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The Marcos government will have a difficult time convincing Congress to pass new tax measures amid high living costs, analysts said, after the Department of Finance (DOF) chief hinted at pushing new taxes.

Philip Arnold “Randy” P. Tuaño, dean of the Ateneo School of Government, said lawmakers are unlikely to approve new tax measures that would affect the general public after the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act was signed into law.

“This may create an unfavorable impression that the administration is aligning themselves to large businesses and foreign investors to the detriment of the middle and lower income classes,” he said in a Facebook Messenger chat.

President Ferdinand R. Marcos, Jr. on Monday signed into law CREATE MORE, which lowers the corporate income tax (CIT) rate and provides more incentives for businesses registered with investment promotion agencies.

Mr. Tuaño noted there was public backlash over the Tax Reform for Acceleration and Inclusion (TRAIN) Act, the first part of the Duterte administration’s comprehensive tax reform package.

It restructured and reduced the rates of personal income tax but imposed higher taxes on tobacco products, petroleum products, automobiles, several nonessential services, sweetened beverages and mineral products.

“In the previous tax reforms under TRAIN, the perception was that by reducing personal and corporate income taxation but increasing excise and value-added taxes, the government was favoring enterprises and higher income groups, and this could also happen again,” Mr. Tuaño said.

“Historically, reforms like the expanded value-added tax law faced backlash due to perceived burdens on everyday consumers, fueling public resistance to any additional tax increases.”

The implementation of CREATE MORE is expected to lead to about PHP 5.9 billion in revenue losses from 2025 to 2028, the Palace said.

Asked how the government could offset these losses, Finance Secretary Ralph G. Recto said: “We have other revenue measures which we’re pursuing. I just discussed also with the Speaker and the Senate President some financial taxes that we are reconsidering.”

“We just plan accordingly. If there’s a revenue loss here, then we look for another bill that will gain the revenue,” he said  on the sidelines of the signing ceremony for CREATE MORE on Monday.

Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said Mr. Recto’s response was to ensure that “whatever erosion in revenue due to CREATE MORE, there is a source to plug it.”

“They have a potential tax in mind to pass. These could have been some of the measures that were not implemented by the previous administration,” he added in a Viber message.

Mr. Ravelas also cited the proposed tax on junk food and sweetened beverages, which then Finance Secretary Benjamin E. Diokno said could add about PHP 70 billion to state coffers while addressing diseases related to poor diet.

The proposed excise tax on single-use plastics, which was already approved on third and final reading at the House of Representatives, is a priority legislation of the Legislative-Executive Development Advisory Council.

But Environment Secretary Maria Antonia Yulo-Loyzaga last month told BusinessWorld on the sidelines of a Palace briefing that the bill could only advance in Congress if the country comes up with cheaper alternatives to plastic.

Another fiscal measure on the LEDAC’s priority list is the proposed rationalization of the mining fiscal regime.

The proposed motor vehicle road user’s charge has not been included in the list, which was last updated in June.

Meanwhile, Mr. Recto’s latest remark on pursuing new “financial taxes” — a shift from his previous statements that the government would not introduce new taxes — could mean that the government was struggling to find new revenue sources.

“The fact they are looking for alternatives indicates there is a shortcoming that needs to be filled,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in a Facebook Messenger chat.

In the face of inequalities, the government should consider taxes on wealth or certain luxury items, which would not affect lower-income households, he said. The government may also consider higher taxes on high-emission industries to incentivize “cleaner business practices while generating new revenues.”

Mr. Rivera said the government should also boost non-tax revenues by improving tax compliance, streamlining collections and expanding public-private partnerships for infrastructure and development projects.

Hansley A. Juliano, who teaches politics at the Ateneo, said the absence of a strong opposition would enable the Marcos administration to push new tax proposals in Congress.

“Considering there’s really no opposition figure reaching the Senate Magic 12 at the moment, administration allies clearly find it easy to get ahead with these kinds of possibly unpopular policies,” he said in a Facebook Messenger chat.

The Philippines will hold midterm elections next year, with 55 people vying for 12 Senate seats. Filipinos will also elect district representatives and other local officials in an election seen to be a referendum of the administration’s performance in the previous years.

As the midterm elections approach, fiscal difficulties will “present opportunities for candidates to project themselves against a variety of scapegoats and in support of alternatives,” Anthony Lawrence Borja, a political science professor at the De La Salle University, said.

Jose Enrique A. Africa, executive director of think tank IBON Foundation, said the government “desperately needs new taxes to expand urgent social and economic services as well to contain bloated government debt.”

“The government needs to take the long view of what is needed for strategic economic development and transformation and then plan major revenue measures accordingly,” he added.

Leonardo A. Lanzona, who teaches economics at the Ateneo, said the government will “continue to rely on indirect taxes which corporations will only pass to their consumers,” amid fears higher taxes will discourage investments.

“In the end, fiscal consolidation is not achieved, and an economic crisis ensues,” he said. – Kyle Aristophere T. Atienza, Reporter

Tourist arrivals in the Philippines are projected to hit 9.7 million by 2028, Fitch Solutions unit BMI said.

In a report, BMI said the Philippines’ tourist arrival growth is expected to average 14.8% annually to reach 9.7 million in 2028.

This year, it noted the Philippine tourism sector remains in a post-pandemic recovery phase.

Department of Tourism (DoT) data showed tourist arrivals in the January-to-October period jumped by 10% to 4.5 million from 4.1 million a year ago. BMI said this figure represents just 66.5% of tourist arrivals in the comparable period in 2019.

“With 10 months of tourist arrival data published for 2024, we maintain our view that arrivals over the year will fall short of a full pandemic recovery,” it said.

BMI projects tourist arrivals to go up by an annual 19.5% to six million this year, but still representing only 73% of the 8.2 million arrivals in 2019.

The DoT is targeting 7.7 million tourist arrivals this year.

“Our 2025 forecast for the Philippines’ tourist arrivals is growth of 38.4% year on year to 8.3 million arrivals which will mark a full recovery as they reach 101.1% of the 2019 arrivals,” BMI said.

Tourism Congress of the Philippines President James M. Montenegro said it is crucial to open up the country to more Chinese and Indian tourists to drive the tourism sector’s recovery.

“If we’re able to issue more Chinese visas, then we will hit the seven million arrivals easily. If we open up our borders to the Indian market, then we can even hit maybe 10 million,” he said in a phone call with BusinessWorld.

He also noted that the lack of Chinese tourist arrivals was the main issue for the tourism sector’s struggles this year.

In 2019, China was the second-biggest source of foreign tourists for the Philippines, accounting for 1.74 million out of the total arrivals of 8.26 million.

“For 2025, if we don’t fix our restrictions on China and to India, it will still be Korea, Japan, and the US. Australia is an upcoming market and there are the European markets,” Mr. Montenegro said.

The Philippines has failed to capitalize on the rebound in Chinese tourists to Southeast Asia, unlike Thailand, Singapore and Malaysia, which offer visa-free entry to Chinese tourists. Thailand is targeting 36.7 million foreign arrivals this year, with Chinese tourists accounting for nearly six million.

The Philippine government has tightened visa requirements for Chinese tourists amid heightened tensions in disputed territories in the South China Sea. Airlines have also reduced direct flights to China amid weak tourist demand.

Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said the Philippines has faced challenges such as limited flight capacity and infrastructure bottlenecks in key tourism areas.

“Global economic uncertainties, dampened revenge travel, high oil prices and higher airfares have affected discretionary travel budgets, which may also have impacted international arrivals,” he said.

Mr. Rivera said South Korea, the US and Japan are expected to remain major source markets due to their “strong historic ties” to the country.

“The Chinese market, while slower to recover due to recent travel patterns and their domestic economic factors, could rebound by 2025 as consumer confidence grows and visa restrictions are relaxed to some extent,” he said.

Mr. Rivera also said Southeast Asian neighbors like Thailand, Indonesia and Vietnam have seen faster tourism recovery from the pandemic due to more aggressive marketing campaigns and more established tourism products, services and infrastructure. — Aubrey Rose A. Inosante

Net inflows of foreign direct investment (FDI) into the Philippines slid in August mainly due to a sharp decline in investments in debt instruments, data from the central bank showed.

Net inflows dropped by 14.5% to USD 813 million in August from USD 951 million a year ago, the Bangko Sentral ng Pilipinas (BSP) reported on Monday.

Month on month, inflows dipped by 0.9% from USD 820 million in July.

“The decline in FDI net inflows during the month was due mainly to the 21.6% contraction in nonresidents’ net investments in debt instruments,” the BSP said in a statement.

Net investments in debt instruments slumped by 21.6% to USD 529 million in August from USD 675 million in the same month a year ago.

These consisted mainly of intercompany borrowing or lending between foreign direct investors and their subsidiaries or affiliates in the Philippines, the central bank said.

“The remaining portion of net investments in debt instruments are investments made by nonresident subsidiaries/associates in their resident direct investors, i.e., reverse investment,” it added.

BSP data also showed a 9.4% decline in nonresidents’ reinvestment of earnings to USD 217 million from USD 240 million a year earlier.

On the other hand, investments in equity and investment fund shares inched up by 2.8% year on year to USD 284 million in August from USD 276 million.

Net investments in equity capital other than the reinvestment of earnings surged (83.6%) to USD 66 million in August from USD 36 million in the previous year.

Equity capital placements plunged by 52.5% to USD 103 million, while withdrawals slid by 79.8% to USD 36 million.

By source, the bulk of equity capital placements were from Japan (72%), followed by the United States (17%).

These were invested mainly in manufacturing (63%); real estate (20%); electricity, gas, steam and air-conditioning supply (9%).

Eight-month period

In the first eight months, FDI net inflows rose by 3.9% to USD 6.07 billion from USD 5.84 billion in the year-ago period.

Investments in equity and investment fund shares jumped by 26% to USD 2.2 billion from USD 1.75 billion.

Net foreign investments in equity capital surged by 59.4% to USD 1.34 billion in the January-August period.

Placements climbed by 38.8% to USD 1.7 billion and withdrawals slipped by 6.6% to USD 356 million.

These placements mainly came from the United Kingdom (45%), followed by Japan (36%) and the United States (8%).

Investments were mostly poured into manufacturing (75%), real estate (11%) and wholesale and retail trade (4%) industries.

Meanwhile, net investments in debt instruments went down by 5.5% to USD 3.86 billion from USD 4.09 billion. Reinvestment of earnings likewise decreased by 4.8% to USD 866 million.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the decline in FDIs can be attributed to the high interest rates, as the central bank only began its easing cycle in mid-August.

The Monetary Board cut rates for the first time in nearly four years at its Aug. 15 meeting, delivering a 25-basis-point (bp) rate cut. Since then, it has reduced borrowing costs by a total of 50 bps, bringing the key rate to 6%.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies (PIDS), said global investors are more cautious amid uncertainty in the United States and European countries.

“High global interest rates and inflation concerns are also causing investors to take a conservative approach, reallocating capital toward safer, less volatile markets,” he added.

Mr. Rivera said the Philippines also continues to face structural challenges that make it difficult for investments to enter, such as “regulatory complexities, high operating and power costs, and persistence of infrastructure bottlenecks.”

“The relatively lower FDI could be brought about by a wait-and-see stance by some foreign investors while waiting for the CREATE MORE to be passed into law,” Mr. Ricafort said.

On Monday, President Ferdinand R. Marcos, Jr. signed into law the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act. The law expands fiscal incentives and further cuts corporate income taxes.

“For the coming months, the CREATE MORE law would now make international investors more decisive to locate in the country with better incentives that could compete better with other Asian countries,” Mr. Ricafort said.

“Thus, there will be more FDIs into the country for the coming months due to CREATE more and also due to the expected further rate cuts by the Fed that could be matched by the BSP,” he added.

The Monetary Board is set to have its final policy meeting of the year on Dec. 19. BSP Governor Eli M. Remolona, Jr. has signaled the possibility of another 25-bp cut.

Meanwhile, Mr. Ricafort noted risk factors such as more protectionist policies by a Trump presidency starting in 2025 “would discourage some US companies from investing and creating more jobs outside the US.”

“However, offsetting risk factors for future FDI data would be possible more protectionist by a Trump presidency stating in 2025 that would discourage some US companies from investing and creating more jobs outside the US,” Mr. Ricafort added.

US President-elect Donald J. Trump is set to return to office in January. One of Mr. Trump’s main policy proposals are his stricter trade restrictions, including plans to slap a universal tariff as well as tariffs on Chinese goods.

The central bank expects to end this year with USD 10 billion in FDI net inflows. – Luisa Maria Jacinta C. Jocson, Reporter

The Philippine government expects to forego PHP 5.9 billion in tax revenue in the next four years from a new law that expands fiscal incentives and lowers corporate income tax (CIT) on certain foreign enterprises.

But these losses under the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act could be offset by an increase in foreign direct investments (FDI) and new taxes,  government officials said.

President Ferdinand R. Marcos, Jr. on Monday signed into law the CREATE MORE Act, which further reduces the CIT to 20%  from 25% for registered business enterprises (RBE).

“This law will surely be useful in attracting investment because we’re reducing income tax rates and then reducing the cost of doing business by reducing duties, especially for exporters,” Finance Secretary Ralph G. Recto told BusinessWorld on the sidelines of a signing ceremony on Monday.

The Philippines has been a laggard in the region in attracting foreign direct investments, with economists citing inadequate infrastructure, high power costs, unstable policies, red tape and foreign ownership limits.

In 2023, net inflows of FDI into the Philippines fell by 6.6% to USD 8.9 billion.

A Palace handout showed the bulk  or PHP 4.06 billion of the revenue losses from CREATE MORE in the next four years are due to the reduction in CIT for RBEs.

An estimated PHP 926.82 billion in revenue losses are due to the law’s provision which doubled the RBEs’ additional power expense deduction to 100%.

The law also allows an additional 50% deduction for expenses related to trade fairs and tourism reinvestments until 2034, which will result in revenue losses of PHP 601.89 billion.

Under the new law, application of the net operating loss carryover may be carried out as a deduction from gross income within the next five years immediately following the last year of the project’s income tax holiday. This provision will result in PHP 290.57 billion in revenue losses in 2028.

Asked how the government could offset the projected revenue losses, Mr. Recto said these are just “paper losses… estimates.”

“We have other revenue measures which we’re pursuing. I just discussed also with the Speaker and the Senate President some financial taxes that we are reconsidering,” he added.

Mr. Recto said the government faces a “tough balancing act between giving incentives and raising revenue.”

“You want more volume of investments, and we need those investments. Jobs will be created,” he explained. “There will be withholding taxes. So, I don’t think it will erode the tax base.”

Asked whether or not the law could affect the country’s fiscal plan and budgetary requirements, Mr. Recto said: “We just plan accordingly. If there’s a revenue loss here, then we look for another bill that will gain the revenue.”

House Ways and Means Chair Jose Maria Clemente S. Salceda, speaking on the sidelines of the signing ceremony, said the new law’s impact on government revenues will be felt “probably in the first phase” and will be “short term.”

“But we expect the velocity of the economy to offset the reduction in rates basically through new investments,” he added.

“If they don’t invest, there’s nothing to erode,” he said when asked to react to earlier remarks that the measure could erode the government’s revenue base. “In other words, in fact, it gives us a chance to come in.”

Mr. Marcos, in his speech at the signing ceremony, said the law was “hard-fought and hard-won.”

It’s the government’s “resounding testament of our commitment to make the Philippines the destination of choice for investments,” he added.

Under CREATE MORE, RBEs will have the option to avail either of the special CIT of 5% or the enhanced deduction regime, which were both extended from the initial maximum 10-year period to a maximum duration of 10 to 27 years, immediately at the start of commercial operations.

The law entitles labor-intensive projects to an extension of five to 10 years.

Under the new law, export-oriented enterprises’ local purchases are zero-rated while importations are exempted from value-added tax (VAT).

This would “address the cash flow issues of direct exporters as they no longer have to tie up funds in VAT payments that would otherwise be refunded later,” the Department of Finance said in a statement.

The Action for Economic Reforms (AER), which was among the supporters of the CREATE Act of 2021, said the new law “carries with it a number of issues sure to worsen the country’s fiscal state.”

“For one, the law massively broadens the scope and coverage of incentives offered to investors in an attempt to drive investment inflow. Contrary to its proponents’ claims, however, this race to the bottom approach will not necessarily bring in additional investments and will instead result in the shrinkage of much-needed revenue for development,” it said in a statement.

Among the major concerns of AER is the transfer of most of the Fiscal Incentives Review Board’s (FIRB) functions to investment promotion agencies (IPAs), which the board is meant to oversee.

The law also allows the President to grant incentives without the recommendation of the FIRB, whose board is chaired by the Department of Finance.

This opens “more doors for abuse and corruption,” AER said, adding that giving the President the power to grant incentives “solely upon discretion” runs “contrary to the principles of good fiscal governance.”

“Such changes to our fiscal incentives system defeat the purpose of the original CREATE Act passed in 2021, which is to ensure that the incentive regime is time-bound, targeted, and performance-based,” AER said.

CREATE MORE fails to address “real hurdles” inhibiting investment in the country, including fiscal stability, sound governance, policy certainty, and reliable infrastructure, it added.

The Joint Foreign Chambers said the new law solidifies the Philippines’ “position as a competitive destination for investments and business expansion.”

“This legislation addresses the urgent need to review and revise the country’s investment incentive policies, ensuring they remain aligned with international standards,” it said in a statement.

George T. Barcelon, chairman of the  Philippine Chamber of Commerce and Industry, said CREATE MORE will heavily benefit local manufacturers as it incentivizes exporters patronizing local products.

Secretary Frederick D. Go of the Office of the Special Assistant to the President for Investment and Economic Affairs said the new law has triggered “a lot of interest from foreign direct investors, especially the big ones,” including those involved in shipyard building as well as the electronics and renewable sectors. 

Mr. Go said these investors are from South Korea, Japan, China, Australia, the United Kingdom, and the United States.

“The passage of CREATE MORE has triggered so much interest from foreign and domestic direct investors, especially the large scale ones. This is our main tool to make the Philippines an attractive investment destination,” Mr. Go said in a statement.

CREATE MORE also institutionalizes flexible work arrangements for RBEs operating within economic zones and freeports, without compromising their tax incentives.

Pre-CREATE registered business enterprises will continue to enjoy the national and local incentives previously granted to them until Dec. 31, 2034, according to the law.

In a statement, the Bureau of Internal Revenue said it will conduct a public information campaign on tax incentives granted by the new law “for the purpose of promoting the Philippines as a prime investment destination.”

Meanwhile, the Philippine Economic Zone Authority (PEZA) said domestic market enterprises will also benefit from the new incentive regime.

“This should stimulate domestic production by local manufacturers, including foreign investors going into import-substitution activities to cater to our growing domestic market,” it said in a statement.

The German-Philippine Chamber of Commerce and Industry, Inc. (GPCCI) also welcomed the signing of the law, whose key reforms include extension of tax incentives for up to 27 years and streamlining of tax refund processes.

“We share the goal of creating a more favorable business landscape to foster growth and job opportunities,”  GPCCI President Marie Antoniette Mariano said. — Kyle Aristophere T. Atienza with Justine Irish D. Tabile

Manila fell 12 spots and continued to lag behind its Asian neighbors in the latest ranking of financial centers based on their green finance performance, London-based think tank Z/Yen Group said in its latest report.

In the 14^th edition of the Global Green Finance Index (GGFI), Manila fell to 81^st out of 97 financial centers, down from 69^th in the previous edition, with its rating dropping from 573 to 549.

The index measures the quality and depth of green financial products of financial centers and monitors their progress toward a sustainable financial system.

“There appears to be a slight drop in confidence in the development of green finance in financial centers,” the report said, noting that the average rating is down 1.96% compared to the previous edition, with only six centers improving their ratings.

In the Asia-Pacific region, the Philippines lagged behind its neighbors and ranked 19th out of 21 countries overall. Singapore was the top performer, followed by Seoul, Shenzhen, Sydney, Busan, Beijing, and Shanghai.

“The majority of centers in the region fell in the rankings, with only Singapore, Seoul, Shenzhen, Jakarta, Gift City-Gujarat, and New Delhi improving,” it said.

The average decrease in the ratings in the region was 2.66%.

Among select East and Southeast Asian territories, the Philippines ranked 14^th out of 15 financial centers.

Overall, London retained the top spot in the index, followed by Geneva, Zurich, New York, Singapore, Luxembourg, Washington, D.C., Los Angeles, Stockholm, and Montreal. Lagos took the 97^th and last place in the ranking, after the British Virgin Islands, Nairobi, Almaty, and the Cayman Islands.

Energy-efficient investment, disinvestment from fossil fuels, and green loans are rated as the areas of green finance with the most impact, according to the respondents.

Meanwhile, energy-efficient investment, renewable energy investment, and ESG analytics were cited as the areas of most interest.

Bangko Sentral ng Pilipinas’ (BSP) latest sustainability report said it is looking to provide more regulatory incentives to encourage green and sustainability financing among banks.

The central bank approved a temporary 15% increase in banks’ single borrower limits last year to enable them to extend loans for eligible green or sustainable projects, including transitional activities. BSP approved a gradual reduction of the reserve requirement rate for sustainable bonds issued by banks.

The report showed that in the first half of 2024, banks’ peso-denominated sustainable bond issuances stood at P236.5 billion. As of the end of March, the total reserves generated from sustainable bonds issued by banks were recorded at P1 billion. — Aubrey Rose A. Inosante

The weaker-than-expected economic growth in the third quarter will allow the Bangko Sentral ng Pilipinas (BSP) to continue cutting rates, analysts said, though this outlook is clouded by the Federal Reserve’s own moves under a Trump presidency.

“I think the result certainly means that the BSP’s monetary policy easing cycle will continue for the foreseeable future, with another 25-basis-point (bp) cut at least in the December meeting,” Pantheon Chief Emerging Asia Economist Miguel Chanco said in an e-mail.

The Philippine economy grew by 5.2% in the July-to-September period, sharply slowing from the 6.4% growth in the second quarter and 6% a year earlier.

This was also the weakest gross domestic product (GDP) growth in five quarters or since the 4.3% expansion in the second quarter of 2023.

Patrick M. Ella, economist at Sun Life Investment Management and Trust Corp., said the latest GDP print “helps cement the BSP to continue its rate cut cycle or even accelerate it next year if topline GDP remains slowing.”

Since August, the central bank has so far reduced the target reverse repurchase (RRP) rate by a total of 50 bps, bringing the benchmark to 6%.

Its final policy review this year is set for Dec. 19, with markets widely anticipating another 25-bp cut as signaled by BSP Governor Eli M. Remolona, Jr.

Finance Secretary Ralph G. Recto said they would want to cut rates further but are “mindful” of inflation expectations and the US Federal Reserve’s actions.

“There’s thought the Fed will continuously reduce interest rates, so if they do, then there’s a possibility we could also, but we’re also looking at the exchange rate,” he told BusinessWorld on the sidelines of a budget hearing last week.

However, Mr. Recto said the central bank is unlikely to deliver bigger-sized rate cuts. He said the Monetary Board may keep quarter-point increments, similar to the BSP chief’s own signals.

Mr. Remolona earlier said they would only consider 50 bps or higher worth of rate cuts in a “hard-landing scenario.”

“At the moment, we are not in the ‘hard-landing’ scenario (for the US and Philippine economies respectively),” Mr. Ella said.

“I think the improvement in consumption in the third quarter versus the first and second quarters is a good sign, we just need a few more quarters of these. Going forward, inflation and interest rates are coming down, so we can expect improvement in consumption down the road,” he added.

TRUMP’S IMPACT ON FED

Analysts also noted the impact of the US president-elect Donald J. Trump on the US central bank’s actions and ultimately, the BSP.

“We previously thought that a weak third-quarter GDP print would open the door for larger 50-bp rate cuts in December,” Mr. Chanco said.

“But Donald Trump’s victory has complicated that scenario, as our house view is now that the Fed will keep the pace of easing to 25 bps in view of the inflationary risks in the US posed by the President-elect’s tariff proposals.”

Mr. Trump is set to return as president on Jan. 20 after beating current Vice-President Kamala Harris in the presidential elections last week.

The Fed will likely “ease more gradually” next year, Mr. Chanco said, which may “constrain the BSP’s options in terms of going for more aggressive cuts.”

Mr. Remolona earlier said it was possible to deliver a total of 100 bps worth of rate cuts in 2025.

The Federal Reserve cut interest rates by a quarter of a percentage point on Thursday.

Nomura Global Markets Research said in a report that the Trump win may dampen overall economic growth amid expectations of higher tariffs, weaker global demand and policy uncertainty.

“We maintain our forecast for GDP growth to improve only marginally to 5.6% year on year in 2024 from 5.5% last year, before picking up to 6.1% in 2025, although we now see some downside risks from Trump’s win in the US election,” it said in a report.

“We still think BSP is unlikely to be more aggressive with 50-bp clips, in part because the substantial reserve requirement ratio (RRR) cut is already providing additional easing,” it added.

Nomura expects the Philippine central bank to cut by a total of 100 bps next year.

On the other hand, Mr. Ella said that the Trump win is unlikely to significantly impact monetary policy.

“On the Trump win, I don’t think there are risks to interrupt the BSP easing cycle. One, the BSP will respond more to commodity or food price risks,” he said.

“Second, remember that Trump favors low rates. At one point in his first term, he wanted the Fed to cut rates to negative territory but the Fed resisted this call and just kept rates on a mildly rate hike path.”

SLOWING GROWTH

Meanwhile, the Philippine economy is unlikely to grow by 6.5% in the fourth quarter to meet the low end of the government’s 6-7% growth target this year, analysts said.

“Growth momentum slowing down. Hopefully, the fourth quarter of 2024 should see a positive support for consumption but [I] am looking at a full growth of 5.8%,” Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said in an e-mailed statement over the weekend.

For the first nine months of the year, GDP growth averaged 5.8%.

Mr. Ravelas said that the government should ramp up spending and support more non-monetary measures to address inflation, noting this has slowed the recovery in consumer spending.

He said another 25-bp cut by the BSP should help support growth.

However, fourth-quarter agriculture output is also expected to decline due to adverse weather conditions, he said.

Agriculture, forestry and fishing shrank by 2.8% in the third quarter, a reversal of the 0.9% growth posted a year ago. The sector, which accounts for around a tenth of Philippine economic output, was battered by typhoons and storms in the third quarter.

Mr. Ravelas projected GDP to grow by 6.5% in 2025, driven by the government’s infrastructure push, rate cuts worth 100 bps by the BSP, and a recovery in consumption.

Meanwhile, Jesus Felipe, distinguished professor and research fellow at the De La Salle University (DLSU) School of Economics, said it is also “very unlikely” that the fourth-quarter growth will reach 6.5%. He sees 6.2% GDP growth for the October-to-December period.

“We forecast growth in 2024 to be 5.9%,” Mr. Felipe told BusinessWorld in an e-mail statement. “The only way growth in Q4 would be higher than 6.2% (and hence annual growth higher than 5.9%) is if the government incurs massive spending.”

The economy has recovered from the pandemic, but real wages are still catching up and getting to 2019 levels, he said.

“This is why private consumption has been subdued,” Mr. Felipe added.

Meanwhile, Pantheon Macroeconomics Mr. Chanco said the latest GDP print was a “painful reality check for the Philippine economic recovery.”

“We’re sticking to our 5.4% full-year growth forecast for 2024 — implying a further drop in Q4 to 4.4% — even though the Q3 print was above our below-consensus 4.8% projection,” he said in a report.

Mr. Chanco said he expects “BSP to continue easing policy for the foreseeable future, given the current setting remains very tight in real terms.”

“But we have pared back our expectations on the aggressiveness of this easing cycle, as the Fed is no longer likely to be as gung-ho in view of the inflationary impact of President-elect Donald Trump’s proposed tariffs,” he added.

He now sees a 25-bp cut by the BSP, from his earlier forecast of 50 bps. For next year, he sees 100 bps worth of easing, down from 150 bps previously forecast.

Jojo Gonzales, research analyst at Philippine Equity Partners, Inc. said the third-quarter GDP growth was worse than expected but maintained the full-year estimate at 5.9%.

“We see private consumption growth improving further in fourth quarter alongside receding inflation, reduced unemployment, improved consumer confidence, and a hike in minimum wages that took effect in 3Q24,” Mr. Gonzales added.

Meanwhile, Mr. Gonzales said government expenditures “remaining subdued” as spending appeared to have been “front-loaded” in the first half of 2024, and may be flat in the fourth quarter.

Peter Lee U, dean of the University of Asia and the Pacific’s School of Economics, said GDP is unlikely to grow by 6.5% in the fourth quarter to meet the low end of the 6-7% target.

“Based purely on past trend when fourth growth rates were 7.9% in 2021, 7.1% in 2022, 5.5% in 2023,” he told BusinessWorld in a Viber Message. – Luisa Maria Jacinta C. Jocson and Aubrey Rose A. Inosante, Reporters

The National Government’s (NG) debt service bill declined year on year in September as amortization payments for domestic borrowings slipped, the Bureau of the Treasury (BTr) reported.

The latest data from BTr showed that the debt service bill slumped by 60.83% to PHP 93.61 billion in September from PHP 239 billion in the same month last year.

Month on month, the debt service bill also fell by 49.73% from PHP 186.22 billion in August.

Debt service refers to the payments made by the government on domestic and foreign borrowings.

The bulk or 78.89% of debt payments in September were made up of interest payments, BTr data showed.

Interest payments stood at PHP 73.85 billion in September, up by 3.26% from PHP 71.45 billion a year ago.

Domestic interest payments inched down by 0.88% to PHP 55.41 billion in September from PHP 55.89 billion last year.

Interest paid to foreign creditors increased by 15.67% to PHP 18.45 billion in September from P15.56 billion in the same month in 2023.

Meanwhile, amortization payments plunged by 88.21% to PHP 19.76 billion in September from PHP 167.55 in the same month in 2023.

Broken down, principal payments on domestic debt slumped by 99.94% to PHP 87 million in September from PHP 148.88 billion a year ago.

Principal payments on external debt increased by 5.1% to PHP 19.67 billion in September from PHP 18.67 billion in the same month a year ago.

Broken down, domestic interest payments were composed of PHP 32.99 billion in fixed-rate Treasury bonds, PHP 19.18 billion in retail Treasury bonds, PHP 3.2 billion in Treasury bills (T-bills), and others (PHP 26 million).

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said lower NG debt maturities in September reduced the debt servicing bill, especially on principal payments.

“However, there would be a relatively larger maturing National Government local Treasury bonds in October 2024, thereby would lead to some pickup on the debt servicing bill of the NG,” Mr. Ricafort told BusinessWorld in a Viber Message over the weekend.

He added that “seasonally lower” maturing government securities and issuances could drag the NG debt servicing cost from November to December.

“The still relatively weaker peso exchange rate vs. the US dollar would lead to a higher peso equivalent of the NG’s debt servicing of its external/foreign debts, both principal and interest payments,” Mr. Ricafort said.

The peso closed at PHP 56.03 per dollar at end-September, strengthening from the PHP 56.111 finish at end-August.

For the coming months, more rate cuts by the central bank will reduce government borrowing expenses and lessen future debt service payments, Ateneo School of Government Dean Philip Arnold P. Tuaño said.

“The only question is how quickly the Bangko Sentral ng Pilipinas (BSP) cut interest rates vis-a-vis the planned cuts also of the US Federal Reserve Bank which will then affect the mix of domestic and foreign borrowing by the Bureau of Treasury,” Mr. Tuaño told BusinessWorld in an e-mailed statement.

Since beginning its easing cycle in August, the Monetary Board has cut rates by 50 basis points (bps), bringing the central bank’s key rate to 6%.

BSP Governor Eli M. Remolona, Jr. has signaled a possible 25-bp rate cut in December, which would bring the benchmark rate to 5.75% by the end of 2024.

For the first nine months of the year, the NG debt service bill stood at PHP 1.64 trillion, 14.81% up from PHP 1.4 trillion in the same period last year.

Amortization payments accounted for 64.52% of the nine-month tally.

Principal payments jumped by 11.34% to PHP 1.06 trillion in the first nine months from PHP 940.19 billion in the same period last year.

Amortization payments on domestic debt went up 3.15% to PHP 879.74 billion, while external payments rose by 51.21% to PHP 180.76 billion.

Meanwhile, interest payments increased by 21.12% to PHP 583.29 billion in the first nine months from PHP 460.12 billion a year ago.

Interest payments on domestic debt amounted to PHP 418.13 billion while those on external debt stood at PHP 165.17 billion.

The NG’s debt stock rose to a fresh high of PHP 15.89 trillion as of end-September, but the BTr said this level is still “manageable.”