Wednesday, August 30, 2023

BWorld 632, Financing Growth

Financing growth
August 22, 2023 | 12:02 am

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.

(1st of a series)

This column will produce a new series on Financing Growth. The take-off point is the successful UP School of Economics program in development economics alumni association homecoming lecture last Saturday titled “A Conversation with finance and budget secretaries on financing sustained economic growth.”

Finance Secretary Benjamin E. Diokno and Budget Secretary Amenah F. Pangandaman discussed the recent and medium-term economic performance and targets of the economic team and Marcos administration.


Of the top 50 largest economies in the world in GDP size in 2022, 32 have reported their second-quarter 2023 GDP data. The top three fastest-growing in the first half or average for Q1 and Q2 2023 were the United Arab Emirates (UAE), Philippines and China. But UAE and China have fast growth in 2023 on low base or low growth in Q1 and Q2 of 2022, whereas the Philippines has fast growth in 2023 on high base or high growth in 2022. So it would appear that of these 32 major economies in the world, the Philippines has the most dynamic and resilient growth.

And of these 32 economies, 11 have low H1 growth of below 2%, while seven have contractions of 0.1% to 1% including Germany — the largest economy in Europe — Sweden, Poland and Taiwan. I added four countries with modest or high growth in Q1 but no Q2 data yet (Table 1).

The global and regional economic environment in 2023 is worse than in 2022. A growth of 3% or higher now looks fast already. The Philippines growing at 5.4% in H1 was already an outstanding performance.


Secretary Diokno and Secretary Pangandaman discussed an optimistic short- to medium-term economic and fiscal outlook. Below are four sets of data presented by the two secretaries, among the many data they discussed and for brevity, I compressed these sub-tables into one.

Sub-table I shows the growth target of the Development Budget Coordination Committee (DBCC), and projections by the ASEAN+3 Macroeconomic Research Office and the three multilaterals — ADB, IMF and WB. The four institutions’ projections for 2023 are within the DBCC target, but for 2024, the three multilaterals have lower projections than DBCC but still high — 5.5% or higher.

Sub-table II shows that all the five credit rating companies either upgraded or affirmed and sustained their previous ratings for the Philippines since President Ferdinand R. Marcos, Jr. assumed power in July 2022. The most recent were made by Fitch, from BBB- to BBB stable in May, and by R&I, from BBB+ stable to BBB+ positive early this month. The next goal is to move from BBB+ to A and I think that is highly possible.

Sub-table III shows the medium-term fiscal projections like reducing the public debt/GDP ratio, deficit/GDP ratio and keeping the infrastructure spending/GDP ratio between 5-6% yearly. I also think these are doable, although I wish that deficit/GDP ratio was below 3% by 2028.

Sub-table IV shows an ambitious infrastructure program of P1.3 trillion until 2028, led by more roads and bridges. Both secretaries highlighted two main sources of funding other than the budget and new borrowings from multilaterals — more public private partnerships (PPP) and the Maharlika Fund (Table 2).

BusinessWorld reporter Keisha B. Ta-asan was at the lecture and she wrote two stories, “Diokno: Tuition-free college education unsustainable” (Aug. 20), “DBM chief says Q2 GDP growth would have been higher if not for gov’t underspending” (Aug. 21). Good to see you there, Keisha.


Even if it was a Saturday afternoon of a long weekend, the UPSE auditorium was full during the lecture by the two secretaries. The bulk of the audience came from PDE alumni batches of the 1970s and 2010s.

After the lectures and open forum with the two secretaries, dinner was served courtesy of the Philippine Center for Economic Development of UPSE. Then came the PDE homecoming program. Mai Valera-Co, president of batch 46th, and I were the co-MCs. There were lots of fun games, raffle prizes and giveaways to all alumni who came, plus food and beer. Our batch also gave an entertainment number — economic carols composed and sang in December 1997.

For that very successful event, the two secretaries’ lecture and PDE homecoming, I want to thank the following.

Our corporate sponsors who gave donations in kind, in alphabetical order: Alas Oplas & Co. CPAs., Astoria Hotels and Resorts, Gallerie Joaquin, iOptions Ventures Corp., Japan Tobacco, Inc., Manila Electric Co., Nestlé Philippines, Philip Morris Fortune Tobacco Corp., Robinsons Retail and San Miguel Corp.

Friends who represent the companies above: Marycris (also my sister), Jeffrey, Jack, Pidro, Robert, Joe, Arlene, Noel, Robina and Ferdie. Thank you guys, more blessings to your companies.

Of those 10 corporations, only iOptions Ventures is province-based, in Palawan. Pidro was my dormmate at the UP Narra dormitory in the 1980s, a very kind man and he formed the Palawenyo Savers, the CSR arm of iOptions that provide scholarships and nurture rural-based entrepreneurship like developing small organic farm systems, biochar production including carbonized rice hull and liquid smoke.

For the organizing team, special thanks to UPSE Dean Joy Abrenica (also our teacher in PDE in 1997-1998), Rose San Pascual, Chelle Magboo, many other staff of UPSE, my co-MC Mai Valera-Co, PDE Alumni Association convenor Monching Bacani and most importantly, former UPSE faculty and PDE Director Ruping Alonzo (RIP) who is well-loved and remembered by so many PDE graduates from various batches.

Thank you all. Fantastic lectures and homecoming. We will do it again next year.

See also: 
BWorld 629, On ratings upgrades and the budget of state universities, August 25, 2023
BWorld 630, GDP growth resilience, and the finance and budget lecture at the PDE reunion, August 26, 2023
BWorld 631, Energy realism: Decarbonization and deindustrialization, August 27, 2023.

Deindustrialization 18, Germany recession and degrowth

More stories about Germany here. Enjoy.

German consumers 'pay the highest electricity prices in Europe'
The Local 7 Jun, 2021

German energy prices are so high they’re driving companies to relocate, industry body says
Hannah Ward-Glenton June 21, 2023

Germany: The return of the 'sick man' of Europe?
Henrik Böhme August 1, 2023

De-industrialization begins
August 4, 2023

Offshore Wind Farms Altering Marine Ecosystems: “Sufficiently Potent To Redirect Existing Currents”

By P Gosselin on 20. August 2023

German Scientists: Global Warming A “Corrupt”, Fear-Mongering Scheme “Headed By Super-Rich”
By P Gosselin on 23. August 2023

Germany is struggling to move away from its ‘sick man of Europe’ image

German economy stagnates in Q2 after winter recession
Reuters August 25, 2023

Germany’s Ministry Of Economic Projects Gas, Electricity Prices To Rise To Painful Levels
By P Gosselin on 26. August 2023

Germany: Record amount of shrinkflation and deceptive packaging helps hide inflation from consumers
Over 1,000 products have utilized deceptive packaging to hide price increases in the last five years
JOHN CODY August 29, 2023

‘Germany Is Run by Idiots,’ Says Top Female AfD Politician
August 29, 2023

"If you live in a country where you are fined for fishing without a license, but not for crossing the border illegally without a valid passport, then you have every right to say that this country is run by idiots."

Germany suffering due to obsession with green energy and bureaucracy, industry federation president claims
Federation of German Industries President Siegfried Russwurm criticized the federal government for lacking the courage to break outdated rules
THOMAS BROOKE  August 29, 2023

“We have to be honest about what CO₂-free energy will cost in the long term – not just wind and solar power, but including the necessary backup capacities when the sun and wind are not delivering,” he added...

“Massive investments in grids are required for power distribution – all of this parallel to the expansion of wind and solar capacity many times over."

Germany begins dismantling wind farm for coal
German energy giant RWE has begun dismantling a wind farm — to make way the expansion of its Garzweiler open-pit mine
By WESTER VAN GAAL  August 29, 2023.


See also:
Deindustrialization 15, Germany turning from Greens to AfD, June 22, 2023
Deindustrialization 16, UK expensive electricity, coal to avoid blackout, July 08, 2023
Deindustrialization 17, Germany recession, ESG problems, August 17, 2023.

Sunday, August 27, 2023

BWorld 631, Energy realism: Decarbonization and deindustrialization

August 17,

(Part 4)

The rush for “net zero” emissions and decarbonization is evident in Europe while many Asian countries are not so enamored with this rush. I have put together a chart showing how the United Kingdom and Spain are in a mad rush towards decarbonization by ditching their coal consumption, compared to China’s more considered conversion and Vietnam’s rejection of decarbonization.

The percentage of coal/total power generation from 1992 to 2022 are as follows: UK, 60% to 2%; Spain, 41% to 3%; China, 75% to 61%; and Vietnam, 9% to 39%. As countries reduce their coal consumption, their overall power generation either declines or flatlines (See Table 1).

To cover more countries, I added Germany and France to the “rush-to-net-zero” decarbonization countries, and India and the Philippines to the “no-rush” decarbonization countries. The coal/total generation of these countries for 1992 to 2022 are as follows: Germany, 55.1% to 31.3%;   France, 8.1% to 0.7%; India, 68% to 74.3%; and the Philippines, 6.9% to 59.6%.

In Table 2 one sees their average economic performance from 1983 to 2019, up to the first half of 2023. The UK, Spain, Germany, and France are generally crawling with just 1% to 3%. In contrast, China, Vietnam, India, and the Philippines were humming along with 3% to 11%, except for the Philippines’ 1% average growth in the 1980s to the early 1990s. This can be explained by the political upheavals in the mid-1980s, the coup attempts in the late ’80s, and severe blackouts plus a volcanic eruption and a major earthquake in 1990-92.

The rush to decarbonization of G7 industrialized countries simply leads to their piecemeal path to deindustrialization.

Of course, there are many reasons and factors why countries grow slowly or fast, but the fast expansion of total power generation is a big factor. Many big investments will not come to a country that suffers from frequent blackouts and has expensive electricity.

There were a number of interesting and beautiful reports in the energy sector recently. See these reports in BusinessWorld written by my favorite energy reporter, Ashley Erika O. Jose:

“No net-zero target in Philippine Energy Plan” (July 23), “NGCP fully committed to completing projects” (July 26), “Energy dep’t counting on extra 8,000 MW in capacity by 2028” (July 26), “RE transition won’t happen ‘overnight’ — DoE” (July 30), “Meralco seeks replacement power for San Miguel’s terminated supply deal” (Aug. 2), “Meralco looks at nuclear power as long-term solution” (Aug. 3), “AboitizPower in talks with US nuclear supplier” (Aug. 10), “August power rates down on lower generation charge” (Aug. 10), “ERC suspends order allowing NGCP to pass on franchise tax” (Aug. 10).

I particularly like the reports on “No net-zero target,” that Meralco and Aboitiz Power are looking into setting up nuclear power plants someday, and the Energy Regulatory Commission’s (ERC) suspension of the National Grid Corp. of the Philippines’ (NGCP) practice of passing their franchise tax on to the consumers.

Coal remains the single biggest power insurance of the Philippines against frequent blackouts and underdevelopment. Existing coal plants should expand, from Luzon to the Visayas to Mindanao.

On nuclear power, France used generate 75% of its total power from nuclear plants, resulting in an ample and cheap supply of electricity. It had very bright and beautiful lights at night, a huge amount of electricity to export to neighbors in Europe, and no nuclear accidents. Then they embraced net zero with an exit plan for many of its nuclear plants. Then energy prices and overall inflation started rising. The Philippines should embark on nuclear power generation, including the revival of the Bataan Nuclear Power Plant, and setting up small modular reactors (SMRs) for big island-provinces.

Regarding the new ERC order to the NGCP, I think this is the first time that the ERC had the courage to issue that kind of order. The NGCP is levied with a 3% franchise tax in lieu of corporate income tax and other taxes and this should not be passed through to the consumers. Consumers pay extra on top of capex and high profit of NGCP — they should not pay for the franchise tax. Bravo, ERC.

See also the previous columns on “energy realism” series: “Energy realism: Raising consumption and economic growth” (Part 1, June 29), “Energy realism: G7, BRICS, and other big Asian economies” (Part 2, July 6), and, “Energy realism: Oil-coal consumption and NGCP’s delayed projects” (Part 3, July 13).

See also: 
BWorld 628, Inflation deceleration, G7 deindustrialization, and deficit reduction, August 24, 2023
BWorld 629, On ratings upgrades and the budget of state universities, August 25, 2023
BWorld 630, GDP growth resilience, and the finance and budget lecture at the PDE reunion, August 26, 2023.

Pol. Ideology 86, Endless crisis narratives and authoritarianism

On endless crisis narratives -- food/hunger crisis, population crisis, HIV/AIDs crisis, NCDs/smoking crisis, garbage/plastic crisis, climate crisis, virus/health crisis, other "end of time" and similar catastrophy scenario -- all these suggest that we need a "saviour", and 99% that saviour is more government, more multilaterals, more authoritarianism.

Overall, people are rational, they won't jump into mutual destruction. That's why we have zero world war since 1945 or nearly 8 decades ago. The doomers will lose and rationality will prevail.

A friend talked about the anti-Christ in BRICS expansion. I replied to him that many anti-Christ now are actually in the US, UK and other western countries. See for instance this outright reversal of nature, transgender surgeries tripled in the US, data for 2016-2019 only, could be worse in 2022-2023.

In contrast, Putin the non Christian is banning transgender mutilations.

Respecting nature means men are men, women are women.

Respecting nature means natural immunity should be trusted, not "vax immunity."

Respecting nature means climate cycle of warming-cooling should be recognized.

Note that "end of time" religious narrative can lead to dictatorship. Like Muslims or Buddhists or Jewish or militant christians etc asserting their end of time version over the rest of humanity.

For me, any "end of time" would be about 10 B years more. Planet earth is about 4.6 B yrs old, all our energy and life sustenance come from the Sun. Like 12 hours of sunlight, evening light from the Moon as reflected light from the Sun, photosynthesis by plants and crops, water evaporation and condensation cycle via Sun heat, etc.

The projected timeline where our Sun will spend out all its solar energy is about 10 B years.

Virus alarmism is political science that masquerade as medical science.

Climate alarmism is political science that masquerade as climate science.

Hunger/population alarmism is political science that masquerade as agriculture science.

All about politics and political science.

Meanwhile, see these recent interesting papers.

Understanding The Parasitic Cooperation Between Globalists And Leftists
Brandon Smith August 18, 2023

The Road to Totalitarianism (Part 3)
CJ Hopkins August 24, 2023

Author Administrator  August 25, 2023

The war on terror must never be won, because the Department of Homeland Security and all the parasites that live off that bloated cow need your money. Joe Rogan points out the same narrative when it comes to homelessness. Bureaucrats and departments in all these Democrat shitholes don’t want to solve the homelessness problem. They would be out of jobs. Everything is a racket.

From Covid To Climate Change: Vehicles For Global Authoritarianism
Brandon Smith August 26, 2023

"The covid agenda and the climate change agenda are very similar in that they rely on a core fallacy. The lie is that these events are actually dictated by human behavior, and thus human behavior must be controlled in the name of the “greater good.” The idea goes beyond this, though, into the realm of collectivism... every single person must have their lives micromanaged by the state to prevent some kind of chain reaction that leads to catastrophe for the precious bug colony."

Biden's 'Booze Czar' Floats New Possible Guidance Of Only Two Beers A Week
Tyler Durden AUG 27, 2023

See also:
Pol Ideology 82, Reflections of a former Marxist on property, December 18, 2021
Pol. Ideology 83, The end of liberalism and return of militarist-protectionism? April 12, 2022
Pol. Ideology 84, Capitalism and prosperity, June 28, 2022
Pol. Ideology 85, Austrian Economics and marginal utility, January 06, 2023.

Saturday, August 26, 2023

BWorld 630, GDP growth resilience, and the finance and budget lecture at the PDE reunion

GDP growth resilience, and the finance and budget lecture at the PDE reunion
August 15, 2023 | 12:02 am

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.

Last week the Philippine Statistics Authority announced that the GDP growth in the 2nd quarter (Q2) of 2023 was 4.3% — lower than the Q1 growth of 6.4%, and lower than the 6% expected by most economists. I myself projected growth of 6%, having forgotten to consider the base effect of high government and household spending in the Q2 2022 election period.

Nonetheless, some articles quickly appeared that bashed the 4.3% growth. One paper suggested that Philippine growth is grinding to a “halt,” which is intellectually dishonest. In Q2 2023, Europe’s top two largest economies, Germany and the United Kingdom (UK) had GDP performances of -0.2% and 0.4%. ASEAN’s richest economy, Singapore, grew by 0.5% while South Korea’s was 0.9%. The Philippines grew by 4.3% and it is grinding to a “halt”? That is a ridiculous political hit job.

I checked the GDP performance of the world’s top 50 largest economies in GDP size nominal values in 2022 (No. 1 was the USA, No. 2 China, No. 39 the Philippines, No. 50 Portugal). Of these 50 economies, five have no quarterly data, and as of this writing, 22 have GDP data until Q1 only (including Japan, Thailand, India, Malaysia, and Canada), and 23 have data until Q2. I averaged the Q1 and Q2 or first half (H1) performance of the 23 economies that provided the data, and the results are very interesting. (See Table 1)

One — The United Arab Emirates (UAE) has had the fastest H1 performance at 8.5%, followed by the Philippines and China with 5.4%. But the UAE’s fast growth rested on a low base, with low growth of only 0.6% in H1 2022, which was the same for China with only 2.6% last year. Whereas the Philippines’ 5.4% rested on a high base, with high growth of 7.8% last year. So, it shows that the Philippines has the most dynamic, most resilient economy out of the 23 here.

Two — If the other 22 economies report their Q2 performance soon, their H1 performance very likely will be lower than Philippines’ because their Q1 data were all lower than the country’s 6.4%.

Three — The global economic environment this year is worse than last year. Of the 23 economies, only five (the UAE, China, Mexico, Hong Kong, and Russia) have H1 2023 results that are higher than in H1 2022. Among the other 18 economies, some suffered huge growth deceleration, like the UK which was at 7.2% in H1 2022 then 0.3% in H1 2023; Austria, which went from 7.5% to 0.8%; Singapore, which went from 4.3% to 0.5%, Taiwan, from 3.4% to -0.7%; and Sweden from 4.7% to -0.8%. Germany is technically in a recession with -0.2% in both Q1 and Q2.

With an economic resilience like this, the Philippines’ economic team has actually done a good job. Minus a political agenda, and just a pure economic assessment considering the worsening global and regional economic environment, one sees that the Philippines deserves a toast.


Now, looking at the sources of growth deceleration — GDP on the demand side, the decline showed up in government consumption which constituted 15% of GDP in 2022, again after a high base in H1 2022 related to the elections in May 2022.

Looking at GDP on the supply side, the decline occurred in the industry sector which constitutes 30% of GDP, particularly in manufacturing. The global slowdown in trade plus high domestic interest rates must have contributed to this situation. (See Table 2)

To give more context, the billions of pesos and not just percentage changes are shown in Table 3. The GDP performance in H1 2022 of P9.6 trillion already recovered or overtook the pre-lockdown period H1 2019 of P9.45 trillion.

Industry performance in H1 2023 of P3 trillion has slowed down percentage wise, but value is still high compared to H1 2019 of P2.88 trillion or H1 2022 of P2.93 trillion.


One big issue that the economic team must address seriously is the big jump in the country’s public debt/GDP ratio since the ill-advised strict and prolonged lockdown dictatorship of 2020-2021. Recall again that the Philippines’ GDP contraction of 9.5% in 2020 was the worst in Asia, and the worst in Philippine economic history since World War 2.

I put together a table comparing public debt/GDP ratios. While the Philippines’ ratio has increased to 57.5% in 2022, this is still lower and more manageable compared to the 66% of Malaysia, 76-77% of Pakistan and China, 83% of India, above 100% of Singapore and the G7 countries except Germany. (See Table 4)

We should focus on reducing the numerator (public debt) while expanding the denominator (GDP size). Political hit jobs via dishonest economic assessments do not contribute to solving these important twin challenges.


This coming Saturday, Aug. 19, the UP School of Economics (UPSE) Program in Development Economics (PDE) Alumni Association will hold a homecoming. The first program is “A Conversation with Finance and Budget Secretaries on Financing Sustained Growth” with Finance Secretary Benjamin Diokno (7th PDE batch) and Budget Secretary Amenah Pangandaman (33rd PDE batch) as speakers. This will be held at the UPSE auditorium in UP Diliman at 4 p.m. This is open to the public.

There are oodles of issues in finance and spending in the country and they are the top officials of the government to address these issues. See for instance these recent reports in BusinessWorld, mostly written by my other favorite objective economics reporter, Luisa Maria Jacinta C. Jocson.

A. Finance and taxation reports: “Untaxed tobacco seen costing gov’t P30B this year,” “Sale of defunct GOCCs’ assets expected to raise over P25B,” “Outstanding debt hits P14.15-T as of end-June” (Aug. 2); “Outstanding debt seen to hit P15.8-T in 2024” (Aug. 3); “BIR files 127 tax evasion complaints” (Aug. 4); “Falling interest payments seen benefiting other gov’t programs” (Aug. 8); “Q2 debt-to-GDP ratio flat at 61%” (Aug. 10); “Proposed tax reforms seen to raise P120.5B in revenues next year” (Aug. 11); and, “Business groups welcome amended CREATE rules” (Aug. 14).

B. Budget and spending reports: “Budget dep’t seeking to fully digitize gov’t procurement process” (July 31); “Study on gov’t pay hike could finish in time for 2024 budget” (Aug. 1); “DBM submits P5.77-trillion national budget to House,” “MUP pension budget for 2024 set at P164B” (Aug. 3); “Consensus reached on mandatory MUP pension fund contributions” (Aug. 7); “DBM to review agencies’ budget use” (Aug. 8); and, “Agencies ordered to draft catch-up spending plans” (Aug. 10).

PDE graduates from different batches, from the late 1960s to 2023, are encouraged to attend this very important lecture and meeting with their fellow alumni.

While the lecture is open to the public, the succeeding program, the PDE reunion, is exclusively for PDE alumni and faculty. On behalf of the organizing team, I would like to thank the following corporate sponsors for their donations in kind, for raffles and give away to participants: San Miguel Corp., Robinsons Retail, Meralco, Astoria Hotels and Resorts, Nestlé Philippines, Gallerie Joaquin, Japan Tobacco, Inc., iOptions Ventures Corp., Philip Morris Fortune Tobacco Corp., and Alas Oplas & Co. CPAs. Thank you.

I particularly want to mention these friends who represent their respective companies above: Ferdie, Robina, Joe, Jeffrey, Arlene, Jack, Robert, Pidro, Noel, and my sister Marycris. Thank you.

See also: 
BWorld 627, Energy at SONA 2023 and electric cooperatives, August 23, 2024
BWorld 628, Inflation deceleration, G7 deindustrialization, and deficit reduction, August 24, 2023
BWorld 629, On ratings upgrades and the budget of state universities, August 25, 2023.

On Cryptocurrency, CBDCs, MIF

Tonight, former BSP Deputy Governor Diwa Guinigundo, a fellow UPSE alumnus and fellow BusinessWorld columnist, gave a talk at Concerned Doctors and Citizens of the Philippines (CDC Ph) and he spoke on two topics.

Some of the slides of Diwa below.

On Maharlika Fund, among the slides he showed.

During the open forum, I briefly spoke and argued that Central Banks (CBs) have created many regulations restrictions that made many investors and the public feel there are many rules over their shoulders already so they created cryptocurrencies to have freedom from CB regulators. Instead of CBs stepping back, they created or plan to create CB digital currencies (CBDCs) to offer some alternative to existing unregulated cryptos while keeping old regulations on fiat money. So those CBDCs may be understandable if there are old regulations to be removed but this is not happening, so I think CBDCs are wrong.

Diwa said CBDCs are still fiat money-based, the value is still backed up and guaranteed by CBs to keep people's trust on the monetary system. That CBs recently raised interest rates and did other monetary tools to fight high inflation, and that people should not blame CBs policies but high inflation.

On the Maharlika Fund, I argued two points why they are useful.

1. Many big infra projects in the country were killed or hindered by politics. Like the Tampakan gold copper mining project in Mindanao, reviving the Bataan nuke power plant (BNPP), or getting majority control of NGCP, the only remaining private monopoly nationwide. 

Tampakan is $5.9 B, the single biggest FDI in the PH. Killed by the provl government more than a decade ago because they do not like open pit mining.
BNPP can generate about 4,200 Gwh of electricity, bigger than the output of all wind and solar plants in the country combined, only about 2,900 Gwh.
NGCP is largely responsible for frequent yellow red alerts, not doing many important transmission projects but earning about P24 B/yr profit.

Maharlika should invest in projects like Tampakan, BNPP revival, and any political harassment from other agencies or LGUs will be minimized as they know there is govt footprint and involvement there.

2. Other SWFs abroad, rich ones like the SWFs of Norway, Saudi, UAE, China, etc. will likely come and invest seeing their counterpart here having confidence in certain big projs.

Diwa argued that there are many institutional problems in the country that should be addressed more than creating the MIF. Like corruption, high power prices.

I did not mention this as I knew that there are other questions from the audience. If we wait to have fiscal surplus, current account surplus before putting up a SWF or SIF it will not happen 100%. Why, because the legislators, the bureaucracy from national to local, the consultants, the academics and consultants, the welfare dependents, etc will just invent new spending anytime when they see new revenues are coming.

Nonetheless it was a good and informative lecture. Thanks Diwa.

Friday, August 25, 2023

BWorld 629, On ratings upgrades and the budget of state universities

On ratings upgrades and the budget of state universities
August 10, 2023 | 12:02 am

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.

Last Monday, Rating and Investment Information, Inc. (R&I), a Japan-based debt watcher, affirmed the Philippines’ investor-grade credit rating at “BBB+” and revised its outlook from stable to positive. The Finance department attributed this good news “to the country’s robust macroeconomic fundamentals, improving fiscal position, sound banking system, comfortable external payments position, and stable political environment,” explaining that “A ‘BBB+’ rating is two ranks higher than the minimum investment grade and just one notch below the ‘A-’ rating.”

On May 22, the Philippines also earned a ratings upgrade from Fitch, with the outlook moved from “negative” to “stable.” The Philippines’ rating remains at “BBB,” considered “investment grade” and above the “speculative grade” of D to BB. A “BBB stable” means the risk of loan default is low and that the country’s ability to pay its financial obligations is high.

I created a table comparing the ratings of major East and South Asian economies from four ratings agencies. The Philippines is within striking distance of an “A” under R&I and “BBB+” under Fitch and, hence, will be in a comparable ratings position as Thailand, and might even be at the position of Malaysia (see Table 1).

Today, Thursday, the Philippine Statistics Authority will release the GDP figures for the 2nd quarter (Q2) of 2023. This column was written yesterday, Wednesday, and, not having seen the date yet, this columnist initially predicted that it would show around 6.4% growth in Q2 — but considering that the electricity demand data for Q2, among other factors, is not that high, I project growth of 6% instead.

The average GDP growth in Q1 and Q2 of 2023 in East Asia were as follows: South Korea 0.9%, Singapore 0.6%, Taiwan -0.7%, Hong Kong 2.2% (but in 2022 it was -3.5%), China 5.4%, Indonesia 5.1%, and Vietnam 3.7%.

After the Philippines’s Q1 growth of 6.4%, if Q2 growth is 6%, then the Q1 and Q2 average growth will be 6.2%. If Q2 growth is only 5.6%, then the average will be 6%. Either way, the Philippines will remain the fastest growing economy in East Asia, if not among the top 50 biggest economies in the world.

This might prompt the other ratings agencies — S&P, Fitch, and Moody’s — to consider another upgrade for the Philippines.


Meanwhile, many state universities and colleges (SUCs) will receive bigger budgets from the National Government (NG). The budget for public elementary and secondary education also keeps rising, and university personnel and students are supposed to be mature enough to generate revenues other than asking for more money from taxpayers. So I build this table on SUCs receipts or income and expenditures.

The good thing is that SUCs’ internally generated (IG) income is rising — from P55 billion in 2019 to P78 billion in 2022, and projected to reach P84 billion next year.

But the National Government’s appropriation for the University of the Philippines (UP) and all its campuses nationwide, plus the Philippine General Hospital (PGH) in UP Manila, is not rising fast, going from P19 billion in 2019 to P30 billion in 2022, but going down to P23 billion next year.

To make sense of these numbers, I computed the ratio of IG receipts (IG + beginning balance or carry over from last year) over NG appropriation plus the ending balance. The result shows an average from 2019-2024 of 50.5% for all SUCs and 44.4% for UP system (see Table 2).

I believe that the law on Universal tertiary education — or simply the free-tuition law (RA 10931, August 2017) — is wrong. People are not getting poorer (for instance, the Philippines’ GDP growth 2012-2017 average was 6.7%), so lawmakers are only raising peoples’ expectations of more freebies from the state.

Government — Congress, the SUCs themselves, the Commission on Higher Education, and local governments — should begin to wean SUCs away from high funding. One scheme is to raise the IG/(appropriations+ending balance) ratio from the current 50% to, say, 55% by 2030, 60% by 2040, and so on. The same trend should apply to UP.

People should assume more personal and parental responsibility for their own lives and households, and not expect more government responsibility which actually means more government taxes to fund such expanded freebies. Besides, there is a double standard in the treatment of Filipino students — those in private universities are not subsidized even if they and their parents are also taxpayers.


The UP School of Economics’ Program in Development Economics (PDE) alumni reunion on Aug. 19, Saturday, at the school auditorium will have two PDE alumni, Finance Secretary Benjamin Diokno (7th batch) and Budget Secretary Amenah Pangandaman (33rd batch) as guest speakers.

The lecture at 4 p.m. will be open to the public plus media. The alumni reunion in the latter part will be exclusive to PDE graduates. While there is no registration fee, there are plenty of raffle prizes and giveaways, courtesy of our corporate sponsors and donors.

See also: 
BWorld 626, Debt service, sustained growth, and the PDE alumni homecoming, August 18, 2023
BWorld 627, Energy at SONA 2023 and electric cooperatives, August 23, 2024. 
BWorld 628, Inflation deceleration, G7 deindustrialization, and deficit reduction, August 24, 2023.

Economics carols (macro, micro, public finance, math econ)

These two economics carols were composed and sang by UPSE PDE batch 33rd, our batch, in Dec. 1997, nearly 26 years ago. We sang this again during the PDE alumni homecoming last Saturday Aug. 19. Enjoy.

Note: Devt. Econ. (DE) 201 is macroeconomics, DE 202 is microeconomics, DE 251 is public finance econ.
Dr. Orville Solon (former UPSE Dean) was our teacher in DE 231 (Stat Econ) with health econ as frequent case studies.
Dr. Joy Abrenica (current UPSE Dean) was our teacher in DE 206 (Math Econ).

Econ. 201, 202, 251
(Tune: Jingle Bells)

201, 201
Aggregate demand
Y = C + I, G + X - M!
IS curve, LM curve
Modelong Keynesian
Inapply sa thailand
Bumagsak naman

Doon sa 202
Andon si Pareto
May monopoly
Perfect competition
And price equilibrium
Isoquant and isocost
Compliments, substitute.

251, 251
Dornbusch and Fischer
kung may market failure
may multiplier, hey!
Government borrowings
Crowding out effect
Interest debt payment
1/3 na ng budget.

Orville and Joy
(Tune: Joy to the world)

Orville Solon
May regression
Gulo ng equation
Dulot ay confusion
Pahingi na lang kami ng condom.

Joy Abrenica
Crush ng bayan
Expert ng Lagrangian
Calculus at algebra
Prisoner’s dilemma
Master ng game theory
At Nash equilibrium
Pahingi na lang kami ng uno.

Thursday, August 24, 2023

BWorld 628, Inflation deceleration, G7 deindustrialization, and deficit reduction

Inflation deceleration, G7 deindustrialization, and deficit reduction
August 8, 2023

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.

Last week, there was a piece of good news reported by the Philippine Statistics Authority — the inflation rate has significantly declined, from 8.7% last January down to 5.1% last June, and only 4.7% in July. The Inter-Agency Committee on Inflation and Market Outlook (IAC-IMO), headed by the Secretaries of Finance, the National Economic and Development Authority (NEDA), and Budget, is working.

Continuing this column’s inflation monitoring of major economies of the world and Asia, I note that the average inflation rate of the Philippines in January-July 2023 is 6.8%, still high but not as bad as that in the UK, Italy, and Germany which range between 7-9%.

I checked food inflation in particular and saw that a surprising trend is that all the G7 countries (group A) have very high food inflation, with averages of 3.5% to 9% in January-July 2022, and 8% to 18% in January-June 2023. Group B (other big Asian economies) and group C (ASEAN-6) countries had food inflation of only 2.5% to 8.8% in January-June 2023 (see Table 1).

This column has suggested since last year that the G7 countries, the Europeans especially, are on the slow path to deindustrialization and degrowth, driven mainly by their climate, energy, and trade policies. Industrialized countries are supposed to have low inflation because they can mass produce and have efficient storage and transportation of a huge amount of food and other commodities — now this is not happening.

The Philippines’ economic and infrastructure teams should note this slow deindustrialization in the west and further modernize our energy, seaports, and airports, toll roads, water and other infrastructure, to attract many companies that are slowly leaving the west.


Also last week, Budget Secretary Amenah Pangandaman and the Office of the President submitted the budget proposals for 2024 to Congress. Below is a summary of the fiscal program from the Budget of Expenditures and Sources of Financing (BESF). I extended the data to 2020 and 2021 to further provide context. Here are the trends.

1. Disbursements have jumped from P3.8 trillion in 2019 to P4.23 trillion in 2020, and P5.16 trillion in 2022. Consequently, the deficit has more than doubled, from P0.66 trillion in 2019 to P1.55 trillion/year average in 2020-2022.

2. Net borrowings (new gross borrowings minus amortization) have nearly tripled, from P0.88 trillion in 2019 to P2.24 trillion/year average in 2020-2022, which is huge and really unsustainable.

3. The Deficit/GDP ratio has expanded from -3.4% in 2019 to -7.8% yearly average in 2020-2022 (see Table 2). This was irresponsible and very dangerous damage done by the lockdown dictatorship of the previous administration in 2020 and 2021.

The projected deficit/GDP ratio this year is still high at 6.1%. The main problem is not in the revenue side, because they keep rising even without new tax measures as many businesses and households are still recovering from the “kill business” philosophy of the horrible lockdowns. The problem is in the expenditure side, and I want to highlight three sources of spending distortion.

1. The salaries, allowances and bonuses of government personnel — from the National Government down to barangay staff — were given intact in 2020-2021 even if millions of people became jobless in the private sector and many taxpaying businesses were closed by the government. Revenues declined from P3.14 trillion in 2019 to only P2.86 trillion in 2020 and P3 trillion in 2021.

2. Endless subsidies with no timetable — like free tuition in all state universities, free irrigation, free healthcare, and free monthly cash for millions of households, and so on. If you reward poverty, then many people will declare themselves poor even if their actual incomes are rising. And many social welfare agencies plus their consultants will demand that their budget should keep rising by tens of billions yearly.

3. The continuing fiscal bleeding from irresponsible pensions for the military and uniformed personnel (MUP). I say irresponsible because the active and retired MUPs contribute zero for their generous current and future pensions, and the pensions are funded 100% from taxes — yet they are not even taxed. The proposed reforms in MUP pension have been submitted to Congress — new entrants will contribute, which is good. But current retirees and pensioners will keep getting tax-free pensions, up to about P180,000/month, tax free. Congress should tax this.

My minimal government hat says I should not support the continuing expansion of the budget while revenues keep lagging. But the economist in me recognizes the constraints faced by the economic team, so I support their target of sustained reduction in the deficit/GDP ratio to only -3.5% by 2026. And hopefully down to only -2.8% or less by 2028 when the Marcos Jr. administration steps down.

See also: 
BWorld 625, SONA 2023: investments, revenues and climate, August 17, 2023
BWorld 626, Debt service, sustained growth, and the PDE alumni homecoming, August 18, 2023
BWorld 627, Energy at SONA 2023 and electric cooperatives, August 23, 2024.

The UPSE PDE lecture and homecoming 2023

A great lecture then homecoming of graduates of the UP School of Economics, Program in Development Economics (PDE) last Saturday, August 19 at the school auditorium.

After the lecture, conversation and open forum that ended around 5:30pm, early dinner, then the PDE alumni homecoming program. 

It was a Saturday afternoon of a 3-days weekend (Monday Aug 21 a holiday) yet many alumni came. This group photo already around 7pm, many still staying.

Good to see old and new friends, fellow graduates of PDE from different batches, the 1970s to 2020s.

Thanks Dean Joy, Rose, Chelle, other UPSE staff.

See also:
BWorld 580, Ten themes in development economics (and the Ruperto Alonzo lectures), February 03, 2023
BWorld 626, Debt service, sustained growth, and the PDE alumni homecoming, August 18, 2023.

Wednesday, August 23, 2023

BWorld 627, Energy at SONA 2023 and electric cooperatives

Energy at SONA 2023 and electric cooperatives
August 3, 2023

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.

At his second State of the Nation Address (SONA) last week, President Ferdinand Marcos, Jr. said, “We finally have a Unified National Grid, with the interconnection of the Luzon, Visayas, and Mindanao grids… However, 68 grid connection projects are much delayed, according to the ERC’s count. We are conducting a performance review of our private concessionaire, the National Grid Corp. of the Philippines (NGCP). We look to NGCP to complete all of its deliverables, starting with the vital Mindanao-Visayas and the Cebu-Negros-Panay interconnections.”

Good points, Mr. President.

The NGCP is the only remaining private monopoly nationwide. All other existing monopolies are geography or province-based, like electric cooperatives (ECs) and private distribution utilities (DUs). NGCP is the transfer of a state monopoly to a private monopoly and should be subject to public audit and oversight.

Below are four reports showing that the NGCP has evaded such audit and disobeyed a number of its franchise responsibilities.

First are reports from the BusinessWorld archives, 2017-2019: “NGCP now expects unified power grid by 2020” (July 5, 2018), “NGCP seeks ERC approval to procure ancillary services from power firms” (July 25, 2018), “NGCP reveals reasons for delayed IPO” (April 4, 2019), “Energy chief slams NGCP for refusing inspection of control center” (Nov. 29, 2019), and, “NGCP a step closer to backdoor listing” (Dec. 23, 2019).

Second are these reports from the Philippine Daily Inquirer archives, 2012-2015: “NGCP lines up 6 major transmission projects” (Feb. 27, 2012), “NGCP still up for IPO; preparations ongoing” (Aug. 4, 2013), “Osmeña: NGCP failed to detect power supply problem” (Jan. 23, 2014), and “ERC orders audit of NGCP performance” (Feb. 6, 2015).

Third is a column by former Finance Undersecretary Romeo Bernardo, “The way forward for the power industry,” BusinessWorld, Jan. 26, 2014: He wrote, “… the systems operator National Grid Corp. of the Philippines fully contracts what the system requires. The establishment of a reserve market has been long delayed.”

Fourth, the Energy department’s Department Circular (DC) 2017-12-0016, “Adopting the guidelines for the performance assessment and audit of all power generation, transmission and distribution systems and facilities” (Dec. 28, 2017), and DC 2019-12-0018, “Adapting a general framework governing the provision and utilization of ancillary services in the grid” (Dec. 4, 2019).

From the above titles alone, it is clear that the NGCP has disobeyed or delayed implementation of key projects like early nationwide interconnection of the grid, doing an initial public offering (IPO), the procurement of firm contracts for ancillary services (AS), and not heeding the call for audit by the Energy department.

Former Energy Secretary Alfonso Cusi persisted on calling for an NGCP audit but his boss, former President Rodrigo Duterte, did not back him up, so nothing happened. Current Energy Secretary Raphael Perpetuo Lotilla has called for an NGCP audit, and he is lucky that his boss, President Marcos Jr., is backing him up, and even mentioned it in his SONA, so audit results should be available in a few months.

I have made my own assessment to see if NGCP has helped or hindered the fast expansion of Philippines power generation. I made a table looking at electricity generation in Asia. Group A are those countries with 2,000+ kWh/capita in 2008, and group B are those with below 1,000 kWh/capita. I chose 2008 as the baseline pre-NGCP because its franchise operation started in January 2009. Then I computed the percent change in power generation from 2008 to 2022.

Group B countries have a low base or a low level of power generation and, hence, percent changes over a decade or more are usually high compared to Group A countries which came in with a high base. The Philippines has had an expansion of 88%, the second lowest out of six countries after Pakistan with just 56% expansion.

From the numbers, I would say that the NGCP has hindered faster expansion of power generation in the Philippines. Being a big nationwide monopoly with lots of fiscal incentives and other privileges that are not available to other sub-sectors of the energy sector, it should have wide leeway to encourage more power generation. But in the absence of a firm contract in AS, there has been delayed transmission for power plants already in operation, plus hesitancy to build new plants for fear of non-available transmission lines.


Recently I saw reports of municipal mayors and their people complaining about their electric cooperatives (EC) giving them lousy service — high electricity prices, occasional or frequent power interruptions. Among these ECs are Batangas Electric Cooperative (Batelec I), and First Laguna Electric Cooperative, Inc. (Fleco).

Nasugbu, Batangas Mayor Tony Barcelon, and 10 out of 11 municipal mayors in Laguna under Fleco, led by Pakil, Laguna Mayor Vince Soriano, are very vocal about the expensive electricity and bad services of these two ECs. Some mayors and residents want their municipalities to be served by Meralco and not their ECs.

In previous columns about ECs, I have argued for consolidation and corporatization of all ECs in the country. Many ECs have little financial discipline because they are under monitoring by the National Electrification Administration (NEA), a political body. Private and corporate DUs on the other hand, are monitored by the Securities and Exchange Commission, along with all other corporations in various sectors and sub-sectors of the economy. Because the NEA is a political body, politics usually prevail, not the financial stability and customer service of the ECs.

The NEA was established in 1969 or 54 years ago. More than half century and it still pampers many ECs that still ask for subsidies and some government support, like forever children in need of adult political supervision. We invite private businesses to invest in the countryside but many ECs themselves cannot finance their own investments in robust distribution systems.

In my province alone, Negros Occidental, there are three ECs — Noneco, Ceneco and Noceco — plus there are two ECs in Negros Oriental — Noreco I and Noreco II. One island and five entities, five separate boards, five presidents and general managers. I checked the Facebook page of Noneco and saw there were lots of “emergency power interruption in…” postings and advisories. Not good.

The Energy Regulatory Commission (ERC) requires ECs and distribution utilities (DUs) to undergo a confirmation process of pass-through charges every three years, because of its heavy workload with about 140 different entities to monitor.

With consolidation and corporatization of ECs nationwide, like having only one DU in Negros, the ERC can do more with fewer regulated companies. The cost of regulation, cost of capitalization, and operating costs can go down, which can translate to lower electricity prices, less service interruptions, and a more stable business environment.

See also:
BWorld 624, First year of Marcos: Assessing energy policies, July 30, 2023
BWorld 625, SONA 2023: investments, revenues and climate, August 17, 2023
BWorld 626, Debt service, sustained growth, and the PDE alumni homecoming, August 18, 2023.

De-dollarization 2: BRICS heading out

Some articles on the subject. Enjoy.

Biden Budget Deficits Look Like Those Normally Seen In Recessions

De-Dollarization: What Is It, and Is It Happening?
By MICHAEL BROMBERG Updated August 16, 2023
Reviewed by KATIE MILLER
Fact checked by SUZANNE KVILHAUG

The Real Cost of De-Dollarization
BENN STEIL Aug 16, 2023

Efforts To Protect US Intensify Amid Global Shift From Dollar
Alex Newman Aug 22, 2023

Gold snatched up by central banks at fastest pace in 55 years
China and Turkey among big buyers as dollar's dominance fades
Many central banks bought gold to counter sanctions-related risks and as an inflation hedge.
MUNEMASA HORIO, February 1, 2023

How Inflation Destroys Civilization… and What You Can Do About It
Nick Giambruno Aug. 22, 2023

Is the US dollar on its way out?
Michael G Plummer 21 August 2023

The Earthquake Starts Tomorrow

The Rise of the BRICS
Felix Richter, Aug 22, 2023

S&P Joins Moody’s in Cutting US Banks Amid ‘Tough’ Climate
Bank stocks are down in August with higher funding costs seen
‘Decline in deposits has squeezed liquidity,’ S&P says in note
David Scheer 22 August 2023

See also: 
De-dollarization 1: trend among countries, April 24, 2023
Gold reserves, Russia and China stockpiling, December 14, 2019.