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The Philippines will likely post the second-fastest growth in Asia this year and in 2025, the International Monetary Fund (IMF) said.

In its latest World Economic Outlook report, the IMF maintained its gross domestic product (GDP) growth forecast for the Philippines at 6% this year and 6.2% in 2025.

If realized, the Philippine economic growth would be the second fastest among selected Asian economies, after India’s 7.5% GDP growth forecast.

The Philippines’ growth forecast for 2024 is faster than China (5%), Indonesia (5%), Malaysia (4.4%), Kazakhstan (3.5%), and Iran (3.3%), the IMF said.

It would also surpass Thailand (2.9%), Egypt (2.7%), Korea (2.5%), Pakistan (2%), Saudi Arabia (1.7%), and Japan (0.7%).

“Asia’s emerging market economies remain the main engine for the global economy,” Pierre-Olivier Gourinchas, economic counsellor and the director of research of the IMF, said in a statement.

The IMF maintained its global growth projection at 3.2% in 2024 and 3.3% in 2025, “broadly unchanged” from the previous report’s forecasts.

The IMF cut the United States growth forecast to 2.6% this year, but kept the growth estimate at 1.9% for 2025.

“The forecast for growth in emerging market and developing economies is revised upward; the projected increase is powered by stronger activity in Asia, particularly China and India,” it said.

The IMF raised its forecasts for emerging market and developing Asia, which is seen to grow by 5.4% this year and by 5.1% in 2025.

The growth projection for China was also raised to 5% for this year, “primarily on account of a rebound in private consumption and strong exports in the first quarter.” China’s growth is expected to slow to 4.5% next year, and “to continue to decelerate over the medium term to 3.3% by 2029, because of headwinds from aging and slowing productivity growth.”

However, “prospects for the next five years remain weak, largely because of waning momentum in emerging Asia,” IMF said.

The IMF said risks to the outlook “remain balanced” although upside risks to inflation “stem from a lack of progress on services disinflation and price pressures emanating from renewed trade or geopolitical tensions.”

“The risk of elevated inflation has raised the prospects of higher-for-even-longer interest rates, which in turn increases external, fiscal, and financial risks,” it said.

“Prolonged dollar appreciation arising from rate disparities could disrupt capital flows and impede planned monetary policy easing, which could adversely impact growth. Persistently high interest rates could raise borrowing costs further and affect financial stability if fiscal improvements do not offset higher real rates amid lower potential growth.”

During its last policy meeting, the US Federal Reserve left interest rates unchanged at 5.25%-to-5.5%. Fresh projections from policymakers showed them dialing back expectations for rate cuts this year from three to just one, Reuters reported. — BMDC

The total resources of the Philippine financial system expanded by 10.69% as of May, mainly driven by big banks, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Based on central bank data, the resources of banks and non-bank financial institutions stood at PHP 31.787 trillion as of May from PHP 28.716 trillion in the same month last year.

These resources include funds and assets such as deposits, capital, as well as bonds or debt securities.

Broken down, banks’ resources rose by 12.3% to PHP 26.463 trillion at end-May from PHP 23.565 trillion in the comparable year-ago period, BSP data showed.

Total resources held by universal and commercial banks increased by 12.32% year on year to PHP 24.799 trillion from PHP 22.078 trillion.

Meanwhile, resources of thrift banks reached PHP 1.102 trillion as of May, 9.76% higher than the PHP 1.004 trillion recorded in the same period a year prior.

Resources held by digital banks stood at PHP 105 billion in the period, surging by 32.91% from PHP 79 billion the previous year.

Lastly, rural and cooperative banks’ resources stood at PHP 458 billion as of end-May, increasing by 13.33% year on year from PHP 404 billion.

On the other hand, nonbanks’ resources also grew by 3.34% year on year to PHP 5.323 trillion as of May from PHP 5.151 trillion.

Nonbanks include investment houses, finance companies, security dealers, pawnshops, and lending companies.

Institutions such as nonstock savings and loan associations, credit card companies, private insurance firms, the Social Security System, and the Government Service Insurance System are also considered nonbank financial institutions.

The expansion of the financial system’s resources as of May reflected the banking industry’s growth in terms of income, loans, and deposits, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Philippine banking system’s net income grew by 2.95% year on year to PHP 92.11 billion in the first quarter of this year, the latest data from the BSP showed.

​​Meanwhile, banks’ net loan portfolio increased by 10.39% year on year to PHP 13.419 trillion as of the end of May, separate central bank data showed. Total deposits likewise rose by 9.03% to PHP 19.11 trillion.

“Rate cuts from the US Federal Reserve and the BSP in the coming months would lead to more trading income by banks and faster growth in the demand for credit moving forward,” Mr. Ricafort added.

BSP Governor Eli M. Remolona, Jr. last month said the Monetary Board may deliver its first rate cut in over three years at its Aug. 15 review as they expect inflation to continue easing this semester.

He said the central bank may slash borrowing costs by 25 basis points in the third quarter and by another 25 basis points (bps) in the fourth quarter.

The BSP last month kept its policy rate at a 17-year high of 6.5% for a sixth straight meeting. — A.M.C. Sy

Money sent home by overseas Filipino workers (OFWs) rose by 3.6% in May, its fastest pace in five months, data from the Bangko Sentral ng Pilipinas (BSP) showed.

The BSP on Monday reported that cash remittances coursed through banks grew by 3.6% to USD 2.58 billion in May from USD 2.49 billion in the same month a year ago.

The growth in cash remittances was its fastest in five months or since the 3.8% logged in December 2023.

Month on month, remittances inched up by 0.8% from USD 2.56 billion in April.

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

Remittances from land-based workers jumped by 3.8% to USD 2.06 billion while money sent home by sea-based workers grew by 2.6% to USD 519.373 million.

In the January-to-May period, cash remittances increased by 3% to USD 13.365 billion from USD 12.981 billion a year ago.

This was also its fastest pace of annual growth in a year or since the 3.1% recorded in May 2023.

“The growth in cash remittances from the United States, Saudi Arabia, and Singapore contributed mainly to the increase in remittances in January-May 2024,” the central bank said.

In the first five months, the United States accounted for 40.9% of total remittances.

This was followed by Singapore (7.2%), Saudi Arabia (6.1%), Japan (5.1%), the United Kingdom (4.7%), the United Arab Emirates (4%), Canada (3.4%), Korea (2.8%), Qatar (2.8%) and Taiwan (2.7%).

“This 3.6% increase (in May), reaching $2.58 billion, suggests a combination of positive factors. Economic growth in key remittance source countries like the US, Saudi Arabia, and Singapore might be putting more money in the pockets of OFWs,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

Mr. Roces said that rising wages of OFWs could also be another factor behind faster remittance growth.

“Finally, favorable exchange rates incentivize sending more money back as it translates to a bigger bump in Philippine pesos received,” he added.

In May, the peso sank to the PHP 58-per-dollar level for the first time since November 2022.

“The continued growth nevertheless is still a good signal for the overall economy as an important growth driver, especially in terms of consumer spending, which accounts for about 74% of the Philippine economy,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Mr. Ricafort also noted there was a seasonal increase in remittances due to the summer holiday.

Meanwhile, personal remittances rose by 3.7% to $2.88 billion during the month from $2.78 billion. This brought personal remittances at end-May to USD 14.89 billion, higher by 3% from USD 14.46 billion in the same period a year ago.

“The increase in personal remittances in May 2024 was due to remittances from 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 BSP added.

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

For the first six months of the year, headline inflation averaged 3.5%. This was slightly higher than the central bank’s 3.3% full-year forecast.

Mr. Ricafort also noted there is a seasonal increase in remittances during the July-August period due to the need to pay for school tuition payments.

The central bank expects cash remittances to grow by 3% this year. – Luisa Maria Jacinta C. Jocson, Reporter

The government of President Ferdinand R. Marcos, Jr. might have done enough pump-priming and should let the private sector take on a bigger role in boosting the economy, according to a congressional think tank.

“The resilience and ingenuity demonstrated by Filipinos, particularly in crises, should serve as a reminder that the government can trust the private sector to do its part in growing the economy. To realize this potential, policymakers must prioritize providing a favorable environment for businesses to thrive,” the Congressional Policy and Budget Research Department (CPBRD) said in a report on Monday.

“This includes lowering regulatory burdens, improving infrastructure, investing in education and skills development in areas that offer the highest economic returns, and fostering competition,” it added.

The Philippine economy would probably grow by 5.02% to 6.17% this year, compared with the government target of 6-7%, the CPBRD said, noting that heightened inflationary pressures, tightening fiscal constraints, weak capital formation and anemic growth in critical productive sectors could further hamper growth.

The think tank said inflation is still a “large and growing threat to economic growth and stability.”

“If prevailing inflationary pressure remains unabated, the likelihood of an economic slowdown is heightened,” it added.

For the first six months of 2024, headline inflation averaged 3.5%, slightly higher than the central bank’s 3.3% full-year forecast.

“Anticipated shifts in regional and global value chains, tightening fiscal constraints, growing geopolitical instability, and the Philippines’ vulnerability to climatic shocks (i.e., a single typhoon that hits Central Luzon has the outsized potential to severely aggravate existing agricultural productivity issues) are other potential threats on the horizon,” the think tank said.

The CPBRD expects growth momentum to continue in the second and third quarters, before decelerating in the fourth quarter.

In a low-growth trajectory, the think tank sees gross domestic product (GDP) expanding by 5.05% in the second quarter, 5.7% in the third quarter and 3.56% in the fourth quarter.

“The low-growth trajectory can be viewed as the expected scenario if inflation accelerates and begins eroding productivity — sooner rather than later,” it said.

On the other hand, the CPBRD’s high-growth scenario sees GDP expanding by 6.3% in the second quarter, 7.04% in the third quarter and 5.35% in the fourth quarter.

“While the Philippine economy faces significant headwinds, it also has the potential for robust and inclusive growth. The path forward necessitates a balanced approach that addresses immediate challenges while laying the foundation for long-term sustainable development,” the CPBRD said.

The think tank said a strong partnership between the government and the private sector can help the Philippines realize its full economic potential.

The Philippine economy faces both challenges and opportunities in the current global economic landscape, it said.

“Exploiting its strengths in services, manufacturing, and agriculture, the country can position itself as a competitive player in emerging regional markets — and eventually the global market,” it said.

“This, however, requires a collaborative effort from both the public and private sectors to build robust markets, foster innovation, and leverage emerging technologies.”

Meanwhile, Security Bank Corp. Chief Economist Robert Dan J. Roces said the government’s 6-7% GDP growth target is not out of reach despite elevated interest rates and high inflation.

“Rising remittances and a potential infrastructure spending boost offer promising signs,” he said in a Viber message.

“Streamlining regulations, investing in vital infrastructure, and nurturing a skilled workforce can unlock private sector potential beyond restrictive requirements,” Mr. Roces said adding that the Marcos administration’s focus on infrastructure and public-private partnerships is a step in the right direction.

The government should also limit its intervention in the economy to allow the private sector to stimulate the local economy, Leonardo A. Lanzona, an economics professor at the Ateneo de Manila, said in a Facebook Messenger chat.

“The economy is so dependent on government expenditures that any underspending causes a negative effect on growth,” he told BusinessWorld. “With private consumption and investment declining, the government in turn has crowded out the private sector and hence not been able to meet its targets.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said Philippine GDP growth could normalize to around 5.5-6.5% annually in the coming years.

In a Viber message, he said it would be possible for the Philippines to achieve 6% GDP growth in the following quarters due to the continued recovery of businesses and increases in government spending in preparation for the 2025 midterm elections. – Kenneth Christiane L. Basilio

The Philippine Economic Zone Authority (PEZA) approved PHP 8.65 billion worth of projects in June, 73.4% lower than a year ago.

In a statement over the weekend, the investment promotion agency said the PEZA Board approved 25 new and expansion projects at its June 28 meeting, up from 22 projects a year ago.

These projects are expected to contribute USD 416 million in export value and 5,881 direct jobs.

However, the amount of PEZA-approved investments in June was 73.4% lower than the PHP 32.56 billion worth of investments approved in the same month last year.

Of the 25 projects, 22 are from locator companies and three are from economic zone (ecozone) developers, PEZA said.

“These locator companies comprise 11 export manufacturing projects, followed by six projects in information technology and business process management (IT-BPM), three in domestic markets, one in facilities development, and one in logistics services,” it added.

Calabarzon was still the top investment destination in June, accounting for 15 projects. The other investment destinations were the National Capital Region, Region III (Central Luzon), Region V (Bicol Region), Region VII (Central Visayas), and Region XII (Soccsksargen).

LOWER INVESTMENTS
For the first half, PEZA said it approved PHP 45.48 billion worth of investments, plunging by 43.6% from the PHP 80.59 billion worth of investments approved in the same period last year.

The PEZA approved 120 projects which are expected to create over 25,000 jobs and generate $1.61 billion in export value.

“The new projects approved recorded an 18% increase from 102 to 120, with projected direct employment reaching a remarkable 64% uptick from 15,424 to 25,259 this year,” PEZA said.

PEZA Director-General Tereso O. Panga said that the approval of the 120 projects signals confidence in the country’s business environment and economic potential.

“Creating more jobs for Filipinos signifies the agency’s proactive efforts in positioning the Philippines as a premier investment destination in Asia,” he said.

During the six-month period, PEZA said it approved five big-ticket projects worth PHP 31.36 billion.

In June, it approved two projects worth PHP 6.15 billion. A Malaysian company will set up a manufacturing and assembly facility for hair stylers, while a Japanese company will manufacture biomass fuel products, oxygen reducers, and activated charcoal made from coconut shells in General Santos City.

From January to June, the top investment sources were the Cayman Islands (PHP 8.86 billion), Japan (PHP 8.02 billion), Malaysia (PHP 4.53 billion), Hong Kong (PHP 1.62 billion), and Singapore (PHP 1.27 billion).

The electronic manufacturing services sector attracted the most investments, accounting for PHP 19.77 billion. This was followed by the ecozone development (PHP 16.21 billion), IT-BPM industry (PHP 2.89 billion), and automotive (PHP 1.04 billion).

“Eastern European countries are also quite interested in the Philippines, with visits from Ukrainian, Polish, and Russian delegations conducting inquiries and site visits preparatory to investing in the country,” PEZA said.

PEZA is hoping to approve between PHP 200 billion and PHP 250 billion worth of investments this year. If realized, this will be at least a 15% growth from the PHP 175.71 billion worth of investments approved in 2023. — Justine Irish D. Tabile