Archives: Business World Article

The Bureau of Internal Revenue (BIR) fell short of its end-July collection target by 8.2%, data from the Department of Finance (DoF) showed.

Preliminary data posted on the DoF’s Facebook page showed that BIR collections as of end-July stood at PHP 1.68 trillion, falling short of its PHP 1.83-trillion collection goal for the period by 8.2%.

The tally as of end-July represents 55.08% of the BIR’s PHP 3.05-trillion collection target for 2024.

Year on year, the BIR’s seven-month revenues jumped by 12.58% from PHP 1.49 trillion in the same period a year ago.

At the same time, the Bureau of Customs (BoC) collections rose by 6% to PHP 536.42 billion during the January-to-July period from PHP 506.49 billion last year.

This accounted for 57.08% of the Customs’ PHP 939.69-billion collection goal for this year.

For the first seven months of the year, revenues from the BIR and BoC — the National Government’s main tax collecting agencies — jumped by 10.89% to PHP 2.22 trillion from PHP 2 trillion a year ago.

A DoF statement said Finance Secretary Ralph G. Recto held a BIR and BoC command conference on Aug. 16 to assess the agencies’ performance and plans to meet the targets.

At the event, the DoF said the BIR committed to “bolster its digitalization programs, intensify its tax enforcement, and run after delinquent accounts.”

“The BoC will continue to improve on its assessment and collection of duties and taxes on importation, ensure importer’s compliance with customs’ laws, and strengthen border protection to detect undervalued and misclassified commodities,” the DoF said.

Mr. Recto said the government should boost collections as economic growth is expected to accelerate with the recent rate cut by the Bangko Sentral ng Pilipinas (BSP) and the credit rating upgrade by Rating and Investment Information, Inc. (R&I).

Last week, Japan-based R&I upgraded the Philippines’ investment grade rating to “A-” to reflect the country’s strong growth prospects. This was one notch up from the country’s previous rating of “BBB+” assigned in August 2023.

The BSP last week cut interest rates for the first time in nearly four years. The Monetary Board reduced the target reverse repurchase rate by 25 basis points to 6.25% from the over 17-year high of 6.5%. — B.M.D.Cruz

​​Cash remittances from overseas Filipino workers (OFWs) rose to a six-month high in June, the Bangko Sentral ng Pilipinas (BSP) said late on Thursday.

Data from the central bank showed that cash remittances grew by 2.5% to USD 2.88 billion in June from USD 2.81 billion in the same month a year ago.

This was the highest level of remittances since the USD 3.28 billion in December 2023.

However, the year-on-year growth in cash remittances eased from the 3.6% pace seen a month earlier.

Month on month, remittances increased by 11.6% from the USD 2.58 billion in May.

“The expansion in cash remittances in June 2024 was due to the growth in receipts from land- and sea-based workers,” the BSP said.

Remittances from land-based workers rose by 2.5% to USD 2.35 billion in June, while money sent by sea-based workers went up by 2.1% to USD 535.6 million.

Meanwhile, personal remittances increased by 2.5% to USD 3.21 billion from USD 3.13 billion a year earlier.

“The increase in personal remittances in June 2024 was due to higher remittances sent by land-based workers with work contracts of one year or more and sea- and land-based workers with work contracts of less than one year,” the central bank said.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said the increase cash remittances recorded in June may be due to the weaker peso, which made it “attractive for OFWs to exchange their hard-earned money.”

The peso mostly traded at the P58-per-dollar level in June and averaged PHP 58.6963 for the month, based on central bank data.

Mr. Asuncion added that OFWs likely sent more money home for the education-related expenses of their families.

“The latest month-on-month pick up came after some seasonal increase in remittances to finance some holiday-related spending during the school vacation season amid better weather conditions and some tuition and other school opening-related expenses at the early stage that could last until early August,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said.

FIRST-HALF REMITTANCES

In the January-June period, cash remittances jumped by 2.9% year on year to $16.25 billion from USD 15.8 billion.

The BSP expects cash remittances to grow by 3% this year.

The United States accounted for nearly half or 40.9% of overall remittances in the first semester. This was followed by Singapore (6.9%), Saudi Arabia (6%), Japan (5%), and the United Kingdom (5%).

Other sources of remittances were the United Arab Emirates (4.1%), Canada (3.4%), Qatar (2.9%), Korea (2.8%) and Taiwan (2.7%).

Meanwhile, personal remittances in the first half rose by 2.9% to USD 18.1 billion from USD 17.6 billion in the year-ago period.

“For the coming months, modest growth in OFW remittances could still continue as OFW families still need to cope with relatively higher prices locally that would require the sending of more remittances,” Mr. Ricafort said.

Approved foreign investment pledges surged in the second quarter, driven by improved investor confidence, preliminary data from the Philippine Statistics Authority (PSA) showed on Thursday.

Foreign investment commitments jumped by 220.7% year on year to PHP 189.5 billion in the April-to-June period, a turnaround from the revised 64% contraction in the first quarter.

It was the fastest year-on-year increase since the 4,445.6% surge seen in the first quarter of 2023.

The amount of foreign investment pledges in the second quarter was the biggest since the PHP 394.46 billion approved in the fourth quarter of 2023.

“The quarter-on-quarter expansion of the Philippine economy was apparently taken as indication of market growth, at least in the short and medium term, prompting an increase in investment pledges and approved investments,” University of Asia and the Pacific Senior Economist Cid L. Terosa said in an e-mail interview.

The Philippine economy grew by 6.3% year on year in the second quarter, faster than the revised 5.8% in the first quarter and 4.3% in the April-to-June period in 2023.

In the second quarter, Switzerland was the top source of foreign investment pledges with P172.04 billion. This accounted for 90.8% of the total.

The PSA compiles the investment pledges from the government’s six investment promotion agencies: Board of Investments (BoI), BoI-Bangsamoro Autonomous Region in Muslim Mindanao (BoI-BARMM), Clark Development Corp. (CDC), Philippine Economic Zone Authority (PEZA), Subic Bay Metropolitan Authority (SBMA), and Zamboanga City Special Economic Zone Authority (ZCSEZA).

The BoI approved PHP 175.08 billion in foreign investment pledges, accounting for 92.4% of this quarter’s total.

PEZA came in second with PHP 14.03 billion in foreign investment pledges which accounted for 7.4% of the total. This was followed by SBMA with PHP 124.09 million, BoI-BARMM with PHP 110.06 million, CDC with PHP 107.81 million and ZCSEZA with PHP 49.65 million.

Negros Island Region cornered nearly half (45.6%) of the foreign investment commitments with PHP 86.46 billion. This was followed by Calabarzon and Central Visayas with PHP 6.93 billion and PHP 4.35 billion, respectively.

Meanwhile, investment pledges from Filipino nationals rose annually by 103.6% to PHP 525.51 billion in the second quarter. It accounted for 73.5% of the combined pledges worth PHP 715.01 billion.

Foreign and local investments pledged during the second quarter are expected to generate 26,915 jobs once the projects are realized.   

Electricity, gas, steam, and air-conditioning supply industry received the largest amount of approved commitments at PHP 172.74 billion or 91.2% of the total. This was followed by manufacturing with PHP 12.39 billion and administrative and support service activities with PHP 2.84 billion.

“Pledges are pledges. Until we see the approved and actual investment happening, we will have to wait-and-see. This is not to rain on the parade of the great investment pledges performance so far, particularly this [second quarter]. But reality has to set in and approved and actual investments are still the best thing,” Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said in an e-mail interview.

Mr. Asuncion said the higher investment pledges are a direct result of President Ferdinand R. Marcos, Jr.’s foreign trips, where he promoted the country as an investment destination.

“Hopefully, this bump in investment pledges will be sustained,” he said.

Mr. Terosa said the weaker peso in the second quarter made investments in certain sectors in the Philippines more attractive.

For the rest of the year, he said a possible recession in some developed countries, the continued weakness of China’s economy and geopolitical tensions may affect investment flows in developing countries like the Philippines.

“I expect investments to be restrained by these conditions in the second half of the year,” Mr. Terosa said.

Foreign investment pledges, which may materialize in the future, differ from the actual foreign direct investments data tracked by the Bangko Sentral ng Pilipinas (BSP). Aside from the projects, the BSP’s monitoring includes other items such as reinvested earnings and lending to Philippine units via their debt instruments. – Lourdes O. Pilar, Researcher

The average annual income of Filipino families increased by 15% in 2023, as wages and quality of jobs improved, the Philippine Statistics Authority (PSA) said.

Preliminary data from the PSA showed that the average annual income of Filipino households rose to PHP 353,230 in 2023 from PHP 307,190 in 2021.

In 2023, the average annual spending of Filipino families went up by 12.8% to PHP 258,050 from PHP 228,800 in 2021.

The increase in income was attributed to the uptick in wages, salaries and entrepreneurial activities for the period, Undersecretary and National Statistician Claire Dennis S. Mapa told a news briefing.

By region, the National Capital Region (NCR) had the highest average annual family income in 2023 at PHP 513,520, up by 22.9% from PHP 417,850 in 2021.

Calabarzon followed in second place with PHP 426,530 in 2023, up by 18.1% from PHP 361,030 in 2021. This was followed by Central Luzon at PHP 375,240 in 2023, 14.2% higher than PHP 328,540 in 2021.

On the other hand, Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) posted the lowest average annual family income at PHP 206,880 in 2023, followed by Zamboanga Peninsula at PHP 257,140 and Negros Island Region at PHP 266,290.

In terms of expenditure, NCR also had the biggest annual average family spending at PHP 385,050 in 2023, followed by Calabarzon at PHP 310,320 and Central Luzon at PHP 298,700.

BARMM also had the smallest average family expenditure at PHP 168,910, followed by Mimaropa Region at PHP 189,770 and Eastern Visayas at PHP 199,910.

National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan told BusinessWorld that the government is looking to improve the quality of jobs to increase Filipinos’ household incomes in the next few years,

“Quality of employment is the foremost priority of this administration because… we have historically low unemployment rate already. You can’t do any better than that now you know because that’s the kind of rate that you see in very mature economies,” he said.

In 2023, the jobless rate fell to a record low 4.3%. The underemployment rate — or the proportion of employed Filipinos looking for more work or longer working hours — declined to 12.3% in 2023 from 14.2% in 2022.

“The three-legged sources of economic growth, such as BPOs (business process outsourcing), OFW remittances, and tourism should be supplemented by growth in the manufacturing sector,” Union Bank of the Philippines, Inc., Chief Economist Ruben Carlo O. Asuncion said in a Viber message.

Mr. Asuncion also said the government must build the necessary digital infrastructure to help bolster growth.

PSA data also showed the Gini coefficient, which measures income inequality, slipped to 0.3909 in 2023 from 0.4063 in 2021, PSA data showed. A Gini coefficient reading of “0” would mean perfect equality, while “1” suggests perfect inequality.

POVERTY

Data from the PSA also showed the poverty rate dropped to 15.5% in 2023 from 18.1% in 2021 amid elevated inflation.

The number of poor Filipinos declined by 12.26% to 17.54 million in 2023 from 19.99 million in 2021.

“It’s good that the income increases faster than the food inflation. But, if food inflation will be lower, of course, the reduction in poverty could be much, much bigger,” Mr. Mapa said.

Inflation averaged 6% for 2023, the highest in 14 years. It also marked the second straight year that inflation breached the BSP’s 2-4% target band.

The PSA said a family with five members needed to have at least PHP 13,873 a month to meet their minimum basic food and nonfood needs in 2023.

Among the regions, nine had poverty thresholds higher than the national average, led by Central Luzon with PHP 16,046, followed by NCR with PHP 15,713, and Calabarzon with PHP 15,457.

On the other hand, the Soccsksargen Region posted the lowest poverty threshold with PHP 12,241.

By region, the NCR recorded the lowest poverty incidence among the population at 1.8%, while the BARMM had the highest rate at 32.4%.

Meanwhile, the national poverty incidence among families with five members improved to 10.9% in 2023 from 13.2% in 2021. This is equivalent to 2.99 million Filipino families that do not have enough income to meet their basic food and nonfood needs.

Among the regions, NCR had the lowest poverty incidence at 1.1%, while the Zamboanga Peninsula had the highest at 24.2%.

The Caraga Administrative Region showed the biggest improvement as its poverty incidence declined by 11 percentage points to 14.9% in 2023 from 25.9% in 2021.

FOOD THRESHOLD

According to the PSA, the food threshold for a family of five rose by 14.7% to PHP 9,581 in 2023 from PHP 8,353 in 2021, mainly due to high food inflation. This would mean the food threshold per person in a day is at PHP 64.

Food threshold refers to the minimum income an individual or a family needs to meet their basic food needs, “which satisfies the nutritional requirements for economically necessary and socially desirable physical activities.”

Mr. Mapa said the food threshold is based on a sample food bundle with three meals and snacks.

Based on the national food bundle, breakfast is composed of scrambled egg, coffee, and boiled rice or rice-corn mix, while lunch is boiled monggo with malunggay and dried dilis, banana, and boiled rice. Dinner is composed of fried fish or boiled pork, vegetables, and boiled rice, while snacks include bread and boiled root crops.

“This is really basic,” Mr. Mapa said. “Most probably, a lot of people will not be happy about it. But that’s how the bundle was arrived at. And of course, there’s science to it.”

Mr. Mapa said the PSA is reviewing the methodology used for the food poverty threshold.

“There is a review process that we’re doing and as I said we have already initiated to the technical staff ng PSA to review our methodology, the menu,” Mr. Mapa said in mixed English and Filipino. — BMDC

Japan-based Rating and Investment Information, Inc. (R&I) upgraded the Philippines’ investment grade rating to “A-” amid the country’s strong economic performance.

“Based on macroeconomic stability and high economic growth path as well as expected continuous improvement in fiscal balance, R&I has upgraded the Foreign Currency Issuer Rating to ‘A-,’” it said in a document posted on its website.

This was one notch up from the country’s previous rating of “BBB+” assigned in August a year ago.

The credit rater also assigned a “stable” outlook for the Philippines from “positive” previously. According to R&I, a positive or negative outlook is not a statement indicating a future change of a rating. If neither a positive nor negative outlook is appropriate, it assigns a stable outlook.

“The Philippine economy will likely see stable growth and continuous improvement in the level of national income against the backdrop of active public and private sector investments, development of domestic business sectors such as business process outsourcing, and favorable demographics, among other elements,” R&I said.

The Philippine economy expanded by 6.3% in the second quarter, the fastest in five quarters or since 6.4% in the first quarter of 2023.

“The Philippine economy has been showing fast growth among the major economies in Southeast Asia,” it added.

At 6.3%, the Philippines’ second-quarter gross domestic product (GDP) growth was the second fastest in Southeast Asia, only behind Vietnam (6.9%) and ahead of Malaysia (5.8%) and Indonesia (5%).

The government is targeting 6-7% growth this year and 6.5-7.5% for 2025.

R&I also noted the country’s improved fiscal management as debt remains “affordable, given the manageable burden of interest payment.”

“The fiscal balance as a share of GDP, which had deteriorated during the COVID-19 (coronavirus disease 2019) pandemic, has improved and the government debt ratio will likely start falling in a year or two,” it added.

As of the second quarter, the government’s deficit-to-GDP ratio stood at 5.3%, still below the 5.6% deficit ceiling set for this year.

Meanwhile, the debt-to-GDP ratio eased to 60.9% in the second quarter from 61% a year earlier. It is expected to ease further to 60.6% by end-2024.

R&I also said that the Philippines’ current account deficit is also “not necessarily a negative element” in its assessment.

“The foreign exchange reserves stand at a sufficient level in comparison with that of imports. Despite the liabilities in excess of financial assets of international investment position, the gap between liabilities and assets remains at a low level relative to GDP. R&I, thus, believes that the external risk is limited.”

The central bank projects a USD 4.7-billion current account deficit for 2024, equivalent to 1% of GDP. The current account deficit stood at USD 1.7 billion in the first quarter, equivalent to 1.6% of GDP.

Meanwhile, Finance Secretary Ralph G. Recto said in a statement that this was the Marcos administration’s first credit rating upgrade.

“Our refined Medium-Term Fiscal Program is our blueprint for our ‘road to A rating,’” he said.

“This ensures that we can reduce our deficit and debt gradually in a realistic manner, while creating more jobs, increasing our people’s incomes, growing the economy further, and decreasing poverty in the process. Sticking to this program can help us get there faster.”

The Department of Finance said that improved credit rating from R&I will help attract foreign investors and access more affordable borrowing terms.

“This allows the government to channel funds that would have otherwise been allotted for interest payments towards more development programs such as more infrastructure projects, improved social services, better healthcare system, and quality education.”

The Bangko Sentral ng Pilipinas (BSP) said that the credit upgrade means lower credit risk which “allows a country to access funding from development partners and international debt capital markets at lower cost.”

“The BSP is committed to delivering on its mandate of promoting price stability, financial stability, and a safe and efficient payments and settlements system as this broadly supports sustained and inclusive economic growth,’’ BSP Governor Eli M. Remolona, Jr. said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that the latest credit upgrade puts the Philippines three notches above the minimum investment grade rating.

“This is already similar and somewhat moved in line with the ‘A-’ credit rating given by another Japanese credit rating agency, JCR,” he added.

The Philippines currently holds a “A-” rating from the Japan Credit Rating Agency (JCR), “BBB” from Fitch Ratings, “Baa2” from Moody’s Ratings, and “BBB+” from S&P Global Ratings.

The government is targeting to achieve an “A” level rating before the end of the administration. – Luisa Maria Jacinta C. Jocson, Reporter

The Maharlika Investment Corp. (MIC) plans to decide on potential investments by the end of the year, Finance Secretary Ralph G. Recto said on Wednesday.

“Admittedly it is taking time to identify investments that Maharlika can make,” he told a Senate Finance Committee hearing with the Development Budget Coordination Committee.

The country’s first sovereign wealth fund has not yet made any investments since Republic Act No. 11954, which created the Maharlika Investment Fund, was signed into law in July 2023.

“As you know it is like a startup, we just passed the law last year, so it has been in operation for about six to seven months right now,” Mr. Recto said.

He said the Maharlika’s board, composed of the Land Bank of the Philippines (LANDBANK), the Development Bank of the Philippines (DBP), the President, and private sector representatives, was “working and complete.”

Mr. Recto, who serves as the board’s chairman, said the corporation was still setting up its office. The board members have not received salaries, he added.

He noted that MIC Chief Executive Officer (CEO) Rafael D. Consing, Jr. is “looking for opportunities” but has not sought the board’s approval for investments.

During past board meetings, Mr. Recto said Mr. Consing mentioned prioritizing investments in the energy sector, particularly on off-grid power projects and infrastructure projects.

“These (priority areas of investment) are very general, nothing final yet,” the Finance secretary said. “Hopefully, by the end of the year, there will be decisions where to invest.”

Mr. Consing earlier said the corporation’s priority sectors include energy, physical and digital infrastructure, food security, aviation and aerospace, mineral processing, transportation, and tourism.

He has said the corporation seeks to raise about $1 billion for energy projects that include grid modernization, electricity distribution, and new sources to “diversify supply and create price stability.”

Mr. Recto said the MIC should focus on investment opportunities locally, not abroad.

“We are anticipating that Maharlika will make significant investments in infrastructure,” Senate Finance Committee Chairperson Mary Grace Sonora N. Poe-Llamanzares said at the same hearing.

The MIC has an authorized capital stock of PHP 500 billion. Its initial capital of PHP 125 billion comes from contributions from the LANDBANK (PHP 50 billion), DBP (PHP 25 billion) and the National Government (PHP 50 billion).

Mr. Recto said the PHP 75 billion released to the MIC is currently invested in the Treasury.

“We just invested in the Treasury, and the interest income is what they are using in their operations,” he said.

Senate Deputy Minority Floor Leader Ana Theresia N. Hontiveros-Baraquel asked Mr. Recto to confirm if for every PHP 1 billion taken from the MIC’s capital stock, PHP 9 billion would be taken from the loanable funds of LANDBANK and DBP, which the Finance chief responded with “possibly.”

“That (P9 billion reduced in loanable funds assumes that everything is correct, with the nine times multiplier effect, but in many instances, LANDBANK and DBP, many of those resources, investable funds, are also invested in the Treasury,” he said.

Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila University, said that the delay in getting investments showed the government’s failure to justify the MIC’s existence.

“The main task of this corporation was to identify a number of top-notch financial persons who will [place its resources in high-yielding investments,” he said in a Facebook Messenger chat.

“The cost of having dormant funds, which this corporation was formed to eliminate, remains.”

Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said it was understandable for the MIC to go through a “meticulous process” of setting up shop.

“This cautious strategy is essential in a volatile global climate, where careful planning and gradual progress are key to long-term success,” he said in a Viber message.

“By the end of the year, we hope that Maharlika will have identified strategic investments that align with its goals, contributing positively to the economic landscape.”

But Jose Enrique A. Africa, executive director of the think tank IBON Foundation, said the government must ensure there is transparency in MIC’s investments.

“The governance issues, lack of public funds for such an investment vehicle, unfavorable investment conditions from a shaky domestic and global economy, also mean risks for public funds,” he said in a Viber message. – John Victor D. Ordoñez, Reporter