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President Ferdinand R. Marcos, Jr. failed to discuss plans to address the country’s fiscal situation in his third State of the Nation Address (SONA), despite his vows to pursue “aggressive” infrastructure projects and push for a wage hike for government workers and teachers, economists said.

“There were no concrete sources of funds from the President’s SONA,” Emy Ruth Gianan, who teaches economics at the Polytechnic University of the Philippines, said in a Facebook Messenger chat.

“There was also no reminder for the Bureau of Internal Revenue to beef up tax collections or other levying units to improve revenue generation,” she added.

In his third SONA on Monday, Mr. Marcos said his government is pursuing an “aggressive” infrastructure development in line with the country’s goal to become an upper middle-income economy by next year.

“Our power and internet services are continuously being upgraded in both capacity and connectivity,” Mr. Marcos said, adding that the government is building “essential infrastructure and linkages” to support artificial intelligence systems “for high-impact practical applications.”

He said the government will boost scholarships and research grants in line with the “agenda to foster startups” and “commercialize and mass produce research and development outputs.”

Mr. Marcos also vowed to pursue a wage hike for government employees and implement an expanded career progression system for public school teachers.

Even though these programs will require massive funding, the President did not call for new taxes or discuss other sources of revenues.

“The President’s declarations on infrastructure and other key initiatives cost money. If we adhere to the policy of simply improving our tax administration without new forms or higher rates of appropriate taxes, the only option is to increase our borrowings,” Diwa C. Guinigundo, a former central bank deputy governor, said in a Viber message.

The National Government (NG) borrows from both foreign and domestic lenders to fund its budget deficit as it spends more than its revenues to support infrastructure projects and boost economic growth. The budget deficit in the January-May period widened by 24.06% to PHP 404.8 billion.

“In time, if borrowings are not translated into growth, debt servicing could even divert public money away from supporting more infrastructure and productive activities in the future,” Mr. Guinigundo said.

Economic managers are targeting 6-7% gross domestic product (GDP) growth this year.

Government debt hit a record high of PHP 15.35 trillion at the end of May, according to the Bureau of the Treasury (BTr), which largely pointed to the weakening of the local currency against the greenback.

“Any form of public goods will require substantial amounts of funds. Hence, a good measure of how SONA should consider not just the type of public goods that will be delivered but also how the public will have to pay in order to acquire them,” said Leonardo A. Lanzona, Jr., who teaches economics at the Ateneo de Manila University.

“In the face of substantial debts and huge budget deficits, this dream that the government will supply for all of this infrastructure and higher wages for government officials will be impossible,” he said in an e-mail.

At a post-SONA briefing on Tuesday, Budget Secretary Amenah F. Pangandaman said the department had set aside some PHP 9.5 billion for the new medical allowance for government employees announced by Mr. Marcos.

The appropriation was allocated under the Miscellaneous Personnel Benefits Fund for 2025, she noted, adding that government workers will each receive a medical allowance as a subsidy to avail themselves of Health Maintenance Organization (HMO) benefits.

The allowance covers employees under National Government agencies, state universities and colleges, and government-owned and -controlled corporations (GOCCs).

Ms. Pangandaman also said Mr. Marcos will issue an executive order detailing the four-tranche salary hike for government workers.

About P70 billion has been set aside under the 2025 National Expenditure Program to ensure the implementation of the first and second tranches, she said.

The last time government workers’ salaries were increased was in 2023, she said, referring to the fourth and last tranches of the Salary Standardization Law of 2019.

At the post-SONA briefing, Finance Secretary Ralph G. Recto said the government is targeting to double its revenue from nontax collections this year.

“Last year it was about P200 billion. This year, we will get about P400 billion… We are on track to hit our fiscal target for the entire year and that’s roughly about PHP 4.25 trillion,” Mr. Recto said.

At its June meeting, the Development Budget Coordination Committee retained the PHP 4.27-trillion revenue target, as well as the PHP 5.75-trillion expenditure program for this year. The fiscal deficit ceiling is set at PHP 1.48 trillion or -5.6% of GDP this year.

A large portion of the nontax revenues collected by the government in the first six months of the year came from remittances from GOCCs, the privatization of government assets, as well as income from the National Treasury, he noted.

In his speech, Mr. Marcos said the Philippine financial system remains robust and resilient, adding that tax and nontax revenue collection was “also efficient.”

“Notably, for the past two years, our GOCCs remitted dividends to the National Government with a combined tally exceeding their contributions in 2022,” he said.

BUDGET

Mr. Marcos also called on Congress to ensure that the proposed budget for 2025 — pegged at PHP 6.352 trillion, which is higher than this year’s PHP 5.768 trillion — is not just approved in a timely manner but also “be adhered to as closely as possible.”

“We expect all agencies to ensure that every centavo allocated will be judiciously spent for our urgent priorities and socially impactful programs,” he said.

The Budget department is scheduled to submit its proposed 2025 National Expenditure Plan to Congress on July 29.

Mr. Lanzona said the government should have a strategy also in terms of financing its programs and plans.

“This means priorities need to be instituted first and then as the time progresses as resources become available, then other promised goods can be obtained until towards the end of the President’s term,” he added.

“Without such a strategy, none of these become feasible unless greater debts and more budget deficits are incurred.” – Kyle Aristophere T. Atienza, Reporter

President Ferdinand R. Marcos, Jr. on Monday announced a total ban on all offshore gaming operations in the Philippines, saying these have been linked to illegal activities including money laundering and financial scams.

“Effective today, all POGOs are banned,” he said during his State of the Nation Address (SONA), referring to Philippine offshore gaming operators (POGOs).

He also ordered the Philippine Amusement and Gaming Corp. (PAGCOR) to wind down and end the operations of all POGO facilities by the end of 2024. He also ordered the Labor department to find new jobs for POGO workers that will be displaced.

“We hear the loud cry of the people against POGOs… The grave abuse and disrespect to our system of laws must stop,” Mr. Marcos said.

Mr. Marcos received a standing ovation after announcing the ban in his third SONA, which analysts said lacked details on the reform agenda and failed to discuss medium-term economic goals.

POGOs have been “disguising” as “legitimate entities” but their operations have ventured into illicit areas, he said.

He linked POGOs to financial scams, money laundering, prostitution, human trafficking, kidnapping, brutal torture, and “even murder.”

The reputational risk from POGOs, which mostly involve Chinese nationals and cater to Chinese markets, could cost the government P55.36 billion in forgone investments due to crimes linked to them, and P29.01 billion in forgone revenues in tourism, the Finance department earlier said.

Several business groups led by the Makati Business Club recently called for a total ban on POGOs, saying their investments accounted for just 0.2% of the Philippines’ gross domestic product (GDP) in 2023 and pointed out significant social costs.

Over 50% of kidnapping cases in 2022 were POGO-related, according to Philippine National Police (PNP) data.

Even Senator Ana Theresia Hontiveros-Baraquel, the highest elected official among opposition personalities, joined the crowd in applauding Mr. Marcos’ announcement.

“This was something people were expecting, thus the standing ovation,” Maria Ela L. Atienza, a political science professor at the University of the Philippines, said in a Viber message. “Hopefully, this can bolster his popularity and trust ratings.”

Mr. Marcos’ performance and trust ratings dropped in the latest Pulse Asia Research, Inc. poll, which was released as he completed his second year in office.

Ms. Atienza noted that POGOs are viewed by many in the government as “negligible” because they are no longer bringing in much revenues.

Foundation for Economic Freedom, Inc. President Calixto V. Chikiamco also expressed support for the phaseout of all POGOs.

“This will help reduce criminality and corruption and even improve our relations with China, which has called for dismantling of POGOs,” he said.

Finance Secretary Ralph G. Recto said the President’s decision to ban POGOs would not lead to major revenue losses for the government.

“When you look at the cost-benefit analysis done by the DoF (Department of Finance), we are spending more than we are earning from POGOs,” he told BusinessWorld after the SONA.

Mr. Marcos began his third SONA speech, which was longer than last year’s, with a discussion of government efforts to address rising prices, touting his executive order that further reduced tariff rates for rice and other key commodities until 2028, as well as the temporary price cap on rice in October.

The Philippine leader said his government had seized more than PHP 2.7 billion worth of smuggled agro-fishery products through modernized Customs procedures and heightened enforcement, “preventing them from entering the market and negatively influencing prices.”

Mr. Marcos said the government would soon enforce a pre-border technical verification and cross-border electronic invoicing of imports. “This will send a strong signal that we mean serious business.”

He also focused on his administration’s “aggressive” infrastructure development program, which he said is key to making the Philippines an upper middle-income economy.

“With the results that we have seen two years into this administration, we can claim that despite challenges, we are steadily progressing towards our targets in the medium term,” he said.

The Marcos administration targets a 6-7% gross domestic product (GDP) growth this year. Under the Philippine Development Plan (PDP) 2023-2028, GDP annual growth target was set at 6.5-8% until 2028.

By 2028, the country also aims for a gross national income (GNI) per capita of $6,044-$6,571, a 3% deficit-to-GDP ratio, and debt-to-GDP ratio of 48-53%.

“To sustain the country’s economic gains, we are promoting investment-led growth. We have set in motion policies and programs to create an environment conducive for businesses to thrive, like reforms in the capital markets, and implementation of ‘green lanes,’” Mr. Marcos said.

Fiscal analyst Zy-za Nadine M. Suzara said Mr. Marcos’ third SONA heavily focused on the government’s accomplishments in the implementation of existing programs that were mostly initiated during previous administrations.

“He did not detail a reform agenda on improving bureaucratic efficiency and sound fiscal management even if these two are part of his eight-point socioeconomic agenda,” she said in an e-mail.

“It appears that these are not among his governance priorities even if these are actually at the core of achieving the rest of his socioeconomic agenda.”

On industrial policy, Mr. Marcos said the IT and creative sectors are burgeoning industries, “knowing no territorial bounds, and holding great promise for our talented and hardworking people.”

Cielo D. Magno, a professor at the University of the Philippines School of Economics, praised Mr. Marcos for touching on the creative and IT sectors, but said he should have discussed a “comprehensive industrial policy.”

“I appreciate clear instructions regarding human capital,” she added.

Mr. Marcos said in his speech that “schools will serve as the preeminent incubators of the innovative and creative energies of all Filipinos.”

He said the government would bank on Technical and Vocational Education and Training (TVET) to address joblessness, which hit a four-month high in June.

“Eight out of 10 graduates of TVET ultimately land decent jobs. So with its high employability rate, TVET will definitely be instrumental in capacitating our people.”

Jesus Felipe, director of the Angelo King Institute for Economic and Business Studies at De La Salle University, noted that the manufacturing sector accounts for only about 8% of the country’s employment share, making it more impossible for the country to produce jobs that are tech-driven.

“Look at the jobs that this economy generates — people riding motorcycles for delivery, etc.,” he said in a phone call. “Do you really believe that you can have a high-income economy?”

PHL ‘CANNOT WAVER’
Mr. Marcos gained a standing ovation after saying that the Philippines would not yield or waver in defending its features in the South China Sea.

Philippine officials “continuously try to find ways to de-escalate tensions in contested areas with our counterparts without compromising our position and our principles,” he said.

“The Philippines cannot yield, the Philippines cannot waver.”

Mr. Marcos, who has visited over 20 countries since his presidency in June 2022, said a substantial number of investment pledges have already commenced operations, “with many more at various stages of development.” These could create over 200,000 jobs for Filipinos, he added.

Among the administration’s priority bills, Mr. Marcos only mentioned the proposed amendments to the Electric Power Industry Reform Act of 2001 and the Corporate Recovery and Tax Incentives for Enterprises Act of 2021, which significantly lowered taxes on domestic and foreign corporations. 

“While it’s good to hear promises and instructions, it is important for the public to continuously monitor and engage the government to hold them accountable,” Ms. Magno said. “Promises can dissipate once the spotlights on his speech are turned off.”

Diwa C. Guinigundo, a former central bank deputy governor, said Mr. Marcos’ headline messages were sound “although we need to dissect them.”

The President should have disclosed why the Philippine Health Insurance Corp. needed to remit P80 billion to the National Government “when this amount could have secured wider and higher health coverage for its members,” he said in a Viber message.

British Chamber of Commerce of the Philippines Executive Director and Trustee Christopher James Nelson told BusinessWorld in a phone call that he was pleased to hear the President discuss agriculture policies, and hoped for Congress’ swift passage of the Anti-Agricultural Smuggling Act.

He said the real issue for foreign investors is whether the Philippines will continue to open up markets and remove foreign restrictions.

Senate President Francis G. Escudero told reporters on the sidelines of the President’s address to Congress that Mr. Marcos’ speech showed that he was serious about improving public transportation, agriculture and dealing with crimes linked to POGOs.

However, the POGO ban could also negatively affect the country’s real estate market, Albay Rep. Jose Ma. Clemente “Joey” S. Salceda, who heads the House ways and means committee, told BusinessWorld. 

“We just have to find the lost revenues, lost employment [due to the POGO ban],” he said after Mr. Marcos’ SONA. “And of course, it will dampen the real estate market.”

“I hope they make a differentiation with IGLs (internet gaming license), [so that] when they ban POGOs it will not lead to a banning of the entire IGL, because that’s PHP 43 billion [that could be lost],” he added.

Philippine Exporters Confederation, Inc. and Employers Confederation of Philippines President Sergio R. Ortiz-Luis told BusinessWorld by telephone that a less than six-month transition for licensed POGOs to wind down operations would mitigate immediate joblessness within the industry.

“The problem is whether we like it or not, there are a lot of investments and contracts, services that revolve around legal POGOs, and I’m sure they are hoping for a way to find an extension (to wind down operations).”

“One area I was hoping he would stress on is the ease of doing business. Although he mentioned the CREATE More bill, it is important to make this point with local governments to reduce the bureaucracy and make it easier for businesses to expand here,” Philippine Chamber of Commerce Chairman George T. Barcelon told BusinessWorld by telephone.

He said legal POGO firms affected by the ban could get back on their feet by pursuing other legitimate businesses that would hire Filipino workers instead of Chinese immigrants serving a Chinese market. – Kyle Aristophere T. Atienza, Reporter, with Chloe Mari A Hufana, Kenneth Christiane L. Basilio and John Victor D. Ordoñez

About 17.54 million Filipinos were living in poverty in 2023, significantly lower than the nearly 20 million in 2021, the Philippine Statistics Authority (PSA) reported on Monday. 

Based on preliminary results of the PSA’s Family Income and Expenditure Survey (FIES), the poverty incidence among the population fell to 15.5% from the 18.1% estimate in 2021.

“This present figure is even lower than the pre-pandemic level of 16.7% in 2018,” President Ferdinand R. Marcos, Jr. said in his State of the Nation Address on Monday. He added that almost 2.5 million Filipinos were lifted from poverty.

The latest figure is also lower than the government’s development target for poverty incidence in 2023 at 16-16.4% under the Philippine Development Plan (PDP) 2023-2028. 

Meanwhile, the poverty incidence among families was recorded at 10.9%, or about three million poor families. 

The PSA defines poverty incidence as the proportion of Filipino families with incomes that are not sufficient to buy their minimum basic food and nonfood needs as estimated by the poverty threshold.   

Meanwhile, 2.7% of Filipino families or about 740,000 families did not have enough income to meet their basic food needs.

Among the population, 4.3% or about 4.84 million Filipinos were living below the food poverty threshold.

With these results, the poverty situation in the Philippines has returned to its pre-pandemic levels, the PSA said. 

National Economic and Development Authority Secretary Arsenio M. Balisacan said the lower poverty incidence reflects government efforts to implement effective policies and initiatives to improve the lives of Filipinos.

“High inflation during the first half of 2023 likely partially offset the positive effects of income growth on poverty reduction. The decline in poverty could have been sharper had inflation been more moderate,” Mr. Balisacan said in a statement. 

He said economic growth was progressive, given that the average income per person for the poorest Filipinos grew more quickly than those in the top decile class and faster than the rate at which the poverty threshold increased.

Mr. Balisacan also said food security remains a top government priority, and creating more high-quality jobs and developing human capital to improve the earning potential of Filipinos are areas to focus on. 

The local statistics agency added that the decline in poverty from 2021 was due to the poverty threshold and income data from 2021 to 2023.

Preliminary data showed that the poverty threshold, which is mainly influenced by changes in food prices, grew by 15.3% from 11.8% previously (2018-2021).

Meanwhile, 2023 FIES data also showed that the mean per capita income, particularly for families near the poverty threshold, jumped by 22.9% from 9.2%, higher than the increase in the poverty threshold.

Security Bank Corp. Chief Economist Robert Dan J. Roces said poverty reduction likely stemmed from a combination of some economic growth, job creation, government aid programs, and stable but high inflation, particularly among food.

“While this is positive, the unbanked population may not have fully benefited yet. Increased per capita income, possibly due to economic growth or rising wages, is encouraging,” Mr. Roces said in a Viber message.

Jesus Felipe, a professor of economics at De La Salle University, said the poverty incidence would continue to decline in the coming years but not as fast as hoped.

“Since poverty in the Philippines is mostly a rural phenomenon, the decline in poverty is linked to improvements in agriculture, in particular to the decline in the share of employment in this sector,” he said in an e-mail.

Headline inflation in 2023 averaged 6%, slightly higher than 5.8% in 2022. Meanwhile, the jobless rate hit an all-time low of 4.3% last year, the lowest in two decades, according to the local statistics agency. — Abigail Marie P. Yraola

In 2023, the agriculture sector grew by 1.2% from 0.5% in 2022 and the 0.3% contraction in 2021. Meanwhile, the Philippine economy grew by 5.5% in 2023 from 7.6% in 2022 and 5.7% in 2021.

“We forecast that the poverty incidence will decline to 14% in 2026, 13.3% in 2028 and 12.2% in 2030,” Mr. Felipe said. — Abigail Marie P. Yraola

The Bangko Sentral ng Pilipinas (BSP) and Bureau of the Treasury (BTr) have launched a fully automated intraday settlement facility (ISF) to address timing issues and make transactions for banks more efficient.

In a statement on Monday, the central bank said it officially rolled out the automated ISF on June 27.

“The facility is available to all eligible financial institutions that encounter timing mismatches when settling their transactions through the Peso Real-Time Gross Settlement (RTGS) Payment System operated by the BSP.”

The automated ISF was developed by linking the BSP’s RTGS system or the Philippine Payment and Settlement System (PhilPaSS) Plus with the BTr’s National Registry of Scripless Securities (NRoSS).

The BSP said the facility’s full automation promotes a “safe, efficient, and reliable mode of fund transfer in support of financial stability.”

“Aside from preventing gridlocks in the PhilPaSS Plus from timing mismatches in the settlement of payments between participants, the ISF is designed to support a quick and efficient paperless process,” the central bank said.

“This allows PhilPaSS Plus participants to obtain funds within a few minutes after initiating a repurchase agreement or repo transaction with the BSP. These funds can cover the participants’ queued or expected outgoing payment instructions in the PhilPaSS Plus,” it added.

A repurchase agreement (repo) is a transaction in which the borrower temporarily lends a security to the lender for cash with an agreement to buy it back in the future at a pre-determined price, the BSP said, citing the International Monetary Fund.

PhilPaSS Plus is a real-time gross settlement system that processes and settles high-value transactions between financial institutions.

The growing number of settlements by financial institutions prompted the BSP to upgrade the PhilPaSS system to PhilPaSS Plus in July 2020.

“This system also settles the clearing results of retail payments made by individuals, businesses, and the government using checks, ATMs, InstaPay, and PESONet,” the central bank added.

Meanwhile, the NRoSS is one of the electronic registry systems the Treasury uses for the issuance of government securities.

In January, the BSP amended the regulations on the return of banks’ bounced checks, as well as reintroduced the intraday liquidity facility to also prevent timing mismatches in the settlement of payments. — Luisa Maria Jacinta C. Jocson