PHP slips to record-low 59 per USD on hawkish Fed cut

The peso sank to the all-time low of PHP 59 against the US dollar anew on Thursday, following the US Federal Reserve’s hawkish cut.

The local unit closed at PHP 59 per dollar on Thursday, weakening by one centavo from its PHP 58.99 finish on Wednesday, Bankers Association of the Philippines data showed.

This was the third time the peso hit its historic low this year on Nov. 26 and Nov. 21. It has yet to breach this record, which was first set in October 2022.

The peso opened at PHP 59 against the dollar, which was already its worst showing. Its intraday best was at PHP 58.98 versus the greenback.

Dollars exchanged dropped to USD 1.099 billion on Thursday from USD 884.55 million on Wednesday.

The peso slipped against the dollar as the market reacted to the Fed’s cut and hawkish guidance for next year, Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

Fed officials see only two 25-basis-point (bp) rate cuts for next year, which would bring the Fed funds rate to the 3.75-4% range by end-2025.

“The market is forecasting a shallower trend for 2025 vs previously estimated,” he added.

Markets have forecasted only one 25-bp rate cut by the Fed next year, only a quarter of the 100 bps in cuts previously seen, Reuters reported. This would bring the US central bank’s policy rate to the 4-4.25% range.

The Federal Open Market Committee (FOMC) on Wednesday lowered its policy rate by 25 bps to the 4.25-4.5% range.

Fed Chair Jerome H. Powell’s signals of requiring fresh inflation progress for future rate cuts also caused equity prices to fall, Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said in a Viber message.

The dollar was generally stronger at new two-year highs on Thursday after the Fed signaled fewer rate cuts next year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

He noted that the dollar was also supported by a weaker euro.

Mr. Ravelas added it was likely that the peso could breach the PHP 59-per-dollar level within the year.

Mr. Ricafort said the Bangko Sentral ng Pilipinas (BSP) will continue to defend the peso against the dollar to keep it at below or at the PHP 59-per-dollar level.

“Going forward, the performance of the US dollar-peso exchange rate would still be partly a function of intervention/defense as consistently seen for more than two years already at the record high closing rate of PHP 59, which has been respected for now and since the latter part of September 2022,” he said.

For Friday, Mr. Ricafort sees the peso moving between PHP 58.85 and PHP 59 per dollar. – Aaron Michael C. Sy, Reporter

BoP deficit widens in November

The country’s balance of payments (BoP) deficit widened in November as the government made more repayments on foreign debt, the Bangko Sentral ng Pilipinas (BSP) said on Thursday.

Data from the central bank showed the BoP position widened to a USD 2.276-billion deficit in November from the USD 216-million gap a year ago. It also more than tripled from the USD 724-million deficit in October.

November also marked the widest deficit in 26 months or since the USD 2.339-billion shortfall recorded in September 2022.

The BoP measures the country’s transactions with the rest of the world at a given time. A deficit means more funds left the economy than what went in, while a surplus shows that more money entered the Philippines.

“The BoP deficit in November 2024 reflected the National Government’s (NG) net foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures, and the BSP’s net foreign exchange operations,” it said.

Earlier data from the BSP showed that the Philippines’ external debt service burden declined by 3.8% to USD 8.68 billion in the January-to-August period.

Outstanding external debt hit a record USD 130.182 billion at the end of June. This brought the external debt-to-gross domestic product (GDP) ratio to 28.9% at the end of the second quarter.

In the first 11 months, the BoP stood at a surplus of USD 2.117 billion, 30% lower than the USD 3.03-billion surfeit in the same period a year earlier.

“Based on preliminary data, the decline in the cumulative BoP surplus was due to lower net receipts from trade in services and net foreign borrowings by the NG,” the central bank said.

The country’s trade deficit widened by 36.8% year on year to USD 5.8 billion in October, its widest trade gap in 26 months or since August 2022, data from the local statistics authority showed.

For the first 10 months, the trade deficit widened by 3.6% to USD 45.22 billion from the USD 43.64-billion gap a year ago.

“However, this decline was partly muted by the continued net inflows from personal remittances as well as net foreign portfolio and direct investments,” the BSP added.

In the first 10 months, cash remittances grew by 3% to USD 28.3 billion from USD 27.49 billion a year prior.

In the same period, BSP-registered foreign investments yielded a net inflow of USD 2.49 billion, a turnaround from the USD 715.43-million outflow in 2023.

Meanwhile, foreign direct investment (FDI) net inflows rose by 3.8% to USD 6.66 billion in the first nine months from USD 6.42 billion a year ago.

At its end-November position, the BoP reflected a final gross international reserve (GIR) level of USD 108.5 billion, down by 2.3% from the USD 111.1 billion as of end-October.

The dollar reserves were enough to cover 4.3 times the country’s short-term external debt based on residual maturity.

It is also equivalent to 7.7 months’ worth of imports of goods and payments of services and primary income.

An ample level of foreign exchange buffers safeguards an economy from market volatility and is an assurance of the country’s capability to pay debts in the event of an economic downturn.

This year, the BSP expects the country’s BoP position to end at a USD 2.3-billion surplus, equivalent to 0.5% of GDP.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the depreciation of the peso impacted on the net payment of foreign debt maturities.

The peso fell to the record-low P59-per-dollar level twice in November.

“For the coming months, the country’s GIR and BoP could still be supported by the continued growth in the country’s structural inflows from OFW (overseas Filipino worker) remittances, BPO revenues, exports, and relatively fast recovery in foreign tourism revenues,” Mr. Ricafort said.

He said further fundraising activities such as global bond issuances could also boost the BoP position.

Finance Secretary Ralph G. Recto has said they are looking to issue dollar- and euro-denominated bonds in the first half of 2025.

“Thus, still relatively high GIR at USD 108.5 billion could still strengthen the country’s external position, which is a key pillar for the country’s continued favorable credit ratings,” Mr. Ricafort said. — Luisa Maria Jacinta C. Jocson

BSP may slash rates by 75 bps in 2025 — Recto

The Bangko Sentral ng Pilipinas (BSP) could cut benchmark interest rates by 75 basis points (bps) in 2025, Finance Secretary Ralph G. Recto said.

Mr. Recto, who previously projected 100 bps of cuts in 2025, told reporters the pace of easing will depend on various factors, such as inflation and the US Federal Reserve’s next moves.

“It depends also on what happens, what the Fed does. So, we have to wait for the inflation numbers, wait for what the Fed does, I suppose. But more or less, my expectation is 75 bps,” he said.

BSP Governor Eli M. Remolona, Jr. had earlier signaled that the Monetary Board could deliver rate cuts in the 100-bp range next year.

On Wednesday, the US Federal Reserve was expected to lower rates by 25 bps, which would bring the policy rate to the 4.25%-4.5% range. However, the pace of the Fed’s easing cycle remains uncertain as US President-elect Donald J. Trump assumes office in January.

Philippine headline inflation stood at 2.5% in November, bringing the 11-month average to 3.2%. This is still well within the BSP’s 2-4% target band.

Mr. Recto, who is also a member of the Monetary Board, said there is a “great possibility” that the central bank would deliver a third straight 25-bp cut at its final policy meeting for the year today (Dec. 19).

“There is a great possibility, [and] probability. I agree with the market consensus of a 25-bp (decrease),” Mr. Recto said.

A BusinessWorld poll conducted last week showed that 13 out of 16 analysts expect the Monetary Board to reduce the target reverse repurchase rate by 25 bps at its meeting today.

If realized, this would bring the benchmark rate to 5.75% from the current 6%, or a total of 75 bps worth of cuts by the end of 2024.

If the BSP delivers another 75 bps worth of cuts next year, it would bring the key rate to 5% in 2025.

The central bank began its easing cycle in August with a 25-bp cut. It delivered another 25-bp reduction in October.

In a separate report, Capital Economics said it sees up to 100 bps worth of rate cuts in 2025.

“With growth set to moderate and inflation likely to remain low, we expect a further 100 bps of cuts in 2025. This will take the policy rate to 4.75% at the end of 2025,” it said in a report released on Dec. 13.

Capital Economics said the strength of gross domestic product (GDP) growth is “unlikely to last.”

Economic managers earlier this month revised their GDP target to 6-6.5% this year from 6-7% previously after weak third-quarter growth.

The economy grew by an annual 5.2% in the July-to-September period, the weakest growth in five quarters or since the 4.3% expansion in the second quarter of 2023.

For the first nine months of the year, Philippine GDP growth averaged 5.8%, slower than the 6% print a year ago.

“Consumption is likely to be boosted by the drop in inflation and further cuts to interest rates, but we doubt the pace of consumption growth in Q3 is sustainable. What’s more, growth in remittances and exports will slow, amid weaker global growth,” Capital Economics said.

It expects inflation to remain low in the next quarters “due to a combination of weaker economic growth and a decline in food inflation.”

The central bank expects inflation to settle at 3.1% this year. — A.R.A. Inosante

Philippines eyes euro, dollar bond issuance

The government is looking to issue US dollar- or euro-denominated bonds in the first half of 2025, the Finance chief said.

“[We’ve approved] a potential double bond — US dollar and/or euro,” Finance Secretary Ralph G. Recto told reporters on Tuesday.

He added the government will look to raise at least PHP 300 billion from the issuance, which is the benchmark size of foreign issuances.

The Philippines’ last dollar bond issuance was in August this year. It raised USD 2.5 billion from the issuance of triple-tranche, US dollar-denominated global bonds.

In September, National Treasurer Sharon P. Almanza said the National Government (NG) will no longer push through with a planned euro bond issuance this year.

The National Government last issued euro bonds in April 2021, raising euro 2.1 billion (PHP 122.4 billion) amid the coronavirus pandemic.

The government has USD 500 million yet to be raised from the international debt market this year from its USD 5-billion external borrowing plan.

Mr. Recto on Tuesday said the government is also planning to issue Sukuk and Samurai bonds next year.

“I think it’s an opportune time that the yen is depreciating so it’s favorable for us. If we borrow from them, they’re depreciating, you know. But more importantly, I think you want to be on the radar screen of investors from Japan,” he said.

The Philippines last issued Samurai bonds in April 2022, raising yen 70.1 billion.

Mr. Recto said there is also demand from Middle East investors.

“Because there’s an appetite from the Middle East. You want more people buying our bonds, our notes, and so on and so forth. If they’re willing to finance government operations, why not?” he added.

The government first issued Islamic debt in December 2023, raising USD 1 billion from the sale of 5.5-year dollar-denominated Sukuk bonds.

The government set its borrowing program at PHP 2.55 trillion for 2025, of which PHP 507.41 billion will come from gross external borrowings.

The government could benefit from tapping the foreign debt market next year as the US Federal Reserve’s further easing is expected to reduce borrowing costs, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

However, the benefits could be offset by a stronger dollar and higher US Treasury yields, Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said in a Viber message.

“Timing is key in the issuance as the greenback and the 10-year US Treasury yields continue to rise. A Trump presidency is supportive of the greenback and 10-year yields,” Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas likewise said in a Viber message.

Mr. Rivera added that demand for bond issuances from the Philippines could be dampened due to heightened global economic uncertainty brought by Mr. Trump’s proposed trade policies and potential tariffs on imports. — Aaron Michael C. Sy

Marcos postpones budget signing amid backlash

President Ferdinand R. Marcos, Jr. has postponed the signing of the proposed 2025 national budget that was originally scheduled for Dec. 20, according to his office.

The postponement was announced just as workers’ groups staged a protest near Malacañang against what they called as the “most corrupt” spending plan in Philippine history.

Executive Secretary Lucas P. Bersamin said in a statement on Wednesday that the delay in the signing would “allow more time for a rigorous and exhaustive review of a measure that will determine the course of the nation for the next year.”

“While we cannot yet announce the date of the signing, we can now confirm that certain items and provisions of the national budget bill will be vetoed in the interest of public welfare, to conform with the fiscal program, and in compliance with laws,” he added.

Mr. Marcos held a meeting on Wednesday afternoon with his economic managers to ensure next year’s budget is aligned with key development priorities, according to the Presidential Communications Office.

Present during the meeting were Finance Secretary Ralph G. Recto, Budget Secretary Amenah F. Pangandaman, Public Works Secretary Manuel M. Bonoan, and National Economic and Development Authority Secretary Arsenio M. Balisacan. No other details were available.

Mr. Marcos on Monday said he’s not keen on issuing a line-item veto, which is allowed by the 1987 Constitution in bills related to appropriations or tariffs.

Major issues hounding the PHP 6.35-trillion national budget for next year are the cut in the Department of Education’s (DepEd) budget and the removal of state subsidy for the Philippine Health Insurance Corp. (PhilHealth), the key agency in implementing the Universal Health Care program.

In the bicameral conference committee report ratified by Congress, the funding for DepEd and its agencies was cut by PHP 11.15 billion, while PhilHealth will not receive its PHP 74-billion government subsidy amid concerns on its failure to use its reserves in the past years.

DepEd, in particular, was denied its proposed PHP 10-billion funding for its computerization program for 2025 due to its failure to spend previous budgets for a similar program as early as 2022.

It reported an obligation rate of 41.9% as of August, ranking 11^th among government agencies in terms of budget utilization. Still, the rate is still higher than that of Congress, which had the lowest obligation rate at 8.8% but has received a PHP 16.35-billion increase in the bicam’s version.

Anthony C. Leachon, a health reform advocate who had worked with the Department of Health (DoH) in the first year of the Marcos administration, said the President had likely “felt the mounting pressure from the civil society, business sector and other stakeholders and the public interest is paramount.”

“What’s the legacy of (Mr. Marcos) as a president if he would turn a blind eye,” he said. “I believe he has been misguided by lawmakers who wanted to shift the formal funding for PhilHealth for pork barrel.”

Some economists have discussed in public fora the implications of removing the subsidy for PhilHealth, which they said had assets lower than its liabilities.

“(Mr. Marcos) stands at a crossroads and his decision on this budget will define his character and presidency,” Mr. Leachon said. “He should veto the 2025 GAA (General Appropriations Act) and prioritize the health and dignity of the Filipino people.”

Senator Mary Grace Natividad S. Poe-Llamanzares, who was part of the bicam, said the President’s decision to postpone the budget signing is “a sign of a healthy democracy.”

“We have to support the checks and balances of our budgetary process,” she said in a Viber message. “I believe his economic managers are giving the President the best advice possible given the situation.”

Speaking to reporters on Monday, Mr. Marcos said PhilHealth has “sufficient funds to carry on” despite the removal of state subsidy.

‘Useless’

Public finance expert Zyza Nadine Suzara said the President should restore the funding for all the development programs that were cut from the budgets of DepEd, Department of Social Welfare and Development (DSWD), DoH, and the Commission on Higher Educations, among “many others.”

“But the way to do that is not through an ‘assessment’ with department heads or a presidential veto. Neither an assessment nor a direct veto will cure the grave mistakes of the bicam,” she said in an X message.

“This process will not restore the slashed funds from the various major departments, and most especially, the line items that were struck down,” she added.

The DPWH’s allocation in the Congress-approved budget rose by PHP 288 billion from the initial proposed PHP 1.1-trillion funding.

As the agency responsible for most of the government’s flagship infrastructure projects became a net gainer, agencies responsible for key social services faced massive cuts.

The budget of DSWD declined by P95 billion from its initial proposed PHP 217.3-billion funding, while that of DoH fell by PHP 25.7 billion from PHP 247 billion.

Ms. Suzara said the President can only cure the budget by returning the ratified budget to the bicam and asking them to “reconvene so that they can swiftly remedy the most corrupt and anti-poor budget we have ever had.”

“They should prioritize the needs of taxpayers and not their personal political ambitions.”

Enrico P. Villanueva, who teaches money at the University of the Philippines Los Baños, said the massive budget increase for DPWH is highly questionable as only 11 or 6% of the 186 flagship infrastructure projects of the government are expected to be ongoing by 2025 and only 51 of them are to be funded by the GAA.

Eighty-six out of the 186 flagship projects are funded by official development assistance, while 43 of them are under the private-public partnership scheme, he added.

“Legislators cited the low budget utilization rate of DepEd and PhilHealth as basis for reducing their budget, but these same legislators also castigated DPWH for its low budget utilization rate at 58% in 2023 and ineffective flood control projects,” Mr. Villanueva pointed out.

Meanwhile, the Nagkaisa Labor Coalition, which held an indignation protest near Malacañang on Wednesday, dubbed the proposed 2025 national budget as the “most corrupt” spending plan in the country’s record, citing the diversion of funds to patronage-driven programs such as the Ayuda sa Kapos ang Kita program and the Medical Assistance for Indigent and Financially Incapacitated Patients program.

Lawmakers, which are mandated by the 1987 Constitution to legislate laws, have been present in the distribution of these cash-aid programs.

Nagkaisa Chair and Federation of Free Workers President Jose Sonny Matula said the government is “using workers’ own contributions against them while leaving them burnt to a crisp.”

“Perceptions by the general public that basic services are being taken away from citizens would lead to an increase in public protests, so it is important the President is aware of the needs of the populace,” said Ateneo School of Government Dean Philip Arnold “Randy” P. Tuaño. – Kyle Aristophere T. Atienza, Reporter

Banks’ real estate exposure sinks to 5-year low

The exposure of Philippine banks and trust entities to the property sector continued to decline at the end of September, hitting a five-year low, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Banks’ real estate exposure ratio dropped to 19.55% at end-September from 19.92% at end-June and from 20.55% at the end of September in 2023.

This was also the lowest real estate exposure ratio recorded in five years or since the 19.5% as of September 2019.

The BSP monitors lenders’ exposure to the real estate industry as part of its mandate to maintain financial stability.

Investments and loans extended by Philippine banks and trust departments to the real estate sector inched up by 2% to PHP 3.22 trillion as of September from PHP 3.16 trillion a year ago.

BSP data showed real estate loans rose by 7.9% to PHP 2.84 trillion as of end-September from PHP 2.64 trillion a year ago.

Residential real estate loans jumped by an annual 8.1% to PHP 1.07 trillion, while commercial real estate loans climbed by 7.8% to PHP 1.78 trillion.

Past due real estate loans stood at PHP 148.157 billion, higher by 10% from PHP 134.828 billion a year prior.

Broken down, past due residential real estate loans rose by 10.1% to PHP 104.967 billion, while past due commercial real estate loans went up by 9.4% to PHP 43.189 billion.

Meanwhile, gross nonperforming real estate loans went up by 7.1% to PHP 111.554 billion as of the third quarter from PHP 104.138 billion a year ago.

This brought the gross nonperforming real estate loan ratio to 3.92% at end-September, slightly lower than 3.95% a year earlier.

On the other hand, real estate investments fell by 15.5% to PHP 376.406 billion as of end-September from PHP 445.666 billion in the same period a year ago.

This, as debt securities dropped by 14.6% year on year to PHP 246.041 billion, while equity securities fell by 17.2% to PHP 130.365 billion.

Joey Roi H. Bondoc, director and head of research at Colliers Philippines, said the slowing real estate exposure seen at end-September is due to the developers’ “lukewarm appetite” for new projects.

“They’re not launching a lot of new projects. Whether it’s for office or for residential, there’s really a tepid appetite at this point for new developments,” he said via phone call.

Over the next three years, Colliers expects about 400,000 to 450,000 square meters (sq.m.) of new office space to be added to the Philippine market.

“That is much smaller, in fact, less than half of 1 million square meters of new office space from 2017 to 2019,” Mr. Bondoc said.

“If you look at launches in the first nine months of this year, they are down by about 50-60% compared to the same period in 2023,” he added.

Mr. Bondoc said developers are opting to prioritize their existing inventory.

“We don’t see a lot of expansion because they are waiting for their remaining current inventory to be taken up, to be absorbed.”

For example, he noted there is 2.6 million sq.m. of vacant office space that will take five years to be absorbed by the market.

“In the residential market in Metro Manila, it will take more than five years. Meaning, that’s about 70 months that you need for the remaining unsold condominium inventory which covers pre-selling and ready for occupancy to be absorbed by the market.”

“It’s really ranging between that period, five to about six years, whether you look at office or residential. They’re waiting for this remaining inventory to be taken up or absorbed by the market.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort also noted the higher vacancy rates amid the ban on Philippine Offshore Gaming Operators (POGOs).

During his State of the Nation Address in July, President Ferdinand R. Marcos, Jr. ordered a complete ban on all offshore gaming operations, citing links to illegal activities such as money laundering and human trafficking.

The Philippine Amusement and Gaming Corp. earlier this month said that only 17 POGOs remain in operation from a total of 298 licensed POGOs in 2019.

“Right now, why are we seeing a lot of vacated office space and unabsorbed condominiums in Metro Manila? POGO exodus,” Mr. Bondoc said, adding that POGOs had previously driven demand for office and condominiums.

Moving forward, Mr. Bondoc said that banks’ real estate exposure is seen to ease further in the next three to five years.

“We will likely see less completion resulting from these less launches that we’re seeing in the market right now, especially in Metro Manila,” he said.

On the other hand, the central bank’s rate-cutting cycle could offset this outlook.

“Hopefully, further cuts from the central bank up to this month spill over to next year and result in lower mortgage rates. Hopefully that provides a much-needed impetus,” Mr. Bondoc said.

“Although, will it substantially stoke the market? I don’t think so. We’ve yet to see as to how big the impact will be on mortgage rates by these interest rate cuts,” he added.

The Monetary Board is expected to reduce the benchmark rate by 25 basis points (bps) at its meeting on Thursday, according to 13 out of 16 analysts surveyed for a BusinessWorld poll.

The central bank began its easing cycle in August this year with a 25-bp cut and again delivered another 25-bp reduction in October.

BSP Governor Eli M. Remolona, Jr. has also signaled further rate cuts next year in the 100-bp ballpark.

“Further cuts in local policy rates would be a positive offsetting factor for the real estate sector that could lead to some pickup in demand for real estate loans by both developers and buyers, but with some lag effects,” Mr. Ricafort added.

In 2020, the central bank raised the real estate loan limit of banks to 25% of their total loan portfolio from 20% previously to help free up additional liquidity as a relief measure during the coronavirus pandemic. – Luisa Maria Jacinta C. Jocson, Reporter

BSP amends guide for participants of Peso Real-Time Gross Settlement system

The Bangko Sentral ng Pilipinas (BSP) has amended its guidelines for the Peso Real-Time Gross Settlement (RTGS) system to revise the penalties for erring participants.

In a memorandum, the central bank said it is adding supplementary policies on penalties and sanctions under the Peso RTGS rules.

“Depending on the gravity of the offense committed by a participant, the Bangko Sentral may impose penalties and sanctions,” it said.

These may include fines, suspension of the participant’s privilege to avail of the Intraday Settlement Facility, and suspension or termination of the participant’s access to the Peso RTGS payment system.

It added that repeat offenders “shall be meted with stiffer penalties and sanctions.”

The amended rules will be part of the Manual of Regulations for Payment Systems.

The monetary penalties go as high as PHP 100,000 to as low as PHP 200, depending on the type of bank and violation.

For example, one of the violations with the largest penalty is the failure to properly manage liquidity position as manifested by any of the following circumstances: queueing of a transaction for over 15 minutes, rejection of more than three transactions per day due to insufficient balance of settlement account, and cancellation of more than three transactions per day.

This type of violation will merit a penalty of PHP 75,000 per incident for universal banks and Islamic banks.

The monetary penalties for other types of banks for the same violation are PHP 65,000 for commercial banks, PHP 30,000 for digital banks and thrift banks, and PHP 20,000 for rural banks, and non banks with quasi-banking functions or nonbank electronic money issuers or other participants maintaining settlement accounts with the BSP.

Failure to establish a resilient, documented and tested business continuity plan and noncompliance with system enhancement requirements will also see universal banks, Islamic banks, and commercial banks getting slapped with the same penalties. Meanwhile, digital banks and thrift banks must pay PHP 20,000, while rural banks will be charged PHP 10,000 for the said violations.

Other violations include noncompliance with settlement timelines set by the BSP and failure to repurchase securities sold to the BSP under an extended Intraday Settlement Facility availment in excess of the allowable limit.

The amended rules also detail the monetary penalties on noncompliance with reporting standards, including delayed, erroneous and unsubmitted reports. Banks can be fined as high as PHP 30,000 for an unsubmitted report, according to the rules.

The BSP could also impose fines ranging from P5,000 to P100,000 for other violations not included in the amended rules, non-compliance with applicable laws, as well as the “combination of violations, or multiple cases of the same violation.”

“Once the Bangko Sentral, through its appropriate department, ascertains that a participant has committed a punishable violation, it shall send a notice of violation with corresponding penalty to the participant,” it said.

“The participant shall justify within 15 calendar days from receipt of notice why it should not be penalized or sanctioned as indicated in the notice. The justification shall be signed by the President (or equivalent) of the concerned participant and sent to the Head of the appropriate Bangko Sentral department.” — Luisa Maria Jacinta C. Jocson

NEDA Board OKs PHP 63B projects

The National Economic and Development Authority (NEDA) Board on Tuesday approved two projects worth PHP 63.2 billion, as well as the release of an executive order (EO) that will implement the tariff commitments under the Philippines-South Korea free trade deal.

The EO will cover Manila’s tariff commitments under the Philippines-South Korea Free Trade Agreement (FTA), which was sealed in September last year, NEDA Secretary Arsenio M. Balisacan said in a statement.

South Korea is the Philippines’ third-largest import source, accounting for USD 989.72 million or 8.3% of Philippine imports in October this year, the Philippine Statistics Authority reported earlier this month.

Seoul is also the sixth-largest destination of Philippine exports.

Total trade between the two countries hit USD 12 billion last year.

Mr. Balisacan said upon the FTA’s implementation, South Korea will grant preferential duty-free entry on 11,164 Philippine products worth USD 3.18 billion.

These products account for 87.4% of total South Korean imports from the Philippines, he added.

Mr. Balisacan said the Philippines-South Korea FTA will help Manila address its lagging trade competitiveness in the region and “secure more preferential concessions” than those currently available under the ASEAN-Korea FTA and the Regional Comprehensive Economic Partnership Agreement, which is touted as the world’s largest FTA.

The FTA was signed by the two countries on the sidelines of the 43^rd ASEAN Summit in Jakarta, Indonesia in September 2023. The Philippine Senate ratified the deal in September this year, while South Korea’s National Assembly gave the greenlight last month.

Meanwhile, the NEDA Board, chaired by President Ferdinand R. Marcos, Jr., also greenlit the National Irrigation Administration’s P37.5-billion Ilocos Norte-Ilocos Sur-Abra Irrigation Project, which is “set to improve agricultural output and water management across the three provinces,” according to Mr. Balisacan.

The project, which will irrigate agricultural lands up to 14,672 hectares during the wet season and 13,256 hectares during the dry season, includes the construction of an earth and rockfill dam across the Palsiguan River in Abra, an afterbay dam in Nueva Era in Ilocos Norte, and various linked irrigation canals serving as major irrigation systems.

“Additionally, the project plans to incorporate renewable energy components, such as hydroelectric power plants and a solar power farm, through a public-private partnership,” the NEDA said.

The Board also approved the Department of Public Works and Highways’ (DPWH) P25.7-billion Accelerated Bridge Construction Project for Greater Economic Mobility and Calamity Response, which aims to improve connectivity and disaster resilience by constructing 29 bridges nationwide.

The project, which is funded by official development assistance loan from the French government, is divided into two components, with the first one comprising seven long bridges and scheduled for implementation from January 2025 to December 2029.

The second component, which consists of 22 calamity response bridges, will be implemented from January 2025 to December 2027.

Meanwhile, the NEDA Board approved adjustments to various parameters of five ongoing projects, namely:

• Value Chain Innovation for Sustainable Transformation in Agrarian Reform Communities of the Department of Agrarian Reform;

• Health System Enhancement to Address and Limit COVID-19 Project of the Department of Health;

• Panglao-Tagbilaran City Offshore Bridge Connector Project of the DPWH;

• Metro Manila Interchange Construction Project, Phase VI of the DPWH; and

• North-South Commuter Railway System Project – Malolos-Clark Railway Project, Tranche 1 of the Department of Transportation.

The projects saw changes in project scope, cost, partial loan cancellation, and extensions of the implementation period and loan validity.

Also, the NEDA reported the completion of the Arterial Road Bypass Project Phase III (Plaridel Bypass) and the Panguil Bay Bridge.

“Through these investment and infrastructure initiatives, we are advancing connectivity to enhance economic opportunities and ensure that progress reaches all regions of the country,” Mr. Balisacan said. — Kyle Aristophere T. Atienza

Pace of easing must be considered very carefully — BSP

The Bangko ng Pilipinas’ (BSP) policy path is skewed towards easing, but the pace of cuts should be carefully considered, an official said.

“In the case of the central bank, we’ve actually had two meetings where the Monetary Board has relaxed the policy stance. The messaging is that while the general direction is still for relaxation, the pacing has to be considered very carefully,” BSP Deputy Governor Francisco G. Dakila, Jr. said at the ASEAN+3 Economic Cooperation and Financial Stability Forum.

The Monetary Board is expected to deliver another 25-basis-point (bp) rate cut on Thursday, according to 13 out of 16 analysts in a BusinessWorld poll conducted last week.

If realized, this would be the third straight meeting that the central bank reduced rates.

It would also bring the benchmark rate to 5.75% from the current 6%, for a total of 75 bps worth of cuts by end-2024.

The BSP began its rate-cutting cycle in August with a 25-bp cut and delivered another cut of the same size in October.

BSP Governor Eli M. Remolona, Jr. earlier said they plan to implement rate cuts in “baby steps.” He also noted that while they are likely to continue further easing next year, it may not necessarily be done every meeting or every quarter.

“When we began the relaxation pace, we were thinking that in 2025, the Fed would be lowering by about 100 bps,” Mr. Dakila said.

“And now… that space has changed considerably because the Fed is now envisioned to move by just 50 bps in 2025,” he added.

Markets are awaiting further signals from the US Federal Reserve’s final meeting for the year. Investors see it as a near-given that the Fed will cut rates by a quarter point at its Dec. 17-18 meeting. However, markets have only priced in an 18% chance of a January cut, according to CME’s FedWatch tool, Reuters reported.

“Because of the changing inflation dynamics in the United States, it may be that right now, we’re not looking at a scenario where the Fed would be raising rates again,” Mr. Dakila said.

“But the most likely scenario is that they will still be reducing in 2025, but at a slower pace than before. And we have taken that into account into our policy scenarios,” he added.

However, Mr. Dakila said the BSP prefers to take into consideration domestic data in its policy decisions.

“But even so, the main consideration for monetary policy would be domestic inflation and how that relates to the target,” he said.

Headline inflation averaged 3.2% in the 11-month period, still well within the BSP’s 2-4% target range.

“Even when we look at the risk-adjusted forecast, they remain within the target band. So having said that, it’s the case, therefore, that the primary consideration for monetary policy would be domestic inflation, how inflation relates to the target,” Mr. Dakila said.

The central bank expects the inflation rate to average 3.1% this year.

Meanwhile, Mr. Dakila said that the peso’s recent performance has been similar to other currencies in the region. Currency movements are making less of an impact on inflation-targeting, he added.

“Just to note that with inflation targeting, what we’ve seen is that the sensitivity of inflation to changes in the currency has gone down considerably as the public has become more accustomed to seeing greater volatility in the peso.”

“I think that’s a good sign because that means that we can worry less about our ability to meet the inflation target while keeping to a market-determined exchange rate.”

The peso closed at PHP 58.671 per dollar on Monday, weakening by 20.1 centavos from its PHP 58.47 finish on Friday. This was its weakest finish since its PHP 58.71-per-dollar close on Nov. 27.

“Having said that, as the Board has already said, we retain the option to go into the market should there be any conditions that threaten to go into an abrupt change in the exchange rate that can dis-anchor inflationary expectations,” Mr. Dakila added. — Luisa Maria Jacinta C. Jocson

Revenue collection to surpass target this year — DoF

Revenue collection is on track to exceed this year’s revised goal, with revenue effort expected to be the highest since 1997, the Department of Finance (DoF) said.

“Total revenue collection for 2024 is expected to increase to PHP 4.42 trillion by the end of the year, surpassing the full-year target,” the DoF said in a statement on Monday.

The Development Budget Coordination Committee (DBCC) on Dec. 2 raised this year’s revenue collection goal to PHP 4.38 trillion from PHP 4.27 trillion previously.

“As a percentage of GDP (gross domestic product) the emerging revenues will climb to 16.7%, the highest in the last 27 years or since 1997,” the DoF said.

The DoF said it was able to generate more revenues to fund the national budget without imposing new taxes.

Instead, the DoF said it privatized public assets, raised the dividend contributions of government-owned and -controlled corporations (GOCCs) and did a “sweep” of unused funds of GOCCs.

In April, the DoF raised the mandatory dividend remittances of GOCCs to the National Government to 75% of their annual net earnings in 2023 from 50% previously.

“The Bureau of Internal Revenue (BIR) and the Bureau of Customs (BoC) likewise improved their revenue administration efficiency by ensuring ease of paying taxes and accelerating their respective digitalization programs,” it said.

Latest data from the Bureau of the Treasury showed revenue collections jumped by 16.83% to PHP 3.77 trillion in the January-to-October period.

Taxes, which made up 86% of the total revenues, increased by 11.4% to PHP 3.23 trillion as of end-October. BIR collections rose by 13.49% to PHP 2.42 trillion as of end-October, while Customs collections went up by 5.32% to P7HP 77.6 billion.

“The rest of the DoF’s revenue reforms are in the advanced stages in Congress, namely the Rationalization of the Fiscal Mining Regime, the Excise Tax on Single-Use Plastic Bags, Package 4 of the Comprehensive Tax Reform Program, and the Motor Vehicle Road User’s Tax,” DoF said.

The House version of the rationalization of the fiscal mining regime was approved last year, while its Senate counterpart is still pending at plenary.

The excise tax on single-use plastic bags, comprehensive tax reform program, and the motor vehicle road user’s tax have also been approved by the House of Representatives.

“2024 is a year of triumph for the Filipino people. In the face of unprecedented challenges, we have emerged stronger. I assure you that from here on, things will get better — because you have a government that works very hard to ensure that all Filipinos reap the rewards of strong economic growth through more comfortable lives and more high-quality jobs,” Finance Secretary Ralph G. Recto said in a statement.

The DBCC trimmed the GDP growth target for this year to a range of 6-6.5% but widened the target band to 6-8% for 2025 until 2028, due to “evolving domestic and global uncertainties.”

Despite the revised target, the DBCC “remains optimistic” about achieving the 6-6.5% growth target this year. — A.R.A.Inosante

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