.

POEA reported that Middle East countries particularly Saudi Arabia continue to absorb a significant number of deployed OFWs including those that have been displaced elsewhere.

�The geographical diversification of OFWs has also contributed to the resilience of remittance flows,� Guinigundo said.

The BSP was originally looking at a zero growth last year but later revised the outlook to a growth of four percent due to the steady deployment of Filipino workers abroad and the increase access to formal remittance channels.

OFW remittances are expected to grow faster at six percent next year especially with the signing of a memorandum of agreement between the BSP and member banks of the Association of Bank Remittance Officers Inc. (ABROI).

The agreement calls for the use of the central bank�s Philippine Payments and Settlements Systems (PhilPaSS) to send the remitted money to the beneficiaries� accounts in other banks.

OFW families are expected to save at least P92 million to as high as P922 million due to the faster and cheaper delivery of remittances to the beneficiaries at a lower rate of P50 per transaction instead of the current range of between P100 and P550 per transaction.

This year, the BSP sees OFW remittances growing at a faster rate of six percent.

MANILA, Philippines - Foreign direct investment (FDI) inflows posted a double digit growth in the first 10 months of last year due to stronger equity capital inflows and higher reinvested earnings, Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. reported yesterday.

Tetangco said FDI inflows jumped by 17.9 percent to $1.328 billion during the first 10 months of last year from a year-ago level of $1.126 billion as both equity capital and reinvested earnings recorded net inflows.

He pointed out that equity capital net inflows soared by 28.3 percent to $1.36 billion in the first 10 months of last year from $1.06 billion in the same period in 2008.

Data showed that equity capital placements jumped by 22.4 percent to $1.503 billion from $1.228 billion while withdrawals fell by 14.9 percent to $143 million from $168 million.

Tetangco said the bulk of the investments came from the US, Japan, Hong Kong, and the Netherlands.

He added that investments were made in the manufacturing, real estate, construction, services, financial intermediation, mining, trade or commerce as well as transportation, storage, and communications sectors.

The BSP chief also reported that reinvested earnings amounted to $125 million from January to October last year, a complete turnaround from the $131-million net outflow registered in the same period in 2008.

�Investors were encouraged to retain part of their earnings in local enterprises or corporations given the Philippine economy�s resilience amidst challenging global economic conditions,� Tetangco said.

Data also showed that other capital account including intercompany borrowing or lending between foreign direct investors and their subsidiaries or affiliates in the Philippines reversed to a net outflow of $157 million from a net inflow of $197 million.

MANILA, Philippines--PHILIPPINE EXPORTS GREW FOR THE first time after 13 months of continuous contraction, increasing by 5.1 percent year-on-year to $3.69 billion in November.

With major markets of Philippine goods hobbling in the global slump, the value of shipments have been shrinking since October 2008, diving as deep as 40.6 percent in January 2009.

The National Statistics Office yesterday reported that total exports surged mainly due to a rebound in electronics shipments, the country�s biggest dollar earner.

This put total exports in the first 11 months of 2009 at $35 billion, dipping by 24.6 percent from the $46.2 billion in the same period in 2008.

In November, electronics�which accounted for 58.2 percent of total outbound cargoes�rose 6.9 percent year-on-year to $2.15 billion due to the continuing decrease in shipments of components and devices.

But compared to receipts in October, electronics slid by 0.7 percent from $2.16 billion, although this was better than the previous� month�s 3.9-percent decline.

The Semiconductor and Electronics Industries of the Philippines Inc.(Seipi) expects exports to improve more steadily in the coming months after a hiccup in October due to devastating typhoons.

Seipi president Ernesto B. Santiago said fourth-quarter export earnings were expected to be better than the $6.22 billion posted in the third quarter.

Santiago said quarterly export bills have been improving sequentially from $4.32 billion in the first quarter and $5.41 billion in the second quarter in 2009.

Even then, the industry group expects full-year outbound shipments to dip by 20 percent although this has been revised from a higher figure set early last year.

NSO documents showed that receipts from the country�s second top export�articles of apparel and clothing accessories�decreased by one percent year-on-year to $131.8 million.

Automotive wiring sets were third, dropping by 10 percent to $96.96 million.

The fourth top exports were woodcraft and furniture, which fell 11.8 percent to $87.54 million.

Manufactured goods represented 88.3 percent of export receipts and went up in aggregate value by 6.8 percent to $3.05 billion in November.

Agro-based products earned $145.43 million or a decrease of 22.7 percent. Receipts from mineral products reached $143.01 million, rising by 11.4 percent.

In November, the three biggest markets for Philippine goods showed increasing orders for shipments.

Cargoes sent to the United States made up the biggest batch at 17.7 percent of total outbound traffic and the value increased by 7.5 percent to $654.17 million.

Exports to Japan followed at 16.2 percent of the total, going up by 2.7 percent to $597.57 million.

Shipments to The Netherlands were third with 10.3 percent of the total, rising by 56 percent to $378.43 million.

THE STOCK MARKET INDEX IS EXpected to be more vibrant this year, with the PSEi, buoyed by the low interest rate environment, seen challenging the 3,800 record posted in 2007.

According to First Metro Investment Corp., the local bourse will grow further consistent with the anticipated recovery of the global and domestic economies from the recent turmoil.

�Stronger-than-expected recovery and low interest rates will stretch the rally of the equities market this year. We see the PSEi challenging the 3,800 seen in 2007,� Eduardo Banaag Jr., vice president of FMIC, said in a press conference yesterday.

Despite a tough economic climate, the Philippine Stock Exchange saw improvements in share prices last year as the domestic economy managed to avoid a recession.

The PSEi last year stood at 3,052.68, up 63 percent from 1,872.85 in 2008.

FMIC officials said the low interest rate regime would prompt investors, who exercised some caution last year amid the global turmoil, to invest more in the equities market this year.

Low interest yields on fixed-income instruments, including government securities, encourage investors to place funds in equities.

Given this, FMIC president Francisco Sebastian said listed companies could easily attain a 15-percent earnings per share.

�Although the share prices have already recovered from pre-Lehman levels, we still see these increasing further,� Sebastian said in the same press conference.

Sectors that are expected to lead growth this year are power and other utilities, broadcast and mining, FMIC officials said. They said the financial sector would likely remain stable.

These projections are in line with the forecast made earlier by the Bangko Sentral ng Pilipinas.

BSP Governor Amando Tetangco Jr. said liquidity in the economy would be manifested strongly this year through higher investments in the equities market. Investments in bonds will still be substantial, but not enough to surpass the projected investments in stocks.

Analysts said the rising risk appetite of the market would benefit the stock market.

Sebastian, however, said there were risks to the projected surge in stock prices this year�such as faster inflation, which may prompt the central bank to raise interest rates, and a less-than-ideal election situation.

He said the rosy stock market forecast was hinged on the assumption that the elections would be peaceful and credible.

AFTER A SHARP SLUMP LAST year, the country�s exports are expected to pick up in 2010, registering growth of between 12 and 15 percent, fueled by the anticipated recovery of the global economy that may translate to higher demand for electronics and other goods.

The projection was made by First Metro Investments Corp. and University of Asia and the Pacific (UA&P), in their monthly publication Market Call.

Victor Abola, professor at UA&P, said in a press conference yesterday that the global recovery from a crippling crisis, described to be the worst since the Great Depression of the 1930s, would mean higher demand for goods coming from the Philippines and other emerging economies.

Demand for electronics, such as computers and cellular phones will pick up, thereby boosting the country�s exports earnings. Electronics exports are the country�s major dollar earner, accounting for about 60 percent of total export revenues.

Latest data from the National Statistics Office showed that Philippine exports reached $31.3 billion in January to October last year, down 27 percent from $42.89 billion in the same period the previous year.

Analysts said the drop in exports was mainly due to sluggish demand for electronics. During a crisis, consumers tend to focus expenditure on food and other basic goods, spending less on non-essential items.

Decline in exports came when the United States and other industrialized nations�major export markets of the Philippines and other developing nations�fell into a recession.

Weak exports were blamed for the slowdown of the Philippines� own economy. The domestic economy is projected to have grown by only 0.8 percent last year from 3.9 percent the previous year and 7.2 percent in 2007.

�Recovery was earlier than expected because of combined monetary and fiscal policies,� Abola said, referring to most governments� efforts to pump-prime their respective economies.

THE country's Gross International Reserves (GIR) surged to an all time high of $45.03 billion in 2009, partly lifted by sustained growth in remittances and income from investments offshore.

At the end of 2008, GIR stood at $37.55 billion.

The BSP said in a report released Thursday that the 2009 GIR was enough to cover 9.1 months worth of imports and 4.2 times its external debt maturing within a year.

�There has been a substantial accumulation of reserves. GIR rose to a record high,� said BSP Governor Amando Tetangco Jr. in a speech during Thursday�s meeting of the Rotary Club of Manila.

He also said the country performed relatively better than most of its neighbors, as shown by the record GIR.

Gross international reserves is an indicator of a country�s ability to engage in commercial transactions�such as import and pay debts in foreign currencies�with the rest of the world. It is the total amount of foreign currencies managed by the BSP.

Foreign exchange inflows in the form of remittances, export income, revenue from investments in foreign instruments, as well as borrowings denominated in currencies other than the peso, help boost the GIR.

Remittances for 2009 were estimated to have reached over $17 billion, up by at least 4 percent from $16.4 billion the previous year.

Remittances continued to grow last year despite the global economic crisis.

The BSP said the GIR also saw a rise in income from its foreign exchange operations and foreign investments.

Borrowings made by the government and state-owned Power Sector Assets and Liabilities Management Corp. were also credited for the rise in GIR.

�Also contributing to the higher year-end GIR level were allocations of Special Drawing Rights (SDR), which were made available by the International Monetary Fund to its member countries,� the central bank said in the statement.

SDR, whose value is based on the values of selected currencies, is the currency used by the IMF.

The IMF gave its member-countries SDR allocations last year to help them cope with the ill effects of the global economic turmoil. The Philippines got $1 billion from the IMF.

Tetangco said the latest GIR indicated that the country�s external liquidity position was healthy. He said the Philippines need not borrow as much�as some countries had�just to boost its GIR.

The peso exchange rate closed higher at P45.83 to the US dollar yesterday at the Philippine Dealing & exchange Corp. (PDEx) from P46.01 the previous day. He weighted average rate appreciated to P45.867 from P45.993. Total volume amounted to $ 798.15 million.

MANILA, Philippines - The stock market held on to its gains for a third day as the index went up by 37.85 points to 3,077.78 yesterday.

Prime mover was Metro Pacific Investments Corp. which was actively traded throughout the day and rose 9.43 percent to P2.90 per share.

In its online report, AB Capital Securities said the stock market gained momentum as investors began picking up stocks this early. "Even small cap stocks were seen to be moving significantly as investors� interest grew," AB Capital said.

Strong and positive activity was evident as all sub-indexes advanced yesterday. Even gainers outnumbered losers, 88 against 35.

Volume turned out better with a total of 3.35 billion valued at P2.52 billion.

Small caps such as MRC Allied Industries Inc. shone as the company affirmed the entry of Lucio K. Tan Jr. into the firm. Another is Liberty Telecoms Holdings Inc. which surprisingly jumped by 24.14 percent to a price of P3.60. Yesterday�s share price movement is a sharp rise from its five months sideways trend.

"Locally, a lot of activities are seen both in the economy and the market. Election developments are making waves while news of a tender offer for San Miguel Corp. shares generated activity in the firm," AB Capital said.

Top Frontier will have a tender offer for SMC shares by March this year at a price of P75 as it acquires a significant ownership in SMC. Meanwhile, SMC will likewise invest in Top Frontier through equity infusion, resulting in a 49-percent ownership in the company.

SMC was the top gainer, with an advance of 7.46 percent to P72 for both A and B shares.

WITH the world economy now starting to recover, local businesses have become even more optimistic about future prospects, with privately held businesses (PHBs) giving an overall optimism rating of 68 percent�up from last year�s 65 percent.

According to Grant Thornton�s International Business Report, released through local member-firm Punongbayan & Araullo, Philippine businesses were among the most optimistic in the world, placing sixth in the global optimism rankings.

�It�s a small uptick, true, but we�re confident that this signals the start of a more upbeat business community,� P&A managing partner and chief executive Marivic Espa�o said in a statement.

Overall, the IBR global optimism/pessimism index for 2010 showed an optimism balance of 24 percent�a huge improvement from the -16 percent registered in the same period last year.

Optimism balance refers to the percentage balance of respondents who are optimistic less those who are pessimistic.

For this year�s index, Chilean businesses expressed the most optimism, with a rating of 85 percent, followed by India with 84 percent, and Australia with 79 percent.

On the flipside, Japan showed the most pessimism, with an optimism rating of -72 percent.

Also remaining pessimistic about the global economy were Spain with -56 percent, Ireland with -42 percent, and Greece with 23 percent.

Asked when they believed the global economy would register an upturn, 37 percent of local business leaders said this would happen within the second half, while 17 percent said the recovery had already started.

Twenty-one percent, however, said they did not expect an economic rebound until next year.

�Business leaders are cautious about their optimism, but they are seeing the signs that we�re pulling out of the financial crisis. Consumer spending is rebounding, thanks partly to strong remittances. The mining sector expects to bounce back this year, and even the semiconductor industry, which was hard hit by the US recession, seems poised to post double-digit growths this year,� Espa�o said.

�We may not be completely out of the woods yet, but the atmosphere is hopeful, and we need that attitude in order to realize a complete recovery.�

MANILA, Philippines - The World Bank has upgraded its growth forecast for the Philippines this year, reversing an earlier estimate of a 0.3-percent contraction to an expansion of 1.4 percent, as it noted that an expected global economic recovery would further lift the inflow of remittances, boost exports and encourage consumer spending.

In its latest East Asia and Pacific update, the World Bank said the anticipated growth falls within the range of the Philippine government�s official forecast of a gross domestic product (GDP) growth of between 0.8 percent to 1.8 percent in 2009.

�Remittances are staying strong. Government consumption and public construction will continue to benefit from the National Government�s spending in the remaining months of 2009. So, based on new data, we believe the government growth forecast for 2009 to be entirely feasible,� World Bank country director Bert Hofman said yesterday.

Money sent home by overseas Filipino workers are expected to rise by four percent to a record $17.1 billion this year, the Bangko Sentral ng Pilipinas (BSP) said.

The World Bank initially projected GDP growth in the Philippines this year at 1.9 percent, scaling it down to �0.3 percent as the economy was teetering into a recession. But a stronger than expected output in the second quarter � boosted by government spending on infrastructure and social services � sparked renewed growth expectations.

MANILA, Philippines - Acknowledging that the Philippines proved to be more resilient in the face of a global financial crisis than earlier anticipated, the World Bank retracted its forecast of a 0.5-percent contraction for the economy this year and set its new projection to a growth of 1.4 percent.

The World Bank likewise revised its outlook on the Philippines for 2010, from a growth of only 2.4 percent to 3.1 percent.

Eric Le Borgne, senior economist for World Bank Manila office, said remittances and the government�s stimulus programs spelled the difference between its old and new assumptions.

It was earlier believed that remittances to developing countries like the Philippines would sharply decline this year because of layoffs in recession-stricken countries in the West.

However, Le Borgne said, remittances to the Philippines remained strong because of the deployment of new workers to alternative labor markets, including the Middle East. Newly deployed Filipinos outnumbered those who lost their jobs.

Earlier, the World Bank said remittances sent to the Philippines would fall by 4 percent from the $16.4 billion recorded last year. Now, it sees a 4-percent increase in the money sent by Filipinos based abroad.

The revised economic growth forecast of the World Bank came after the announcement that Philippines grew by 1.5 percent in the first half.

According to the Arroyo administration, this figure kept the economy on the growth track, expecting it to rise between 0.8 and 1.8 percent for the full year.

�The Philippines avoided a recession, thanks to timely fiscal and monetary stimuli combined with larger than projected inflow of remittances,� the developmental lender said in its latest Philippine Quarterly Report released yesterday.

The World Bank (WB) is expecting a 1.4 percent growth of the Philippine economy this year and 3.1 percent in 2010 despite the impact of the recent typhoons.

In its Philippine quarterly update, WB noted that the country has avoided a recession this year due to the renewed consumer spending and the timely monetary and fiscal stimuli by the government.

WB country director Bert Hofman said: �Remittances are staying strong. Government consumption and public construction will continue to benefit from the national government's spending in the remaining months of 2009. We believe the government growth forecast for 2009 to be entirely feasible."

Eric Le Borgne, WB senior economist in the Philippines, said that the export and the corporate sectors are showing signs of recovery. Exports to developed countries like the United States and Germany have improved since August.

"While SMEs, especially those which are export-oriented, are still reeling from the crisis, the corporate sector focusing on the domestic market is showing improved profitability. With financial markets also on the rebound, banks are able to turn around losses experienced in the last quarter of 2008," said Le Borgne.

The property sector remained strong owing to the continuing demand for condominiums and houses from expatriate Filipinos as well as office spaces from the bourgeoning business process outsourcing industry.

Higher remittances, export rebound seen

MANILA, Philippines - Economic prospects seem rosier for the Philippines next year after a not-so-bad 2009, with resilient remittances and post-typhoon rebuilding efforts likely sustaining the momentum, according to New York-based think tank Global Source.

In an Oct. 27 country report titled �The Sun Also Rises,� the report also said the two leading candidates in the 2010 presidential elections based on the latest popularity surveys were acceptable to the business sector and could be expected to manage the economy competently.

The two are Senators Benigno �Noynoy� Aquino III of the Liberal Party and Manuel Villar of the Nacionalista Party.

The report, written by Filipino economists Romeo Bernardo and Margarita Gonzales, said the Philippines could still expect a growth in gross domestic product (GDP) of 1-1.5 percent this year on surprisingly robust remittances from overseas Filipinos. A faster GDP growth of 4 percent was projected for next year.

�Prospects look particularly promising for 2010 when the country will be led by a new president brought peacefully to power while the world economy gains strength. Such would usher in continued remittances, export recovery, and a honeymoon period with a new leader that could only improve the environment for investments,� the report said.

Global Source said the growth drivers could strengthen next year as overseas workers gain greater confidence with improvement in income prospects and especially with export recovery, additional activity from elections, and a potential honeymoon period of important economic sectors with a new president going through a smooth transfer of power.

�But tepid world recovery would still serve to limit the country�s growth even as the Asian region is slated to be the strongest rebounder after the global crisis,� it said.

The Philippine government continues to target a GDP performance at 0.8-1.8 percent and 2.6-3.6 percent this year and next, respectively.

�With calamity effects likely to be temporary and intentionally subdued, we expect headline inflation to average at around 3.2 percent this year and about 4.1 percent in 2010, though keeping in mind other supply-side risks particularly with oil prices on a rise as the global economy recovers,� the report said.

It noted that monetary authorities themselves were expecting inflation at 3 percent this year and about 3.4 percent in 2010.

Global Source said the inflation-targeting Bangko Sentral ng Pilipinas would likely begin raising policy rates as a �preemptive� measure only in the latter part of 2010 when the economy picks up speed and the output gap starts to narrow.

Key interest rates have been kept on hold since August after a monetary easing cycle that slashed key rates by a total of 200 basis points since December last year.

�The Philippine scenario does not look as bleak as one would expect after a great flood,� the report said.

�A robust current account was able to mask increased fiscal worries by allowing a healthy amount of foreign currency borrowing to occur in what appears to be another case of overseas Filipinos saving the day. This in a nutshell keeps financial markets in still quite good shape,� the report said.

On the race toward the 2010 elections, Global Source is expecting a closer match by May as other candidates begin to gain national exposure.

Remittances from Overseas Filipino Workers will continue to drive Philippine economic growth over the next 7 years at least, Development Bank of the Philippines (DBP) President and CEO Reynaldo G. David told the Association of Development Financing Institutions in Asia and the Pacific (ADFIAP) CEO Forum the other day at the Dusit Thani Hotel.

�In the future, migrant workers will be concentrated in the Middle East, Asia and countries whose immigration laws are very stringent. Sea-based workers will continue to grow,� he projected. However, �Remittances will not be the Philippines saving strength forever. As a major development financial institution, DBP is in a constant quest for long-term solutions so our migrant workers can come home where they belong.�

To date, cash transfers from 9 million Filipinos abroad account for 10 percent of the country�s economic output. Although many OFWs lost their jobs, remittances over the past 8 months totaled $11.3 billion, up 3.6% year-on-year, mostly from Filipinos in the United States, Canada, Saudi Arabia, United Arab Emirates, Japan, Malaysia, United Kingdom and Italy.

Already, the Bangko Sentral ng Pilipinas (BSP) revised its 2009 forecast, saying remittances will grow 4 percent, on the average, to $17.1 billion from last year�s $16.4 billion, indicating that the global turmoil had an insignificant bearing on the amount of money OFWs send in.

�Remittances may even grow faster in the next two months of the year as our mostly Christians workers send in more money for the Christmas season,� according to David. With the global economy on its way to recovery, remittances may even surge in the months ahead and DBP sees a more favorable outlook for remittances through end-2009.

While the last two typhoons took its toll on economic growth, strong overseas remittances continue to buoy up the economy. In fact, �We believe these natural disasters triggered incremental remittances. We are just awaiting the official remittance figures for September and October,� the DBP President noted.

MANILA, Philippines - The Philippine economy can expect a growth rate higher than previous expectations despite the damage from tropical storm �Ondoy,� which may in fact drive expansion of domestic output, according to an investment research unit of UBS.

UBS Securities Pte Ltd., which is part of the Swiss bank group, said recovery efforts would mean a boost to economic activity mainly through government spending.

Also, UBS Securities said in its latest report on the Philippines that the country could afford to incur a budget deficit at more than half the P250-billion government target for the year.

The study, penned by economist Edward Teather, said that while business confidence and regional data suggest there is more to come for the Philippines in terms of the recovery, the human calamity caused by Ondoy could disturb the growth path of the economy.

�However, while disrupted economic activity along with damage to corporate and household balance sheets are both human and economic negatives, the rebuilding effort�probably led by the public sector�could provide a temporary lift for economic growth in coming quarters,� Teather said.

�We retain our forecast for 4.6 percent growth in 2010, but edge up our 2009 real gross domestic product forecast to 1.3 percent (from 0.8 percent)�less than we would have done in the absence of Ondoy,� he added.

Teather said that in the wake of the storm, precautionary buying of basic goods and services could cause a lift to inflation despite government price controls.

He said that even then, the Bangko Sentral ng Pilipinas should see this as temporary and thus play down risks to long-term inflation expectations and keep monetary policy settings easy for now.

Further, Teather argued that while any extra public expense would come on top of an already sharp deterioration in government finances, the Philippines can sustainably run a wider budget deficit in the range of 4 percent to 5 percent of GDP without pushing the debt-to-GDP ratio higher in 2010 and beyond.

Finance Secretary Margarito B. Teves last week expressed commitment to keeping the deficit at P250 billion or 3.2 percent of the total output of goods and services within the country this year, partly due to concerns that the country�s debts already represent some 56 percent of GDP.

MANILA, Philippines - The Metrobank Group and the University of Asia and the Pacific (UA&P) are expecting a 3.5-percent increase in remittances this year despite the global economic slowdown.

In a report titled �The Market Call Capital Markets Research,� Metrobank�s First Metro Investment Corp.(FMIC) and UA&P said that strong remittances would help the Philippines register a gross domestic product (GDP) growth of 2.2 percent this year.

The study said that remittances from overseas Filipino workers (OFW) would likely increase by 3.5 percent, or about $574 million, to almost $17 billion this year from a record $16.4 billion last year.

The Bangko Sentral ng Pilipinas has revised upwards its projected growth in remittances to at least three percent from zero percent after inching up by 3.8 percent to $10 billion from January to July.

Data from the central bank showed that money sent home by Filipinos abroad posted its highest year-on-year growth of 9.3 percent in July to $1.5 billion on the back of sustained demand for Filipino manpower worldwide.

�Given the resiliency of OFW dollar remittances in the first seven months, highlighted by an impressive 9.3 percent jump in July, we are revising upward our forecast for the whole year to a positive 3.5 percent growth,� the report said.

�Although there had been lay-offs, demand for Filipino migrant workers continues to be sustained. Moreover, hiring agreements are presently taking effect. As such, the lay-offs were being offset by new jobs being taken up by our OFWs,� the study added.

Due to robust remittances that would continue to boost consumption, FMIC and UA&P see the country�s GDP expanding by at least two percent in the third quarter and 4.2 percent in the fourth quarter.

This would bring the full-year GDP growth to 2.2 percent or slightly lower than the earlier projection of 2.4 percent. The revised forecast was higher than the government�s GDP growth projection of between 0.8 percent and 1.8 percent this year.

The country�s GDP grew by one percent in the first half of the year from four percent after the country�s domestic output expanded by 1.5 percent in the second quarter and by 0.6 percent in the first quarter.

�Our outlook has mellowed only mildly. GDP growth in the third quarter is likely to barely exceed two percent. But we expect a more robust export demand and early election spending to boost GDP by 4.2 percent in the fourth quarter, and lead to a full-year average of 2.2 percent,� the study said.

FMIC and UA&P see inflation increasing to 0.7 percent in September, 1.5 percent in October, 2.4 percent in November, and 3.8 percent in December due to rising crude oil prices.

MANILA, Philippines - The peso again entered the 46-to-the-dollar territory yesterday, following through with its appreciation past the 47 level last Friday to close at 46.70 against the greenback, propped up by continued dollar inflows from overseas Filipinos and the general weakening of the dollar against Asian currencies.

Traders said overseas Filipinos have been sending more dollars to help relatives who have been severely affected by tropical storm Ondoy.

The peso opened at 47 against the dollar, with total volume hitting P977.3 million during yesterday�s trading.

The strengthening of the peso also comes after British bank Standard Chartered upgraded its economic growth outlook for the Philippines to 1.5 percent from the previous 0.7 percent.

Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. has said that dollar remittances from overseas Filipinos may grow more than three percent this year following the hefty dollar inflows that poured into the country in July.

The latest estimate is higher than the previous projection of a two to three percent growth for 2009 and the original forecast of a zero percent growth. In 2008, remittances hit $16.4 billion.

Remittances from overseas Filipinos rose to $1.5 billion in July from $1.4 billion in the same month last year, posting the highest year-on-year growth for 2009 at 9.3 percent, latest data from the BSP showed.

The July figures brought remittances in the first seven months of the year to $10 billion, up 3.8 percent from the year-ago level, data from the central bank also.

MANILA, Philippines - The Union Bank of Switzerland (UBS) has revised upward its 2009 economic growth forecast for the Philippines on the back of higher dollar remittances from overseas Filipino workers (OFWs) and a widening fiscal deficit which is expected to fuel economic activities in the remaining part of 2009.

The UBS has revised its gross domestic product (GDP) growth projection to 1.3 percent from 0.8 percent previously. The revised projection is within the government�s economic growth projection for 2009 of 0.8 percent to 1.8 percent. For 2010, the UBS retained its economic growth forecast of 4.6 percent.

In the second quarter of the year, the economy grew by 1.5 percent year-on-year, compared to the 0.4-percent growth registered in the first quarter.

Remittances from OFWs remained robust, climbing by 9.3 percent to $1.5 billion in July from $1.4 billion in the same period last year.

UBS said that while typhoon Ondoy has disrupted economic growth, the rebuilding efforts initiated by the government and the private sector would translate to economic activities in the remaining quarter of the year.

�While economic activity may be temporarily impacted by the tragic floods seen on the weekend of Sept. 26, the rebuilding effort will likely help the trend recovery in activity to continue in coming quarters. We retain our forecast for 4.6 percent growth in 2010, but edge up our 2009 real GDP forecast to 1.3 percent � less than we would have done in the absence of the typhoon Ondoy,� UBS said.

The Switzerland-based bank said that because of the need to pump-prime the economy after typhoon Ondoy, the government would likely incur a budget deficit of P300 billion this year or 3.9 percent of GDP. This is higher than the government�s revised deficit ceiling of P250 billion or 3.2 percent of GDP.

�So long as the National Government�s deficit spending does not drive up real interest rates too much relative to real GDP growth by competing with the private sector for the pool of savings, a modest primary deficit should be consistent with stable debt to GDP. And that in turn would be consistent with an overall deficit of four to five percent of GDP,� UBS said.

THE PESO IS EXPECTED TO HOVER IN THE 46-to-a-dollar territory this week, following through with its intra-day appreciation past the 47 level last Friday.

Analysts said the fact that the peso touched 46.99 to a dollar last Friday indicated that the local currency could hit a stronger level this week, citing the effects of the weakening of the greenback against Asian currencies.

After hitting an intra-day high of 46.99, the peso closed at 47.10 on Friday. Volume of trade amounted to $695.5 million.

Although Friday�s finish was still weaker than the previous day�s close 47.05, traders said the peso could again break into the 46 territory this week as some investors shy away from the greenback to place more money in perceivably riskier but higher-yielding investments.

Jonathan Ravelas, market strategist for Banco De Oro, said the peso could touch 46.80 to a dollar this week.

�The peso is simply benefiting from a weakening dollar. Because people believe that the global economy is slowly recovering from the crisis, they gain more appetite to invest in things like commodities and other instruments and move away from the dollar,� Ravelas said.

Meanwhile, other market analysts said some investors chose to move away from the dollar as the US economy recovers from the turmoil at a slow pace.

The US economy shrank 0.7 percent in the second quarter, although an improvement from the 6.4-percent contraction in the first quarter.

The Bangko Sentral ng Pilipinas said the peso might gain some strength in the coming months because of the resurgence of risk appetite of foreign investors and growing attractiveness of emerging economies like the Philippines.

BSP Deputy Governor Diwa Guinigundo said that once the global economy shows firmer signs of recovery from the turmoil, the Philippines and other emerging markets would benefit from higher inflows of foreign direct investments and foreign portfolio investments.

Given the resiliency shown by emerging economies amid the global crisis, he said more investors would be keen on investing in these markets.

A consequence of rising inflows of foreign investments would be the appreciation of the peso, Guinigundo said.

The BSP has adopted the policy of keeping a market-determined exchange rate. It intervenes in the foreign exchange market only in times of sharp and sudden appreciation or depreciation of the local currency, which disrupts budget planning by businesses, monetary officials said.

Standard Chartered bank, in a commentary, said it expected the peso to improve in the coming months as the domestic economy moves from the slowdown caused by the global turmoil.

�We are raising our short-term (forex) rating for the Philippine peso to �overweight� from �neutral.� We expect it to gradually catch up with other Asian currencies,� Standard Chartered said.

An �overweight� outlook reflects expectation that a currency would appreciate, while a �neutral� one indicates projection of minimal or sideways movement.

STANDARD CHARTERED BANK raised its economic growth forecast for the Philippines for this year and 2010, saying the domestic economy was benefiting from the unexpected rise in remittances and the stimulus efforts of the government.

For this year, StanChart expects the Philippine economy to grow by 1.5 percent, up from its original forecast of 0.7 percent.

For 2010, the international bank sees the country growing by 3.3 percent, faster than its original projection of 2.7 percent.

These projections are within the government�s growth targets of between 0.8 and 1.8 percent for this year and between 2.6 and 3.6 percent for next year.

�We have raised our forecasts for Philippine GDP (gross domestic product) growth due to stronger than expected overseas Filipino workers� remittances and the continued plans for strong fiscal pump-priming next year,� StanChart said in a paper on its outlook on the Philippines.

The bank expects remittances to grow by 6 percent this year from $16.4 billion last year.

It said it was expecting remittances to rise partly because the recession in the United States, where many Filipino workers were based, was already easing.

Remittances from Filipinos working offshore were earlier feared to contract this year in view of layoffs in recession-afflicted countries. However, money sent by Filipinos overseas continued to grow due to the rising demand for manpower in alternative labor markets.

The Bangko Sentral ng Pilipinas earlier reported that remittances in the first seven months of the year hit $9.97 billion, up 3.8 percent from year-ago level.

BSP Governor Amando Tetangco Jr. said the latest data proved that its own forecast of a flat growth for the full year was too conservative. The BSP is revising its projection and will likely announce its new target this month.

To counter the adverse impact of the slowdown in global demand for Philippine exports on the country�s overall economic output, the government allowed a much higher deficit spending this year.

It had set a budget ceiling of P250 billion this year, much higher than the actual deficit of only P68.1 billion last year.

The Department of Finance said the government would revise its budget deficit ceiling for next year and would likely set it at P233 billion.

StanChart said the Philippines� likely rebound from the economic slowdown would help attract foreign investments. As a consequence, it said, the peso would gain strength against currencies of trading partners.

MANILA, Philippines - The Bangko Sentral ng Pilipinas said the country�s foreign currency reserves was estimated to have breached the $40-billion mark last month to a new all-time high.

Despite the ongoing global economic turmoil, the BSP said the Philippines� gross international reserves (GIR) were expected to grow due largely to the steady increase in remittances.

The central bank said news that the worst of the turmoil was over and that the world was on its way toward a recovery also encouraged investors to move away from the sidelines and invest more. Rising foreign investments were also beefing up the country�s reserves, the central bank said.

Monetary officials said emerging markets like the Philippines, which showed relative resiliency during the crisis, were starting to attract foreign portfolio investments. Investors looking for money-making opportunities are considering developing economies that have weathered the global turmoil.

After delivering a speech during the 52nd anniversary celebration of the Social Security System yesterday, BSP Governor Amando Tetangco Jr. told reporters that the country�s GIR was not expected to have shrunk in August. In fact, he said GIR could have actually grown further.

As of end-July, the GIR stood at a record $39.9 billion, or enough to cover 6.9 months� worth of imports or better than the internationally accepted threshold level of three to four months.

The GIR, a measure of a country�s level of external liquidity, is the total amount of foreign currencies kept at and managed by the central bank. It determines a country�s ability to pay for imports and services and settle foreign currency-denominated debts.

The improving sentiment among foreign portfolio investors was also helping boost the country�s GIR. Central bank documents showed that in January to July, �hot money� registered a net inflow into the country of $265.09 million, a swing from a net outflow of $576.62 million in the same period last year.

The Philippines was 10th in the Asian Development Bank�s 2008 ranking of developing countries in Asia with the biggest reserves.

The list was led by China with $1.95 trillion. It was followed by Taiwan ($292 billion), India ($247 billion), South Korea ($200 billion), Hong Kong ($182 billion), Singapore ($174 billion), Thailand ($108 billion), Malaysia ($91 billion) and Indonesia ($49 billion).

THE BANGKO SENTRAL NG PILIPINAS reported that the outstanding consumer loans extended by banks as of end-June reached P398.6 billion, up 3.3 percent from the end-March level.

If compared with year-ago level, the end-June 2009 figure was 13.1 percent higher.

The amount covered loans extended by universal, commercial and thrift banks.

Consumer loans include those used for the purchase of real estate property, mostly residential and automobiles, as well as credit card receivables.

The BSP said real estate loans amounted to P164.8 billion as of end-June, up 2.8 percent from P160.38 billion as of end-March. The continued rise in real estate loans indicated sustained growth in demand for residential units, monetary officials said.

Credit card receivables of banks stood at P109.9 billion, up 3 percent from P106.8 billion quarter-on-quarter.

Officials said the rise in credit card loans extended by banks helped spur consumption in the second quarter.

Auto loans reached P86 billion as of end-June, up 5.5 percent from P81.6 billion as of the end of the first quarter.

The rise in car loans was consistent with the vehicle manufacturing industry�s projections that demand for new automobiles would rise this year despite the lingering crisis, which was earlier feared to dampen consumer demand.

Other consumer loans reached P37.68 billion, up 1.9 percent from P36.97 billion, the BSP said.

Earlier, BSP Governor Amando Tetangco Jr. said consumer spending, aided partly by loans from banks, helped boost the economy in the second quarter.

In the first quarter, personal consumption was anemic, resulting in a mere 0.6 percent gross domestic product growth.

During the first three months of the year, officials explained, many Filipino households, especially those dependent on remittances sent by a family members working overseas, spent less and saved more amid fears of layoffs offshore.

In the second quarter, however, households were more confident to spend in view of reports about the gradual recovery of the global economy from the crisis. Some employers offshore that laid off workers due to the crisis were starting to rehire their workers, officials said.

The BSP said remittances, a closely watched economic indicator, fuels demand for real estate, auto loans and other goods and services.

The National Economic and Development Authority (NEDA) is confident of a sustained economic growth beyond 2009 after the country�s gross domestic product posted a modest growth of 1.5 percent in the first half.

NEDA acting director general Augusto B. Santos said that the Philippines continues to be economically resilient and remains as one of the few economies enjoying positive GDP growth rates.

Santos noted that the Philippines has avoided a recession when its seasonally adjusted second quarter GDP grew by 2.4 percent from a revised -2.1 quarter-on-quarter GDP growth for the first quarter of 2009.

�Government and private sector hiring programs, flexible working arrangements, and the frontloading of infrastructure projects under the government�s Economic Resiliency Plan (ERP), all helped cushion the economy�s growth and employment from the global recession,� Santos said.

�The country is on track in achieving the high-end of the government annual growth target of 0.8-1.8 percent.�

With the coming election spending and the Filipino penchant to consume during the Christmas season, Santos said a 1.8 annual GDP growth is possible.

National Planning and Policy Staff Director Dennis Arroyo said that it is �possible to breach the high-end of the government target given the signs of an economic turnaround such as the growth in Philippine exports, the rise of the stock market, and the slowdown in inflation.�

Arroyo expects that the growth in the third quarter of 2009 would be better than the second quarter.

Consumer spending in the coming months is also seen to rise due to continued inflow of remittances as Overseas Filipino Workers (OFWs) return to work abroad as well as increases in retail trade beginning in December, earnings in tourism, and spending from the Business Process Outsourcing (BPO) industry workers.

The improvement in the second quarter personal consumption to 2.2 percent growth rate compared to the last quarter �seems to indicate the easing of the fear� in consumers, Arroyo said.

However, the risks such as the speculation in oil due to the �greenshoots� phenomenon and a probable drought towards the end of 2009 might slow down economic growth. To take advantage of the global economic rebound in 2010, the government has designed the REAP (Reloading for Economic Acceleration Plan).

THE PHILIPPINES DODGED RECESSION IN THE SECOND QUARTER to become one of few Asian economies to withstand the deepest global slump in decades, thanks to strong inflows of remittances and increased state spending, a Reuters poll shows.

Seven out of 12 economists forecast the economy grew by a seasonally adjusted 2 percent in the second quarter, a reversal of the previous quarter�s contraction of 2.3 percent.

On an annual basis, growth likely picked up to 0.6 percent in the second quarter, from 0.4 percent in the first quarter, the poll showed.

Standard Chartered Bank was the most pessimistic, saying the economy contracted by 0.5 percent year-on-year in the second quarter.

At the other end was Banco de Oro Universal Bank, which said growth from April to June should come in at 2.3. percent.

The National Economic and Development Authority said last week the economy likely bottomed out in the first half and should post stronger growth later this year when election-related spending starts and consumers shop ahead of the Christmas holidays.

Analysts said the data is unlikely to alter views that policy rates will remain on hold at a record low for the rest of the year, with the central bank focusing on the economy�s performance in the second half of 2009 to gauge the strength of the recovery.

Local stocks yesterday posted their biggest single-day gain this year as global risk appetite surged on expectations that the world was now coming out of the worst downturn seen since the Great Depression.

The main-share Philippine Stock Exchange index rallied 5.11 percent to close at 2,859, led by the property sector whose counter jumped 6.2 percent. All sub-sectors were up as P4.9 billion worth of shares changed hands as 97 advancers edged out 18 decliners and 46 unchanged stocks.

The counter for holding firms was up 5.4 percent so were the financial service as well as mining and oil sub-indices which rose 4 percent, 4.1 percent and 2.7 percent, respectively.

Index heavyweight PLDT accounted for the biggest volume of yesterday�s buying sprees while the following completed the roster of 10 most actively traded stocks; Meralco, Megaworld, Ayala Land, Alliance Global Group, Ayala Corp., Filinvest land, Metrobank, Bank of the Philippine Islands and SM investment Corp.

�Coming off a long weekend and looking toward another long weekend, the local stock market had its best day of the year. Investors came back to positive developments from the US and bought aggressively,� said Prince Anthony Yeung, and analyst at AB Capital Securities.

Eli Remolona, a global Filipino economist currently based in Hong Kong as chief representative of the banks for international settlements (BIS), yesterday said his personal view was that the global economy was on the mend given the various fiscal and monetary stimulus packages put in place by various governments.

�But the global financial system is still quite weak, which means the banks and financial institutions have to repair themselves and that means their contribution to the economy will be very weak and so the [global] economy will have to fix itself with the help of consumption by the people and households and trade,� he said.

Remolona, who had worked for the World Bank and the Federal Reserve Bank of New York, was in town to receive the BPInoy award given by the Ayalas� bank of the Philippine Islands each year to outstanding global Filipino achievers.

The economist said Asia was leading the way in terms of the stimulus package, particularly China and also noted that the Philippines was among the few countries that had so far managed to post a positive economic growth this year.

�It will be a U-shaped [global] recovery but the right said of the U is flatter than the left side of the U. In other words, recovery is there but it�s going to be rather weak until the financial systems can fix themselves� he said.

AB Capital�s Yeung said the optimism in the stock market yesterday was pent up given the shortened trading week last week.

Favorable comments from the chides of the US Federal Reserve and the European Central bank that suggested that the global economy was bottoming out cheered stock markets across the globe. The US Dow Jones Industrial index ended last week at its year-to-date high while both the NASDAQ and S&P 500 ended above crucial resistance levels. But Yeung said there was a growing sense of fear that the markets were hitting �overbought� levels.

There seems to be a lack of catalyst for the markets, both local and foreign, to move convincingly in either direction. The main catalysts for this week would be the 9second quarter GDP (gross domestic product) repots of the US and the Philippines,� Yeung said.

LOCAL BANKS HAVE STOPPED tightening their credit standards in the second quarter, encouraged by reports that the worst of the global economic turmoil was over.

This was according to the Bangko Sentral ng Pilipinas, which regularly monitors changes in the lending requirements imposed by banks on potential borrowers.

�Lending standards have become steady in the second quarter; there was no more tightening,� BSP Deputy Governor Diwa Guinigundo told reporters.

Reports that the worst of the global economic crisis was over injected confidence among banks to allow easier access of individuals and corporate entities to credit.

Developments related to bank-lending requirements in the second quarter were contrary to those in the previous quarters when banks tightened their credit standards, like asking for higher-value collateral from credit applicants and imposing more stringent documentary requirements.

The stiffer requirements were imposed following the onset of the global economic crunch, which banks feared could adversely affect the capability of borrowers to pay their debts.

The BSP, however, said the tightening of credit standards did not mean a lost of appetite among banks to lend. Bank lending continued to grow at a double-digit level, but the expansion came at a slower pace than that seen last year.

According to central bank documents, outstanding loans extended by commercial banks in the country amounted to P2.2 trillion as of end-June, up 11.1 percent from a year ago.

Growth in bank lending hovered beyond 20 percent last year.

Guinigundo said the move of banks to stop tightening credit standards was a welcome development, but he stressed that banks should contribute more to efforts at boosting the economy by accelerating lending.�It will benefit them [banks] in the end if they will lend more,� Guingundo said.

In its bid to encourage bank lending, the BSP has cut its key policy rates by 200 basis points from December last year to July. The overnight borrowing and lending rates of the BSP now stand at 4 and 6 percent.

MANILA, Philippines - Philippine stocks surged 5.11 percent higher yesterday fuelled by strong gains in the US and European markets as optimism mounted that the global economy is getting back on its feet after the worst recession in decades.

At the Philippine Stock Exchange (PSE), the 30-company composite index surged 139 points to close at 2,859.18 while the all-shares index jumped 3.79 percent to 1,810.36.

Yesterday�s gain was the biggest single day increase since Jan 5, 2009.

�Foreign investors are turning bullish on the Philippines given expectations that there will be growth in the second quarter and that economic prospects are better in the second half of the year,� said Astro del Castillo, managing director of First Grade Holdings Inc.

Across Asia, the upbeat start to the week came after US stocks rose to fresh 2009 highs on Wall Street Friday in response to bright housing data and Federal Reserve chief Ben Bernanke�s comments that global recovery prospects ��appear good.�� recent sharp falls sparked by fears of overheating calmed investors� nerves across the region.

Analysts said investors take their cue from Wall Street where the Dow Jones Industrial Average surged 1.67 percent on Friday to finish at 9,505.96, posting a fourth straight daily gain.

Yesterday�s trading at the PSE produced 97 gainers against 18 losers and 46 that were unchanged.

At its current level, analysts said the local index looks poised to make another assault at this year�s high. Buying was broad based as 30 of the 32 index stocks were up with the others unchanged. Turnover amounted to 2.42 billion shares worth P4.25 billion.

�We are playing catch up. We were closed on Friday,� so the Philippine market is only reacting to the run-up on Wall Street on Monday, said Jose Vistan of AB Capital Securities Inc.

�The Dow Jones (index) made a new 2009 high,� on Friday. �That strong run-up pulled Asia up as well,�� Vistan said.

Meanwhile, oil prices rose in Asian trade bolstered by improved investor sentiment amid widespread hopes for a global economic recovery, analysts said.

�Sentiment remains broadly supportive of commodities including oil in anticipation of an economic recovery,� said David Moore, a Sydney-based commodity strategist with the Commonwealth Bank of Australia.

New York crude prices scaled new 2009 highs last week, rising above $74 Friday on a weak greenback, an improved US macro-economic outlook and positive eurozone data.

MANILA, Philippines - The Bank of the Philippine Islands (BPI) is optimistic that the remittance business in the Philippines will expand on the higher end of the single-digit growth this year.

The Bangko Sentral ng Pilipinas (BSP) said that its conservative forecast is flat growth to an optimistic view of between two to three percent this year. It registered total remittances of $16.4 billion last year.

�In fact, we even see the remittance business for BPI growing by over 10 percent this year,� Raul Marcelo de Leon Dimayuga, president of BPI Direct Savings Bank.

Total remittances in the first semester of 2009 hit $8.5 billion for a 2.9 percent increase for previous levels. In the month of June alone, it grew by 3.3 percent to $1.5 billion.

Traditionally, the second quarter reflects weaker remittances and peaks at the last quarter.

�The continued growth of remittance flows since January this year accompanied by emerging sings of improving global economic conditions have affirmed the positive outlook for steady remittance for 2009,� Amando M. Tetangco Jr., Governor of the Bangko Sentral ng Pilipinas (BSP), said.

To be able to increase its scope, BPI increased its presence in the Middle East market through correspondent banking, remittance companies and international money transfer firms.

It was timely since remittances from the United States grew albeit in an almost snails pace.

In contrast, deployment of Filipinos steadily increased including Qatar, Chad, Algeria, Malta and Saudi Arabia.

Moreover, the Philippine Overseas Employment Authority (POEA) reported that the employment of additional production workers in Taiwan was facilitated starting August through the special hiring program for Taiwan (SHPT) in cooperation with the Manila Economic and Cultural Office (MECO).

Sea-based deployment remains strong as Filipino seafarers have been retained despite the large number of dry-docked cargo vessels due to the economic crisis.

BPI reportedly controls 60 percent of the remittance business among sea-based Filipinos.

The BSP reports that remittances from sea-based Filipinos grew by 4.5 percent while it expanded by 2.5 percent for land-based Filipinos.

MANILA, Philippines - An acclaimed economist of the Bank for International Settlements (BIS) is optimistic that the Philippine economy will make a strong recovery in the second semester of 2009.

Dr. Eli Remolona, BIS chief representative for the Asia and Pacific region explained that the Philippines was never in a prolonged state of economic downturn.

�Hopefully, the economy is in the upside of economic downturn,� Remolona said.

The BIS is composed of central banks worldwide, including the Bangko Sentral ng Pilipinas (BSP). It sets international standards for monetary policy as well as banking standards.

Asia is leading the world in recovering from the global credit crisis, which started in the United States. However, the global economy is still believed with the bottomline of the economic disaster although it is generally believed to start its upward march next year.

Remolona is in the Philippines to receive an award extended by the Bank of the Philippine Islands (BPI) to recognize Filipinos gaining extraordinary achievements.

He is considered to be the most prominent Filipino economist in the international monetary and financial policy circles.

The Philippine economy grew last year but recorded an unexpected 0.4 percent growth in the first quarter of 2009. It is widely believed to grow by a little over one percent in the second quarter.

The national government�s forecast growth for the whole of 2009 was placed at 0.8 to 1.8 percent. Government economic planners said that revisions may be made anew depending on the second quarter and first semester performance.

Majority of Philippine growth forecasts range from one to 1.5 percent this year, and from two to three percent in 2010.

Other awardees of the BPInoy program are Anita Magsaysay-Ho in the field of international visual arts, and Cristeta Pasia-Comerford, outstanding achievements I the culinary arts.

Ho is often described as the �Female Amorsolo� and is recognized in both domestic and international circles. Pasia-Comerford is the executive chef of the White House, the only female and the only Asian to hold the post in US history.

A HONG Kong-based Filipino banker said the pace of the Philippines� economic recovery is on track, since it is one of three countries not directly affected by the collapse of the global financial system.

�The Philippine economy never quite got into the �V�- or �U�-shaped pattern that clutched the countries directly hit by the crisis,� Eli Remolona of the Bank for International Settlements (BIS) said on Monday.

Remolona, BIS chief representative, spoke to reporters after receiving an award from Bank of the Philippine Islands (BPI) as one of three highly exceptional Filipinos overseas.

He explained that the global economy is on a �U�-shaped pattern of recovery after the United States� housing industry collapsed from unsecured debts and rolled over outside its borders.

Remolona said, however, the recovery on the right side of the �U� is flatter, signaling weakness.

�The Philippines is on the good part of the upside of this �U�,� he noted, citing that the country was affected only because of ROP bonds. �But this is also marginal.�

BPI executive Raul Dimayuga agreed, saying he sees the recovery more of the shape of a hockey stick, with recovery slow and may take a longer time.

Dimayuga, BPI overseas banking and channel services group senior vice president, said continuous remittance of overseas Filipino workers would ensure that the Philippines remain on track with its recovery.

The National Economic and Development Authority has stuck to its forecast growth range of 0.8 percent to 1.8 percent in the country�s gross domestic product for this year.

However, low consumer spending remains an uneasy factor shadowing chances of the economy hitting this target.

�But we�re resilient as a people and as a nation. Despite the hardships, we have this ability to take everything in stride,� Remolona said.

He noted, however, that the shifts in leadership positions next year may affect the pace of recovery.

Remolona is one of the 2009 BPInoy awardees, recognized for his outstanding achievements in the field of banking and economics.

EASILY 10 percent is the growth rate expected by the Bank of the Philippine Islands (BPI) this year, mainly because of money sent by Filipinos in the United States and Europe, an executive told reporters on Monday.

This, despite its weak foothold in the Middle East, which Raul Dimayuga, BPI overseas banking and channel services group senior vice president, said is another growth area the country�s third-largest bank by assets is muscling in on.

�We�re strong in the US and Europe but have not been as strong in the Middle East, where we�re pouring resources in for the past months,� Dimayuga said on the sidelines of a press conference for the 2009 BPInoy Awards.

On its fourth year, the bank recognizes Filipinos overseas deemed exceptional in their profession while working abroad. This year the bank honored White House executive chef Cristeta Pasia-Comerford, Chief Representative for Asia and the Pacific of the Bank for International Settlements Eli Remolona, and artist Anita Magsaysay-Ho.

Dimayuga, however, acknowledged stiff competition will come from banks with remittance services like Al-Rajhi Bank and Saudi American Bank in the Kingdom of Saudi Arabia. Other money-transfer organizations like Western Union and TeleMoney also operate in that country.

According to a World Bank Group web site, Saudi Arabia-Philippines is one of the least costly corridors for remittances, with 26 Saudi rial as the total average fee last year. �We�ve sent a team there to study the market and the possibility of a tie-up,� he added.

Dimayuga said overseas Filipinos remain the driver of the bank�s growth, referring to the 22-percent rate it posted last year. He said roughly $5 billion of money by overseas Filipinos contributed to this growth.

�That�s why we�re very bullish since we�ve not seen a drop in remittances even though it�s been predicted in view of the financial crisis,� Dimayuga said, noting that the crisis pressed Filipinos to send more but �less often� before the crisis. �We noticed that that made us different from migrants of other nationalities. Nagsasakripisyo ang mga Pinoy doon para merong maipadala. [Filipinos further tightened their belts just to send money home.]�

He added that BPI also hasn�t seen a drop in remittances from sea-based workers since �we have seen a drop in trade ships that dried up, and deployment has increased.�

Still, Dimayuga said BPI expects their second-quarter performance to be a �slowdown.� �This is normal even in terms of industry average,� Dimayuga said, adding that BPI expects the banking industry�s remittance business �will continue to grow at least at single-digit levels.� BPI, partly owned by DBS Bank of Singapore, posted a 36.8-percent drop in net income last year to P6.6 billion, from P10 billion in the previous year.

BPI president Aurelio Montinola III was quoted in a BusinessMirror report as saying he expects the bank�s full-year net income is likely to be bigger than last year but less than what it posted in 2007.

MANILA, Philippines - Millions of Filipinos working overseas sent home a record high $1.5 billion in June, up 3.3 percent from last year, allaying fears that remittances will dry up amid the global slowdown.

The June data brought total remittances for the first half of the year to $8.5 billion, up 2.9 percent from a year ago, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The June figure raises hopes remittances for the full year could top the previous record of $16.4 billion set in 2008.

�The continued growth of remittance flows since January this year accompanied by emerging signs of improving global economic conditions have affirmed the positive outlook for steady remittances for 2009,� BSP Governor Amando M. Tetangco Jr. said yesterday.

He said that sustained foreign demand for highly-skilled and professional Filipino workers combined with wider access of overseas Filipinos and their beneficiaries to a broad array of financial products and services offered by banks and other financial institutions have been the driving factors behind the sustained growth in remittances.

The government expects deployment of Filipino workers abroad to be steady in the months ahead given the employment arrangements between the Philippines and host countries such as Qatar, Saudi Arabia, Canada, Australia and South Korea.

Apart from the prospective recruitment of about 4,000 Filipino medical workers in Libya, the Tripoli-based Philippine Overseas Labor Office is also exploring employment opportunities for OFWs in non-traditional markets such as Algeria, Chad, Malta, and Morocco, particularly in the hotel, oil and gas, and technical services sectors.

Furthermore, the Philippine Overseas Employment Administration (POEA) reported that the employment of additional production workers in Taiwan will be facilitated starting August this year through the special hiring program for Taiwan (SHPT) in cooperation with the Manila Economic and Cultural Office (MECO).

The government�s strong support for overseas Filipino workers in crisis-affected countries has also resulted in the deceleration in the OFWs displacement rate.

The BSP also said that the continued expansion of bank and non-bank service providers� of their international and domestic market coverage also helped sustain the inflow of remittances.

The enhancement of their operations overseas and the introduction of new products and services have contributed significantly in addressing the remittance needs of overseas Filipinos and their beneficiaries, the BSP said.

For the period January to June 2009, the major sources of remittances were the United States, Canada, Saudi Arabia, United Kingdom, Japan, Singapore, United Arab Emirates, Italy, and Germany.

The World Bank had earlier projected a four percent drop in remittances this year but Tetangco said that signs of a global economic recovery �affirmed the positive outlook for steady remittances for 2009.� � With AP - By Iris C. Gonzales (Philstar News Service, www.philstar.com)

MANILA, Philippines - Moody�s Investors Service upgraded the Philippines� sovereign ratings, indicating its optimism that the country�s economy would remain resilient despite the global slowdown.

The upgrade was due to the �relatively high degree of resiliency exhibited by both the country's financial system and external payments position in face of the global financial and economic crises."

The ratings agency raised the Philippines� foreign and local currency government ratings to Ba3 from B1 despite a fiscal gap that surged to more than eight times during the first six months of the year.

The country ceiling for foreign currency bonds was also promoted to Ba1 from Ba3 after its assessment indicated a lower risk of an external payments moratorium.

Improvement in the country's long-term fiscal outlook is expected to be brought about by �more progress in shoring up government revenues, both through tightened administration and the introduction of new tax measures, several of which are pending before Congress," Moody's senior vice president Tom Byrne said.

The last rating action on Philippines was taken last February when Moody's affirmed the positive outlook on the government of the Philippines' B1 rating.

Although it recognized the widening budget deficit, Moody�s believed this can be financed from domestic and foreign funding sources.

The Philippines was able to �exploit the re-opening of global credit markets this year in its effort to minimize both a crowding-out of the domestic markets and a rise in government bond yields," the ratings agency said.

"At the same time, Moody's notes that pressures have risen on the budget and are more severe than had been originally expected this year by the government," Byrne said.

However, Moody�s warned downward pressure on the rating would come from the country�s inability to improve government finances as the global economy recovers or from a structural weakening in the balance of payments.

It cites exports of manufactures and services along with inflows of remittances as key concerns.

For his part, Finance Secretary Margarito B. Teves said the upgrade �affirms our sound response to the global financial crisis."

�The credit rating action becomes more significant as this was done after more than four years with the Philippines rated at B1 since February 2005 and at a time when the world economy is experiencing probably its worst crisis in global history," he said in a text message.

�The credit ratings upgrade clearly shows confidence in the resiliency of the Philippine economy which was earned through formulation and implementation of economic and fiscal reforms early on," he added.

The government already incurred half of its P250 billion target during the first semester at P153.4 billion even if it spent below the P736.5 billion-target at P699.1 billion as it failed to meet the P581.4-billion revenue goals.

�The Philippines' larger budget deficit is mainly a result of the collapse in economic activity, a pattern that is evident in other regional and global economies," Moody�s said in a statement.

The ratings agency added that it expects �economic growth will be gradually restored and, along with that, some pick-up in the government's fiscal revenue performance will help contain the abnormally large deficit."

Moody's cited a stable peso is �crucial" for keeping in check budgetary debt service payments and reflecting the �resiliency of the balance-of-payments to the global crisis."

Lower inflation � which has been kept within the Bangko Sentral ng Pilipinas� 2.5 t 4.5 percent estimate � �should help ease pressure on the exchange rate this year," Byrne said.

The low inflation environment would be able to provide �the central bank with scope to maintain an accommodative monetary policy to cushion the effects of the global recession," Byrne said.

Byrne emphasized policy prudence and additional fiscal reform along with continued improvement in the investment environment �to place the economy on a path of a strong, sustainable growth."

"For the Philippines' rating to move upwards, Moody's will assess prospects for the continued resiliency of the country's balance of payments, the health of the financial system, and progress towards the achievement of the new, fiscal consolidation goal by 2013," he said.

MANILA, Philippines - Remittances from overseas Filipino workers (OFWs) would continue to grow this year as the Arroyo administration pushed for bilateral agreements for the deployment of more workers abroad.

The consensus projection made by private analysts since the beginning of the year indicated that remittances are generally expected to decline by as much as 20 percent this year as the global economy struggle to prevent job losses.

The government expects remittances to only match last year�s inflow of $16.4 billion and central bank officials based its balance of payments projections on this assumption.

According to the latest Market Call Research of First Metro Investment Corp. and the University of Asia and the Pacific, however, they expect remittances to be sustainable despite the lingering global economic crisis.

Remittances actually continued to grow, albeit slowly, rising by 2.2 percent in April, slightly lower than 3.1 percent in March.

�Even so, it can also be observed that OFW remittances for the first four months of the year now stands at $5.5 billion, up by 2.6 percent from last year�s levels,� the report noted.

Although remittances rose by 2.2 percent, the report said inflows were steady and despite the minimal growth rate, it was still on track. �It is defying consensus that OFW remittances will register significant negative growth this year,� the report said.

�Sustained demand for our migrant workers in different countries continues to help keep up these inflows of OFW remittances,� Market Call said.

�Moreover, with the government�s employment deals with several countries in need of our workers � the risks from the continuing global economic recession affecting the remittances are being tempered,� the report added.

The research report cited the Japan-Philippines Economic Partnership (JPEPA) which led to the deployment of an additional 273 health workers to Japan. More importantly, the initial adverse trends in labor deployment have also shifted.

�Even the rise in retrenchments of OFWs has abated,� the report said.

In peso terms, the Market Call report said the small 2.2-percent growth of OFW remittances in April translated to a huge 17.9 percent growth. However this rate was below the 20-percent mark, indicating a slowdown.

The Market Call Report said the slowdown resulted not only from the deceleration in the growth of remittances in dollar terms but also from the half-percent appreciation of the peso in March to April.

However, even central bank officials were not willing to call it either way, especially since there are underlying indications that remittance inflows could really decline for the first time in history.

Data from the Bangko Sentral ng Pilipinas (BSP) indicated that remittances from the US declined by 10 percent in the first four months of the year and if this continued for the rest of the year, total remittances could post the first decline since the country started sending workers abroad.

From January to April, remittances from the US reached only $2.286 billion, accounting for nearly half of the $5.498-billion total remittances for the period this year.

BSP data indicated that the four-month level was 10.43 percent lower than the $2.552-billion level posted over the same period in 2008, with the largest decline recorded in sea-based remittances which dropped by 16.15 percent.

Out of the total remittances coming from the US, inflows from sea-based workers accounted for $635.83 million while land-based workers accounted for $1.917 billion.

The BSP has been careful about breaking down remittances that come from the US since these also include inflows that only pass through the US financial system but do not actually originate from US-located Filipinos.

A clearer indicator, according to the BSP data, were remittances that came from land-based workers which presumably represented workers located in the US as well as immigrants.

THE impact of the global financial crisis on the Philippine economy will likely cut the country�s gross domestic product (GDP) growth to 2.4 percent in 2009, according to an independent analysis released by First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) Capital Markets Research.

However, this was still higher than the latest projection of the interagency Development Budget Coordination Committee (DBCC), which revised the country�s full-year growth projections downward. The DBCC now sees GDP to be within a range of 0.8 percent to 1.8 percent in 2009.

Nonetheless, the FMIC-UA&P Capital Markets Research group said the projection is lower than the 3.8-percent GDP growth posted in 2008. This was based on the latest data revision of the National Statistical Coordination Board (NSCB) released in May.

The group also maintained a �no recession� scenario for 2009, and even said a 1.5-percent GDP growth is possible at the end of the first half of the year, which would signal a �bottoming out� of the Philippine economy.

�Taking off from the basic trends so far and seeing a weak recovery in the United States, Europe and Japan, but robust growth in China, we expect the economy to bottom out in the first half of the year [and pick up] to 2.5 percent to 3.5 percent GDP growth in the second half; on average, the year should slow down to 2.4 percent from 3.8 percent in 2008,� the FMIC-UA&P Capital Markets Research group said in the June 2009 edition of The Market Call.

The group also sees headline inflation rate in the Philippines averaging 3.3 percent this year and increasing to 4.2 percent in 2010. This will be due largely to higher crude-oil prices.

The FMIC-UA&P Capital Markets Research group also expects inflation to go below 1 percent in July and August. However, inflation is expected to hit 4 percent in December.

Meanwhile, interest rates are expected to remain low since the 91-day T-bill rates are seen to slow down to a low of 3.5 percent by August and inch up to 4 percent by year-end.

�(The) benchmark 10-year T-bonds should follow a similar pattern, dropping to a moderately low of 7.2 percent by September and flatten toward year-end, a slight downward bias. The third-quarter yields do not go down as fast as the headline inflation rate and the likely rate cut, because of larger fundraising during the quarter,� the group said.

Labor and employment

The increase in employment in the April round of the Labor Force Survey, released in the second week of June, came as a surprise, according to the FMIC-UA&P Capital Markets Research group.

Considering the severity of the global economic recession, this is considered a positive development and would be a good sign that a recession will not be possible in the near term.

The group said despite the fact that there was an increase in the number of those who worked less than 40 hours per week, this only reflected the shift that businesses needed to make to avoid laying off employees.

Filipinos who worked less than 40 hours a week increased to 41 percent of total employment, higher than the 35.6 percent in 2008.

�We should consider that the 1-million decline in those working at least 40 hours per week moved to the lower category of falling below the benchmark time. Netting this out from 2.4 million still gives 1.4 million new part-time employees. Even in the unlikely assumption that these only worked 50 percent of the time, the net increase in employment would still be some 700,000, or 2.2-percent increase for a year. That is still above the population growth of anywhere between 2.0 to 2.2 percent,� the group added.

Weaker peso

The group sees the peso further depreciating in the second half of 2009, mainly due to slower overseas Filipino worker (OFW) remittances and negative double-digit growth, costlier oil imports and a higher fiscal deficit.

The group sees the peso hitting P48.11 in July, P48.28 in August, and P48.51 in September. The group said the peso has been trading at around P47 to P48 for the most of mid-May to June, largely a fallout of the crisis in the US economy and other international markets.

�It finally broke the 48-per-dollar mark when the government revised its growth forecast for 2009 from 3.1 percent to 4.1 percent to just 0.8 percent to 1.8 percent. The government�s raising of the deficit ceiling from P199.2 billion to P250 billion also contributed to the weakening of the peso against the dollar. This projected budget shortfall of 3.2 percent of GDP, together with a rally in the greenback, continues to weaken the peso,� the group said.

Another major factor for the depreciation of the peso is the slow increase in OFW remittances, largely because the peak months of OFW remittances have passed. A depreciation in the peso, the group said, is needed to boost remittances.

�Given that we are now past the months with high OFW remittances, we do not expect dollar remittances to post large growth rates. Nevertheless, we should still expect positive growth given the sustained deployment of migrant workers to different countries,� the group said.

THE Philippines has joined the ranks of the world�s emerging information-technology (IT) and information technology-enabled services (ITES) players which are slowly catching up with India, the world leader in both industries.

This is the assessment of the World Bank, which, in a report titled �Extending Reach and Increasing Impact� in its publication Information and Communications for Development 2009 listed the Philippines, China and Mexico among the world�s emerging IT and ITES leaders.

IT services include hardware and software maintenance, network administration and system integration, help-desk services, application development and consulting, as well as activities in engineering, such as mechanical design, production and software engineering.

ITES are services that can be delivered remotely using telecommunications networks. These include services for industries like banking, insurance and telecommunications, as well as functions that exist across industries such as human-resources management, finance, administration and marketing accounta.

�Developing countries have been very successful in IT services and ITES. Undoubtedly, India is the global leader in both industries. However, China, Mexico and the Philippines are also emerging as potential players in this space,� the study stated.

The World Bank said the global distribution of offshore IT service markets showed the Philippines already accounted for 1 percent of the market. In IT services India accounted for 54 percent, followed by Canada with 29 percent; Ireland, 8 percent; China and Central and Eastern Europe, tied at 3 percent; and other sources, 2 percent.

In terms of the global distribution of offshore ITES markets, the World Bank study showed the Philippines accounts for the third-biggest market share at 15 percent. India accounted for the biggest share with 37 percent, followed by Canada with 27 percent.

ITES markets that trailed the Philippines were Ireland and Mexico with a market share of 5 percent each, Central and Eastern Europe with 4 percent, China with 2 percent, and other sources, 5 percent.

The same study said the Philippines is now considered the leader in the East-Asia and Pacific region, accounting for as much as 56 percent of all Information and communications technology (ICT) goods exports.

Other economies in the East Asia and Pacific also considered leaders in ICT goods exports are Singapore which accounted for 46 percent; Malaysia with 45 percent; Hong Kong, China, 42 percent; and China, 31 percent.

The World Bank said the expansion of IT services and ITES creates significant economic and social benefits, especially for developing countries like India and the Philippines.

India, the World Bank said, exported more than $40 billion worth of IT services and ITES in 2007. This represented one quarter of the country�s total exports and nearly half of its service exports.

The study cited data from the Business Processing Association of the Philippines (BPAP) that IT services and ITES employed 345,000 people as of mid-2008 and are projected to directly employ close to 1 million people by the end of 2010.

�Employment of this scale means that the sector would account for 27 percent of all new jobs created in the Philippines by 2010� the bank said.

Another important positive impact of the growth of IT services and ITES is on the status of women. The study said that in the Philippines, women account for 65 percent of the total professional and technical workers in IT services and ITES.

In India, women make up 30 percent of the IT services and ITES workforce�a much higher rate of female participation than in the services sector in general�and this share is expected to grow to 45 percent by 2010.

�More than half of call-center employees are women. In both countries, women fill a greater number of high-paying jobs in IT services and ITES than in most other sectors of the economy,� the World Bank said.

One of the advantages of the Philippines, according to the World Bank, is an American-based approach in education. This not only refers to a bilingual education system but in specific areas of study that are crucial in delivering IT services and ITES.

Universities in the Philippines, the bank said, offer courses in finance and accounting modeled after the US� Generally Accepted Accounting Principles (GAAP). This has made the Philippines a natural choice for US banks and financial institutions seeking to offshore portions of their operations.

�Developing globally benchmarked skills in partnership with leading standards organizations helps not only maintain a certain level of quality, but also align skills with industry requirements,� the bank stressed.

Services growing globally

The services sector is growing globally�it already accounts for 70 percent of employment and 73 percent of gross domestic product (GDP) in developed countries and for 35 percent of employment and 51 percent of GDP in developing countries.

The study said IT services, a component of the services sector, represents a $325-billion annual potential market, according to McKinsey & Co. estimates.

As for ITES, estimates of the size of the market varies. The bank said analysis by McKinsey & Co. suggested that the annual potential market for ITES was $150 billion in 2007.

However, the bank said a Gartner Research in 2008 saw the global market growing from $171 billion in 2008 to $239 billion in 2012. There are more optimistic estimates, the bank said. This included the one from Nasscom-Everest in 2008, which suggested that the global ITES market will be worth $700 billion to $800 billion by 2012.

MANILA, Philippines � Overseas Filipino workers (OFWs) have been known to favor saving portions of their earnings but lately, the central bank has noted more of them have also begun making investments.

Every year, about $16 billion worth of foreign exchange is sent home by Filipinos working abroad and through the decades, the Bangko Sentral ng Pilipinas (BSP) said these inflows have supported private spending.

Consumer spending, according to BSP deputy governor Diwa Guinigundo, accounted for over 60 percent of the country�s economic production, making overseas workers the strongest economic drivers.

But Guinigundo said overseas Filipinos have only recently begun to develop the financial maturity for strategic spending � apportioning their earnings to consumption, savings and investments.

In the latest Consumer Expectations Survey conducted by the BSP, it was shown that investments made by families of overseas Filipinos have increased significantly in the second quarter of the year.

On the whole, the survey results indicated that OFW households utilized their remittances primarily for food, education, medical expenses, debt payments, and savings in the second quarter of the year.v Out of the OFW households surveyed, the quarterly survey indicated that 96.2 percent of these households spent part of their remittances for food and other household needs.

On the other hand, 68.2 percent of the OFW households used their remittances for education expenses, and more than half (51.1 percent) allotted remittances for debt payments.

The percentage of OFW households that utilized remittances to purchase consumer durables and motor vehicles increased to 25.9 percent and seven percent, respectively.

Meanwhile, the survey noted a broadly steady percentage of OFW households at 10.8 percent (from 11.2 percent in the previous quarter) allocating part of their remittances to amortization or full payment for houses purchased.

The percentage of households that allotted portions of remittances to savings dropped slightly to 38.3 percent (from 40.0 percent in the first quarter) but the survey showed this was not necessarily bad news.

According to the survey, the percentage that devoted a part of the remittances to investment increased appreciably to 8.3 percent in the second quarter from 5.9 percent in the first quarter.

Guinigundo explained that savings and investments increase the pool of resources available to both households and corporate borrowers for their credit needs. �That helps sustain economic activity,� he said.

Guinigundo pointed out that the country�s savings rate was much lower compared to other countries in the region although he said the national savings rate also included public savings.

�Public savings in turn depend on the government�s ability to collect taxes and improve its fiscal position,� Guinigundo said. �All other things considered, there is further scope for higher level of savings.�

The BSP, however, is wary of encouraging savings at a time when the economy would need a sustained increase in spending to support activities that would cushion the impact of the global slowdown.

�Having the scope for higher savings does not mean of course that we should discourage consumption expenditure in the economy,� Guinigundo said. �Consumption sustains higher level of economic activity.�

Guinigundo added consumption expenditure could also be supported by higher level of savings and investment that in the future would give the consumer more and higher stream of future income.

According to the BSP, the shift was likely the result of growing pessimism over the country�s economic prospects which compelled families to save and invest rather than spend on consumables.

MANILA, Philippines�The perception that the worst of the global economic turmoil has passed appears to have revived appetite for portfolio investments, with the Philippines registering a net inflow of foreign �hot money� in May, reversing the flight of portfolio capital reported the previous month.

According to the Bangko Sentral ng Pilipinas (BSP), $978 million worth of foreign portfolio investments flowed into the country in May, offsetting the $480 million that was funneled out in the same month.

The resulting net inflow of $498 million in May was a turnaround from the $276 million worth of net outflow seen in April.

The latest net amount of foreign portfolio investments was also a reverse of the $173.8 million in net outflow posted in May last year.

The country�s performance in attracting portfolio investments in May brought the total net inflow of foreign hot money in the first five months of the year to $276 million�a swing from the net outflow of $461 million in the same period last year.

�On the global front, confidence in the world economy rose as job losses in the United States continued to slow down and global production improved, reinforcing the growing perception that the crisis has bottomed out,� BSP Governor Amando Tetangco Jr.

Most analysts believe that the global economy�s recovery from the existing turmoil, described as the worst crisis since the Great Depression, is likely to be slow.

But according to Tetangco, the perception that the worst of the crisis has passed seems to have prompted some portfolio investors to start investing again.

Emerging economies like the Philippines are benefiting from the renewed confidence of portfolio investors, he said.

The central bank reported that 91 percent of gross inflows of hot money in May were placed in publicly listed companies, while the balance was invested in peso-denominated government securities. On the other hand, the gross outflow was mostly those withdrawn from bank deposits.

Monetary authorities said that if the revitalized confidence of foreign portfolio investors were to be sustained, the Philippine economy could maintain a surplus in its balance of payments (BOP). They said the Philippines so far found no need to borrow just to maintain a healthy level of external liquidity.

The central bank has projected that the country�s BOP for the year will likely register a surplus of $700 million.

BOP, a record of the country�s commercial transactions with the rest of the world, is the difference between inflows and outflows of foreign currencies to and from the economy. A surplus in the BOP increases the country�s total reserves of foreign currencies

MANILA, Philippines � The Joint Foreign Chambers of the Philippines (JFC) is not expecting the economy to slip into a recession this year, thanks to the country�s strong remittance inflows and revenues from the information technology (IT) services sector.

In a report released yesterday, the seven-member chamber said money sent home by overseas Filipino workers (OFW) and revenues from the IT-enabled services sector will support the continued growth of domestic consumption, allowing the Philippines to show positive gross domestic product (GDP) growth in 2009.

�There is a chance of mild recession should global recovery be slow and remittance and service revenue flows deteriorate more than expected. But this seems unlikely,� the report said.

�The archipelago is the leader in East Asia in the deployment of overseas workers and in the IT-enabled services sector,� it added. Last month, consulting firm Ovum Plc. said government initiatives for technology adoption will drive the growth of the country�s IT sector.

OFW remittances hit a record $1.47 billion in March from $1.3 billion recorded in the previous month. Its growth rate, however, slowed to 3.04 percent as traditionally strong remittance sources, such as the United States and the Middle East, contracted or were flat.

For the full year, the Bangko Sentral ng Pilipinas (BSP) is expecting a flat growth in remittances, while the International Monetary Fund (IMF) projected a 7.1-percent decline. However, JFC said the growth of remittance inflows remain positive for the first three months of the year at 2.6 percent.

�We expect remittances to return gradually over several years to 2008 volumes and to grow in rough proportion to global economic recovery,� JFC said. Last year, remittances increased 14 percent to $16.4 billion, accounting for 10 percent of GDP.

Meanwhile, JFC said the upcoming national elections will also boost the country�s GDP by less than one percent.

�Election spending should have a booster shot effect on GDP. But any recurrence of serious political intability could be a negative tipping point. Such risks require vigilance and avoidance of complacency,� the report said.

JFC�s position in the report remain unchanged even as the National Statistics Coordination Board (NSCB) reported a 0.4-percent GDP growth for the first three months of the year, the lowest since the Asian financial crisis.

The latest figure was much worse than the government�s 1.8 to 2.8 percent quarterly projection. But while the country is still posting positive growths, NSCB Secretary General Romulo Virola said the Philippines is already on �the brink of recession� not just based on GDP rates but on worrisome May to June leading economic indicatores.

The indicators include the consumer price index, electricity consumption, exchange rate, hotel occupancy rate, money supply, number of new business incorporations, stock price index, terms of trade index, total imports, tourist arrivals and wholesale price index.

MANILA, Philippines - The country�s exports of goods and services are expected to pick up in the coming months � reversing a sharp contraction since last year � as the global economy starts recovering from a crippling recession, Trade Secretary Peter Favila said.

He said there have been encouraging signs of an export-led recovery, pointing as an example food and furniture exporters who have reportedly started recovering the lost orders they have incurred at the height of the worldwide economic slowdown.

More importantly, Favila noted that the electronics industry appears to be gaining ground again. �This is good news because this is our number one export,� he said.

The National Economic and Development Authority (NEDA) earlier said merchandise exports are showing signs of recovery, posting a 15.9-percent growth in March this year from the previous month, as exports of all major commodity groups performed better than in February.

The economic planning agency also pointed out that while there was a 30.9-percent decline in exports shipments in March from a year ago, this was also an improvement from a 39-percent reduction in February, �indicating signs of the easing recession in trading countries.�

Exports earnings for March 2009 reached $2.9 billion compared to $2.5 billion in the previous month but lower than $4.2 billion in March 2008. On a cumulative basis, export revenues for the first quarter of 2009 amounted to $7.9 billion, 36.8 percent lower than the same period in 2008.

�The slight rebound in electronics in March compared to the previous month followed global trends wherein worldwide sales of semiconductors grew by 3.3 percent, as demand has somewhat stabilized, as reported by the Semiconductor Industry Association,� the NEDA report said.

NEDA added that market research company iSupply Inc. has observed that �the global semiconductor manufacturing industry is expected to take a breather in the second quarter as utilization rises by 60 percent�. The majority of the country�s electronic exports for the month of March went to China, the Netherlands, United States, Hong Kong and Japan.

The United States remained the biggest overseas market for Philippine goods with a 17.3 percent share in total export revenues in March. Japan was the second major destination of outbound shipments in March with a 15.4 percent share.

Other major export markets were China (10.6 percent), Hong Kong (9.4 percent), and the Netherlands (9.2 percent). The aggregated shipments to China, Hong Kong, and Taiwan accounted for 23.3 percent of the total merchandise exports in March 2009.

Semiconductor devices, electronic data processing (EDP) machines, and garments made up 65 percent of the total shipments to the five biggest export markets in March 2009.

Favila said aside from the exports industry, other forecast drivers for growth in the second quarter are the tourism and the business process outsourcing (BPO) sectors.

SEOUL, South Korea (via PLDT) � More Filipinos working or planning to work in South Korea have a reason to celebrate, following the extension of a bilateral agreement giving Filipino workers three years to work in South Korea.

South Korea is home to 60,000 Filipinos, most of whom are working here.

Labor and Employment Secretary Marianito Roque said the Republic of Korea (ROK) has given 8,000 slots for Filipino workers in the latest memorandum of understanding (MOU) between the two countries.

Roque is accompanying President Arroyo, who is on her second day of official bilateral visit here upon the invitation of South Korean President Lee Myung-Bak. After which, the President will be heading for Jeju Island for the Association of Southeast Asian Nations (ASEAN) � Republic Korea Commemorative Summit on June 1 and 2.

Roque signed the MoU with South Korea Labor Minister Lee Young-hee at the Blue House, which was witnessed by President Arroyo and President Lee.

Roque said the renewal of the MoU gives Filipino workers a chance to work in South Korea, particularly in the manufacturing sector, for a period of three years.

Prior to the renewal of the MoU, the two countries had agreed to give Filipinos a chance to work in South Korea for only a period of two years.

The MOU, which focuses on the employment permit system (EPS) of workers, started in 2004 and is constantly being renewed by the two governments.

Roque disclosed that another MoU, which is on cooperation in the field of labor and manpower development, focuses more on the technical aspect, particularly on the exchange of experts. This, he said, is expected to improve the technical capability of the country�s human resources.

Also in Seoul, the Philippine government is expected to bring home an estimated $500 million worth of new agricultural investments from two Korean private institutions in its bid to improve livelihood in the countryside.

"We�re computing that the investments that the agriculture (sector) is bringing home are about $500 million," Agriculture Secretary Arthur Yap said.

Yap is also part of Mrs. Arroyo�s official delegation in this city.

The agriculture secretary said the Philippines has forged an agreement with two Korean private firms - Eco-Solutions and Enviro�Plasma - that will benefit the Philippine agricultural sector.

He said that the Eco-Solutions is pegging $175 million for a two- year project to tap Sarangani, South Cotabato as a jatropha planting area.

"The Department of Agriculture (DA) is helping package the entire deal," he said.

The other Korean firm, Enviro-Plasma, is starting immediately a $300-million sugar bioethanol project in Central Luzon.

He said the DA helped iron out the project, which will be locally led by the Central Luzon Bioethanol Corp.

Enviro-Plasma said it is looking for a 40,000-hectare sugarland in Tarlac, Pampanga, Zambales, and Bataan for bioethanol production.

The Philippine Council for Industry and Energy Research and Development (PCIERD) in its Biofuels Science and Technology roadmap, includes the use of sugar from sugarcane for bioethanol and jatropha for biodiesel production.

The national government started its five percent total volume mandate last Feb. 6, three years after the Biofuels Act of 2006 was signed into law.

As for biodiesel, the government mandated two percent use of biodiesel blend starting last Feb. 6 from one percent since the law was passed in 2006. The country is targeting 60 percent energy self-sufficiency by 2010 from the current 57 percent.

Yap also disclosed that the country has forged an agreement with the Rural Development Administration of Korea for a technical tie-up.

The Rural Development Administration of Korea is South Korea�s research and extension arm in agriculture, which can help the country in developing food processing technologies, especially in preserving and prolonging top local fruits� shelf life.

"It is worth noting today that the Philippines is still the number one supplier of bananas, pineapples, and mangoes and is the second largest supplier of coconut products and by-products in South Korea," Yap said.

He also noted that the Korea International Cooperation Agency has given a study grant for Malinao Dam in Bohol worth P800-million.

"This will be an P800-million expansion project for the next three years. This would ensure that we can now water the entire service area of the irrigation project in Malinao dam," Yap disclosed.

The expansion project will cover 5,000 hectares of irrigated land from the previous 3,200 hectares.

Aside from the two new investments, the agriculture sector is also a beneficiary of the latest MOU between the Philippines and South Korea, including the establishment of a rice processing complex in Sta. Barbara, Pangasinan; Pototan, Iloilo; Pilar, Bohol; and Matanao, Davao del Sur; and agricultural, scientific, and technical cooperations.

MANILA, Philippines�The peso is expected to remain relatively stable over the next two quarters, as gradual easing of the global crisis may offset factors that lead to depreciation of the local currency.

This was according to investment bank ING, which projected that the peso would trade well within the range of 47.5 to 48.5 against the US dollar over the next two quarters.

In a recent paper on the Philippines and other Asian countries, ING said �weak BOP [balance of payments] and public finances could limit the downside, while global healing would cap the upside.�

In the first four months of the year, the country�s BOP hit a surplus of $2.198 billion, higher than the $2.14 billion in the same period last year.

Despite the year-on-year increase in the BOP as of April, ING said net outflow of foreign portfolio investments would dampen the likelihood of a sustained growth in the BOP. In turn, this could create dampening pressures on the peso.

BOP, a record of the country�s commercial transactions with the rest of the world, shows the difference between inflows and outflows of foreign currencies into the economy.

A surplus in the BOP helps build up the country�s reserve of foreign currencies, also called gross international reserves. GIR determines a country�s ability to engage in commercial transactions, such as importation and payment of debts denominated in foreign currencies.

ING said the government�s weakening fiscal position could also drag the peso down. The government incurred a budget deficit of P111.8 billion in January to April, higher than the P25.8 billion in the same period last year.

A higher budget gap tends to increase interest rates and, therefore, raise the government�s required spending for debt servicing.

Higher servicing of dollar-denominated debts pushes up demand for the greenback and thus cause the peso to depreciate.

But ING said the impact of weak BOP and fiscal condition on the peso would be offset by the positive effect of easing uncertainty in the global economic front.

Although advanced economies are still seen to be in recession in 2009, some analysts said the crisis could have already bottomed out and a slight recovery could be expected by the end of the year.

Gradual revival of the global economy would benefit emerging economies like the Philippines, analysts said.

The peso is expected to average weaker this year from last year�s P44.47 to a dollar. But ING said the local currency would not likely move past P48.50 to the dollar.

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) said its zero-growth remittance projection for 2009 is now considered conservative, with inflows growing by 2.7 percent in the first quarter of the year.

BSP Governor Amando M. Tetangco Jr. said remittance inflows are still positive, reflecting the double-digit increase in the deployment of new workers abroad that easily offset job losses and wage cuts.

Because of the strength of remittance inflows as well as the initial resilience of the country�s exports that Tetangco said might not fall as much as expected, the BSP had also started reviewing its balance of payments forecast for the year.

The BSP�s 2009 BOP forecast pegged a $700-million surplus by yearend � not so much when compared to 2006 and 2007 levels but significantly better than the 2008 surplus of $88 million. �We are still projecting a surplus about $700 million, but we will review that,� Tetangco said.

According to Tetangco, the $2.2-billion surplus in the first four months resulted from the decision of the National Government to frontload its borrowings from both commercial and official development assistance (ODA) sources.

�But there will be foreign exchange requirements by the end of the year,� Tetangco pointed out. �We have to look at the improvements in inflow, particularly considering the impact of the improvement in risk appetite that could put funds back in emerging markets.�

Tetangco also expressed optimism that there would be improvements in the global economy by the second half of the year and this could mean exports would not plummet as badly as expected.

�So there could be slower decline in exports in second half,� he said.

MANILA, Philippines�(UPDATE) Share prices closed 1.05 percent higher Wednesday to hit a seven-month high on expectations of another round interest rate cuts, dealers said.

The composite index rose 24.18 points to close at 2,333.76, while the all-shares index rose 1.50 percent, or 22.40 points, to close at 1,506.40.

A total of 2.98 billion shares worth P3.66 billion ($77.21 million) changed hands.

Advancers trumped decliners 96 to 19, while 44 issues were unchanged.

The peso traded at P47.40 to the dollar from its previous close of P47.28.

"The prospect of further (monetary policy) easing and sustained remittance growth bodes well for the property sector," Jose Vistan of AB Capital Securities told Dow Jones Newswires.

Tourists and �alternative travelers� are continuously flocking to the Philippines despite the worldwide recession and threat of swine flu.

The Department of Tourism cited the growing impact of European and Japanese alternative travel markets who have become discriminating and demanding for historical destinations, cultural and eco-tourism sites.

�We are now seeing a more significant number of high-spending tourists looking for places of raw and rustic charm without the trappings of mass tourism.� the DOT said.

For most of the European and Japanese travellers, the Banaue Rice Terraces stood out as a one-of-a-kind heritage site they haven�t encountered anywhere in the world. The caves, hills, and hanging coffins of Sagada were also cited for their distinctive and idyllic appeal even for seasoned travelers.

The Japanese are looking forward to �travel with a twist� among our more than 7,107 islands,�

DOT Undersecretary Eduardo Jarque, Jr., said the country has managed to build a continuing relationship with Europe�s tourism industry through its participation in major travel missions, aggressive marketing of European-based tourism offices, concessions with local partners and strong presence in foreign media.

He also said �the Philippines� exposure in Japanese media as an �alternative destination� indeed made a significant difference in intensifying the country�s position as an important historical destination.�

�This is not an overnight success, but rather a long journey of negotiations, promotions, and involvement, complemented with the unyielding support of our partner hotels, resorts, transportation firms, and travel operators,� Jarque said.

The country is likewise a year-round destination, another desirable rarity for Europeans, explained Venus Tan, DOT Director for Western, Central and Eastern Europe.

Dorie Tan, handler of DOT�s Europe promotion team, for her part, said: �They (Europeans) are interested in unique culture so they plan their visits at different times of the year. They want to experience a country�s diversity also through festivals and celebrations.�

�We see an emergence of niche travelers within the Japan market; those who are enticed by the extraordinary. They travel to discover and explore not only sites, but stories of people,� Director Benito Bengzon Jr., Marketing Team head for Japan, said.

Sedat Tatli, director, Division for Asia of Meier�s Weltreisen, pointed out that @a factor that draws tourists to the Philippines is that its easy to hop around the islands because almost everybody speaks English.�

Eric Roufs, travel retailer for Dutch operator Paul Crombag, said �some of my clients will ask me to buy them a ticket to the Philippines then they go on their own to book flights and accommodations to the other islands. Accessible language and transportation allow them to add spontaneity to their holidays.�

MANILA, Philippines�Local stocks are widely expected to consolidate this week after posting their best performance so far this year last week.

The main-share Philippine Stock Exchange index surged 6.58 percent week-on-week to close at a year-high of 2,241.98 on Friday, boosted by a much-improved sentiment in Wall Street. Financial markets here and abroad cheered reports suggesting the global recession may be easing.

�There will be a consolidation because the market has risen too fast,� said Marvin Fausto, chief investment officer at Banco de Oro Unibank.

Fund managers said any market dip would be an opportunity to accumulate undervalued stocks as investor sentiment here and abroad had turned positive.

�We�ve seen the worst of the panic. The uncertainty is being addressed by giving numbers, as the (US) banks started giving numbers on capital requirements,� Fausto said.

MANILA, Philippines - Economists have lowered their projected average inflation rate for this year from 4.5 percent to four percent, falling within the government�s official target inflation of 3.5 to 5.5 percent.

The Bangko Sentral ng Pilipinas (BSP) conducted a survey among private sector economists and analysts in the first quarter of the year and the resuls showed that inflation expectations have improved.

Based on its survey of non-government analysts and economists, the BSP said the mean inflation forecast for 2009 was four percent, lower than the 4.5-percent forecast in the survey three months previously.

The BSP said its survey indicated an average forecast inflation rate of 3.9 percent in the second quarter and 1.7 percent in the third quarter.

For 2010, the BSP said the average inflation forecast was relatively stable at 4.9 percent (from 4.8 percent a quarter ago).

�Inflationary pressures are expected to be dampened by soft global commodity prices owing to the severe economic slowdown and continued lack of demand-pull pressures,� the BSP said.

According to the BSP, most economists expect strong base effects from very high consumer price index (CPI) levels in 2008 when the average rate peaked at over 12 percent in the third quarter.

MANILA, Philippines�(UPDATE 2) Shares closed 0.14 percent higher on Friday as investors bought undervalued stocks anticipating a strong rally in the near future, dealers said.

The composite index rose 3.06 points to 2,241.98, while the all-shares index rose 0.45 percent to 1,443.10.

There were 76 gainers against 36 losers and 39 that were unchanged.

Turnover amounted to 2.244 billion shares worth P3.255 billion ($68.4 million).

The local currency traded at P47.56 on Friday morning from its close of P47.45 to the dollar on Thursday.

"The Philippine market is making a bet that there is still a search for discounted values out there," said Nisha Alizer of DA Market Securities Inc.

Philippine Long Distance Telephone Co. fell 0.46 percent to P2,160 while its main rival, Globe Telecom slipped 0.6 percent to P815.

But property giant Megaworld Corp. gained 1.06 percent to 95 centavos while Filinvest Land rose 6.35 percent to P67.

MANILA, Philippines�The National Economic and Development Authority has expressed confidence that the country�s employment woes, marked by job layoffs mostly in the manufacturing sector, may soon be over.

According to Dennis Arroyo, Neda director for policy and planning, there have been indications that job cuts by firms here in the country may have already reached its peak in March.

�There are signs that job displacements are already bottoming out,� Arroyo told reporters. �Official data are encouraging.�

He cited data from the Department of Labor and Employment (DOLE), showing that layoffs reached 1,026 in the first half of April. This was a stark slowdown from the peak of 14,512 job losses recorded in March.

Job cuts have been blamed on the recession in advanced economies, particularly in the United States, that serve as major export markets of the Philippines.

Hardest hit are electronics exporters, which saw a drastic slide in global demand for their products. Analysts said that, in tough times, it was natural for households to focus spending only on essentials.

Because electronics is the country�s major export product, accounting for about 60 percent of total, anemic global demand for these items dragged down the country�s export revenue. Exports have been falling by double-digit figures since late last year.

But Arroyo said job cuts in the electronics sector would soon end. He cited a report by the US-based Semiconductors Industry Association that sales of semiconductors inched up a bit to $14.7 billion in March from $14.2 billion in February.

As far as overseas employment is concerned, Arroyo said, prospects were also improving. He said projections of declines in remittances�due to layoffs in advanced economies�were exaggerated given that job opportunities were opening in other offshore labor markets.

MANILA, Philippines�Local stocks held on to recent gains despite an overnight retreat in Wall Street as offshore investors tempered their risk-taking ahead of the US government�s stress tests on banks.

The main-share Philippine Stock Exchange index Wednesday inched up by 0.41 percent to close at 2,206.23 despite a continued cautious trading on index heavyweight PLDT and profit-taking on other stocks like EDC and Metrobank.

The financial sector and property indices were slightly up 0.31 percent and 0.99 percent, respectively, while the service and mining counters were marginally down.

Total trades reached about P3.5 billion, with 67 gainers edging out 41 decliners and 39 unchanged stocks.

Among the stocks which were buoyant were Megaworld, ICTSI, Filinvest Land, Ayala Corp. and SM Investments.

Property stocks are benefiting from expectations of a further downtrend in interest rates as the country�s inflation rate softened further in April.

MANILA, Philippines�Local stocks rallied by 2.8 percent yesterday, taking cue from the bullish Wall Street trading overnight as investors across the globe cheered further signs that the global recession may be easing.

The main-share Philippine Stock Exchange index, which was on a winning streak for the third trading day, gained 60 points to close at 2,197.20. The relatively resilient first-quarter local corporate results and further slowdown in inflation also boosted confidence in stocks despite the cautious trading on index heavyweight PLDT.

Appetite for equities across the globe surged following a report in the United States of a 3.2-percent increase in Americans� purchases of previously owned homes, which beat forecasts of zero growth. This news sent the S&P index 3.39 percent higher, reversing the losses earlier this year.

Global investor confidence also surged on reports that China�s manufacturing output increased for the first time in nine months, further boosting hopes that the world may have seen the worst of this downturn.

The local stock market rally yesterday was led by the property sector, whose index went up 8.33 percent. The counters for the financial sector, holding firms as well as mining and oil also jumped by 4 percent, 3.8 percent and 4.2 percent, respectively.

MANILA, Philippines�The local stock market sprang back vibrantly from a long weekend break, supported by relatively buoyant first-quarter local corporate results and the bullish sentiment across Asian equities.

The main-share Philippine Stock Exchange index yesterday rose 1.62 percent to 2,137.62 despite the sell down on index heavyweights PLDT and Ayala Land.

The financial counter, boosted by an initial stream of rosy profit reports from banks as well as a surprise downtrend in loan delinquency, led the stock index higher with its 3.87-percent rise. The index for holding firms was also up 2.57 percent.

Only the property index traded in the red by 0.468 percent due to selling in Ayala Land.

�The results are not as bad as expected and some are really good, so the market is adjusting stock price valuation,� said Joseph Roxas, president of local stock brokerage Eagle Equities Inc.

He said the companies which had to write off large trading losses last year would now start booking gains.

Roxas said the local market also benefited from the sharp rally in the region especially Taiwan, China and Hong Kong, which were up 6 percent, 2.3 percent and 4.2 percent, respectively.

MANILA, Philippines -- The peso has outperformed most emerging market currencies so far this year and is likely to prove a store of value in 2009 as the economy is less vulnerable to the factors hammering markets elsewhere.

The country is likely to be the only nation in Southeast Asia to post a sharp pick up in its balance of payments surplus in 2009, partly the result of loans and privatization proceeds.

The economy is also less dependent on exports compared with its Asian neighbors, an unexpected bonus when world trade is shrinking and big markets are in recession.

The country's banks have little exposure to the credit problems being experienced elsewhere and the government's finances are far less reliant on overseas debt than in the past.

The big unknown is remittances from Filipinos working abroad, a driver of domestic consumption and pillar of the country's balance of payments. But even in this sector, the Philippines may be better off than many other countries.

"I think what is making it an outperformer is really because of the fact that our number one export, which is really people as reflected in the remittance numbers, will probably be resilient," said Wilfred Song Keng Po, managing director for fund management at AIG Investments in Manila.

"I'm looking at 10 percent decline for remittances as a worst case scenario," he said.

The peso has held its ground so far in 2009. It is down just 1.0 percent against the dollar, when other emerging market Asian currencies are down an average of more than 3.0 percent. Emerging currencies elsewhere are down an average of 5.0 percent.

At 48 per dollar on Tuesday, analysts said the currency might drop to around 50 in coming months if remittance flows disappoint -- a modest fall compared to those already seen in other currencies. The Korean won, Asia's worst performer, is down almost 9.0 percent and has been far more volatile.

NURSES, DOCTORS, HELPERS

The central bank expects 2009 remittances to match 2008's record level of $16.4 billion. Analysts say that is optimistic.

A Reuters poll forecast a 6 percent drop, the biggest fall in nine years and the first drop since 2001.

Remittances are the biggest source of overseas income in the Philippines, generating over a tenth of gross domestic product.

And as the fourth-largest recipient of remittances in the world behind Mexico, China and India, the 14th, third and 12th biggest economies in the world, the Philippines punches well above its economic weight as the 45th biggest economy.

A report prepared for the World Bank sees remittance flows from overseas workers to East Asia and the Pacific falling as much as about 8.0 percent this year, in line with its forecast for developing countries in general, after rising about 7.0 percent in 2008 and by double digits in 2007 and 2006.

Still, the forecast of a drop in remittances for the Philippines this year appears less gloomy compared with an official estimate of a 10 percent fall in such inflows to Indonesia, where remittances reach about 4.0-6.0 percent of GDP.

Filipinos are spread out overseas and hold varied jobs -- from nurses and lawyers to domestic helpers -- providing some resilience in remittances.

"Overseas Filipinos are well diversified geographically. This is unlike overseas Mexican workers, who are almost all in the US," Cem Karacadag, analyst at Credit Suisse, said in a note.

British banking giant HSBC expects the Philippine economy to grow by about two percent this year and thereby avoiding the recession being suffered by western economies.

The foreign bank�s top representatives in the Philippines are also upbeat on opportunities on both retail and wholesale banking business in the country, despite a lingering global financial turmoil.

Personal finance business is likewise expected to continue growing in the Philippines and the bank has brought in Ron Logan as new head of this segment. Logan headed the same business for HSBC in Vietnam and was CEO of HSBC�s joint venture with Bank of Communications in China.

The new executive said HSBC�s consumer lending would continue to grow, albeit at a single-digit pace or slower than the 15-percent rise seen in previous years. �But that�s still positive. We don�t see a recession. We�ll still see a growth of more than five percent.�

Logan noted that remittances from overseas workers were continuing, the government�s budget deficit is under control and foreign exchange reserves at an all time high. �We�re not seeing a reduction in infrastructure [spending] and there�s a lot of agricultural demand.�

By the second half of this year, Logan added that the country would benefit from fresh spending ahead of the presidential elections, which could be its own internal stimulus.

HSBC, active in local investment banking apart from its personal finance services, expects a heavy pipeline of local fund-raising activities within the next three months, the bank�s country manager Mark Watkinson said in a press briefing yesterday.

�Definitely, the offshore market is more challenging now,� he said, noting that local issuers would thus likely tap the domestic markets.

As to whether there would likely be a crowding out among local borrowers, Watkinson said: �You�ve got to get your timing right. If you go to the market, you�ve got to be conscious who else is issuing at the same time you are. If you issue at the wrong time, at the wrong price, nobody�s going to take your bond.�

MANILA, Philippines � At least 41,00 jobs in Eastern Visayas and Luzon will be available to workers laid off due to the global financial crisis, government executives announced.

A government program, called the Comprehensive Livelihood and Emergency Employment Program (CLEEP), will provide over 30,000 jobs in Eastern Visayas, according to Presidential Assistant for Eastern Visayas Cynthia Nierras.

Public Works Director for Central Luzon Alfredo Tolentino said 17 firms that won 126 government infrastructure projects worth P5.8 billion in the region are hiring 5,000 workers to help ease the impact of the financial crisis on the labor sector.

In Mimaropa (Mindoro Occidental, Mindoro Oriental, Marinduque, Romblon and Palawan), at least 6,000 workers have been given jobs through the CLEEP since it was launched late last year in the region, according to Vice President Noli de Castro.

The CLEEP involves the creation of jobs through government projects and entrepreneurial training.

Nierras said 15 government departments and agencies had been enlisted to provide job placements.

The Department of Public Works and Highways first implemented the CLEEP in Eastern Visayas by holding a jobs fair in Tacloban City last month.

At least 1,000 persons were hired for infrastructure projects during the fair.

The jobs available under CLEEP include membership in the Bantay Dagat (sea watch) and Bantay Gubat (forest watch) organizations in their communities, as well as workers for farm-to-market road constructions, irrigation repair, utility service in public schools, clean-and-green projects, roadside maintenance and flood control projects.

The government will also provide soft loans to those who want to engage in small businesses, such as organic fertilizer production, goat dispersal, swine raising, mini stores, transport business, port stevedoring and fabrication of concrete blocks.

The other government departments and agencies participating in the program are the Departments of Agriculture, Department of Agrarian Reform, Department of Education, Department of Environment and Natural Resources, Department of the Interior and Local Government, Department of Health, Department of Justice, Department of Labor and Employment, Department of Tourism, Department of Social Welfare and Development, Trade and Industry, and the Department of Foreign Affairs, as well as the Land Transportation Office and the Philippine Ports Authority.

Luzon

Tolentino said construction projects for roads, bridges and school buildings needed machine operators, drivers, carpenters, plumbers, electricians, masons, laborers, foremen engineers, surveyors, clerks and medical workers, lists from the Philippine Constructors Association and the National Constructors Association of the Philippines showed.

The projects last from four months to one year, Tolentino said.

The DPWH and DOLE job fairs for the PCA and Nacap in Central Luzon followed the one held on Feb. 23 by the DPWH central office, in which 2,300 workers were hired from among 4,800 applicants.

Public Works Secretary Hermogenes Ebdane Jr. said the agency aimed to create 500,000 jobs through government infrastructure projects within the year.

He said the DPWH regional office and 14 districts in Aurora, Bataan, Bulacan, Nueva Ecija, Pampanga, Tarlac and Zambales had been hiring 2,800 workers every three months for road maintenance work.

The national government stepped up its job-generating campaign as more than 40,000 workers were laid-off since the last quarter of 2008.

In Central Luzon, especially at the Clark Freeport in Pampanga and Subic Bay Freeport in Zambales, the number of displaced workers have reached 3,554 and those working less hours, 6,837, in the last two months up to March 2, the DOLE regional office reported.

De Castro, the Cabinet Officer for Regional Development for Mimaropa, said the CLEEP was being implemented through various projects such as roadside maintenance and the Upland Development Program of the DENR.

He said that under the Grassroots Entrepreneurship and Employment Tourism or GREET, two tourism-related livelihood projects were also approved that created jobs for 95 people in Palawan. De Castro said other regional department officials told him that more projects would be implemented in the coming months to provide safety nets for poor families in the region, especially those affected by the crisis.

He called on the DPWH to fast-track the repair and improvement of roads along the nautical highway.

He instructed the DOT to coordinate closely with the local government executives in identifying and spearheading tourism projects in the region. Joey A. Gabieta, Inquirer Visayas and Tonette Orejas, Inquirer Central Luzon; Cynthia D. Balana in Manila

MANILA, Philippines - The business process outsourcing industry is projecting a 200 percent increase in jobs this year as the world�s biggest companies struggle to cut down on costs by outsourcing some of their operations to countries like the Philippines where labor is cheaper.

A survey conducted by the Business Process Association of the Philippines (BPAP) showed that 95 percent of the industry�s executives and human resource (HR) managers indicated a positive outlook for job growth for 2009, forecasting employment growth of up to 200 percent.

The BPO industry is closely watched by the Bangko Sentral ng Pilipinas (BSP) since it is fast becoming one of the country�s biggest source of foreign exchange.

The BSP expects exports to actually decline and remittances from overseas workers to slow down dramatically this year. But officials said foreign exchange is expected to flow into the country particularly through BPO operations.

The survey was conducted by the BPAP with Outsource2Philippines (O2P) and TeamAsia and the results indicated that �about 50 percent� of respondents expected their workforce requirements to increase by over 15 percent.

BPAP said the response rate was 24 percent with 158 responses from 664 invitations sent to industry executives in a wide range of BPO sectors. The survey was conducted online.

The survey results indicated that the value add of services outsourced to Philippine BPOs was increasing, which meant that the industry was beginning to grab higher-paying BPO contracts from high-value BPO operations.

�Moderate to very high-value services ranging from financial analysis to knowledge management comprised 97 percent of the services offered by respondent companies,� BPAP said. The survey indicated that 67 percent said their organizations provide high to very high-value services. Sectors that expect the highest workforce increases involve complex services such as back-office processes, IT services and infrastructure management, and website development.

�The average expected ramp-up is 11-15 percent from current staff levels,� BPAP said.

BPO companies with workforces ranging from 1,000 to 15,000 employees expect an average increase in staffing requirements of between six percent and 10 percent, close to the average workforce increase expected across all sectors and respondents.

Small- and medium-sized operations are expecting employment to increase at the same rate. The biggest growth is expected from companies that employ 5,000 to 10,000 personnel, with 33 percent expecting jobs to grow between 11 percent and 15 percent in 2009. � With Elisa Osorio

MANILA, Philippines�Unmet demand for housing will reach between 423,000 and 687,00 units this year, ensuring that the real estate sector remains one of the bright spots of the domestic economy amid the worsening global financial crisis, a government official said.

Gonzalo Benjamin A. Bongolan, president of the Home Guaranty Corp., said housing demand in 2009 was estimated at between 643,422 and 913,480 units.

However, supply has rarely exceeded 200,000 units in the past eight years and peaked at 221,000 in 2008.

He said that supply grew 27.6 percent last year from some 173,000 the previous year, which is believed to have been due to the record 7.2-percent growth in the gross domestic product in 2007.

Bongolan said that in the same period, there was a 141-percent increase in the supply for condominiums and 55 percent in low-cost housing units, which he said indicates a growing preference for these packages.

Also, the HGC chief said the default rate of housing loans, or loans used to buy a residential property, settled at 7.62 percent as of 2007 from a 10-year peak of 13.87 percent in 2000.

For loans used to develop a subdivision or condominium, the default rate slid to 13.25 percent from a high of 38.97 percent in 2002.

�We are observing a growing preference for developmental housing loans and continued lending by government agencies and banks,� Bongolan said.

He said the government�s economic stimulus package, especially in infrastructure spending and monetary expansion should benefit the housing and real estate sector.

Still, Bongolan also said the sector was being threatened by the job crisis both here and abroad as well as the projected weakening of the dollar.

These may give rise to defaults on loans due to layoffs and retrenchments and the reduction of housing demand from OFWs.

National flag carrier Philippine Airlines and budget airline Cebu Pacific have removed fuel surcharges on their international flights.

Cebu Pacific waiving the fees means a 17-percent reduction in its fares, the airline said.

While Philippine Airlines said it removed as much as $38 from its fuel surcharge in selected international flights on Feb. 14.

�With the decline in fuel prices, we are able to pass it on to our customers,� Cebu Pacific president Lance Gokongwei told reporters.

�We will grow in this crisis.�

Fuel and insurance surcharges cost $40 to $75 one way after world oil prices soared last year.

But Gokongwei said jet fuel prices had fallen from a peak of $181 a barrel in July 2008 to about $60 this year. As a result, fuel�s share in the company�s total operating cost dropped to 30 percent this year from 60 percent last year.

Falling fuel prices also allowed Cebu Pacific to announce a new promo fare of P1,999 one way for flights from Manila to Bangkok, Hong Kong, Ho Chi Minh, Kaohsiung, Kota Kinabalu, Kuala Lumpur, Macau, Singapore and Taipei.

Gokongwei said the company expected to fly nine million passengers this year, up from 6.7 million last year, as a result of its lower fares.

More than 500,000 jobs will be opened to skilled and unskilled workers in the construction industry starting this month.

The Department of Public Works and Highways will host a job fair next week for the new hires as part of the government�s pump-priming program amid the global economic crunch.

Among the positions open are civil engineers, construction foremen, skilled carpenters, masons, heavy equipment drivers/operators, steelmen, painters, skilled technical personnel, quantity surveyors/estimators, helpers and other construction-related jobs.

The DPWH said qualified applicants would be fielded in 3,414 infrastructure projects, including construction of new roads, bridges and school buildings, road and bridge repair and rehabilitation, flood control and farm-to-market road projects.

Job seekers must bring resum�s, transcript of records, NBI and police clearances and other requirements.

The department will hold job fairs starting Monday, February 23, in DPWH district and regional offices in time for the signing of a Memorandum of Agreement among the National Constructors Association of the Philippines (NACAP), Philippine Contractors Association (PCA) and the Department of Labor and Employment.

The MoA aims to provide skilled and nonskilled workers a chance to secure positions with the contractors, given the need for increased manpower to accomplish the government- awarded contracts.

The DPWH assured the hired personnel will receive at least the minimum wage in their respective areas of designation or possibly more depending on the firms that they will work for.

�Their rights as employees will be protected by the contractor, and they will be given due benefits,� a public works official said.

The hiring of Filipino nurses and caregivers in Japan will continue despite the country�s worst economic crisis in 35 years.

The Philippine Overseas Employment Administration allayed fears about the cancellation of the planned hiring, and even said 1000 Filipino nurses and caregivers will be hired over the next two years.

�We will be deploying an initial batch of 200 nurses and 300 caregivers by end of April or early May this year as part of the agreement,� POEA chief Jennifer Manalili said.

Under the agreement between the Department of Labor and Employment (DOLE) and the Japan International Corp. of Welfare Services (JICWELS), those who qualify for the jobs will undergo a six-month language and culture training in Japan during which they will receive an allowance of $400 or more than P21,000, Manalili said.

Fresh economic data revealed a Japanese economy contracting at its fastest pace since 1974.

But Manalili reiterated that Japanese employers have not expressed plans to cancel or defer the hiring of Filipino nurses.

At this time, Manalili said, the POEA has received an �overwhelming� number of applications for the initial 500 nurses and caregivers set to be deployed to Japan.

The POEA said there are some 2,000 applicants for the first 200 nursing slots while more than 5,000 aspirants are contending for the 300 caregiver slots.

Prospects are bright for the Philippines� business process outsourcing (BPO) and other services sectors in 2009.

The local BPO industry is still expected to generate 100,000-110,000 new jobs this year, in addition to the around 400,000 already in place, according to the Business Process Association of the Philippines (BPAP).

ExcelAsia, a full-service human resource solutions company reported an increase in workforce demand among its outsourcing clients who seek to fill up 4,000 new outsourcing jobs each month.

Taipan Andrew Tan, chair of publicly listed Alliance Global Group Inc., also announced his company was spending a total of P20 billion for the construction of various projects targeted at the office, residential and hotel markets, expecting to create 50,000 new jobs in the construction sector this year.

BPAP chief executive Oscar Sanez said jobs would still abound in the BPO space this year, considering that cost-reduction considerations could prompt more companies abroad to bring some of their functions offshore.

The local BPO industry should also register a growth of 20-30 percent, with revenues seen hitting around $7.8 billion, Sanez said in a presentation during the e-Services Global Sourcing Conference and Exhibition.

He said last year resulted in revenues of almost $6.1 billion and 74,000 new jobs.

�The momentum we�ve established is strong, and that�s something we�d like to pursue. Globally, India holds 38 percent of the BPO market, while the Philippines has 7 percent of the pie. We�re gunning for 10 percent by 2010,� he related.

To be able to hit its targets, Sanez said the local BPO sector would focus on driving awareness and interest among potential clients and on driving competitiveness through talent development.

Among the activities that BPAP and its partners planned to conduct this year to reach those goals were more English-proficiency trainings, BPO investment missions and conferences, a standard assessment test for the BPO industry, a scholarship program, and leadership training for middle managers.

The outsourcing sector remains strong and can potentially help laid-off workers find new employment opportunities despite the global economic crisis, ExcelAsia president Rita Trillo-Ugarte agreed. She explained that a different industry background is not a hindrance to beginning a career in BPO.

�Individuals with export, retail, or electronics industry backgrounds will fit into most of our clients� needs,� Trillo-Ugarte said.

She said her company�s existing partnerships were being renewed and new clients were expected to relocate in the country. This resulted in the establishment of new ExcelAsia sites in Sta. Rosa and soon in Eastwood, in addition to its existing sites in Makati, Alabang, Cebu, and Bacolod City.

ExcelAsia currently has over 50 local and global clients from various industries.

�ExcelAsia is in need of almost 4,000 jobseekers a month for our clients, who all seem to be ramping up and expanding despite the crisis,� Trillo-Ugarte said. �We expect more and more companies to outsource their service-oriented businesses to BPOs in the Philippines.�

AGI�s Tan announced that the company would finish this year more than 100,000 square meters of BPO office space in five office buildings that the company was putting up in Eastwood City, McKinley Hill and Newport City.

This will accommodate around 14,000 jobs in the BPO sector beginning this year until 2010, Tan said.

On top of that, AGI is hiring 3,500 new people through its subsidiary, Travellers International Hotel Group Inc., for two hotels that it is opening this year�Marriott and Maxim�s.

MANILA, Philippines - Despite the global financial crisis, remittances from Filipinos working abroad beat expectations, rising by 13.7 percent to hit a record high of $16.4 billion in 2008 from a year ago level, the Bangko Sentral ng Pili-pinas (BSP) reported yesterday.

Last year�s remittances exceeded the central bank�s target of $16.3 billion.

For December alone, remittances hit $1.4 billion, an increase of 0.8 percent over the same period in 2007, the BSP said.

The major sources of remittances in 2008 were the United States, Saudi Arabia, Canada, the United Kingdom, Italy, the United Arab Emirates and Japan.

�Amidst the challenges posed by the global financial market strains and the economic downturn experienced by host economies, remittances from overseas Filipinos remain a dependable source of foreign exchange for the economy,� BSP Governor Amando M. Tetangco Jr. said.

He attributed the increase to sustained demand for Filipino workers abroad, particularly professionals and skilled workers.

Government figures show that Filipinos who went abroad to work in 2008 rose 27.8 percent to $1.376 million.

The central bank said it expects a contraction in the number of workers deployed to countries that are suffering from the global financial crisis but it added that there appeared to be strong demand for workers in countries such as Canada, Bulgaria, Australia, the United Arab Emirates and Qatar.

The Philippines is one of the world�s leading sources for skilled and unskilled workers with up to nine million people, about 10 percent of the population, living and working in 140 countries.

Their remittances have become a major pillar in supporting the economy contributing to about 10 percent of the country�s gross domestic product.

The government has been promoting the deployment of more workers overseas as the world financial crisis sent exports plunging 40 percent in December.

Preliminary data from the Philippine Overseas Employment Administration (POEA) showed that the number of Filipinos deployed abroad in 2008 rose considerably by 27.8 percent to 1,376,823 from 1,077,623 in 2007.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said he does not expect an outlook or ratings downgrade this year despite the difficulties to be faced by the economy in the wake of the global slowdown.

Fitch Ratings earlier said it was retaining its �stable� outlook on the Philippines, while other countries have been put on negative watch because of the effects of the US financial crisis and the ensuing economic recession.

Tetangco expressed optimism that the same sentiment is likely to carry across to the other credit ratings agencies as they evaluate the country�s prospects this year.

�I think the Fitch move to keep our outlook stable is a general view among other rating agencies,� Tetangco said. �I think we�ll do okay as long as we keep on track.�

However, he added this would depend on government actions in the coming months and how regulators would be able to implement the economic stimulus plan.

�It all depends on how we will handle the challenges,� Tetangco said. According to him, the implementation of the economic stimulus plan would be critical to stable ratings, regardless of whether the government spends more than the 2009 prescribed budget or net.

There have been criticisms that the Arroyo administration�s P300-billion plan would not be enough since it has already been in the 2009 budget since before the crisis became into a full-blown meltdown.

But Tetangco said he was less concerned with the amount allocated by the government than with its capacity to actually implement the programs and spend the money.

�The important issue is for the money to be spent, it doesn�t matter if it is not new money,� Tetangco said. �It is the money that you are spending that would create economic activity and generate growth.�

London-based Fitch Ratings said earlier it was maintaining its stable outlook on the Philippines, saying that the country was �reasonably healthy� despite the tumult in the global economy.

Tetangco said Fitch�s decision indicates confidence on the country�s ability to weather the global slowdown, even a recession in its major trading partners.

A stable outlook means that the Philippines would stay at its current credit ratings until the next Fitch review.

Fitch managing director James McCormack singled out the Philippines, along with China and Indonesia, as the only countries that were not in Fitch Ratings� negative watch.

Tetangco said Fitch�s action affirmed the view of moentary officials that the country�s strong external position would support its fundamental stability through the gloom of the global economic slowdown.

�The Philippines is still reasonably healthy, public finance is well-managed in the last couple of years,� McCormack said, adding that weaker growth in the region was not necessarily negative from a sovereign creditor�s perspective.

More than 60,000 overseas Filipino workers (OFWs) were hired in various countries abroad in the last month of 2008 despite the financial crisis, the Philippine Overseas Employment Administration (POEA) reported yesterday.

POEA chief Jennifer Manalili said OFWs filled at least 61,000 of the 450,000 existing overseas job vacancies abroad last December.

�We now have a current balance of 389,000 active job orders from the previous 450,000,� Manalili said, noting that the POEA posted a total of 650,563 new job orders from January to December 2008.

Manalili said the remaining job orders can be filled by qualified overseas Filipino workers this year.

According to Manalili, it takes time for the country to fill the job vacancies abroad, not due to a shortage of workers but because of the strict requirements in securing visas from the embassies of countries employing the OFWs.

Labor Secretary Marianito Roque has expressed confidence that the country�s overseas deployment last year could reach 1.3 million.

�We have already recorded over 1.2 million deployment as of November so if we will add those who left in December, the figure could hopefully hit a record high of 1.3 million,� Roque said.

Meanwhile, Philippine labor attach� to Kuwait Josephus Jimenez said the hiring of Filipino workers in the Arab country could reach as many as 70,000 this year even with the prevailing financial crisis.

�On the average, I approve 200 employment contracts daily so we could easily fill a minimum 12,000 job vacancies and even exceed 30,000 based on our current trend,� Jimenez pointed out.

Jimenez noted that Kuwait is a cash economy and therefore unlikely to be affected by the current financial crisis.

He added that Arab employers continue to prefer Filipino workers over other nationalities.

�Filipino workers are the highest paid professionals in Kuwait,� he said.

Jimenez said the government is also exerting efforts to veer away from so-called �five Ds� � dirty, difficult, dangerous, degrading, and deceptive � jobs being offered.

Of the 140,000 Filipinos currently employed in Kuwait, Jimenez said, 60,000 are domestic helpers.

BRITISH banking giant HSBC sees developing countries in Asia in a much better position to withstand the current global financial turmoil than during the 1997-98 regional currency crisis. While emerging Asia would slow down alongside the global downturn triggered by the US credit crunch, the region--the world's fastest growing in the last few years--would likely remain resilient, HSBC group chief operations officer Michael Geoghegan said in an international teleconference late Monday.

He said Asia outside Japan would still sustain a respectable growth of 7 percent this year.

"If the world economy slows, Asia will be impacted, but unlike the Asian crisis, the Asian economies are strong. They have strong reserves, current account reserves and each country is capable of stimulating domestic demand," Geoghegan said.

He noted that Asian stock markets have already fallen by 40-50 percent this year but the outlook was now turning to be "modestly positive."

"Asia is certainly still stronger than in other parts of the world and will remain stronger than in other parts of the world," he said.

HSBC would like to see contribution from emerging markets rising to 60 percent as a ratio of its business.

"We will continue to focus on core business, accepting deposits and lending," he said.

Asked whether HSBC was interested in some of the assets of beleaguered US financial giant AIG, he said the group would "look at opportunities as they arrive" but could not comment at this point in time.

In the Philippines, he said HSBC would continue to build opportunities in business process outsourcing or global resourcing. HSBC recently opened its second BPO hub along Commonwealth Avenue, Quezon City.

HSBC's pre-tax profits hit $4.3 billion in the third quarter, higher than a year ago, despite loan write-offs in the United States. Loan impairment charges in the United States rose by $700 million from the second quarter.

President Gloria Macapagal-Arroyo is supporting a plan to set up a P100-billion program aimed at upgrading expressways, roads and bridges as a means to pump-prime the economy amid the global economic slowdown.

Speaking before business leaders, the President said Wednesday she was open to tapping government financing institutions (GFIs) for the proposed fund, as she outlined contingency plans against a recession in the United States, a major trading partner of the Philippines.

Arroyo said Donald Dee, chairman emeritus of the Philippine Chamber of Commerce and Industry (PCCI), had suggested that P50 billion would be drawn from the GFIs and an equal amount from private banks.

�I welcome the proposal given to me on the platform by Donald,� she said in her speech at the Philippine Business Conference and Exposition, an annual event of the PCCI.

Dee said the proposed P100-billion fund for infrastructure upgrade was an offshoot of a brainstorming he had with Romulo Neri, president of the state-run pension fund Social Security System (SSS), and Reynaldo David, president of state-owned Development Bank of the Philippines (DBP).

He said the government investment unit National Development Co. (NDC), the DBP and the SSS had committed P10 billion each to the public sector counterpart of the fund, and he would next talk with other GFIs and banks to complete the fund.

The SSS, DBP and NDC �will invest jointly with the private sector to create the growth momentum,� Dee said. �For every peso that you put in, you will have a seven times multiplying effect in terms of the jobs that it will create.�

At a news briefing in Malaca�ang later in the afternoon, Finance Secretary Margarito Teves said the PCCI proposed tapping half of the P100 billion from GFIs so as not to touch the national budget.

When asked whether the government was realigning funds from GFIs for the infrastructure upgrade, Teves said, �Not necessarily. Implicitly, they have money for this outside of their own commitments or existing priorities.�

Sen. Manuel Roxas II has proposed that P100 billion from the proposed budget for 2009 be realigned to benefit food, education and health sectors to cushion the impact of the global financial crisis on the country.

An economic adviser to the President, Gov. Jose Salceda of Albay province, is also calling for a realignment of a part of the proposed budget for next year. He wants the realignment of P33 billion from capital spending to direct subsidies for education, health service and food.

In her speech, President Arroyo said the P100-billion program was getting the support of various sectors.

�We hope the private banking sector will join in this,� she said.

�In that way, we can put our money in human capital formation, which will provide direct income and services to the poor during the coming period,� she added.

The President said the economy could withstand the effects of a US recession because of the solid banking system in the country, increasing foreign exchange remittances from overseas Filipino workers, a growing business process outsourcing (BPO) sector, a manageable budget deficit, and slowing inflation, among other good economic factors.

�The Philippine economy has certain shock absorbers,� she said.

In her speech, the President said the government should upgrade the country�s infrastructures under a Comprehensive Integrated Investment Program (CIIP) to stimulate the economy.

The CIIP contains projects funded by both public and private sources, including the national budget, official development assistance, cost sharing between the national government and local government units, private-public sector partnerships, joint ventures, among others.

The government has placed at P2 trillion the investment requirement to implement the CIIP from 2008 to 2010.

The transport sector alone will need P755 billion under the program. Arroyo said the government would increasingly tap the private sector for priority transport projects under the build-operate-transfer (BOT) law.

These projects include the Tarlac-Pangasinan-La Union Toll Expressway, C-6 Road, Manila-Cavite Coastal Road, the North Metro Manila Skyway, Southern Luzon Expressway and Southern Luzon Arterial Road.

�But if the US recession happens, we would need more private financing and BOT so that we can realign some of our infrastructure money to strengthen programs that promote human capital formation,� Arroyo said.

These programs include conditional cash transfers, scholarships, rice procurements and health insurance, among others, designed to carry families through an economic slowdown.

Dee said the government would go ahead with the upgrade of major infrastructure projects whether or not the United States slid into recession.

He said of the President�s message: �What she�s saying is, �I�m not going to wait. I�m going to do it to make sure that the economy is sustained.��

The President also announced other strategies to pump-prime the economy and shield different sectors from the impact of a US recession:

• Heightened monitoring of displacements of overseas workers, and the setting up of a P250-million livelihood fund for displaced overseas workers.
• Procurement of one million metric tons of �palay� [rice before milling] from farmers beginning this coming harvest season, up from 100,000 metric tons last year.
• Increasing the insurance coverage of depositors from P250,000 to P1 million through a bill to be filed by Rep. Joseph Violago.
• Marketing Philippine BPO as a �cost-cutting solution� for US firms.

ANY MOVE TO RAISE the ceiling on insured deposits should be accompanied by government equity infusions into the central bank and the state deposit insurer, the two institutions� chiefs yesterday said.

Bangko Sentral ng Pilipinas Governor Amando M. Tetangco, Jr. said the central bank supports the proposal to hike the maximum deposit insurance coverage but the BSP and the Philippine Deposit Insurance Corp. (PDIC) also need to be strengthened.

"We support the proposed increase in deposit insurance coverage. But this and other reforms should be taken in a context of an overall plan to strengthen the BSP and PDIC," Mr. Tetangco told reporters.

Jose Ma. Clemente "Joey" S. Salceda, Albay governor and Palace adviser, has suggested hiking the insured deposit ceiling to P500,000 from P250,000. President Gloria Macapagal Arroyo on Tuesday said she wants it set at P1 million.

Mr. Salceda has also proposed a national government equity infusion of P40 billion into the central bank and P10 billion in PDIC. He also pointed out the need to give "pre-emptive inspection powers" to PDIC and the central bank.

The BSP is waiting for P40 billion in additional capitalization from the government. The Securities and Exchange Commission needs to approve the issuance of so-called financial stability bonds for this purpose.

Jose C. Nograles, PDIC president, said the government should infuse P45 billion to beef up the Deposit Insurance Fund where insurance payments are sourced.

Leonilo G. Coronel, Bankers Association of the Philippines executive director, said raising the insured deposit ceiling was needed to prevent deposit flight to other countries that have promised a 100% guarantees.

But he stressed the need for more oversight by the BSP and the PDIC to check "moral hazards." He pointed out that a higher deposit insurance coverage could trigger complacency among depositors and prompt them to park their funds in risky banks.

"[Increasing the maximum deposit insurance coverage is] certainly worth looking into because other countries have hiked their deposit [guarantees]," Mr. Coronel said in a telephone interview. "But we have to strengthen the regulatory framework. If regulations are strong enough, we can avert losses."

As the increase to either P1 million or P500,000 would be left to Congress to decide, Mr. Tetangco said lawmakers should be wary of the costs this would incur.

Banks pay annually an insurance premium equivalent to a fifth of 1% of total deposits to the PDIC. It is not clear who will shoulder the added cost since a higher insured deposit ceiling necessarily requires a higher insurance premium.

Mr. Coronel said: "It makes sense to do it to allay fears and to prepare ourselves, but we have to balance it against costs."

Mr. Nograles said the P45 billion in fresh capital would fund the proposed P1 million deposit insurance coverage. It would allow the PDIC raise the Deposit Insurance Fund to over P100 billion. The fund stood at P54.3 billion as of December 2007.

The PDIC chief, who met with Malaca�ang officials yesterday, said the government would ask Congress to amend the PDIC charter to accommodate the increased capitalization, which he said would be a "quick response mechanism".

"We�re not contemplating an increase in assessment. We are requesting P45 billion, which we can access on a staggered basis," he said.

Banks have said a hike in insured deposit ceiling would dent efficiency ratios � operating expenses in relation to profits � and that the additional cost could be passed on to borrowers by way of increased loan rates.

Mr. Nograles said he had proposed a plan to have the PDIC revert to the P250,000 deposit insurance coverage "after three years when the situation normalizes".

"The P1 million is only for three years, but extendable. We don�t know how long this global financial crisis will persist," he said. � Gerard S. dela Pe�a with a report from Ma. Eloisa I. Calderon

PRESIDENT GLORIA MACAPAGAL-ARROYO yesterday announced plans to establish a P100-Billion fund � to be part of a series of government contingency measures � that would help insulate the economy from a global slowdown.

Mrs. Arroyo said the fund had been proposed by the Philippine Chamber of Commerce and Industry (PCCI), the organizer of the 34th Philippine Business Conference she was addressing, and would be equally shouldered by the state and the private sector.

No further details were provided, and Cabinet officials said the plan would still have to be discussed by private sector representatives and economic managers.

"We must not lose sight of the impact on the ordinary Filipino who bears the brunt of the market fluctuations ... During this time it is the role of the government to help insulate the citizens from price shock and economic pressures," Mrs. Arroyo said.

The government�s contingency plan, she said, includes:

• upgrading infrastructure by encouraging projects funded by both the private and public sector;
• strengthening the financial system by supporting a measure that would hike the deposit insurance coverage to P1 million from P250,000;
• continued support for agriculture by sourcing more rice locally;
• support for housing, and small and medium enterprises ;
• promoting the Philippines as an outsourcing destination;
• attracting investors from the Middle East and diversify the country�s trading ties with China; and
• monitoring labor market displacements, and repatriation and livelihood packages for overseas Filipino workers who may be affected by the global economic slowdown.

MANILA, Philippines�Despite the gloomy forecasts, Filipinos should not fret about job losses or possible cutbacks in opportunities in the United States, the Middle East and elsewhere, Labor Secretary Marianito Roque said Tuesday.

Roque said the Department of Labor and Employment (DOLE) had not received any reports from its 37 labor officers posted abroad about cutbacks in the demand for Filipino workers in the face of the global economic crunch.

�So the situation remains stable and we do not expect any reduction in the demand for overseas Filipinos especially in the Middle East,� he said at a press briefing.

The Building and Wood Workers� International had warned that the number of jobs in the badly hit construction industry in the United States could further shrink, increasing the number of undocumented Filipinos there.

It said it had monitored some overseas Filipino workers (OFWs) who had flown back to Manila after losing their jobs, adding that their �families will have a sad Christmas.�

Over the years, OFWs have managed to keep the economy afloat, sending home some $14.4 billion last year, nearly a tenth of the gross domestic product.

Roque said it was inaccurate to assume that the OFWs coming home were laid off as a result of the global economic slowdown.

�This is the normal trend after their contracts have been terminated,� he said.

Jobs in Canada, Australia, Europe

Contrary to fears of a contracting job market abroad, there are many jobs awaiting Filipinos in Canada, Australia and European countries, Roque said.

�We have signed up with four provinces in Canada,� he said. �The pay rates are relatively higher compared with what the Filipinos are enjoying in other countries.�

Another DOLE team is leaving for Australia to start negotiations on the possible employment of Filipinos there, Roque said.

�When the option comes for Filipinos to go overseas, and entertain a job offer from Australia, we have ample potential mechanisms that are already in place,� he said.

Both Canada and Australia are offering jobs for nurses, IT personnel, truckers and hotel workers, among others, Roque said.

Worst-case scenario

�We are also looking at France, Norway and New Zealand as new markets that would be needing the services of Filipinos,� he said.

Roque said that the DOLE had drawn up a contingency plan for overseas workers in case the United States slides into a recession.

�We have assumed the worst-case scenario; and we are prepared for it. We have the mechanics to assist our workers and we will provide them with the necessary assistance,� he said, but declined to go into specific details.

Hurricane Ike

In some parts of the United States, the aftermath of nature�s wrath is cushioning the impact of the global financial crisis on Filipino construction workers.

Some labor groups fear that the economic slump would hurt the construction business in the United States, which employs many Filipino workers.

But 50-year-old Jerry, a private contractor in Texas, said the construction business is booming now in states recently pummeled by Hurricane �Ike.�

�The business is booming now because of the damage brought by �Ike.� Many homes and buildings have to be repaired,� Jerry told the Philippine Daily Inquirer by phone.

Hurricane Ike hit Texas and nearby states in early September, shutting down oil production in the area as well as damaging residential areas.

But Jerry acknowledged that a few of his friends from other states, like New Jersey and California, had already lost their jobs.

He also said that prices of basic commodities had gone up.

International labor groups with Filipino members said the other day that the financial slump was also threatening the jobs of more than eight million Filipinos overseas.

They said those in the service sector, like construction workers and nurses, are the most vulnerable. If they lose jobs, they are likely to stay as undocumented migrants instead of coming home, since no work awaits them in the Philippines, said the Building and Wood Workers� International.

Overseas Filipino workers are also likely to reduce the amount of their remittances this holiday season, the group also said.

Filipinos in the United States are not giving up hope, however. �There are many jobs here that the Americans do not want to take. So we are optimistic we can survive the crisis,� Jerry said.

Second or third jobs

Aside from the looming threat of losing their jobs, Filipino domestic helpers will have to learn to cope with cuts in their salaries due to the global financial crisis.

Connie Bragas-Regalado, chair of Migrante International, said Filipino maids would have to cope with the crisis by taking on other jobs, borrowing money or participating in the underground economies in their respective countries.

�To ensure that they can send money home, they will have to find ways to cope. Our maids will have to look for a second or even a third job or sell goods in the underground economy,� Regalado said.

The Philippines remains �an island of calm� amid the global financial storm because of its good macroeconomic fundamentals, an official of Standard & Poor�s said.

Press Secretary Jesus Dureza and National Economic and Development Authority (NEDA) deputy director general Rolando Tungpalan made public the statement of Agost Bernard, S&P�s associate director, during a news briefing in Malaca�ang yesterday.

The statement was also part of Tungpalan�s presentation to President Arroyo during a NEDA Cabinet Group meeting at the Palace on the current global economic developments.

�The Philippines is �lucky� because they have made the necessary adjustments and reforms when times were still good. So they are facing the global market problems and economic slowdown from a considerably improved position, compared to what they were in three to four years ago,� Tungpalan said quoting Bernard.

�The Philippines is an �island of calm� currently, while there is turmoil in the higher rated and previously stable countries,� he said. The S&P official apparently was referring to Malaysia and Thailand but Tungpalan declined to confirm this.

The NEDA official did not read Bernard�s entire statement but said it was part of an email of the S&P official to the Investor Relations Office of the Department of Finance the other day.

In an earlier report, S&P�s said the global financial crisis will not threaten the Philippines� credit ratings but the government must improve its fiscal position.

The President earlier called for a coordinated regional action to help cushion the effects of the global economic slowdown.

The country�s economic contingency plan as well as the performances of the stock markets around the world was discussed during the Cabinet meeting. Press Secretary Jesus Dureza said Mrs. Arroyo is expected to issue a statement today on her call for a region-wide approach to addressing the financial crisis.

He said Mrs. Arroyo had dispatched Finance Secretary Margarito Teves, Socioeconomic Planning Secretary Ralph Recto and Budget Secretary Rolando Andaya to the US to discuss her proposal.

The economic managers were expected to return to the country yesterday and report to the President.

Tungpalan said the improvement in the stock markets around the world �gave us a boost of confidence in where we are right now.�

He said there �seems to be better comfort� from the initiatives taken by developed countries to address their financial problems. But he said the Philippines will not let down its guard.

Mrs. Arroyo earlier told an economic forum that despite the looming recession in the US and in other major economies in Europe, the Philippines will not experience negative growth at least until next year.

�There is no doubt that we live in unsettled times today. The world is at a tipping point,� she said.

She said the setbacks from �the past year and the past weeks are real and profound. It will take time and perseverance to put the pieces back together.�

She said that while a recession in advanced economies is a cause for concern, �we are in best position to be able to weather such slowdown.�

�It (reform) is paying off. Our economy is more resilient today than ever before,� she said.

�We have created almost seven million jobs in seven years. Our international reserves cover six months of imports and the reforms have given us some running room to weather the wave of global price shocks that reverberated across the world this year,� Mrs. Arroyo said.

�It hasn�t been easy but Filipinos are tough and resilient and that is one of our sources of competitiveness,� she said.

�We have pulled together. We have been able to draw on additional revenues to provide targeted investments in food and fuel to keep our poor afloat until a better day,� she pointed out.

She argued that while some economies in the region were experiencing recession in 2001, the Philippines was posting growth.

She said the administration is doing everything it can to keep the country�s fundamentals stable.

The country, she said, has already diversified its export markets and that the US is no longer its No. 1 market but China.

�Our banks are well capitalized and the innate conservatism of our bankers is matched by the prudential foresight of our regulators,� Mrs. Arroyo said.

STATE spending for infrastructure next year, as a percentage of economic output, remains below the 4%-5% benchmark believed needed to sustain growth, but economic managers of the Arroyo administration said this should not be a major problem.

Under the proposed P1.415-trillion budget submitted to Congress yesterday, the government plans to raise its infrastructure outlay by 20.67% to P147.47 billion next year, or P25.25 billion more than this year�s allocated P122.214 billion.

At P147.47 billion, however, public investment for infrastructure continues to lag behind a regional average of about 4% at 1.7% of the expected gross domestic product (GDP) for 2009.

This year, infrastructure spending accounts for 1.58% of GDP, which is projected to grow within a revised 5.5%-6.4% range.

Public sector infrastructure budgets, as against GDP, have been on a downtrend at least since 2000, documents from the House of Representatives� Congressional Planning and Budget Department (CPBD) showed. Since the start of this decade, allocation for the sector in relation to GDP reached a peak of 3.54% in 2000 and had been below 2% since 2005, according to CPBD.

But Former Socioeconomic Planning Secretary Cielito F. Habito, current director of the Ateneno de Manila Center for Economic and Research Development, said in an interview yesterday that there could be an spike in this ratio as the 2010 elections approach, since "that�s been the pattern" in past election years like 2004 and 2007.

The World Bank has prescribed an infrastructure spending-to-GDP ratio of at least 5% for economic growth to become sustainable and to attract more investments.

While the government still eyes raising this spending level to 5.2% of GDP by 2010 under a medium-term development plan, Budget Secretary Rolando G. Andaya, Jr. yesterday noted that prevailing economic conditions do not warrant boosting outlays at a rate that would align with global yardsticks.

"Up to now, we�ve been having implementation problems with the infrastructure sector. Growth on capital outlay between January to June is only 2% year-on-year," he said in an interview. "There�s no sense in putting all those funds, when they can�t be spent withinthe year."

Mr. Andaya blamed the slow spending in the first semester on a slump in public construction, whose growth according to National Statistical Coordination Board contracted 9.5% in the first quarter year-on-year. "We identified the problems that caused the delay and, basically, it�s brought about by the increase in the price of steelWe expect infrastructure to catch up for the remainder of the year," he said.

But Mr. Habito said the government will have a lot of catching up to do in terms of public investment if it wants to sustain a 7.2% growth posted last year.

"I don�t know if the government could catch up in the remainder of the year," Mr. Habito said. "We have to have a more sustained and deliberate infrastructure spending."

Of the P147.47-billion proposed infrastructure outlay for next year, the Department of Public Works and Highways takes up the largest chunk at P99.72 billion, with roads and bridges alone accounting for P83.8 billion.

The Department of Agriculture will receive P17.315 billion, mainly for its post-harvest facilities and farm-to-market roads. The government is allocating P14.85 to the Department of Transportation and Communications; P8.5 billion to Education; P3.36 billion to Agrarian Reform Fund; P1.5 billion to Health; P1.16 billion to the Autonomous Region in Muslim Mindanao; and P1 billion to local governments.

It has also alloted P631 million for the rehabilitation of the Pasig River, P226 million to the Metro Manila Development Authority and P175.9 million to the municipal development fund.

The proposed 2009 budget assumes a P40-billion budget deficit.

The government estimates that the budget, which raises allocation for spending on agriculture by 62% to P35.8 billion, will help the economy expand 6.1%-7.1% in 2009 from a 5.5%-6.4% estimated growth this year.

Education got the biggest allocation at about P168 billion, or about 8.5% of total spending. Defense gets P65.2 billion, or aout 4.6%. Social welfare will receive a 117% increase in funding for cash payments and subsidies to families most vulnerable to soaring commodity prices. Government workers will get a pay rise, with P20 billion set aside for them.

Cost of debt servicing will fall to 21.4% of the budget next year from 22% this year and 31.6% in 2005. � with Reuters

Foreign exchange remitted by overseas Filipino workers (OFWs) through banks reached $1.4 billion in May, up 15.6 percent from a year earlier, bringing the January-May total to $6.8 billion, up 14.7 percent, the central bank reported Tuesday.

OFWs deployed in the period from January to May totaled 533,945, up 40 percent from 382,777 recorded in the same period last year, said the central bank, Bangko Sentral ng Pilipinas (BSP), citing data from the Philippine Overseas Employment Administration.

Around eight million Filipinos, or one-tenth of the population, work overseas, mostly as nurses and caregivers, domestic helpers, ship crew members, entertainers and engineers.

The bulk of the remittances originated from the United States, Saudi Arabia, Canada, the United Kingdom, Italy, United Arab Emirates, Singapore, Japan and Hong Kong.

In a statement, BSP Governor Amando Tetangco Jr. said the establishment of more remittance centers by Philippine banks was expected to further facilitate the inflow of rising remittances.

The central bank expects total remittances coursed through banks this year would reach about $15.7 billion, up 9.0 percent from 2007.

Remittances in 2007 sustained domestic consumption, which was the country's biggest growth driver during the year. Consumption accounts for about 70.0 percent of the gross domestic product.

Tetangco said OFW remittances were expected to remain robust in the months ahead. He noted reports of expansion of oil-production capacity in the Middle East, which he said the expansion could result in increased demand for Filipino workers.

The remittances have helped to ease the drop of the peso this year while export earnings have slackened and imports have risen.

Exports grew only 3.1 percent in the January-May period, compared with the government's full-year target of 6.0 percent, because of weakening global demand for electronics, the Philippines' major export product. Imports rose 17.7 percent in the period from January to April, compared with the government's full-year projection of 10.0 percent.

MANILA, Philippines-We may have hot weather and hotheaded drivers, and "hot" money pocketed by some corrupt government officials, making life a little bit more difficult here in the Philippines. But looking at the brighter side, one "hot" item may bring back the word "pearl" in Asia's struggling Pearl of the Orient.

The Philippines was recently declared as a popular real estate hub in Southeast Asia by international commercial real estate services firm CB Richard Ellis Philippines.

It further cited that "investment opportunities in tourism, infrastructure, mining and real estate remain high" here.

In its July 2 news release sent to Inquirer Property, CBRE Philippines general manager Trent Frankum even used the superlative "hottest" in his description of how foreign investors took up properties in the Philippines. He enumerated the positive effects of the stable Philippine peso, increasing tourist arrivals, the BPO boom, and the influx of overseas Filipino workers' dollar remittances on the property market.

Frankum's declaration was heard in the recently held SMART Investment and International Property Expo at the Hong Kong Convention and Exhibition Centre June 21 and 22.

Not yet overpriced

In a recent phone interview with the Inquirer Property, Joey Radovan, vice chair of CBRE Philippines, said the reason for the country's popularity among property investors was that "we're not yet overpriced, we're still cheap." He cited, for instance, that Singapore is three to four times more expensive than Manila.

Rodovan, who also heads the global corporate services, said the developers are seriously looking at the European and Middle East markets.

Rodovan singled out business process outsourcing, tourism and OFW money as major drivers putting the Philippines in the map of Southeast Asia's most sought-after business locations.

Colliers

"Broadly agree" was the term used by Colliers International Philippines' managing director David A. Young, when asked to react on CBRE Philippines statement that the country is the "hottest" real estate hub in Southeast Asia.

Said Young: "The Philippines' real estate market is attracting unprecedented levels of investor from investors, most visibly in hospitality and tourism projects. A virtuous circle is evident. Capital investment in new infrastructure and tourist-related facilities is enhancing the Philippines' offering to new markets and generating increased visitor spending.

Despite this wave of new investment the Philippines is still playing catchup relative to its regional competitors. When it completes in 2011, Kingdom's Fairmont Hotel will be the first new luxury hotel to open in Makati for 15 years.

Tourists, hotels, condos

CBRE Philippines cited that last year, tourist arrivals broke the two-million mark for the first time since 2004, with arrivals rising to 3.091 million. CBRE said it is expecting new markets, such as Russia, Middle East, China and Korea, to help sustain tourism growth. CBRE is also projecting arrivals to increase to 3.4 million this year and generate US$5.8 billion in international tourism receipts.

Hotel room occupancy rates rose to 73.06 percent in 2007 from 71.95 percent in 2006. "New hotel and resort developments are currently in strategic business locations such as Makati City, Fort Bonifacio and the Bay Area as well as top tourist destinations such as Cebu and Boracay, further enhancing industry prospects," Frankum said.

New development projects include the US$153 million Kingdom Hotel, a combined hotel and residential condominium that will rise in Makati City.

"We expect 18,143 units to be provided from 28 upcoming residential condominiums in Makati that are targeted for completion between 2008 and 2013. Likewise in Fort Bonifacio, 11,652 units are expected to come on the market from 33 residential condominiums being constructed from 2008 to 2012," Frankum said.

Meanwhile, the offshoring and outsourcing (O&O) boom in the Philippines has created new opportunities for the real estate market, Frankum stressed. "Major investors and businesses are looking at the Philippines because it is one of the largest English-speaking nations in the world and has 33.5-million Filipinos in the workforce," he noted.

The Philippines is now the hottest real estate market in Southeast Asia, thanks to the business process outsourcing industry boom, said property services company CB Richard Ellis Group Inc.

Trent Frankum, CB Richard Ellis Philippines general manager, said the offshoring and outsourcing boom in the Philippines had created new opportunities for the real estate market.

"Major investors and businesses are looking at the Philippines because it is one of the largest English-speaking nations in the world and has 33.5 million Filipinos in the workforce," Frankum said in a statement.

He made the assessment at the recently held Smart Investment and International Property Expo, the largest and longest-running real estate expositions in Asia held in Hong Kong.

The expo showcased global real estate market opportunities and featured property experts and investors from global companies based in Asia, Australia and the United Kingdom.

Frankum said major multinational business process outsourcing firms were expanding their presence in the Philippines.

He cited Accenture, which has leased 1.3 million square feet. Other companies, such as Teletech, have built six facilities outside Metro Manila.

The Asian Development Bank expects the Philippine economy to grow 6.0 percent this year, citing that the country will not be affected too much by a volatile global environment to be caused by a US recession.

The ADB, one of the Philippines' biggest sources of concessional loans, expects growth in Thailand at 5.0 percent, in Singapore at 5.2 percent and in Malaysia at 5.4 percent. It projects 6.0 percent in Indonesia, 7.0 percent in Vietnam, 7.7 percent in Laos and 7.5 percent in Cambodia.

The ADB has committed to support the Philippine government's goal of sustaining development and said it would set aside $750 million for lending to the Philippines this year, up 28 percent from $583.8 million allotted in 2007. The ADB allocated $175 million for the Philippines in 2005 and $650 million in 2006.

In its 2008 outlook for Asian economies, released Wednesday, the ADB said investment in the Philippines "is expected to expand in 2008. Improved fiscal position is allowing the government to raise investment in much-needed infrastructure."

Tom Crouch, ADB deputy director general for Southeast Asia, said in a news briefing that the Philippines and many countries in the region would not be substantially affected by weakening demand in the United States and other industrialized countries.

The Philippines will feel the impact of a global slowdown, as the United States accounts for close to one-fifth of Philippine export earnings, but the effect will not be "worrisome," he said.

"Private consumption will remain a major growth driver this year," Crouch said. "However, high food and fuel prices will force consumers to reduce their discretionary spending."

The Philippines posted a 2007 growth of 7.3 percent expansion. For 2008 the government is aiming for 6.3-7.0 percent. The ADB projection of 6.0 percent is higher than those of many foreign investment banks and the World Bank's 5.9 percent.

Crouch said a challenge for the Philippines this year would be the government's ability to sustain gains on the fiscal front.

He noted that "many economists and developmental partners" regard the government's ability to balance its budget this year "as the litmus test as far as credibility is concerned. The government has already established credibility, but it is important to sustain this."

But he added that it was equally important for the government to respond to calls for higher spending for social services and infrastructure, especially given a tough external environment. He agreed that increasing public spending was needed to help the domestic economy cushion the effects of a global slowdown.

Crouch said increasing public spending should be matched with increasing revenue collection so as to avoid fiscal slippage.

The government is prepared to withstand the challenges brought about by a looming economic recession in the United States.

Finance Secretary Margarito Teves said the government has laid down mitigating measures to ensure that the Philippine economy would continue to grow in case the current slowdown in the US worsens into a recession.

"We continue to maintain our fiscal targets. However, we are prepared to finance additional spending if such spending is needed to counter emerging global risks that could dampen the country's growth prospects," Teves said.

The US is facing a serious economic crisis due to a credit crunch in its housing mortgage market. Investment companies are counting huge losses due to their exposure in the housing market.

Teves said that one way for the Philippines to cope is for the government to increase spending on activities and projects that would pump-prime the economy.

The priority of the government would be to finance any additional spending through revenues by improving tax collection and generating higher non-tax revenues, Teves said.

He also noted that GOCCs could be a key source of support for the National Government's pump-priming efforts.

"We are closely monitoring the developments in the US and other major markets and we are committed to doing what is necessary to mitigate the impact of a potential global slowdown on our economic growth and to maintain fiscal discipline," he said.

Asked if the government is sticking to its balanced budget goal amid its plan to increase spending, Teves said that for the moment the government has not changed its fiscal program.

"Along the way, it's possible that things could happen. We will continue to monitor this�We need to work out possible scenarios," Teves said.

Overseas Filipinos sent home $ 1.3 billion in January, higher by 15 percent compared to the same period in 2007, the Bangko Sentral ng Pilipinas (BSP) said yesterday.

BSP forecasts remittances to reach $ 15.7 billion this year. Fund transfers from OFWs are a major contributor to the country's balance of payments (BOP) and overall gross international reserves (GIR).

"The robust foreign exchange inflows from remittances at the start of the year could be traced in part to the acceleration in the deployment of Filipino workers," BSP Governor Amando M. Tetangco Jr. said.

The biggest source of OFW monies are the US, Saudi Arabia, UK, Italy, the United Arab Emirates, Canada, Japan, Singapore and Hong Kong.

Preliminary data obtained from the Philippine Overseas Employment Administration (POEA) showed that the total number of deployed overseas workers grew year-on-year by 12.4 percent in January 2008.

Classified by type of worker, the number of deployed land-based workers grew 12.3 percent to 88,775 while that of seabased workers rose by 13.2 percent to 19,804. "Continued preference for and confidence in the professional competence and skills of Filipino manpower support the view that a high level of remittances could be sustained in the months ahead," said Tetangco.

In the meantime, the BSP said remittance flows are expected to improve this year due to banks and non-bank remittance agents' "intensified efforts to provide efficient transfer mechanisms for on-time delivery of remittances and to widen their network through the establishment of more remittance centers abroad and tie-ups with foreign financial counterparts."

"The recently concluded agreement between a local telecommunications service provider and a financial institution in Saudi Arabia is expected to further facilitate the electronic transfer of remittances," said Tetangco.

Last year OFWs remitted $ 14.45 billion, up 13.23 percent compared to 2006's full-year of $ 12.76 billion. Total remittances accounted for 10 percent of nominal gross domestic product (GDP) in 2007.

BSP said there are more overseas employment opportunities in construction, information technology, engineering, architecture, and hotel/restaurant service this year.

The Philippines' trade deficit widened 15.7 percent year-on-year to $ 5.04 billion in 2007, the government said Tuesday.

Imports grew 6.8 percent to $ 55.32 billion, outpacing exports which rose 6.0 percent to $ 50.27 billion in the same period, the National Statistics Office (NSO) said.

NSO is headed by Administrator Carmelita N. Ericta.

For December, merchandise imports totalled $ 5.0 billion, 19.7 percent more than a year earlier, while exports rose 21.2 percent to $ 4.7 billion.

Total merchandise trade in December 2007 increased by 20.4 percent to $ 9.473 billion from $ 7.869 billion in December 2006.

Revenue generated by exports grew by 21.2 percent to $ 4.472 billion from the 2006 level of $ 3.690 billion.

The same is true for imports as its growth reached 19.7 percent to $ 5.001 billion from $ 4.178 billion in December 2006.

The balance of trade in goods (BOT-G) in December 2007 recorded a deficit of $ 528.00 million, higher by 8.2 percent from last year's recorded deficit of $ 488.00 million.

Electronic products which accounted for 42.2 percent of the total import bill amounted to $ 2.110 billion, up by 1.6 percent growth over the 2006 figure of $ 2.076 billion.

Compared to the November level, purchases went down by 7.6 percent from $ 2.283 billion.

Among the major groups of electronic products, semiconductors had the biggest share of 33.8 percent, up by 1.7 percent to $ 1.689 billion from $ 1.661 billion during the same month in 2006.

Imports of mineral fuels in December 2007 ranked second with a 20.5 percent share, posting a growth of 90.6 percent to $ 1.023 billion over the 2006 level of $ 536.70 million.

Transport equipment, contributing 4.6 percent to the total bill, was the country's third top import for December 2007 with payments placed at $ 228.10 million from last year�s $ 197.78 million or an increase of 15.3 percent.

This may be due to the importation of other aircraft of an unladen weight exceeding 15,000 kg. Industrial machinery and equipment ranking fourth recorded a share of 4.5 percent at $ 226.91 million worth of imports; up by 44.5 percent from its year ago level of $ 157.08 million.

Iron and steel accounting for a 2.5 percent of the total imports, ranked fifth as foreign bill amounted to $ 126.55 million or a yearon-year growth of 49.6 percent from $ 84.59 million in 2006.

Organic and inorganic chemicals ranked sixth, comprising 2.2 percent of the total imports; registered $ 108.90 million worth of imports or an increase of 85.5 percent from its year ago level of $ 58.71 million.(Edu Lopez)

Business opportunities still abound in the Philippines despite the controversies hounding the Arroyo administration, analysts said.

In an interview, Astro del Castillo, managing director of investment firm First Grade Holdings, said the business community has gotten used to the political noise created by critics of the government.

"The business sector is comfortable with the current administration. We don't see a credible replacement at this time," Del Castillo said, referring to calls for the resignation of President Arroyo.

He said he has been in touch with foreign investors who are still willing to infuse money in the country, particularly in the mining, oil, tourism, real estate and transportation sectors.

However, the investors, he said, are remaining on the sidelines until the government is able to settle the issue regarding the botched national broadband network deal, which led to a flurry of corruption charges against ranking government officials.

"The general sentiment is that the business sector is still unaffected because the peso and the stock market are not sliding," he noted.

Del Castillo said the gauge of confidence among businessmen are the peso and stock market, both of which have remained stable.

However, he said he is not entirely discounting the recent events. "There is a dent for sure but the general sentiment remains unaffected."

In fact, he warned that if the issue of corruption against ranking government officials is are not solved immediately, the country might see a downturn in investments.

"Currently the protest actions are sporadic but if this drags on for a few more weeks we might lose some economic gains that we have already achieved," Del Castillo said.

Meanwhile, Sergio Ortiz-Luis, Philippine Chamber of Commerce and Industry (PCCI) chairman, said protest actions and the political turmoil are detrimental to the country's economic growth.

"The foreign investors will start to look at other locations if we keep this up. We are not the only investment destination," Ortiz-Luis warned.

In fact, he said investors have voiced other concerns about investing in the country such as the high cost of power.

With this in mind, he said the government must strive to quickly resolve the problem.

"If this keeps up then we should expect a lingering effect but if we can resolve this quickly then the market will be able to outgrow it," he said.

The buoyant real estate sector said the subprime mortgage woes that now threaten economic recession in the US is not likely to happen in the Philippines following the implementation of document procedure to avert delinquencies in payments of housing loans.

In a statement, Chamber of Real Estate and Builders' Association Inc. (CREBA) chairman Manuel M. Serrano said the government housing institutions have already implemented the change in the documentation on installment sales of house and lot packages from the conventional deed of sale with mortgage (DSM) to the Contract to Sell (CTS) mode.

"While the switch in documentation appears simple, the implications are far-reaching," Serrano said.

Serrano explained that under a CTS mode, a 100 percent collection of monthly amortizations is assured such that should delinquencies ensue, the holder of the CTS has simply to cancel the contract, forfeit all previous payments, and re-sell the house and lot. The title to the property purchased is transferred only upon full payment of the consideration.

On the other hand, under the DSM mode the title to the property purchased is transferred immediately in the name of the buyer and the balance of the consideration is covered by mortgage and annotated at the back of the title covering the property.

When delinquencies occur, which was the case with what is now happening in the U.S, Serrano said the mortgagee has still to resort to foreclosure, repurchase the property through the auction sale, and consolidate ownership only after the redemption period of one year has expired - a process that is not only time-consuming but expensive as well. In the meantime, the money covered by mortgage remains idle.

Apart from the assurance of a 100 percent collection of receivables, said the CTS has opened opportunities for Filipinos to afford decent shelter.

Under the CTS mode, a token 10 percent equity from a housing loan borrower will suffice as against the substantial 30 percent equity required under the DSM mode.

"While the DSM equity requirement was meant to minimize chances of foreclosure but in essence it constricts the market only to the moneyed who can afford the payment of substantial equity upfront even if the payments of monthly amortizations are well within the capability of the buyer to meet," Serrano noted.

In addition, a mortgage origination under the DSM is messy and takes long time to process and approve because of the many supporting documents that the buyer must satisfy to establish the buyer's eligibility, proof of capability to pay such as Income Tax Returns and list of income sources, a thorough credit check and proofs of good credit standing such as good track records in payments of credit cards, utility bills, etc.

Under the CTS, Serrano said, all these unnecessary requirements may be dispensed with because in essence, the issue of repayment capability is selfpolicing. How the buyer performs under the terms and conditions of the CTS is what establishes his right to acquire the property he contracted to purchase or not;

"If the buyer misrepresents and is therefore unable to pay and by reason of which is contract is cancelled, he has only himself to blame. This is why under CTS, all that is required is that he files an information sheet and he understands fully the terms and conditions of the CTS," he said.

That is why the housing bonds and securities backed by mortgage receivables could shaky as what happened in the U.S. As a result, before housing securities can henceforth be marketed, future investors may require issuance of an insurance cover or sovereign guaranty.

On the other hand, housing bonds and securities backed by CTS, because of its all attractive features of 100 percent collection assured, may not only be attractive to ordinary invistors, local or foreign, but may also serve as ideal substitutes for insurance and bank reserves.

The use of the CTS in lieu of DSM was CREBA's proposal which was adopted by the government financial institutions involved in financing installment sales of house and lot packages.

Since its adoption in the late 1990's, banks have been scrambling in purchasing CTS receivables instead of DSM receivables.

The business process outsourcing industry in the Philippines will likely grow almost 43 percent this year to bring in $ 7 billion in revenue, government officials and industry executives said yesterday.

A dozen deals are expected to be signed between local business process outsourcing (BPO) firms and foreign companies that would contribute to attaining the industry's target of creating 200,000 jobs this year and 40 percent increase in revenues over last year.

This developed even as President Gloria Arroyo in a keynote address at yesterday's opening of the 8th e-Services Global Sourcing Conference & Exhibition announced that investments in telecommunications infrastructure would form part of the P200-billion total infrastructure budget of the government this year.

The government is set to establish the Philippine Cyber Corridor in various cities outside of Metro Manila to encourage more offshoring and outsourcing firms to locate in the regions.

Business Processing Association of the Philippines (BPA/P) CEO Oscar Sanez confirmed to reporters at the same event that a dozen deals are being forged during the two-day event.

"A dozen business deals are to be signed but these are ongoing leads and in the process to be finalized," Sanez told reporters.

Of the expected business deals to be signed before the end of the two-day conference, Sanez said these have been the results of ongoing discussions in the BPO sector particularly in financial services and call centers.

"These deals would help the industry achieve the growth targets of an additional $ 2 billion in revenues this year to reach $ 7 billion total from last year's $ 5 billion or a 40 percent growth until 2010," he said.

As of last year, there were already 320,000 workers employed by the industry.

Sanez said the P350 million additional training for work scholarship program granted to the Technical Education and Skills Development Authority will be distributed to 54,000 potential hires through scholarship vouchers that they can use to enroll at TESDA-accredited institutions.

Since its inception in 2006, the program by President Gloria Arroyo has already benefited 44,331 call center agents, 6,346 medical transcriptionists, 389 software developers, 254 animators, 50.66 percent of whom have found employment in various BPO firms in the country.

Sanez, however, said that the industry does not measure its growth in terms of investments inflow because it is not capital intensive but rather in terms of computers and people.

With the Philippines being singled-out for its competitiveness in the voiceservices sector, Sanez said the country could leverage on that strength and established with future niches to establish it as a center of excellence in higher value added services.

According to Sanez, the next sectors where the country has the most potential to excel are in software, animation, architecture and engineering services. The software industry grew by 28 percent last year and expected to grow by 50 percent this year.

He further said that as the industry matures, there would be further consolidation where growing BPO companies acquiring smaller ones to expand their operations and yet there are new entrants into the industry that are still learning the ropes

Despite the appreciation of the peso, Business Process Outsourcing (BPO) players in the Philippines are continuing to expand, projecting an annual growth of 40 percent to $ 7 billion this year from the 2006 level of $ 5 billion.

Significantly, the anticipated economic slowdown in the US is prompting companies to go global via offshoring and outsourcing to save on costs. "Some companies still see Metro Manila as a safe and conservative location while others who have been operating BPO centers for more than 3-4 years here are confident the prospects of going provincial are worth it," according to Joey M. Radovan, Vice Chairman and Head of Global Corporate Services of CB Richard Ellis Philippines. "We see a balance on the growth prospects for space between Metro Manila and the provinces."

While the Philippine call center industry is likely to feel the brunt of a looming US recession as large global corporations cut back on investment spending, the increase in Offshoring and Outsourcing of back office operations of most US companies will offset shortfalls for voice-related BPO business.

For most Fortune 500 companies, the key to survive the current US recession is to maintain their revenue levels by saving on operational cost through their back office operations.

Filipino accountants, engineers, architects, and animators fill in the ongoing contraction in the US economy and drive the offshore demand for labor, office space and incidentals in the Philippines.

CBRE also sees a continuous influx of US companies outsourcing in the country. On the supply side, a total of 613,804 square meters is scheduled to be completed this year across Metro Manila. This will cater to BPO demands in areas like Bonifacio Global City, McKinley Hill, Northgate Cyberzone, UP Science & Technology Park.

CBRE foresees a lack of supply in the provinces for quality space to serve the BPO demand though that can change as provincial sites gets more interest.

"We also see the shift in preference of BPO players to campus-style settings that offer 4-10 storey structures in a bid to manage efficiency as experienced in operating in high-rise buildings," Radovan noted. "Low-rise buildings are also low-cost maintenance and offer exclusive occupancy to a sole occupier."

Meanwhile, the traditional office space in the Makati CBD vacancy remains low at 1% with no new Grade A space completing this year. Movement from multinational/non-BPO firms have been limited as they renew in existing premises due to the rising rents of Prime Grade A space weighed at P1,200 per square meter for 2007.

CBRE also anticipates the relocation from such firms to Grade B space since Grade A space have reached an all time high. Rents in the Makati CBD are seen to be stable as further increase might drive out more BPO firms that occupy close to 60% of the newer Grade A space to lower costs space.

This can also be viewed as a positive to other locations bringing the balance of driving overall growth to areas where no major office developments existed before.

At this time, most if not all of new office business being built within Metro Manila and Metro Cebu are 100% committed to tenants through pre-leasing leaving no buffer for immediate need for office for new entrants and/or existing office expansion. This demonstrates the caution being employed by local developers both old timers and new comers to avoid the recurrence of another local property industry crash.

A looming recession in the United States is expected to boost the Philippines' booming property market and its outsourcing industries, real-estate consultants CB Richard Ellis said Thursday.

"We see no end to the demand for commercial real estate," CB Richard Ellis Philippines Chairman Rick Santos told a news conference.

"We haven't seen this much interest since pre-1997 [before the Asian crisis]," he said.

A report by the company said that while the call-center industry in the Philippines may feel the brunt of a US recession, it will be offset by an increase in the business process outsourcing (BPO) business as US companies increase their outsourcing of back office operations. (See related story page B1.)

Manila and other major Philippine cities are seeing building booms in office and housing to cater to the large pool of accountants, engineers, architects, and animation professionals that give US firms a lower-cost option.

Outsourcing companies in the Philippines project an annual growth of 40 percent to about $7 billion this year, from $5 billion in 2006, despite the peso's appreciation, it added.

The company's country vice-chairman, Joey Radovan, said outsourcing firms now account for more than 60 percent of occupancy of the three million square meters of office space in the Makati City, the financial district of Metro Manila.

Some 613,804 square meters of new commercial space are to be completed this year across the metropolitan area, and all are committed to tenants through pre-leasing, the report said.

The Philippine economy grew 7.3 percent in 2007, the highest growth rate in 31 years, the government reported yesterday.

In 2006, the economy grew by 5.4 percent.

The government attributed the increase to "positive growth" in all sectors of the economy, led by services and industries.

"In an environment of benign inflation, low interest rates and a strong peso, the Philippine economy turned in its best performance in 31 years," said Romulo Virola, secretary-general of the National Statistics Coordination Board.

"I think this was more or less discounted by the market. But even so, it was slightly higher than what most people had expected," Astro del Castillo, director of the Association of Securities Analysts of the Philippines, told AFP. "What we are worried about now is moving forward."

Gross national product (GNP) expanded to 7.8 percent from 6.1 percent largely due to the money sent home by Filipinos working overseas.

However, net factor income from abroad (NFIA) slipped slightly to 12.6 from 13.3 percent in 2006.

In the fourth quarter of 2007 alone, the country's gross domestic product (GDP) expanded by another record 7.4 percent from 5.5 in the same period in 2006.

Socio-economic Planning Secretary Augusto Santos said the full year growth rate "exceeded market expectations."

As earlier predicted, the services sector took the growth lead, expanding by 8.7 percent in 2007, better than its already strong 6.7 percent in 2006.

Industry grew by 6.6 percent and agriculture, fishery and forestry (AFF) from 3.8 to 5.1 percent.

The industry sector was boosted by the 25 percent growth of the mining sector coming from gold, copper, nickel and other metallics.

Only the government services moved in negative zone within the services sector. The leader in that sector was the financial sector, particularly the insurance industry.

Total contributions of OFWs last year rose to another record level of $16.5 billion or 19.5 percent higher than the $13.8 billion in 2006.

Tourist arrivals was at 3.1 million in 2007, propping up domestic travel and trade in the country. As a result, the financial services likewise did very well in 2007, so were the trading and logistics sectors.

Malaca�ang said that the high growth rate registered in 2007 was a clear manifestation that President Arroyo has taken the right economic strategies and fundamentals and steps have been taken to sustain the momentum.

According to deputy presidential spokesperson Anthony Golez, the administration took the necessary steps to ensure that the country would achieve a new level of economic maturity and stability.

Golez said that the administration intends to sustain the growth momentum by investing in more infrastructure as well as the people in order to improve the country's competitiveness in the global market.

"The key to continuing the growth momentum is to invest in our people and projects, particularly in areas with the highest multiplier effects and in infrastructure that will upgrade the competitiveness of the Philippines," Golez said.

He said that the President would continue to lead the country until the end of her term with "a bigger stride in economic growth, surge of more foreign investments, more jobs for our people, strong currency and better delivery of basic services that will all be benefiting the poorest sector of our society."

"These investments have also structurally prepared the country to weather the inevitable US recession thereby mitigating the consequential effects to our economy," he said.

The President said that the government has been able to step up its anti-poverty program because of the renewed strength of the Philippine economy.

Speaking at the National Congress on Education at the Manila Hotel yesterday, Mrs. Arroyo said that the economy has turned around from being a laggard to one that is experiencing 28 consecutive quarters of growth.

"Our stock market is up, seven million jobs were created in seven years and our currency is one of the strongest in Asia," the President said.

"Investments are surging and many new companies are investing in us. We are one of the best values in Asia right now and we can be the best value if we are able to match education and job requirements," she added.

Mrs. Arroyo emphasized that poverty alleviation is still the goal of her administration and that she would continue to focus on this.

"Balancing the budget is just the first step. Over the next few years, we will translate the positive results of our reforms to real benefits for the people," the President said.

Original target remains

Despite the positive growth conditions last year, Santos said the government will retain its original 2008 growth target of 6.3 to seven percent.

Export target was placed at "less than 10 percent" after a disappointing 3.1 percent in 2007.

Inflation target, meanwhile, is from 2.5 to 4.5 percent due mainly to concerns over the volatility of world oil prices and the prospect of an economic recession in the US.

"There are still clouds in the horizon," he added.

Based on a study made by the National Economic and Development Authority (NEDA), a one percent contraction in the US economy can result in a 1.764 percentage point contraction in the Philippine GNP.

The US remains the country's leading trade partner although its contribution shrunk slightly while trade with the rest of Asia and the Pacific has increased.

Remittances from OFWs and migrant Filipinos based in the US remains the leading contributor.

The leading business process outsourcing (BPOs) firms are US-based, and the main market is the North Americas.

MANILA, Philippines -- Surpassing expectations, the Philippine economy as measured by the gross domestic product (GDP) grew 7.3 percent in 2007, its best performance in more than three decades.

"As expected, the 7.3 percent full-year output expansion exceeded market expectations and is so far the strongest since the economy registered its peak of 8.8 percent in 1976," said Augusto Santos, acting director general of the National Economic and Development Authority (NEDA).

The growth was well above the government's target of 6.1-6.7 percent and beat most forecasts by private sector economists. In 2006 the growth rate was 5.4 percent.

The high growth is expected to place the Philippines among the top five fastest-growing economies in Asia for 2007, the NEDA said. Neighboring countries have yet to announce their 2007 economic results.

The gross national product (GNP) -- the GDP plus net factor income from abroad, which covers money remittances from overseas Filipino workers -- grew 7.8 percent, the fastest rate since 1977.

Broad-based

Santos said the robust growth was broad-based, as all major sectors of the economy recorded faster expansion.

The agriculture, fisheries and forestry sector rose 5.1 percent last year, compared with 3.8 percent in 2006. The industry sector grew 6.6 percent (from 4.5 percent in 2006), and the services sector expanded 8.7 percent (from 6.7 percent in 2006).

The corn sub-sector grew 10.8 percent, banana 10.1 percent, and forestry 12.2 percent.

In the industry sector, mining and quarrying grew 25.0 percent, after a drop of 6.1 percent in 2006.

The growth in mining "is an indication that the government's effort to revive the mining industry is bearing fruit," Santos said in a statement.

Construction grew 19.6 percent, compared with 7.3 percent in 2006.

The services sector rose 8.7 percent. This sector, which includes the booming business process outsourcing sub-sector, had its fastest growth since 1987.

Almost all services sub-sectors registered faster growth: transportation and communications, 8.2 percent (compared with 6.3 percent in 2006); trade, 9.8 percent (6.1 percent in 2006), finance, 12.3 percent (11.4 percent in 2006); real estate, 6.0 percent (5.7 percent in 2006); private services, 8.8 percent (6.9 percent in 2006). Only government services registered a slowdown to 3.3 percent from 4.7 percent in 2006.

Government consumption, which pumped-prime the economy, grew 10.0 percent, the fastest pace since 1974, the NEDA said.

Economic officials said the government's improving revenue generation allowed it to spend more on social services and infrastructure.

The government raised P90 billion from the sale of assets last year, which helped it stay within its financial target for 2007 despite a shortfall in tax collection.

The government aimed to limit the budget deficit at P63 billion last year; but the Department of Finance has said the result will likely be a "small deficit" because of increased revenues. The budget deficit data are to be released next month.

From overseas

Money remitted through banks by overseas Filipino workers (OFWs) rose to an all-time high of $13 billion in the period from January to November, according to the latest available data.

The NEDA said money sent by OFWs to their families reached P759.3 billion last year, up 7.4 percent from P706.9 billion in 2006.

The negative factor from overseas is the possibility of a US recession this year, which will hurt the Philippine economy.

Recession is defined as two consecutive quarters of decline in the GDP.

The United States accounts for 16-19 percent of Philippine exports.

A one-percentage-point drop in the GDP of the United States would result in a decrease of 1.76 percentage points in the GNP growth of the Philippines, according to NEDA estimates.

The US is also the biggest source of OFW remittances, and is where most clients of call centers and other business process outsourcing operations in the Philippines are based.

Rising international oil prices and the strengthening of the peso -- which reduces the peso equivalent of dollar remittances -- will also adversely affect household spending, Santos said.

Finance Secretary Margarito Teves said,"The administration is committed to doing whatever it can to ease the burden imposed on Filipinos by the strong peso, volatile international energy prices, and a potential global economic slowdown.

Doubt on data

Benjamin Diokno, an economics professor at the University of the Philippines and former budget secretary, said it was unlikely that agricultural growth accelerated in 2007 after farm production was hit by drought.

Diokno also said imports were likely understated, because a lot of products were smuggled into the country. Earnings from exports minus spending for imports are part of the GDP computation.

The NEDA said imports contracted by 6.6 percent last year, while exports grew by 2.0ercent.

Diokno said a more believable GDP growth figure for 2007 was between 6.0 and 6.5 percent.

For 2008, Diokno said it would be difficult to sustain the 2007 growth because of the ill effects of the strong peso, restrained government spending, and slower exports.

He said GDP growth this year could reach only 5.0-5.5 percent.

Philippine economic growth, which is expected to slow down this year, is expected to recover to 7 percent in 2009, the Institute of International Finance (IIF) said in a report.

The IIF said the Philippines' macroeconomic stability will be further improved by the continued fiscal and monetary management which is "helping the economy weather more unfavorable global conditions."

"Moderate growth in consumption and a slackening in external demand are likely to slow real GDP growth to 6.5 percent in 2008 from 7 percent in 2007, before a rebound in the global economy and more accommodating policies help lift it to close to 7 percent in 2009," the IIF in its January 22 Philippine Outlook Update said.

In the meantime the IIF report said weak export growth also suggests that the country's current account surplus will be lower this year or from billion in 2007 to billion, before "recovering" to billion in 2009 as exports growth picks up.

Overseas Filipinos remitted $ 13.05 billion as of November 2007, 14.08 percent higher than the amount sent home the same period in 2006, the Bangko Sentral ng Pilipinas (BSP) said yesterday.

For the month of November alone, remittances amounted to $ 1.2 billion, up by 3.8 percent compared to the November 2006 level.

"Since May 2006, monthly remittances have surpassed $ 1 billion," BSP Governor Amando M. Tetangco Jr. said. Remittances coursed through banks are expected to reach .3 billion in 2007.

Tetangco said the sustained strong remittance flows "reflected the continued rise in the number of deployed overseas workers."

Based on initial data from the Philippine Overseas Employment Administration, the total deployment in the first 11 months rose year-on-year by 7.7 percent to 81,530. The number of deployed land and sea-based workers in November grew by 10.1 percent and 3.2 percent, respectively, BSP said quoting POEA.

Classified by skill, the bulk of deployed land-based Filipino workers comprised mostly of higher-paid professional and skilled workers such as medical and healthcare workers staff, engineers, office and restaurants/food service staff, and production-related personnel.

BSP said the higher remittances from January to November 2007 were also attributed to the increase in the number of remittance centers abroad as banks and other financial institutions strengthened their tie-ups with foreign remittance agents. "These developments provided remitters fast and efficient modes of remittance transfer facilities and also allowed beneficiaries to avail themselves of the range of financial services offered by banks," it said.

BSP said to increase banks' share of total remittances, they continue to establish strategic marketing agreements in countries with a high density of Filipino workers, such as in the US, Middle East and Southeast Asia.

Remittances from overseas Filipino workers (OFWs) reached $1.2 billion in November last year, bringing the cumulative total to $13.1 billion from January to November last year.

The Bangko Sentral ng Pilipinas (BSP) reported yesterday that remittances that went through banks expanded by 3.8 percent in November 2007 and marked the seventh straight month that monthly remittances went over $1 billion.

According to the BSP, the level of remittance in November brought the cumulative amount for the 11-month period to $13.1 billion, higher by 14.1 percent compared to the year-ago level of $11.4 billion.

The November level indicated that remittances in December would have to be at least P1.2 billion to surpass the projected $14.3 billion total for the whole of 2007.

BSP Governor Amando M. Tetangco said the sustained strong remittance flows in November reflected the continued rise in the number of deployed overseas workers a year ago.

Tetangco said that based on preliminary data from the Philippine Overseas Employment Administration (POEA), total deployment in November rose by 7.7 percent to 81,530 a year ago.

In particular, Tetangco said the number of deployed land- and sea-based workers in November grew by 10.1 percent and 3.2 percent, respectively.

Classified by skill, the bulk of deployed land-based Filipino workers comprised mostly of higher-paid professional and skilled workers such as medical and healthcare workers staff, engineers, office and restaurants/food service staff, and production-related personnel.

Tetangco said the increase in remittances from January to November 2007 could also be attributed to the increase in the number of remittance centers abroad as banks and other financial institutions strengthened their tie-ups with foreign remittance agents.

"These developments provided remitters fast and efficient modes of remittance transfer facilities and also allowed beneficiaries to avail themselves of the range of financial services offered by banks," he said.

Tetangco also reported that the bulk of remittance flows came from the US, UK, Italy, United Arab Emirates, Saudi Arabia, Canada, Singapore, Japan, and Hong Kong.

Tetangco expects total remittances from OFWs to reach $16.2 billion this year with labor deployment increasing despite the slowdown in the US economy.

Tetangco said gross OFW inflows would expand by eight percent next year, including remittances that go through informal and non-bank channels.

Remittances that go through banks, on the other hand, are projected to grow at a faster rate of 10 percent to reach $15.7 billion compared to only $14 billion this year.

According to Tetangco, the latest estimates of the BSP also upgraded the full-year projection for 2007 when OFW remittances are expected to increase faster by seven percent.

"Originally, we expected remittances to grow by five percent but based on what we have seen so far, we think total remittances will actually grow by seven percent," Tetangco said.

At this rate, Tetangco said total remittances are projected to reach $15 billion, about $300 million more than the $14.7 billion total projected earlier in the year.

Remittances that go through banks, on the other hand, are projected to reach $14.3 billion in 2007, slightly over the original projection of $14 billion.

Tetangco said there was an expected pick-up in deployment in 2008 but said that over the medium term, the sustainability of remittances would depend on the availability of manpower.

"The demand is likely to stay, it all depends on how fast and how many we can train to fill up that demand," Tetangco said.

Meanwhile, the Philippine Overseas Employment Administration (POEA) reported a higher deployment of highly-paid Filipino professionals abroad in 2007.

POEA chief Rosalinda Baldoz said the country posted a 14.1 per cent growth in dollar remittances last year mainly due to the enforcement of rules increasing the minimum monthly salaries of Filipino domestic helpers abroad.

"The growth in dollar remittance from our OFWs in 2007 was the result of reform package that regulates the deployment of domestic helpers abroad," Baldoz explained.

Baldoz noted that the country continued to post higher dollar remittances despite the minimal one per ent increase in the number of Filipino workers deployed overseas last year.

"We only posted a minimal increase in deployment but we have recorded a high growth in remittance because we have deployed more professionals," Baldoz stressed.

Recruitment leader Lito Soriano said OFWs are forced to send higher dollar remittances to the point of securing loans just so their families here could pay for their basic needs.

"They have to send more because the value of dollar is lower than before," Soriano said as he also urged banks to lower the remittance fee to help OFWs cope with the dollar depreciation.

According to Baldoz, the growth in dollar remittances should be viewed as a positive development considering the negative factors that affected the hiring of Filipino workers abroad in year 2006.

"We should appreciate the fact that despite the negative factors such as the existing deployment ban in four countries, we still recorded higher deployment and increasing dollar remittance," she said.

Combined foreign and domestic investments in the Philippines reached P350 billion in 2007 with Singapore as the top investor, Trade Secretary Peter Favila said over the weekend.

Favila said in the weekly radio program of Vice President Noli de Castro that 54 percent of the total investments last year came from foreign sources and surpassed domestic investments that reached 46 percent.

He noted that the top investors were Singapore, Japan, United States and The Netherlands which is mostly engaged in chip processors, electronics and cellphones.

According to Favila, the power and water sectors benefited most from the investments.

But he said power rates in the country are the second most expensive in the region next to Japan.

"We continue to attract investors. We hope to solve power rates because we are the next highest in Asia next to Japan if there will be investors in the power sector," he said.

Last October, Washington urged the Philippines to be one of the top business destinations in Asia as it acknowledged the significant growth in the Philippine economy bringing the country back on the radar screen of the world.

Ambassador Kristie Kenney said the Philippines, once called the "laggard" in Southeast Asia, is now in a great position because of economic improvements.

Kenney said the country should sustain the economic growth that requires to keep investing in infrastructure, good business practices to ensure that it is easy to do business in the country, respect international laws, protection of intellectual property and working on environmental protection.

She cited infrastructure projects, including construction and improvement of airports, roads and bridges to attract foreign investments.

Kenney said consumers want to buy products that are environmentally friendly and businesses want to invest where there are good environmental protection standards and tourists increasingly want eco-tourism destinations.

The decline of the dollar against the peso has drawn foreign investors to the country seeking to pour their money in mining, power and information technology, a top official of the Bangko Sentral ng Pilipinas (BSP) said.

BSP Deputy Governor Diwa Guinigundo told reporters during the weekly Kapihan sa Sulo hotel in Quezon City that the entry of foreign investors is among the positive results of the continuing decline of the dollar against the peso.

"The market sentiment is in favor of the Philippines. Investments are coming," he said.

He said the strong peso is triggered by the weakening of the dollar resulting from a fiscal deficit brought by the costly invasion to Iraq which is bleeding the US economy.

Guinigundo said since the decline of the dollar is due to supply and demand, the government cannot do anything except to provide financial management advice to affected sectors, particularly the OFWs.

He said the BSP is conducting a series of lectures to help OFWs manage their financial resources earned from their employment abroad.

He said one advice to OFWs is to refrain from buying expensive cell phones and other electronic gadgets that will just put to waste their hard earned money.

Instead, OFWs are advised to invest in income generating projects that will expand the value of their money and help them cope with the daily needs of their families.

The peso-dollar exchange rate averaged P45.94: $1 in the third quarter of 2007, appreciating by 11.9 percent from P51.39: $1 level in the same quarter in 2006, the Bangko Sentral ng Pilipinas (BSP) said in its latest balance of payments report. On a cumulative basis, the peso which averaged P47.16: $1 in the first three quarters of the year was stronger by 9.9 percent from the P51.83: $1 in the comparable period in 2006 due mainly to sustained dollar inflows from overseas Filipinos’ remittances and foreign investments. BSP said during the period, the peso was relatively steadier compared to the same period last year as it fluctuated within a narrower band. The peso-dollar exchange rate ranged from P49.16: $1 to P44.79: $1 during the first nine months of the year. (LCC)

RP posts hefty savings due to strong peso
By Iris C. Gonzales

The steady appreciation of the peso against the dollar during the first 11 months of the year has allowed the government to save billions of pesos in interest payments.

The government booked P33.2 billion in interest savings from January to November this year and P1.5 billion in savings in November alone due to the continued strengthening of the local currency against the greenback, Finance Secretary Margarito Teves said over the weekend.

Estimates by the Department of Finance (DOF) showed that the Philippines saves as much as P4.2 billion in debt service requirement for every P1 appreciation against the US dollar and another P5.1 billion for every percent decline in domestic interest rates.

DOF data showed that interest payments fell 12.9 percent to P255.1 billion during the 11-month period from the P292.2 billion recorded in the same period last year.

Teves said that aside from the appreciation of the peso against the dollar, the government also benefited from better-than-expected market rates.

Government economic managers expect the local currency to continue with its rapid increase against the dollar in 2008. 

The inter-agency Development Budget Coordination Committee (DBCC), the group that sets the country’s economic targets, expects the peso to range from P46 to P48 against the dollar this year from the original assumption of P48 to P50 against the dollar and further to P42 to P45 against the greenback in 2008.

Despite the savings during the 11-month period, however, the Philippines still has to service billions in debts to various lenders.

The government has earmarked P601.7 billion or 9.1 percent of gross domestic product (GDP) to service foreign and local debt this year.

Nonetheless, this is 30 percent or P253 billion lower than last year’s P854.4 billion or 14.2 percent of GDP.

Of the total amount allocated to service its debt this year, P303.3 billion would be used for interest payments while P298.4 billion of GDP would be used to service principal loans.

The Philipines hopes to contain the budget deficit at P63 billion this year but indications are strong that the government may end the year with a much stronger fiscal position.

Privatization of state-owned assets have reached P90.6 billion as of end-November, allowing the government to post a surplus of P12.6 billion in the first 11 months of the year.

Govt share in GOCC, state-run financial institutions’ earnings nearly double
By Chino S. Leyco Reporter

REMITTANCES to the national government made by government owned or controlled corporations (GOCCs) and government financial institutions (GFIs) nearly doubled at end-November, the Department of Finance said.

Finance Undersecretary Jeremias N. Paul Jr. said that GOCCs and GFIs remitted P34.49 billion in the first 11 months of the year, higher than the P18.81 billion in the same period last year.

“These composed of guarantee fee, interest advance, [national government] shares, dividends and income received from GOCCs like Pagcor, Manila International Airport Authority,” Paul told reporters.

National government’s share in GOCCs income reached P10.87 billion, while GFIs turned in P8.87-billion worth of dividends, P3.45 billion in interest advances and P9.3 billion in guarantee fees.

Paul said the department also collected P1.71 billion from accelerated arrears last month.

“But our program for the guarantee collection for 2007 is only P1.9 billion,” he said.

Dividends paid by the Bangko Sentral ng Pilipinas amounted to P2.5 billion. This was followed by the Philippine National Oil Co. at P2.2 billion; Philippine Port Authority, P1.37 billion; and Land Bank of the Philippines, P1 billion.

Under Republic Act 7656 or the Dividends Law of 1994, GOCCs and GFIs are required to remit half or 50 percent of the income earned in each fiscal year to the national government. The remittance should be in the form of cash or in unencumbered or real-estate properties with clean titles.

The Philippines had been hard pressed raising revenues due to weaker than programmed collections by the Bureaus of Internal Revenue and of Customs. GOCCs and GFIs had been ordered to voluntarily increase their dividend remittances to the national coffers.

Last month, the government enjoyed its biggest budget surplus of P54.1 billion, largely due to the proceeds from the sale of state assets, without which it would have ended that month in the red.

Guarantee fee eyed from PNOC-EDC

Paul also said the government expects to collect at least a billion pesos by 2010 due to a sovereign guarantee fee imposed on the new private owner of Philippine National Oil Co.–Energy Develop-ment Corp. (PNOC-EDC).

He said the government may collect P1 billion to P1.8 billion, after a decision to raise its guarantee fee to 2 percent and another 0.25 basis point every year thereafter from the existing 1 percent.

“This is the net present value [and] the bulk of it will be paid in 2010. After that will be minimal. Essentially, 80 percent of the loans will be paid by 2010,” Paul told reporters.

The sovereign guarantee will provide First Gen Corp. and its partner more time to settle the nearly P25 billion in obligations of PNOC-EDC that will mature until 2026.

To date, the country’s largest geothermal energy producer’s loans amount to P24.750 billion, including liabilities to the World Bank, Asian Development Bank and the Miyazawa Fund.

“This is a continuing guarantee. We’re not issuing a new guarantee. We’re just continuing contractual obligations to the entities that we have guaranteed,” Paul said.

Antonio Cailao, PNOC president, earlier said the Department of Justice favored extending the guarantee to the winning bidder of PNOC-EDC to make it more attractive to bidders.

OFW inflows seen to hit $16.2B in 2008
By Des Ferriols

The Bangko Sentral ng Pilipinas (BSP) expects total remittances from overseas Filipino workers (OFWs) to reach $16.2 billion in 2008 with labor deployment increasing despite the slowdown in the US economy.

BSP Governor Amando M. Tetangco Jr. told reporters over the weekend that gross OFW inflows would expand by eight percent next year, including remittances that go through informal and non-bank channels.

Remittances that go through banks, on the other hand, are projected to grow at a faster rate of 10 percent to reach $15.7 billion compared to only $14 billion this year.

According to Tetangco, the latest estimates of the BSP also upgraded the full-year projection for 2007 when OFW remittances are expected to increase faster by seven percent.

“Originally, we expected remittances to grow by five percent but based on what we have seen so far, we think total remittances will actually grow by seven percent,” Tetangco said.

At this rate, Tetangco said total remittances are projected to reach $15 billion, about $300 million more than the $14.7 billion total projected earlier in the year.

Remittances that go through banks, on the other hand, are projected to end 2007 at $14.3 billion, slightly over the original projection of $14 billion.

Tetangco said there was an expected pick-up in deployment in 2008 but said that over the medium term, the sustainability of remittances would depend on the availability of manpower.

“The demand is likely to stay, it all depends on how fast and how many we can train to fill up that demand,” Tetangco said.

Labor deployment, however, has been criticized by economist as a “cop-out” as the Arroyo administration opted to train workers for off-shore employment rather than working to create higher-paying local jobs.

A 2005 survey of the National Statistics Office revealed that the country has so far deployed over 1.4 million workers abroad, about 76.6 percent were working in Asian and the rest in Europe, North and South America.

The NSO said 50.3 percent were makes and the rest were females with female OFWs aged 25 to 29 years. The NSO said one in every three (33.1 percent) OFWs was employed as unskilled worker while those who worked as trade workers or trade-related workers comprised 14.5 percent of the total number of OFWs.

In November this year, Tetangco said that based on preliminary data from the Philippine Overseas Employment Administration (POEA), the total deployment in October increased by 3.9 percent to 88,058.

Tetangco said this was the fourth consecutive month that the deployment figure was higher compared to the respective year ago level, indicating that future remittances would continue to go up.

Classified by type of worker, the number of deployed land-based workers rose by 10.7 percent to 64,066 in October, while the number of deployed sea-based workers contracted by 10.7 percent to 23,992.

Supported by heavy dollar inflows, the peso rose to a new seven-and-a half-year high of 41.850 to the  dollar yesterday, leaving behind other currencies in the region as uncertainties about the fallout from the US mortgage crisis and interest rate decisions persisted.

At the close of trading of the Philippine Dealing System (PDS), the peso settled at 41.880, up 15 centavos from Wednesday’s close of 42.030 to $1.

Traders said the strength of the peso was due mainly to huge inflows from overseas Filipinos sending money to their families in preparation for the holiday season.

The seasonal strength of remittances was also accompanied by robust inflows of foreign portfolio investments into the stock market as financial markets saw relief in the latest US jobs data.

“Remittance flows are strong but I expect we should see some people covering dollar short positions today,” said a trader in Manila, referring to transfers back home from Filipinos working overseas, which are usually Peso still high at the end of the year.

 Morgan Stanley strategist Stewart Newnham said the Bangko Sentral ng Pilipinas (BSP) should be careful about how it moved out of the sweet spot where high interest rates support the peso but a declining trend in rates brings flows into equities and bonds.

“Monetary conditions should therefore be tightened quickly in order for the BSP to be seen to be ahead of the inflation curve,” Newnham wrote to clients.

“This is best done with the BSP taking a more hawkish tone in its communication with the markets and allowing further peso appreciation to create the necessary disinflationary offset — good news for the bullish peso call.”

 The Philippine fundamentals of a strong macroeconomic position, fiscal consolidation and stable politics were all relatively favourable, he said, and the upward trend in the peso was very much in place.

Analysts also said the US private sector jobs data boosted market sentiments and led to a rally in Asian stock markets.

After breaching the 42:$1 support level, analysts said the market would be looking at 41.80  and possibly as high as 41.75 to the dollar.

According to a trader, the Bangko Sentral ng Pilipinas (BSP) was seen in the market but not really to aggressively cap the peso against the dollar but generally offering token bids throughout the week.

Peso sustains rally, nears 41 to $1
By Des Ferriols

The peso continued to rally yesterday, edging closer to the psychologically important level of 41-to-a-dollar as it settled at 42.120 due to strong inflows from investments as well as remittances from overseas Filipino workers (OFWs).

Foreign exchange inflows that had to wait over the long weekend continued to boost the peso against the dollar, with OFW remittances picking up even more momentum towards the holidays.

The peso opened at 42.350 to $1 at the beginning of yesterday’s trade and went steadily up to its closing rate of 42.120 to the dollar which was also the intra-day high. Yesterday’s close was 18.50 centavos higher than Monday’s close of 42.305 to $1.

The volume was thinner, reaching $503.12 million against the previous day’s $621.10 million. But traders noted very little demand for dollars which pushed the peso up even higher.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said the peso would have been significantly stronger without the measures that eased foreign exchange outflows.

According to Tetangco, the appreciation of the peso worked in favor of the economy, first by allowing the build up in the country’s international reserves and creating a room for more flexibility in debt management.

From a policy standpoint, however, Tetangco said the strength of the peso also allowed the BSP to work through the initial phase of the liberalization of foreign exchange outflows.

Allowing the more liberal outflow of foreign exchange, according to Tetangco, also had the side-effect of taming the appreciation of the peso since forex inflows are not forced to stay in the country.

“In a way, the effects of these strategies have increased the demand for dollars,” Tetangco said.

Since forex outflows are allowed with more ease, Tetangco said the exchange rate did not appreciate as steeply as it would have.

Tetangco said the demand for dollars was also boosted by the fact that both the private and public sectors have taken advantage of the strength of the peso to prepay up to $2.55 billion worth of foreign obligations since it had become cheaper to do so.

“If we had not taken these steps, the peso would have been a lot stronger and appreciated a lot more steeper,” he said.

Tetangco said that these indirect measures, more than direct intervention, had better chances of taming the appreciation of the peso since the BSP’s market activities were geared only to smoothen volatility.

The International Monetary Fund (IMF) said as much, reporting that the intervention of the BSP in the currency market has done little to slow down the peso and would have little effect on future appreciation.

Property demand buoyed by OFW money, outsourcing needs

REMITTANCES from overseas Filipinos will bouy property demand despite the rising cost of goods and services, real estate money management and services firm Jones Lang LaSalle said.

A booming business process outsourcing (BPO) industry will also continue to prop up the luxury condominiums and office space market, the firm said in its latest Asia Pacific Property Digest.

�Consumer spending is expected to be buoyed by the sustained remittances from Filipinos working abroad,� Jones Lang LaSalle said.

�The main players SM Prime, Robinsons Malls and Ayala Malls have announced their expansion plans and are likely to further boost the demand for retail space in the near term,� it added.

With no new substantial supply, strong demand pulled the vacancy rate further downwards to 5.2% in the third quarter from 5.8% in the previous quarter.

Jones Lang LaSalle said sales would likely remain robust for luxury condominiums given demand from affluent Filipinos.

�Rental demand is also expected to remain healthy given the growing number of expatriates from the expanding business process outsourcing industry� The rising leasing demand for luxury condominiums is buoyed by expatriates working in BPO firms� it said.

�On the other hand, overseas Filipinos are still the main driver of home sales.�

Developers claim to have cornered 30% of remittances, thus roadshows have been staged in areas with a �high concentration� of Filipino workers such as the US, Europe and the Middle East.

While no new project was launched during the quarter, Jones Lang LaSalle said 1,029 units were scheduled to be completed in the last quarter. These will come from Fifth Avenue Place and Serendra District I section B and C.

�About 97% of there potential units have already been pre-committed, puching [the] vacancy rate down to 2.1%. The strong take-up encouraged established developers such as Ayala Land, Inc., Megaworld Corp. and Century Properties to launch new projects,� it added.

Capital Values went up by 4.7% quarter on quarter to P83,673 per square meter (sq.m). The average was lower then the pre-selling prices of new projects, now around P100,000 per sq.m.

Rental values inched up at a �steady rate� of 2.4% quarter-on-quarter at P6,024/sq.m./year.

The BPO industry, meanwhile, remains the key driver of the office market.

Jones Lang LaSalle said office rentals would continue their upward trend as new supply is �not sufficient to meet the growing demand.�

�Despite the current and expected huge demand for office space from the BPO industry, few developers have yet to embark on providing the much needed supply,� it added.

While no new supple was launched during the third quarter, both Net Cube and One World Square in Bonifacio Global City are in their final stages of construction.

�As expected, vacancy rate continued its downward slide to 3.4%. Currently, most Grade A buildings like Robinson Summit and Sky Plaza enjoy an occupancy rate or 100%.� Jones Lang LaSalle said.

Rentals have �moved up rapidly� in the past quarters as demand exceeds supply. The property firm said annual net rentals reached P8,081/sq.m./year.

BOP surplus seen topping $7-B mark

THE PHILIPPINES’ BALANCE-OF-PAYMENTS SURPLUS LIKELY breached the $7-billion mark as of end-October given the favorable foreign investment climate and stronger overseas Filipino remittances, the Bangko Sentral ng Pilipinas estimated.

From January to September this year, the BOP surplus amounted to $6.7 billion, already exceeding the central bank’s full-year target of $6.3 billion.

But BSP Deputy Governor Diwa Guinigundo Tuesday said the central bank was still reviewing its external payments forecasts for this year and next in time for the forthcoming annual review with the International Monetary Fund.

The BSP is set to release the actual BOP report for October later this week.

The BOP measures the foreign exchange transactions between the domestic economy and the rest of the world. Any transaction which gives rise to a payment by a Philippine resident like importation or debt servicing is a deficit item in the BOP while any which gives rise to a receipt like borrowing, exporting or overseas Filipino worker remittance is a surplus item.

The strong BOP position since the start of the year had fueled the peso’s appreciation by more than 14 percent since the start of the year, making the local currency the best performing in developing Asia.

Robust OFW remittances and foreign investments are driving up the country’s foreign reserves and external payments account to record surpluses this year.

Based on the latest data from the BSP, money sent home by overseas Filipinos through the banking system surged by 10.6 percent in August from a year ago to $1.2 billion despite the downtrend in the offshore deployment of new workers.

The year-on-year growth in August was faster than the 4.64-percent annual expansion in July and brought total inflows for the eight-month period to $9.3 billion, 15.3-percent better than the remittances in the same period a year ago.

The US Federal Reserve’s recent interest rate cuts have also revived global investors’ appetite for assets from emerging markets like the Philippines.

The monetary easing by the US central bank was meant to avert an economic recession that may be caused by rising delinquencies in the American subprime mortgage credit or housing loans given to borrowers with blemished credit history and little equity.

Aside from the BOP and its components, the BSP is likewise reviewing its forecasts on the gross international reserves for this year and 2008.

The country’s chronically poor performance in various international competitiveness surveys has alarmed both the public and private sectors, although the urgency seems to be felt more by the latter than the former.

During a recent presentation by the National Competitiveness Council (NCC), its co-chair Cesar B. Bautista pointed out that the Philippines ranked 49th out of 61 economies in the World Competitiveness Yearbook of the Switzerland-based IMD business school.

It also ranked 126th out of 175 countries examined by the International Finance Corp.'s "Doing Business" survey, and 71th out of 131 economies in the Global Competitiveness Report of the World Economic Forum.

Behind these weak numbers is the reality that the country continues to face an uphill struggle to improve the local economy and the lives of Filipinos.

"The challenge is not merely to improve ratings, but to create a better environment for business and our people," Bautista said.

Last year, President Gloria Macapagal-Arroyo created the NCC, which brought together representatives of the private and public sectors in an effort to arrest the country's slide in world competitiveness rankings.

Its goals were to help create a competitive Philippines by 2010, instill a culture of excellence in the country and use so-called public-private partnerships (PPP) as the country's development engine.

These goals are no less lofty when translated in tangible terms.

"We want the country to rank in the top third of all major international surveys by 2010, from our present position of being in the bottom third," NCC executive director Virgilio Fulgencio said in an interview.

Difficult task
The task is no walk in the park, however, and there have been many large-scale efforts over the last few decades--initiated by both the public and private sectors--to remedy the country's chronic problem.

According to the latest survey of the Makati Business Club (MBC) conducted for the World Economic Forum, the country rates poorly in the competitiveness of its institutions and infrastructure, with only macroeconomic stability as its saving grace.

"We're talking about our low inflation rate and low interest rates which should basically be credited to the BSP (Bangko Sentral ng Pilipinas)," MBC senior research associate Michael Mundo said in an interview. "We're very strong in that department."

The same survey revealed that businessmen were also worried about policy instability, an inefficient government bureaucracy, government instability and coup attempts and tax rates and regulations, among others.

Given the urgent problems in many sectors that make up the overall competitiveness picture, the task facing the NCC seems daunting.

The group's priorities, however, are centered on medium- and long-term solutions to buttress the country's strength as a service economy.

"We are focused on human resource development," Fulgencio said. "We want to improve basic education like English, science and math proficiency."

He noted that no less than the Department of Education is alarmed by the falling test scores of public school students in these fields, all of which are critical to retaining the country's traditional strength in the service industries.

2010 target
The NCC's program calls for a 30-percent score improvement in these fields by 2010, the implementation of teacher support programs to promote the profession and student nutrition programs.

"Education is an important field because our strength in services is founded on this," Fulgencio said.

Other aspects that the NCC wants to focus on is effective access to financing for small and medium enterprises, effective public and private sector management, improved transaction costs and flows, a seamless infrastructure network, and energy cost competitiveness and sufficiency.

For sure, the NCC's game plan is not lacking in boldness, given the failure or similar efforts in the past.

The peso continued its rampage yesterday, easily crashing the P43/$ 1 psychological barrier to enter the P42/$ 1 territory, and closing at P42.795 to the dollar, a new seven-year peak as the US dollar extended its decline to hit new lows after Fed Chairman Ben Bernanke’s view of the US economy.

Despite intervention from the monetary authorities, the peso climbed on big inflows from Overseas Foreign Workers and portolio investments also boost the local currency, now described as the best performing Asian currency in the past two weeks, having gain 1.0 percent during the period.

Expectations of another cut in the Bangko Sentral ng Pilipinas policy rate next week also lifted the peso which rose as high as P42.65 in early trade.

The BSP, armed with a record-high foreign exchange reserve of $ 31.4 billion as of last September, has been intervening actively to slow the peso’s gains.

Bank treasurers are looking at "lows of P41 or possibly highs of P40" as the rate for the end of the year.

"The current strength will give impetus for peso to fly to lows of P41 and possibly highs of P40 by year end," projected Rizal Commercial Banking Corporation (RCBC) Executive Vice President and head of treasury Eduardo Sergio G. Edeza.

As early as mid morning trade in the spot, the peso already touched down the P43 barrier to hit P42.85. New concerns on the extent of the damage wrought by the subprime mortgage sector turmoil in the United States prompted some portfolio managers to preen their eyes on emerging markets, including the Philippines.

This pushed the peso to breach the P42 level, commented Chinatrust Philippines Executive Vice President Roland Avante.

Before the end of the morning session, the peso surged to P42.67.

"The weakness of the dollar, continued flows of OFW remittances and investments, including in government securities plus the speculative positioning by market on the expected rate cut by the BSP next week were the factors driving the peso to its new levels," explained Avante.

BSP Deputy Governor for monetary stability Diwa Guinigundo admitted that the strong inflows as shown by the "impressive performance in the stock market" is driving the peso up.

"The strong inflows are consistent with our projection of a strong BoP (balance of payments) arising from our strong financial system," Guinigundo said.

In fact, Guinigundo disclosed the BSP is currently reviewing its BOP numbers for a possible revision, in preparation for the visit of the International Monetary Fund (IMF) later this month.

But analysts also suspect the central bank is happy to see the currency appreciate slowly, to alleviate the pressure on inflation from rising food and crude oil prices.

"We continue to see a stronger peso going forward because of expectations OFW remittances will pick up during the Christmas season," another trader said.

"This coupled with dollar inflows expected from the stockmarket and privatisation of PNOC-EDC... our target is P42.50 now," he said.

The Philippine government is selling its 60-percent stake in PNOC-Energy Development Corp to raise funds to meet its budget deficit target for the year.