The rate of joblessness in the Euro zone has reached 10.8 percent, this is indeed high.
source: http://www.tradingeconomics.com/euro-area/unemployment-rate.
More unemployment means less purchasing capacity by the consumers and people of a particular country or economy. It is not clear when the economic conditions in Europe will improve, so that unemployment rate and other macroeconomic indicators will start to improve.
Fiscal bleeding in the Euro area continues, as the average budget deficit (expenditures are larger than revenues) reaches 6 percent of GDP. This is twice the original target of 3 percent of GDP maximum among EU member economies.
source: http://www.tradingeconomics.com/euro-area/government-budget
More budget deficit simply means more borrowings, when those governments should in fact reduce borrowings to limit the pile up of their public debt.
From The Economist’s survey for July 2012:
GLOBAL business sentiment has worsened sharply, according to the latest Economist/FTsurvey of over 1,500 senior executives, conducted by the Economist Intelligence Unit. The balance of respondents who think the world economy will improve over those who think it will worsen fell from minus 5 percentage points in April to minus 25 in July…. Overall, 42% of executives now reckon business conditions will worsen… that Europe’s biggest problem will be economic uncertainty. More than 60% believe economic conditions in the euro area will get worse in the next six months….
source: The Economist, August 16th 2012, http://www.economist.com/blogs/graphicdetail/2012/08/daily-chart-1
Since the public debt problem in Europe and North America will linger for many years to come, the gloom will most likely stay in the medium term.
Dear Readers,
After leaving this blog inactive for many months, we are reactivating it with more regular posts, hopefully. Thank you for checking our site from time to time.
The WB-IFC’s Doing Business 2012 Report was released a few months ago. In terms of ease of doing business, our two neighbors, Singapore in the south and Hong Kong in the north, ranked 1st and 2nd worldwide, respectively. The Philippines though ranked a very far 136th.
The discrepancy in Philippine government’s business regulations policy with Singapore and Hong Kong is too far. Let us hope that the Philippine government will do something to improve and ease the procedures in doing business in the country.
Persistent bad economic news plus statements from the heads of the IMF and WB that the US economy is inching closer to a “danger zone” sparked another sell off in the US and European stocks the past 2 days or more.
source: http://www.cnbc.com/id/44629921
Note that 3 of the top 14 biggest losses in Dow Jones Industrial Average since 1987 have occurred this year — August 4, 8 and 10.
Not a good day to end the week.
The gross international reserves (GIR) of the Philippine central bank has grown by almost $5 B from July to August 2011. It is possible that the GIR might reach $80 B by the end of this month or next month.
source: BSP, SPEI/International Reserves
The bulk of such reserves though, are in the form of foreign investments. With what is happening in Europe and the US, many foreign investors are putting their money in many emerging markets like the Philippines — in local equities, bonds, the peso, etc.
The National Statistics Office released the July 2011 Philippine exports data last week. There are some surprising data:
1. Despite the damage to the Japan economy as a result of the big earthquake + tsunami last March, Japan’s imports from the Philippines has increased by almost $1 billion from Jan-July 2010 to Jan-July 2011.
2. There was a substantial decline in Netherlands and Germany importation from the Philippines over the said period, combined decline of $1.4 billion. US importations from the country also declined but by a smaller amount, only $289 M.
source: NSO Foreign Trade Stats
3. The increase in importation from China, Taiwan, Thailand and other countries have covered up the decline in importation from Europe and US.
The National Statistics Office released last week its 3rd quarter, July 2011 Labor Force Survey. The results are not good. Unemployment rate + underemployment rate in July 2011 was 26.2 percent of labor force, while it was only 24.9 percent in July 2010.
| Philippines | July 2011 1/ | July 2010
|
| Population 15 years and over (in ‘000) | 62,054 | 60,928 |
| Labor Force Participation Rate (%) | 64.3 | 63.9 |
| Employment Rate (%) | 92.9 | 93.0 |
| Unemployment Rate (%) | 7.1 | 7.0 |
| Underemployment Rate (%) | 19.1 | 17.9 |
The underemployed are those who have work but are still looking for extra work, mainly to augment their income. Meaning, they compete with the unemployed in looking for work. This should be a wake up call for the current administration to do more in encouraging more job creation in the economy.
Gold prices almost breached the $1,900 per troy ounce late last month as the uncertainty over the US debt limit hike bill was on-going.
Philippine mining will surely benefit from this continuing “gold rush”. We would like to see more transparent and more accountable system of mining via well-registered mining companies, local or foreign. Environmental fragility should be considered in the extraction of gold and other precious metals and minerals.
The government, through the National Telecommunications Commission (NTC), will soon rule whether it will not stop the planned merger of PLDT/Smart and Digital/Sun cellular with the former as the surviving entity. Even big businesses also need extra resources, perhaps the Gokongwei group sold out so it can have more money for its real estate and mall development (Robinsons), airline expansion (Cebu Pacific) and other businesses.
Consumers and telecom subscribers like us would naturally fear that a two-players industry (Smart and Globe) would not be to our advantage as we shall have only two choices, instead of three or four or more, in a really competitive environment. Our problem is that the Constitution limits the entry of foreign players like any of the big telecom companies in the US, Europe, Japan and other countries. With 40 percent maximum foreign equity, they will have a hard time looking for those big local players who can put up the 60 percent equity. So we just hope that a two-players industry will not result in higher telecom rates later.
Alas, Oplas & Co., CPAs - RSM 