source: Reuters

BASEL, Switzerland - Interest rates in the Philippines are appropriate given balanced inflation risks, which allow the central bank to pursue stable monetary policy without endangering growth, it governor said on Sunday.

Amando Tetangco also told Reuters China's recent move to make the yuan's exchange rate more flexible -- one of the key focuses for central bankers gathering on Sunday for the annual meeting of the Bank for International Settlements -- reflects confidence in the world's third largest economy and is positive for Asia.

The Philippine central bank held its policy rate at a record low of 4% for the eighth consecutive meeting in June but unexpectedly cut its 2010 and 2011 inflation forecasts, raising expectations that any tightening could be later and less than expected.

The downgrade comes even as the economy expanded 3% in the first quarter, its fastest in almost 22 years, prompting the government to raise its 2010 growth target to 5% to 6%.

"Growth rates in Q1 gave us a surprise. (But) it is unclear whether that kind of growth is going to generate additional inflationary pressures. Growth in Q1 even Q2 may have been influenced by election spending," Tetangco said in an interview in the Swiss city of Basel.

"There is a broad balance between upside risks and downside risks to inflation. Inflation dynamics are quite favourable. Given this we should be able to have the flexibility to preserve monetary stability and support economy growth ... We see interest rates as appropriate at this time."

On the full-year growth forecast, Tetangco said: "It's doable. There may be some deceleration (from the Q1) ... because of certain uncertainties such as what's happening in Europe, how it's going to impact other developed economies."

Multi-speed recovery

Tetangco said central bankers gathering in Basel will discuss China's economy, Europe's sovereign debt crisis and a recovery in the United States.

"The global economy is showing a multi-speed recovery, with emerging markets particularly those in Asia seen to lead this recovery. As a result of that, if a tightening cycle would start, it will be in Asia," he said.

"China is the main driver of growth in the global economy now. China is re-orienting itself towards the domestic economy. The (yuan reform) is really a sign that China's authorities are more confident that the recovery is on a solid footing. That should be positive for us in Asia."

source: abs-cbnnews.com

A former budget secretary on Monday urged incoming President Benigno "Noynoy" Aquino III to consider increasing the 12% value-added tax while lowering income taxes as a way to rein in the country's ballooning budget deficit.

In an interview, former budget chief Benjamin Diokno said the Aquino administration should increase taxes based on consumption instead of income. He said a person who has three jobs actually loses a third of his salary to taxes before spending a single centavo of his earnings.

"You should be taxed based on consumption or what you take from society. If you do nothing but shop, then your taxes should be higher. [Income taxes] are at 32% right now but if you cut it by 18%, it puts more money in
your pocket, which gives you more spending power. The government can now earn back that money by the higher VAT," he told ABS-CBN's "Umagang Kay Ganda."

Diokno said the new government should also consider increasing taxes on so-called sin products such as cigarettes and alcohol, and allocating the collections from that tax to health care.

He said the Aquino administration could also increase taxes on gasoline and earmark collections to public infrastructure spending.

Diokno said the government should move quickly in implementing new programs while Aquino's political capital is high. He said the country can only operate on deficit spending for the next 18 months before getting serious on the budget deficit.

The Department of Finance earlier raised this year's budget deficit ceiling to P300 billion, which is P7 billion higher than the P293.2-billion original target ceiling

Diokno, meanwhile, warned that a failure to rein in the budget deficit will lead to even higher taxes for future generations.

"We are spending more than what we are earning. It's scary because if you look at our tax collections in the first quarter compared to the amount we spent on paying for foreign debt, we are paying P127 to debt principal and amortization for every P100 we collect," he said.

He added: "So the question is -- where is the government getting the money to fund education and health and other sectors? It means we're borrowing more. It means bigger taxes for the youth or belt-tightening, which restricts services to people who really need it."

For his part, Finance Secretary Margarito Teves said the new target is still in line with the deficit-to-gross domestic product (GDP) ratio goal of 3.6%.

"What is important is the trajectory. Our deficit as a percent of the GDP is getting lower and at the same time our debt as a percent of GDP is also getting lower," he said.

source: gmanews.tv

The Energy Department is offering investors in oil and gas exploration nine to 10 new areas under the 2010 Philippine Energy Contracting Round, an official told reporters on Friday.

The department is making a final list of the oil and gas areas that will president to the incoming Energy secretary of President-elect Benigno Aquino III, according to Energy Undersecretary Ramon Oca.

“We will have to present that to the new Energy secretary. I guess it might be too late to present it to Secretary (Jose) Ibazeta," Oca told reporters.

The sites in are in Palawan, as well as in Mindanao and Central Luzon.

“We're still checking if there are protected areas in these sites. If there are protected areas or even sanctuaries, we will have to avoid them to avoid problems also, particularly bird and marine sanctuaries," Oca said.

The department started promoting oil and gas exploration in 2004 in an effort to reduce the country's reliance on imported fuels.

The contracting round is designed to encourage private sector participation in the government’s energy independence program through a transparent and competitive system of awarding service and operating contracts.

The contracting round for oil and gas exploration has brought in $455 million worth of investments, involving 30 service contracts as of March this year, according to Energy data.

The department offers separate contracting rounds for geothermal and coal areas.

Under the 2006 contracting round, the government offered to nine petroleum areas covering 71,357 square kilometers, which included coal prospects with a combined estimated reserves of 421 million metric tons and geothermal areas with an estimated capacity of 100 megawatts. —VS, GMANews.TV

source: gmanews.tv

SINGAPORE — Oil prices rose above $69 a barrel Wednesday in Asia as a drop in US gasoline supplies and rebounding Asian stock markets bolstered confidence that demand for fuel is rising.

Benchmark crude for July delivery was up 65 cents to $69.40 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract dropped $1.46 to settle at $68.75 on Tuesday.

Gasoline supplies unexpectedly fell last week, dropping by 3.2 million barrels, the American Petroleum Institute said late Tuesday. Analysts had expected an increase of 150,000 barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Crude supplies at the key Cushing, Oklahoma storage terminal fell 772,000 barrels while overall inventories of crude and distillates rose, the API said.

"A draw in stocks at the Cushing, OK hub is potentially a bullish signal for crude oil," energy consultant The Schork Group said in a report.

The Energy Department's Energy Information Administration is scheduled to announce its supply report later Wednesday.

All major Asian stock markets bounced back Wednesday from losses this week, boosting the optimism of oil traders who often look to equities as a barometer of overall investor confidence.

However, this month's debt crisis in Europe has lowered expectations for the global economy. Bank of America Merrill Lynch lowered its forecast for the average oil price in the second half to $78 from $92 as slower economic growth undermines crude demand.

"Almost all of the (oil demand) growth will be generated in emerging markets while we have sharply reduced our forecasts for the developed world," the bank said in a report.

In other Nymex trading in June contracts, heating oil rose 1 cent to $1.882 a gallon, and gasoline gained 2.42 cents to $1.955 a gallon. Natural gas jumped 2.4 cents to $4.075 per 1,000 cubic feet.

In London, the Brent crude July contact was up 26 cents to $69.81 on the ICE futures exchange. — AP

By Lawrence Agcaoili (The Philippine Star)

MANILA, Philippines - Local share prices resumed their downtrend yesterday, reflecting renewed concerns over the European debt crisis and Wall Street’s overnight slide on fresh worries about the global economic outlook.

At the Philippine Dealing System (PDS), the peso broke into the 47 to $1 level, weakening by another 54 centavos to close at 47.100, its lowest level in six months. The peso opened at 46.690 before hitting a high of 46.690 and a low of 47.110 to $1.

Total transaction amounted to $1.601 billion, up sharply from Monday’s $717.2 million.

Analysts said investors rushed to the exits on fears that a debt contagion is inevitable, following reports that Spain’s central bank took over long-established regional savings bank CajaSur. This came after the European Union ministers agreed last week on several billions of dollars bailout package for debt-saddled Greece.

Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo earlier told reporters that the equities as well as foreign exchange markets worldwide are “significantly wild” on account of increased risk aversion on questions of the sufficiency of the rescue plan as well as the ability of European countries to adopt austerity measures to pursue fiscal consolidation.

Guinigundo believes that the jitters in the market are short term and are driven by market sentiments.

“But once some certainty is seen by the market then we expect risk aversion will normalize or stabilize and market volatility will also subside, then we should start seeing more stability more normal movement in the peso against the US dollar,” he stressed.

“What we are just seeing today are volatilities which to my mind are short term volatilities. These are driven by market sentiments and as far as emerging markets particularly the Philippines we should not be seeing this kind of volatilities for a long time because our macroeconomic fundamentals continue to be strong and very resilient,” Guinigundo said.

On Wall Street, the Dow Jones Industrials ended at a three-month low on Monday, as a bigger-than-expected increase in home sales was overshadowed by nervousness about global economic recovery.

The Dow Jones Industrial average lost 126.82 points to end at 10,066.57, extending last week’s massive losses.

The main index of the PSE declined by 2.8 percent or 88.7 points to 3,102.59. The broader all-share index lost by 2.2 percent or 44.75 points to 1,973.85.

All sub-indices finished in negative territory, with services and holding sectors, down the most as both slipped by more than three percent.

Market breadth was bearish, with decliners thumping advancers 114 to 13, while 39 issues were unchanged.

A total of 3.87 billion shares worth P4.21 billion changed hands. A quarter of that amount was accounted for by conglomerates Ayala Corp. and SM Investments.

Ayala Corp., led by the Zobel group, lost 1.5 percent to P320 per share.

SM Investments, the holding company of businessman Henry Sy, gave up 4.5 percent to P372.50.

Sector leader Philippine Long Distance Telephone Co., shed 3.9% to P2,360 per share.

Traders said that sentiment on PLDT was also weighed down by expectations that its subscriber base will not increase substantially this year.

There was one block sale in PLDT which amounted to P324 million.

Shares in power distributor Manila Electric Co. were volatile. The stock seesawed through much of the session before ending lower by 0.6 percent at P168.

At the annual stockholders meeting, Meralco Chief Executive Officer Manuel M. Lopez said he will step down on July 1 as CEO and hand over the reigns of the

company to businessman Manuel V. Pangilinan. Lopez will remain as Meralco’s chairman.

Pangilinan’s group that includes PLDT and Metro Pacific Investments Corp., controls 41.4 percent of Meralco. Pangilinan’s bloc acquired a stake in Meralco last year. Only 6.6 percent of Meralco is owned by the Lopezes.