Archives: Business World Article

The National Government’s (NG) gross borrowings declined by 65% in September, reflecting a slowdown in public spending.

The latest data from the Treasury showed that total gross borrowings fell by 64.89% to PHP 128.913 billion in September from PHP 367.183 billion in the same month a year ago.

Month on month, gross borrowings slid by 74.65% from PHP 508.527 billion in August.

Domestic borrowings, which made up 93.51% of the total, slipped by 16.98% to PHP 120.548 billion in September from PHP 145.2 billion in the same month last year.

This was composed of PHP 111.848 billion in fixed-rate Treasury bonds (T-bonds) and PHP 8.7 billion in Treasury bills (T-bills).

External borrowings, which mainly consisted of project loans, plunged by 96.23% to PHP 8.365 billion in September from PHP 221.983 billion in the previous year.

“This (lower gross borrowings) could very much reflect the lower share of foreign borrowings to the total borrowing mix of the government and could also reflect prudence of some private sector borrowers by reducing US dollar-denominated and other foreign borrowings in view of foreign exchange risks involved,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The peso closed at PHP 58.196 per dollar on Sept. 30, down by 35.1 centavos from its PHP 57.845 finish on Dec. 27, 2024.

“(The) lower amount of approved foreign loans reflected that cautiousness vs. potential forex (foreign exchange) losses that entail US dollars and other foreign loans,” Mr. Ricafort said.

Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said in a Viber message that the lower borrowings reflected slower government spending, particularly on infrastructure, and the government’s “deliberate recalibration of financing strategy” for the fourth quarter.

“While this moderation in borrowings can help ease immediate pressure on yields and debt servicing costs, it also raises two cautions such as if the underlying budget deficit remains large or rises further, the NG may need to ramp up borrowings again potentially at less favorable terms,” Mr. Rivera said.

The NG’s gross borrowings stood at PHP 2.4 trillion in the January-to-September period, up by 4.11% from PHP 2.3 trillion a year ago. This made up 92.11% of the revised PHP 2.6-trillion financing program for 2025.

Domestic debt rose by 9.16% to PHP 1.96 trillion in the period ending September from PHP 1.795 trillion a year ago. This accounted for 92.83% of the PHP 2.04-trillion domestic borrowing program this year.

Broken down, domestic debt was composed of PHP 1.05 trillion in fixed-rate Treasury bonds, PHP 425.61 billion in retail Treasury bonds, PHP 300 billion fixed-rate Treasury notes, and PHP 181.15 billion in T-bills.

As of end-September, gross external debt stood at PHP 434.597 billion, down by 13.84% from PHP 504.447 billion a year ago. This made up 89.03% of the PHP 488.174-billion external borrowing program this year.

Broken down, foreign debt was composed of PHP 191.965 billion in global bonds, PHP 171.307 billion in program loans, and PHP 71.325 billion in project loans.

External borrowings as of end-September were padded by the global bond issuance that raised USD 3.3 billion or PHP 192 billion in late January but settled in February. — Aaron Michael C. Sy

KUALA LUMPUR — The Philippines expects stronger regional trade and investment flows as two key trade pacts — the Association of Southeast Asian Nations (ASEAN)-China Free Trade Area (ACFTA) 3.0 Upgrade and the Second Protocol to Amend the ASEAN Trade in Goods Agreement (ATIGA) — promise to modernize economic cooperation across the regional bloc.

At a news briefing here on Sunday, Palace Press Officer Clarissa A. Castro quoted Special Assistant to the President for Investment and Economic Affairs Frederick D. Go as saying the ATIGA upgrade will keep the intra-ASEAN trade pact relevant amid evolving global trade conditions.

“The enhanced agreement offers significant benefits, particularly through improvements in trade facilitation measures, transparency provisions, dispute settlement mechanisms, and the inclusion of new and emerging trade elements,” she said.

The amended ATIGA was inked by Trade Secretary Ma. Cristina A. Roque on Saturday and was turned over to the ASEAN leaders on Sunday.

Ms. Castro said the new provisions, including mutual recognition of Authorized Economic Operators, will allow certified traders faster cargo clearance throughout ASEAN.

The agreement also promotes self-declaration of origin, electronic certification (e-form B), and the acceptance of digital documentation, making cross-border trade easier for Philippine businesses.

“Businesses will find it easier to comply with administrative requirements self-declaration of origin, the implementation of the Electronic Certificate of Origin (e-Form D), and the acceptance of digital documentation,” Ms. Castro added.

Meanwhile, the Philippines and Canada aim to finish free trade agreement negotiations by 2026, vowing to accelerate talks following a bilateral meeting at the 47^th ASEAN Summit between President Ferdinand R. Marcos, Jr. and Canadian Prime Minister Mark Joseph Carney.

They talked about efforts to deepen a trade relationship valued at more than USD 3 billion, covering sectors such as manufacturing, defense, and both conventional and clean energy.

Mr. Carney, in a separate statement, outlined Canada’s strategy to double its non-US exports over the next decade, positioning Southeast Asia as a key partner in that effort.

Canada and the Philippines agreed to fast-track negotiations on a bilateral free trade agreement, with the goal of completing talks by 2026.

They also committed to advancing a broader Canada-ASEAN free trade pact, which they aim to conclude during the Philippines’ ASEAN chairmanship the same year.

The two leaders also welcomed the prospect of a bilateral visit “at the earliest opportunity” and agreed to maintain close coordination as both countries look to expand trade and investment cooperation.

Meanwhile, Ms. Castro said the ACFTA 3.0 upgrade will make the ASEAN-China partnership “more modern, more comprehensive, and better aligned with today’s global realities.”

Citing Foreign Affairs Secretary Ma. Theresa P. Lazaro, Ms. Castro said the revised framework will deepen cooperation in digital and green economies, enhance sustainable supply-chain connectivity, and promote the empowerment of micro, small and medium enterprises (MSMEs) within regional value chains.

The ACFTA 3.0 Upgrade expands the original pact, which was signed in 2002, by introducing provisions on competition, consumer protection, digital economy, green economy, and supply-chain connectivity, on top of trade in goods, customs procedures, and investment cooperation.

The pact with China was ASEAN’s first FTA outside the bloc and remains one of the most important partnerships of the bloc.

Beijing is the largest trading partner of the bloc since 2019, reaching USD 507.9 billion in 2019, according to ASEAN’s website.

The ASEAN-China FTA in 2005 quadrupled the trade between the two.

ASEAN studies lecturer at De La Salle-College of St. Benilde Josue Raphael J. Cortez said the upcoming signing of the ACFTA 3.0 Upgrade underscores ASEAN’s commitment to strengthening ties with major global powers while ensuring its economies remain adaptable and competitive.

The enhanced pact reflects the bloc’s readiness to address global trade challenges, green transition, and sustainable growth — priorities shared with key partners such as China, the US, and the European Union, he added.

“With China showing further commitment to embrace green prosperity, we may expect that this partnership will signal deepened ties between the 11-country membership and Beijing not just on tech transfer, but also in devising ways on how we may effectively navigate green transition together,” he said via Facebook Messenger.

“At the same time, in recognition of the integral role MSMEs play in bolstering the Southeast Asian economies, this may also be a way for the sector to gradually embrace digitalization, which is now the name of the game in conducting business.” — Chloe Mari A. Hufana, Reporter

The Philippines’ budget deficit narrowed in September, the Bureau of the Treasury (BTr) said on Thursday, as corruption probes into flood control projects slowed government spending.

The fiscal gap shrank 9.22% year on year to PHP 248.1 billion, while month on month, it nearly tripled from August’s PHP 84.8-billion shortfall. Total government spending dropped 7.53% to PHP 529.8 billion from a year earlier, reflecting a slowdown in project implementation.

Primary expenditures — total spending minus interest payments — fell 10.22% to PHP 448.1 billion, while interest payments rose 10.63% to PHP 81.7 billion.

Revenue collection also weakened, slipping 5.99% to PHP 281.7 billion as nontax revenues plunged by almost two-thirds. Treasury profits fell 21.73% to PHP 7.8 billion, while income from other offices dropped 77.82% to P8 billion.

Tax revenues provided some relief, increasing 4.91% year on year to PHP 265.9 billion. The Bureau of Internal Revenue (BIR) collected PHP 183 billion, up 4.74%, while Bureau of Customs (BoC) receipts rose 5.25% to PHP 80.3 billion.

The primary deficit, which excludes interest payments, narrowed by 15.67% to PHP 166.4 billion.

The narrower gap likely reflected delayed public disbursements “especially in infrastructure amid ongoing investigations in flood control spending,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in a Viber message.

From January to September, the budget deficit widened 15.15% year on year to PHP 1.117 trillion, or 71.6% of the government’s PHP 1.56-trillion full-year target. Expenditures rose 5.18% to PHP 4.484 trillion — about 73.7% of the PHP 6.082-trillion spending program.

Primary spending during the period increased 3.76% to PHP 3.818 trillion, while interest payments jumped 14.15% to PHP 665.8 billion.

Revenues climbed 2.24% to PHP 3.367 trillion, equivalent to 74.49% of the PHP 4.52-trillion goal. Tax collections grew 8.56% to PHP 3.053 trillion, while nontax revenues fell 34.71% to PHP 314.1 billion.

The BIR collected PHP 2.323 trillion, up 10.88%, and Customs’ take rose 1.59% to PHP 701.7 billion. The Treasury attributed stronger tax performance to higher corporate and personal income taxes, as well as gains in value-added, tobacco and bank taxes.

Despite the decline, nontax revenues already exceeded their full-year goal, supported by dividends from state companies and income from gaming and airport operations.

As of September, the primary deficit had widened 16.66% to PHP 451.4 billion.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said spending could remain subdued amid heightened scrutiny of government contracts.

“There is a risk of slower government spending in the coming months amid anti-corruption measures that could slow down economic growth,” he said in a Viber message.

Mr. Rivera said the sustainability of a narrower deficit remained uncertain. “While slower spending might temporarily improve the numbers, it is not a substitute for revenue growth or healthy public investment,” he added.

BMI, a unit of Fitch Solutions, expects the Philippines’ budget deficit to slightly narrow this year as spending remains constrained by election-related restrictions and weak infrastructure disbursements.

It projects the fiscal deficit to reach 5.5% of gross domestic product (GDP), matching the ceiling set by the Development Budget Coordination Committee (DBCC). That would be a modest improvement from last year’s 5.7%.

“We forecast a narrower Philippine fiscal deficit of 5.5% for 2025 as spending has lagged programmed expenditures in the fiscal program,” BMI said in an Oct. 22 note.

Government revenue collection as of August had exceeded monthly targets, but spending continued to trail expectations due to curbs on pre-election disbursements and slower rollout of infrastructure projects.

Budget Secretary Amenah F. Pangandaman earlier warned that infrastructure spending could decelerate as the Department of Public Works and Highways faces investigation over irregularities in flood control projects.

BMI expects the fiscal gap to narrow further to 5.4% next year, helped by one-off privatization proceeds and new trade agreements with the US. Still, the estimate is slightly above the DBCC’s 5.3% target.

The report noted that tariff concessions under the US-Philippine trade deal could reduce government revenue by as much as PHP 30 billion, after Manila agreed to eliminate duties on select American exports such as vehicles, pharmaceuticals and soybeans.

Customs Commissioner Ariel F. Nepomuceno earlier said the government could lose PHP 27 billion to PHP 30 billion in revenue this year due to the zero-tariff policy.

BMI added that the proposed PHP 6.793-trillion budget for 2026 could strain fiscal consolidation efforts, as plans to expand the tax base remain limited.

The government aims to keep the deficit at PHP 1.56 trillion this year and gradually bring it down to PHP 1.55 trillion, or 4.3% of GDP, by 2028. — Katherine K. Chan

Typhoons and the ongoing corruption scandal involving government flood control projects may have led to slower economic growth in the third quarter, the University of Asia and the Pacific (UA&P) said.

In its latest The Market Call report released on Wednesday, UA&P said Philippine gross domestic product (GDP) likely grew by 5.2% last quarter, below the government’s 5.5-6.5% target.

“We project a GDP slowdown to a 5.2% year-on-year pace in (the third quarter) due to more weather disturbances and the popular uproar over the flood control controversy,” UA&P Senior Economist Victor A. Abola and economist Marco Antonio Agonia said.

This is slower than the 5.5% expansion recorded in the second quarter but would match the pace recorded in the same three-month period last year.

Third-quarter GDP data will be released on Nov. 7.

Economy Secretary Arsenio M. Balisacan earlier said growth might soften further in the third quarter due to typhoon-related disruptions but could still meet the lower end of the government’s goal.

Meanwhile, the UA&P economists said economic growth could pick up to 5.7% in the fourth quarter, which would bring the full-year average to the low end of the government’s goal.

Mr. Abola and Mr. Agonia said there are “positive signs of recovery” this quarter as they expect inflation to remain benign and average at just 1.6% in the three-month period, which would support domestic demand.

Headline inflation picked up to 1.7% in September, faster than the 1.5% clip in August but slower than the 1.9% seen in the same month last year. Still, this marked the seventh straight month that the consumer price index (CPI) was below the Bangko Sentral ng Pilipinas’ (BSP) 2-4% annual target.

For the first nine months, inflation averaged 1.7%, matching the BSP’s full-year forecast.

They added that the employment recovery seen in August also bodes well for growth. The country’s unemployment rate eased to 3.9% that month amid increased hiring activity in the agriculture and construction sectors, lower than the three-year high of 5.3% in July and 4% in the same month a year ago. However, the year-to-date jobless rate was a tad higher at 4.1% from 4% last year.

“Robust” remittances from overseas Filipino workers could also support consumption, they said, and exports also remain steady despite the tariffs imposed by the United States on Philippine goods.

Cash remittances rose by 3.2% to $2.977 billion in August, bringing the eight-month tally to $22.909 billion, up by 3.1% year on year. Filipinos abroad are expected to send more money home in the coming months amid the holiday season.

Meanwhile, the country’s exports climbed by 4.6% in August, slower than the 17.6% growth seen in July but faster than the 0.4% a year earlier. This led to the narrowest trade gap in six months at $3.54 billion.

More rate cuts

The UA&P economists also expect further monetary easing until next year as inflation remains low, which would provide more economic stimulus.

“With its view of ‘benign’ inflation until 2027, BSP will likely cut another 25 bps (basis points) before the end of 2025 to bring policy rates to 4.5%,” they said.

“More easing in 2026 should bring policy rates to 4% or lower by end-2026.”

The central bank sees inflation averaging 3.1% in 2026 and 2.8% in 2027, well within its 2-4% target.

The Monetary Board this month unexpectedly lowered benchmark borrowing costs by 25 bps for a fourth straight meeting, bringing the policy rate to 4.75%. It has now cut rates by a total of 175 bps since kicking off its easing cycle in August 2024.

BSP Governor Eli M. Remolona, Jr. said another reduction is possible at their last meeting this year on Dec. 11. He added that they could extend their rate cut cycle until next year as they now see the neutral nominal policy rate to be closer to 4% than their earlier projection of 5% as they see the need for a more accommodative stance as governance issues related to the corruption mess have led to softer growth prospects due to weakening investor sentiment.

Mr. Abola and Mr. Agonia added that lower benchmark rates would also support the Philippine bond market and ease the government’s interest payment burden. — Katherine K. Chan

The Philippine economy could face stronger inflationary pressures and slower growth as increasingly frequent and severe typhoons disrupt supply chains and farm production, the International Monetary Fund (IMF) said.

“The Philippines is highly exposed to natural hazards, particularly typhoons, which are the most frequent and costliest climate shocks in the country,” the IMF Regional Office for Asia and the Pacific said in a Facebook post. “These events represent supply shocks, creating inflationary pressure and reducing economic activity.”

The IMF estimated that a Category 5 storm could raise headline inflation by 0.4 percentage point (ppt) and food inflation by 0.7 ppt, based on regional data from its latest Article IV consultation with Manila.

Super Typhoon Ragasa, locally named Nando, was one such storm that battered the country late last month, causing floods and an initial PHP 1.38 billion in agricultural damage.

Data from the Department of Agriculture showed that the southwest monsoon and typhoons Mirasol, Nando and Opong have caused PHP 7.71 billion in combined losses. Farmers and fisherfolk lost 472,701 metric tons in production and 205,016 hectares of farmland.

The IMF said such weather shocks could drag agricultural labor productivity by as much as 2.5% and shave 0.4 ppt off economic growth, with estimated damage amounting to about 0.2% to 0.3% of gross domestic product (GDP).

Inflation accelerated to 1.7% in September from 1.5% in August, the fastest in six months, the Philippine Statistics Authority said. While slower than 1.9% a year earlier, the pickup reflected higher food prices after recent typhoons.

The agency said vegetable prices rose 19.4% in September, up from 10% in August — the steepest increase since January. Food inflation climbed to 0.8% from 0.6% in the previous month.

Average inflation this year stands at 1.7%, matching the Bangko Sentral ng Pilipinas’ (BSP) full-year target but slightly above the IMF’s 1.6% forecast.

The economy expanded by 5.4% in the first half, slower than last year’s 6.2% but in line with the IMF’s full-year outlook.

Economy Secretary Arsenio M. Balisacan said growth might soften further in the third quarter due to typhoon-related disruptions but could still meet the lower end of the government’s 5.5% to 6.5% goal. The third-quarter GDP data will be released on Nov. 7.

The IMF said monetary authorities should carefully balance inflation control with the need to support growth after natural disasters. “Post-disaster, monetary policy must carefully weigh trade-offs between anchoring inflation expectations and supporting economic recovery,” it said.

The BSP delivered its fourth straight 25-basis-point (bp) rate cut on Oct. 9, bringing its benchmark rate to a three-year low of 4.75%. It has reduced borrowing costs by 175 bps since August 2024.

“Fiscal policy is central to building climate resilience before disasters strike, to help mitigate the macro impacts of natural disasters,” the IMF added. — Katherine K. Chan