Mar.

8, 2022

NCR, other low risk areas transition to Alert Level 1

Quarantine restrictions in NCR and most regions eased to Alert Level 1 from March 1 to March 15, 2022. Public transportation and establishments are
now allowed to operate at full capacity. According to NEDA, the economy is estimated to gain an additional PHP9.4bn per week as the country
continues to move towards the new normal. As the economy continue to reopen, those sectors that were hurt the hardest during the hard
lockdowns have potential to recover or benefit the most. For instance, as consumers again visit malls and go back to work in offices, the property
sector as well as retail sale and food service/restaurants stand to benefit. Similarly, as travel restrictions loosen, travel and tourism sectors could also
benefit.

Amendments to the Foreign Investments Act of 1991 signed into law

President Duterte signed into law RA 11647 or the amendments to the Foreign Investments Act of 1991. The new law encourages the entry of more
foreign investments as it allows qualified non-Philippine nationals to do business in the Philippines or invest in a domestic enterprise up to 100% of its
capital and liberalizes the practice of professions not governed by existing special laws. The law also allows foreign investors to set up 100% ownership
of all SMEs. As one of the measures pushed by economic managers to open up the economy, the law is seen to benefit domestic industries through
improving technology transfer.

Russia invades Ukraine

Years of geopolitical tensions in Eastern Europe, particularly in Russia and in former Soviet state Ukraine, escalated into a full-scale Russian military
campaign to take Ukraine. Efforts to stop the fighting have so far failed, prompting the West to impose its toughest economic sanctions against Russia.
Given that Russia is one of the biggest oil and gas producers in the world, these sanctions led to an energy price shock and a financial markets shock
amid a backdrop of a still-recovering global economy from the economic fallout due to the COVID-19 pandemic.

Although neither Russia nor Ukraine was a major trading partner of the country, the conflict will still affect the industries through higher input prices
caused by rising oil prices. The conflict also caused uncertainties that could lead to some delay or, worse, decline in foreign investments that
could have been beneficial to local industries. These factors could slow down recovery prospects of industries. Another perspective, however, is that the
country may still entail upsides from the Russia-Ukraine crisis as investors from Central and Eastern Europe may shift to other markets to do
business as part of their relocation and diversification.

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RCBC Industry Assessment

RCBC’s Industry Assessment categorizes industries based on estimated pace of recovery—slow, moderate, or fast recovery. The table below provides a
quick summary on the latest developments per industry and their corresponding effect/s.

Industry Current Latest Developments Assessment

Rating

Transportation Slow AirAsia expects stronger travel demand Relaxation of border and quarantine measures in
and Storage recovery  AirAsia Philippines expects a stronger travel demand this some countries could improve recovery prospects
hot dry season, banking on the “revenge travel” for the airline industry. However, it still offset by the
phenomenon, as the government eased pandemic increase in airline costs due to rising energy prices.
restrictions this month.
Airbus SE sees gradual recovery in the air transport market Rising oil prices and shipping costs, along with
in Asia-Pacific disruptions in the global supply chain, brought by
IATA sees passenger numbers to surge 103% in 2024 the Russia-Ukraine conflict could further slow down
recovery prospects for the shipping industry.
 International Air Transport Association (IATA) says air
traveler numbers will reach 4 billion in 2024, up 103%
over 2019 pre-COVID-19 levels, because “people want Improvement of links to global ports could bring
to travel, and when travel restrictions are lifted, they positive effects not only to the shipping industry in
return to the skies.” terms of business expansion but also to exporters
 However, Asia-Pacific market is expected to continue to in terms of reliable or wider and faster links to
lag the recovery with the region’s largest market, China, global markets. Specifically, industries such as in
not showing any signs of relaxing its severe border agriculture, automotive, electronics, construction,
measures in the near future. and garments can take advantage of their
 Notably, the IATA forecast does not calculate the impact improved connection to major transshipment hubs.
of the Russia-Ukraine conflict. Pre-COVID-19, Russia
was the 11th largest market for air transport services in
terms of passenger numbers, including its large domestic
market. Ukraine ranked 48. The impact on airline costs
as a result of fluctuations in energy prices or rerouting to
avoid Russian airspace could have broader implications.
Ukraine war to hike shipping costs – AISL
 Association of International Shipping Lines (AISL) says
Russia-Ukraine crisis will complicate the current supply
chain problem and will increase shipping costs.
 Aside from oil prices, shipping lines expect an increase in
freight rates. Ships entering the Black Sea will have to
increase their insurance coverage.

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 ICTSI Subic now part of MSC Asian coverage
 An expanded maritime service at Subic by the Subic Bay
International Terminal Corp. (SBITC) and the
Mediterranean Shipping Co. will provide industries in
northern and central Luzon with a reliable link to global
markets, especially in Europe and US.
 In addition to its comprehensive coverage of Asian ports,
the service also establishes an improved connection
between Subic and Singapore, which could help speed
up shipments of dry and reefer imports by MSC from
Europe, US, Canada, South America and other long-haul
markets covered by MSC.

Business Moderate BPOs bat for more permanent hybrid work set up to retain Positive for IT-BPO to increase competitiveness,
Services and -paced competitiveness but negative for RE leasing/office space market.
Activities recovery

Financial and Moderate BSP prescribes reporting standards for payments system Efforts by the government to ensure the efficiency,
Insurance -paced operators safety, and reliability of the payments system bring
Activities recovery  BSP issued Circular 1138 which standardizes reporting positive effect to the banking industry.
requirements for operators of payment systems and also
requires periodic independent reviews of such reports.

Mining and Moderate DMCI Mining posts record 2021 shipment Stronger external demand, brought by the
Quarrying -paced  DMCI Mining Corp. shipped 1.9 million WMT of nickel ore continued recovery in global trade activity, could
recovery in 2021, a significant increase of 18% from 1.6 WMT the further benefit the mining industry. However, this
prior year and an all-time high for the company due to could be offset by supply disruptions and market
strong China demand and elevated nickel prices. volatility brought by the Russia-Ukraine conflict.
 Average selling prices jumped 40% from US$30 to
US$42 on low global inventory amid a stronger-than-
expected recovery in stainless steel production, steady
build-up in electric vehicle battery demand and the
continuing Indonesian nickel ore export ban.

Education Moderate Vaccination not required for children attending in-person Continued reopening of schools will have positive
-paced classes effect for the Education industry.
recovery  As of March 1, 4,315 schools under DepEd nationwide Positive effect also to spillover to allied businesses
have started holding in-person classes, of which 76 are such as dorms, transport, and food
private schools. stalls/restaurants.

Electricity, Gas, Fast DOE open to suspension of taxes on coal and oil Suspension of taxes as a cushion to mitigate the
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Steam and Air recovery  Dept. of Energy says it welcomes the proposal of
Conditioning independent power producers for the government to
Supply explore the possible suspension of excise tax and VAT
on coal and oil to address the looming power rate
increase.
 Philippine Independent Power Producers Association’s
initial estimates indicate that the effect on the price of
fuel alone may reach PHP9.00 per kWh, given the March
3, 2022 price of coal, which was at US$446 per ton.
President Duterte signed EO 164
 The President orders to include nuclear power in the
country’s energy mix and look into the reopening of the
Bataan Nuclear Power Plant
Agriculture, Fast ACPC eyes P5B in lending for 2022
Forestry, and recovery  Agricultural Credit Policy Council (ACPC) hopes to lend
Fishing around PHP5bn this year to farmers and fisherfolk.
 ACPC released over PHP5.39bn worth of loans in 2021
and was also able to provide financial service access to
73 unbanked municipalities, increasing its reach to 436
out of a total of 496 unbanked municipalities.
Onion production gets additional P94.6M in gov’t support
Wholesale and Fast Supermarket industry warns of rising prices due to higher
Retail Trade recovery materials costs
 Philippine Amalgamated Supermarkets Association
warns that prices of many goods started rising this month
in response to higher fuel prices, and advised consumers
to explore substitutes for their usual favorite brands.
 Prices of basic necessities and prime commodities
increased by around 3% to 6%. For nonessentials, as
high as 8% to 15%.
Manufacture of Fast D&L Batangas plant SCO moved
Non-Essentials recovery  D&L moved the start of commercial operations of its
increase in the prices of oil and other commodities
could benefit production of electricity. Positive
effect also to spillover to other industries in terms
of lower input costs.
Advocates of nuclear power claim that it is a
reliable and cost-competitive source of energy,
which could also benefit other industries in terms of
lower input costs. It is worth noting that the cost of
electricity in the Philippines is among the highest in
Southeast Asia and also considered relatively high
compared to global standards, which in turn
discourages foreign direct investments in the
country. However, the use of nuclear power is
widely opposed due to public and safety concerns.
Nevertheless, having a source of energy that is
reliable, cost-competitive, and safe according to
international standards could benefit the industries.
Access to financial service could benefit the
agricultural sector as it could help solving its long-
standing problems in farm productivity.
Higher input prices brought by rising oil prices due
to Russia-Ukraine conflict could slow down
wholesale and retail trade.
Quarantine restrictions, supply chain disruptions,
and lack of business-friendly regulations (ease of
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 coconut oleochemicals plant in Batangas to January business) still remain as some of the factors that
2023 from May 2022. The company's plant will slow down recovery in manufacturing.
manufacture coconut oleochemicals for consumer care
products.
 According to the company, the move was "in
consideration of the recent turn of events," which
includes the earlier Omicron-related surge, global port
congestion and supply chain disruptions, and "longer-
than-expected" processing of registration and licenses.

Information and Fast PLDT building a 100-MW data center in Laguna Positive for the expansion of the industry.
Communication recovery Globe, ST GDC, Ayala Corp form joint venture for data
center business
DITO pilots 5G fixed wireless broadband in 146 barangays in
NCR.
BOI is pursuing the planned investments of SpaceEx for a
satellite-based internet services in the country
Philippines to benefit from possible subsea cable projects
 The country stands to gain US$34bn in additional GDP
cumulatively from 2021 to 2025 and 380,000 new jobs by
2025 from the subsea cable investments of Meta
Platforms (or Facebook), which aims to expand
broadband capacity in emerging markets worldwide.

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