Term deposit yields inch down as inflation eases

Yields on the Bangko Sentral ng Pilipinas’ (BSP) term deposits went down on Wednesday following slower-than-expected inflation in February, which could open the door for further monetary policy easing.

The BSP’s term deposit facility (TDF) attracted bids amounting to PHP 250.471 billion on Wednesday, above the PHP 190 billion on the auction block as well as the PHP 194.816 billion seen a week ago for the same volume offer. The central bank made a full PHP 190-billion award of the papers.

Broken down, tenders for the seven-day papers reached PHP 115.922 billion, higher than the PHP 100 billion auctioned off by the central bank and the PHP 110.14 billion in bids for the same offer volume seen the previous week. The BSP accepted PHP 100 billion in bids as planned.

Accepted yields ranged from 5.74% to 5.77%, narrower and slightly lower than the 5.5% to 5.775% band seen a week ago. This caused the average rate of the one-week deposits to inch down by 0.14 basis point (bp) to 5.754% from 5.7554% previously.

Meanwhile, bids for the 14-day term deposits amounted to PHP 134.549 billion, above the PHP 90-billion offering and the PHP 84.676 billion in tenders for the same offer a week ago. The central bank made a full PHP 90-billion award of the tenor.

Accepted rates were from 5.76% to 5.79%, narrowing from the 5.7% to 5.815% margin recorded a week ago. With this, the average rate for the two-week deposits inched down by 0.53 bp to 5.7752% from the 5.7805% logged in the prior auction.

The central bank has not auctioned off 28-day term deposits for more than four years to give way to its weekly offerings of securities with the same tenor.

The term deposits and the BSP bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.

TDF yields went down on Wednesday after the release of the latest headline inflation data, which showed that the average rise in prices of consumer goods eased more than expected last month, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“More benign inflation data could support a BSP rate cut as early as the next rate-setting meeting on April 3,” Mr. Ricafort said.

Headline inflation sharply slowed to 2.1% in February from 2.9% in January and 3.4% a year ago, the Philippine Statistics Authority reported on Wednesday.

This was the slowest monthly print in five months or since the 1.9% in September 2024. The February print was also well below the 2.6% median estimate in a BusinessWorld poll of 18 analysts conducted last week.

Despite surprising markets with a policy pause last month, BSP Governor Eli M. Remolona, Jr. has said the central bank is still in easing mode, signaling the possibility of up to 50 bps worth of cuts this year.

Mr. Ricafort added that the peso’s recent strength against the dollar also led to lower TDF yields as this could support further easing in inflation, which would give the central bank more room to cut borrowing costs.

The peso has closed at the P57 level since late February after trading at the P58 range earlier this year as the dollar hit multi-month lows due to concerns over the US economy’s health. — Luisa Maria Jacinta C. Jocson

Banks likely to continue posting record incomes

Philippine banksmay continue to post record-high net incomes this year as robust economic growth is expected to spur lending.

“We expect another record year for banks given the accelerating domestic economy, loan growth pickup and robust expansive balance sheets of the corporate sector,” First Metro Investment Corp. Head of Research Cristina S. Ulang said.

“Banks’ earnings in 2024-2025 are likely to remain robust and could approach or surpass record levels… With consumer and business confidence improving post-pandemic, loan growth has accelerated, particularly in key segments like retail and corporate lending,” Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said.

Borrowing costs will remain elevated compared to pre-pandemic levels even with the Bangko Sentral ng Pilipinas (BSP) expected to continue its easing cycle, he said. “This, combined with prudent cost-of-funding strategies, supports higher net income margins.”

“Meanwhile, fee-based income streams, such as credit card fees, transaction fees, and income from wealth management, continue to grow due to increased economic activity and digital banking adoption,” Mr. Rivera added.

“Banks are poised for another solid year in 2024 and moving forward to 2025, with a high likelihood of record net incomes if the economy maintains its growth momentum and external risks remain manageable. However, sustained performance will depend on effective credit risk management and adaptation to a dynamic macroeconomic environment.”

The Philippine banking system’s combined net profit increased by 9.76% to PHP 391.28 billion in 2024 from PHP 356.49 billion in 2023, latest BSP data showed.

Several listed banks have reported that they booked all-time high net incomes in 2024, including Metropolitan Bank & Trust Co., Bank of the Philippine Islands, China Banking Corp., Security Bank Corp., and East West Banking Corp., driven by higher net interest earnings amid the elevated rate environment.

The BSP last year cut benchmark interest rates by a total of 75 basis points (bps) via three consecutive 25-bp reductions since it began its easing cycle in August, bringing the policy rate to 5.75%.

The Monetary Board, in its first meeting for 2025 held on Feb. 13, kept borrowing costs unchanged in a “prudent” move.

BSP Governor Eli M. Remolona, Jr. said uncertainty over the trade policy of US President Donald J. Trump and its potential impact on the Philippines led to the decision to keep rates unchanged for now.

Still, the BSP continues to be in an easing cycle, with the pause letting the central bank hedge itself against the risk of policy reversal, he said.

Mr. Remolona added that the central bank will likely continue reducing interest rates by 25 bps at a time, with 50 bps in cuts still on the table this year.

Margins

Mr. Rivera said the expected rate cuts could have mixed effects on Philippine banks, depending on their impact on loan demand, asset quality, and funding costs.

“A 50-bp rate cut will likely be neutral to slightly negative for banks’ margins but supportive of loan demand in consumer and corporate segments. The impact on nonperforming loans (NPL) will depend on how the broader economy responds. If rate cuts successfully spur growth, credit risks could remain manageable,” he said.

“Large firms may take advantage of lower borrowing costs for expansion or refinancing, but their appetite will also depend on business confidence and economic conditions. If uncertainty remains high, demand may be lukewarm,” Mr. Rivera added. “Rate cuts generally support retail loans (auto, housing, personal loans), but household debt levels and inflation will determine how much of this demand materializes.”

Regina Capital Development Corp. Head of Sales Luis A. Limlingan likewise said that while further monetary easing may compress banks’ margins, it could also boost loan demand, especially from consumers and small and me-dium enterprises.

“Large banks with strong CASA (current and savings account) ratios can better defend margins, while smaller banks may face pressure. NPL risks remain, especially in unsecured consumer credit,” he said.

Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said lower interest rates may help stabilize banks’ NPLs as it could ease the cost of doing business.

“Hopefully, with the cost of doing business improving and inflation stabilizing, consumption recovery will materialize, thus improving consumer and business sentiment and loan uptake,” Mr. Ravelas added.

Ms. Ulang added that lower interest rates will be positive for banks’ funding costs and can boost their profitability.

“Rates are not going to stay higher for longer… The cost of borrowing will ease and borrowers’ ability to pay will even be better as economic growth accelerates this year.” — Aaron Michael C. Sy

Philippine govt debt rises to new high of PHP 16.3T

The national Government’s (NG) outstanding debt hit a fresh high of PHP 16.31 trillion at the end of January as it ramped up borrowings, the Bureau of the Treasury (BTr) said on Tuesday.

Preliminary data from the BTr showed that outstanding debt jumped by 1.63% or PHP 261.47 billion to PHP 16.31 trillion from PHP 16.05 trillion at end-2024.

“The month-over-month rise in debt stock was due to the net incurrence of new domestic and external debt, as well as the impact of peso depreciation against the US dollar from PHP 57.847 at the end of 2024 to PHP 58.375 at the end of January 2025,” the Treasury said in a statement.

The debt stock rose by 10.29% from PHP 14.79 trillion at end-January 2024.

“This level remains manageable and in line with the government’s target to support economic development while ensuring fiscal sustainability,” the BTr said.

NG debt is the total amount owed by the Philippine government to creditors such as international financial institutions, development partner-countries, banks, global bond holders and other investors.

BTr data showed the bulk or 67.9% of total outstanding debt was from domestic sources, while 32.1% was from foreign creditors.

Domestic debt increased by 1.41% or PHP 153.68 billion to PHP 11.08 trillion as of January from PHP 10.93 trillion in December. Year on year, it rose by 9.07% from PHP 10.16 trillion recorded at end-January 2024.

“This was mainly due to the net issuance of government securities of PHP 152.17 billion as gross issuances of PHP 270.01 billion exceeded repayments of PHP 117.84 billion to partly finance the projected deficit for the quarter,” the BTr said.

The valuation effect of the peso depreciation against the US dollar increased domestic debt by PHP 1.51 billion in January.

Meanwhile, external debt went up by 2.1% to PHP 5.23 trillion as of end-January from PHP 5.12 trillion at end-2024.

Year on year, external debt climbed by 12.98% from PHP 4.63 trillion.

“This was driven by net availment of foreign loans amounting to PHP 59.3 billion, as well as the upward revaluation caused by unfavorable US and third currency movements amounting to PHP 46.74 billion and PHP 1.75 billion, respectively,” the Treasury said.

External debt consisted of PHP 2.7 trillion in global bonds and PHP 2.52 trillion in loans, the BTr said.

NG-guaranteed obligations slipped by 0.11% to PHP 346.27 billion as of end-January from the end-December level of PHP 346.66 billion.

Year on year, guaranteed obligations fell by 0.69% from PHP 348.66 billion.

As of end-January, the net repayment of domestic guarantees stood at PHP 1.55 billion, while external guarantees amounted to PHP 250 million.

“The redemption of matured guarantees more than offset the currency valuation adjustments on US dollar and third-currency denominated guarantees amounting to PHP 0.83 billion and PHP 0.58 billion, respectively,” the BTr said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the increase in outstanding debt reflected the continued budget deficit in recent months that “fundamentally required additional borrowings” by the government.

The NG posted a budget deficit of PHP 1.506 trillion in 2024, narrowing by 0.38% year on year. However, it overshot the PHP 1.48-trillion deficit ceiling set by the Development Budget Coordination Committee (DBCC) by 1.48%.

Mr. Ricafort also said the weaker peso against the US dollar in January increased the peso value of external debt.

He expects the NG debt to set new records as the government ramped up borrowings in the early part of 2025.

“(There is also) the need to hedge both local and foreign borrowings of the National Government given the Trump factor that caused volatility in the global financial markets,” he said.

Oikonomia Advisory and Research, Inc. economist Reinielle Matt M. Erece said debt is expected to further increase.

“I would expect debt to rise this year as a result of both expansionary fiscal policy to promote growth and an election year, which usually results in higher government spending. Financing this spending is difficult to achieve with a tight fiscal space and borrowing might be needed,” he said.

Mr. Erece said the debt is still manageable “as long as the government improves its revenue generation and minimizes corruption.”

At end-December, the country’s debt as a share of gross domestic product (GDP) inched up to 60.7% from 60.1% a year earlier. This is slightly higher than the 60% threshold considered manageable by multilateral lenders for developing economies.

The Philippines’ debt-to-GDP ratio of 60.7% positions it “competitively” with its Southeast Asian peers, according to the BTr. It is higher than Thailand’s 56.6% and Indonesia’s 36.8%, but below Malaysia’s 64.6% and Singapore’s 173.1%.

The government aims to bring down the debt-to-GDP ratio to 60.4% this year, 60.2% in 2026 and 56.3% in 2028.

The National Government plans to borrow PHP 2.55 trillion this year — PHP 2.04 trillion from the domestic market and PHP 507.41 billion from external sources. — Aubrey Rose A. Inosante

Philippine homeownership dreams stifled by costs, wages

Michael Joseph D. Server, a 28-year-old Filipino entrepreneur, has been renting a condominium unit in Quezon City near the Philippine capital for two years now and doesn’t plan to buy his own house soon.

“Owning a home is one of the biggest financial decisions you can make,” he told BusinessWorld. “Outside of saving for a downpayment, there are a number of factors I’d need to take into consideration before making a concrete decision.”

A study by PhilhealthCare, Inc. (PhilCare), a health maintenance organization, found that 39% of Generation Z (Gen Z) people — those born in the late 1990s to early 2000s — cited homeownership as one of their top worries.

“For a young working professional, it can be challenging to acquire a property right away, especially with the rising prices,” Roy Amado L. Golez, Jr., director of research and consultancy at Leechiu Property Consultants, said in an e-mailed reply to questions.

“If their only source of income is their salary, they need to set aside enough funds for a downpayment and make sure they’re able to sustain installment payments,” he added.

Buying a house today has changed drastically from just a few decades earlier.

“Housing availability was already a major issue even decades ago,” Mr. Golez said. “There were not enough homes for the general population, and this caused terrible traffic even then.”

“During the time of our parents, buying a home in Metro Manila meant buying a house and lot or townhouse with a lot of space. Land prices in general were still affordable relative to household income,” he pointed out.

Alyssa C. Uy, an account director and freelancer, owns a condo unit where she lives in some days, but for the most part, she still lives in her parents’ house.

“Given the current market and landscape for homeownership, it’s quite difficult to own and eventually maintain the fees for a home, whether it’s land tax or other association fees,” she said in an Instagram message.

While she has multiple income sources to help her sustain the ownership, she said she needs more to live comfortably especially once a family comes into the picture.

Owning a condo unit was much easier a few years ago, when financing for one that costs PHP 2 million to PHP 3 million was effortless, Joey Roi H. Bondoc, a director and head of research at Colliers Philippines, said by telephone.

“The required monthly income for you to be able to get a bank approval was much easier at that time,” he said. “But because of the increase in prices, the hurdles also got higher. That has eventually resulted in young people having a difficult time buying these condominium units.”

The average appraised value of new housing units in the Philippines stood at P86,417 per square meter in the third quarter of 2024, 31% higher than in 2020, according to data from the Philippine central bank.

Jet Yu, founder and chief executive officer at PRIME Philippines, said the property market has undergone a “significant transformation” in the past decades, with more people living in urban areas.

“This shift has driven increased demand for housing in metropolitan areas, pushing property prices higher and reshaping homeownership trends,” he said in an e-mailed reply to questions.

Data from property developer DMCI Homes, Inc. showed that inquiries for rental and rent-to-own properties as well as units for purchase have been increasing steadily over the years.

“As thousands of new households are created each year, the need for housing, whether for lease or purchase, therefore remains strong,” Januel O. Venturanza, DMCI Homes vice-president for marketing, told BusinessWorld.

“The challenge is finding the right home and arrangement — whether for rent, rent-to-own or purchase — that suit the customer’s lifestyle and budget,” he said in an e-mailed response.

Mr. Yu said the interest in homeownership is prevalent among the younger generation.

“More financially independent and willing to take risks, many Millennials view condo ownership as a symbol of success,” he said, referring to people born between the 1980s and the late 1990s. “Similarly, Gen Z — also known as Zoomers — are entering the workforce, bringing with them a preference for condo living.”

Both Millennials and Gen Z — people born from 1997 to 2012 — are “shaping residential condo demand,” Mr. Yu said.

He noted that in recent years, there has been a noticeable shift toward renting, particularly among young professionals and small families. “The increasing popularity of rent-to-own schemes has provided flexibility for those not yet ready to commit to full ownership.”

Central bank data showed that the prices of condominium units fell 9.4% in the third quarter from a year earlier, reversing 10.6% growth in the previous quarter and 8.3% a year ago.

Filipinos preferred single-detached homes and land ownership a few decades ago, Mr. Yu said, but with rising land prices, horizontal residential developments have become scarce, particularly in Metro Manila.

“As a result, vertical living — primarily through condominiums — has become the norm in major commercial business districts and is now widely accepted in key cities across the country,” he said. “With the median age of Filipinos at 25.34 years, a significant portion of the population will continue to drive condo sales and rentals in the coming years.”

Property developers have been cutting the sizes of units to a studio or one-bedroom type to cater to younger buyers, Mr. Yu said.

“Due to affordability issues, renting of homes by families has always been the practice,” Mr. Golez said. “This is especially true for single or starter families. Of course, owning your own home has always been the dream of every Filipino.”

But elevated real estate prices are the main barrier to homeownership.

“In general, the cost of construction, land and financing has grown faster than the salary levels of the population,” Mr. Golez said.

The House of Representatives in February approved on second reading a bill that seeks to give minimum wage workers a PHP 200 daily increase. The Senate approved a counterpart proposal for a PHP 100 daily wage increase for private-sector workers in February last year.

Labor groups have said these proposed increases are not enough amid spiraling prices especially of food.

Mr. Golez said inflation’s effect on building materials, labor, construction and financing costs, as well as the growing scarcity of land in Metro Manila would continue to push up property prices.

“There are potential buyers that have been commenting on how they find primary unit property prices are on the high side,” he said. “However, we don’t see a high possibility for developers to lower prices.”

Mr. Yu said elevated property prices are driven by sustained urbanization and steady demand for residential properties, particularly in key cities.

“A young population with a strong motivation to invest in condominiums continues to fuel this demand,” he added.

Condominium prices had been rising more than 10% annually before the COVID-19 pandemic, he pointed out.

“However, in the past year, there were quarters where condo prices slightly dipped,” he said. “Moving forward, price increases are expected to remain moderate, likely within the single-digit percentage range.”

Central bank data showed housing prices nationwide declined 2.3% in the third quarter, the first contraction in more than three years.

‘Buyer’s market’

Analysts said homeownership prospects are possible for young professionals despite these hurdles.

“If there is one phrase to describe this market, it’s a buyer’s market at this point, meaning they can really haggle prices,” Mr. Bondoc said.

Colliers data showed that the vacancy in Metro Manila’s secondary market rose to an all-time high of 23.9% in 2024 as Chinese workers left the Philippines after a ban on Philippine offshore gaming operations.

“Now it’s a buyer’s market, and the market dynamics are shifting toward the preferences of young buyers, whether in terms of amenities, in terms of pricing, and even in terms of foreign exchange,” Mr. Bondoc added.

The Bangko Sentral ng Pilipinas (BSP) said real estate loans rose 7.9% in the third quarter of 2024 from 7.2% a quarter earlier and 5% a year ago.

“This shows sustained demand for real estate loans,” it said in an e-mailed statement. “Against this backdrop, property analysts remain positive about the strong demand for real estate loans in the country.”

It expects the continued supply of residential condominiums as developers offer more appealing payment terms for pre-selling and ready-for-occupancy projects.

It added that the industry growth would continue to be driven by urbanization, e-commerce, tourism recovery and evolving work models.

While owning a home may seem like an impossible goal, it is still achievable with the right financial habits, Mr. Venturanza said.

“Start preparing as early as possible, define and tenaciously pursue long-term goals, and do your research,” he said. “Look at developer track records, compare properties and identify which ones offer truly superior overall value.”

Mr. Golez said young professionals should start saving and investing as soon as they can.

“Create an emergency fund of six to 12 months of personal overhead. Do your research on the property you want to purchase and look at other options available to you,” he said.

“The more information you have, the better armed you will be in deciding on your housing investment. Always have the habit of setting aside a portion of what you earn today. You’ll eventually have enough to start buying your own home,” he added.

Mr. Venturanza said a good portion of DMCI customers are below 35 years old.

“Property prices continue to increase, so developers are trying to find ways to address this issue of affordability,” he said.

He added that they are looking to offer flexible and friendlier payment terms.

“Young professionals and families are a significant part of our target market, and we recognize their evolving needs when it comes to housing,” he said.

For example, DMCI Homes offers amenities that cater to younger buyers, such as coworking spaces and fitness facilities.

“Developers need to be more creative and implement out-of-the-box strategies to really attract the young market at this point,” Mr. Bondoc said.

Daisy Isabel Crichton-Stuart, a 23-year-old web developer and entrepreneur based in Manila, sees the opportunities of owning a home even if it’s not an easy task.

“It’s the best time in history to acquire wealth,” she told BusinessWorld. “Everybody has a shot at building their own wealth through many platforms and spaces of opportunity. This can be done through resourcefulness and skill, in addition to plain grit.”

“I have been looking into owning a home recently, but it likely won’t be tomorrow,” she added. – Luisa Maria Jacinta C. Jocson, Reporter

PERA contributions rose to PHP 491.4 million at end-2024

Filipinos’ Personal Equity and Retirement Account (PERA) contributions jumped by 24% year on year at end-2024, data from the Bangko Sentral ng Pilipinas showed.

Accumulated contributions to PERA climbed to PHP 491.4 million at end-2024 from PHP 396.3 million as of 2023, the central bank said.

The total number of PERA contributors likewise rose by 6.4% to 5,912 at 2024’s close from 5,555 a year prior.

The bulk (69.5%) of the accumulated PERA contributions came from employee contributions, equivalent to PHP 341.7 million at end-2024 across 4,211 contributors.

This was followed by overseas Filipino workers’ (OFW) contributions at PHP 82.2 million with 789 contributors.

Lastly, there were 912 self-employed contributors for a total of PHP 67.4 million in contributions.

Launched in 2016, PERA is a voluntary fund scheme meant to supplement retirement benefits from the Government Service Insurance System (GSIS) or the Social Security System (SSS), as well as private employers.

Contributors aged 18 and above and have a tax identification number are allowed to open a PERA account. Self-employed and locally employed contributors can make an annual contribution of PHP 200,000 while OFWs can invest up to PHP 400,000.

The PERA Law also offers various incentives to contributors, such as tax exemptions on earnings from PERA investments, a 5% income tax credit on contributions that can be used for paying income tax liabilities, and a tax-free distribution on qualified withdrawal of PERA investments.

“The increase in PERA contributions in 2024 suggests a growing awareness among Filipinos about the value of retirement planning, despite the relatively low number of participants,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said.

“More Filipinos, especially the employed sector, are recognizing the need to secure their retirement, given economic uncertainties and the rising cost of living.”

Mr. Rivera said the rise in contributions could also be attributed to the effort of the central bank, financial institutions and employers to promote PERA.

“While many Filipinos still struggle with daily expenses, certain groups like OFWs and professionals, may have had more financial flexibility to set aside funds for retirement,” he said.

“With concerns over the long-term sustainability of the SSS and GSIS pension funds, some workers may be looking for alternative or supplemental retirement income sources.”

In 2020, the BSP launched the digital platform for PERA to make it more accessible, allowing Filipinos to open accounts, choose different accredited products, and settle transactions online.

The central bank earlier said the wider use of PERA can help increase government savings, foster investment and capital market development, which would support economic growth. — Luisa Maria Jacinta C. Jocson

Manufacturing growth slows in Feb.

Philippine manufacturing activity in February expanded at its slowest pace in 11 months amid softer growth in orders and output, data from S&P Global showed.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) stood at 51 in February, easing from the 52.3 in January.

This was the lowest PMI reading in 11 months or since the 50.9 reading in March 2024. February also marked the second straight month of slowing growth.

A PMI reading above 50 denotes better operating conditions than in the preceding month, while a reading below 50 shows a deterioration.

“Robust growth observed from the end of the previous year into the beginning of this year waned in February, as the latest survey data indicated slower expansions in output and new orders,” Maryam Baluch, economist at S&P Global Market Intelligence, said in a statement on Monday.

The Philippines posted the second-fastest PMI reading among six Association of Southeast Asian Nations (ASEAN) member countries, after Indonesia (53.6) and ahead of Thailand (50.6).

Malaysia (49.7), Vietnam (49.2), and Myanmar (48.5) all posted a contraction in factory activity in February.

In its report, S&P Global said the manufacturing conditions in the Philippines continued to improve in February, although this was the “least marked in nearly a year.”

“However, underlying data showed a mixed picture, with the sector showing a slight cooldown as growth in new orders and output moderated on the month, leading to a softer increase in purchasing activity,” it said.

S&P Global said growth in new orders moderated in February after the robust increase seen in the fourth quarter of 2024. New factory orders rose at the slowest pace in seven months, while growth in new export orders was subdued.

Production growth also moderated in February, with output growth at the weakest since July 2024.

As demand cooled, manufacturers tempered their purchasing activity. February saw the slowest expansion in the last 15 months.

S&P Global noted manufacturing firms reported a fresh rise in backlog of work for the first time in five months.

“Although the rate of accumulation in work-in-hand was modest, it was the most pronounced seen in nearly two years. Consequently, companies utilized their inventories to meet order requirements and thereby reduced their input stock holdings, signifying the first decrease in three months,” it said.

Ms. Baluch noted that employment levels went up for the first time in three months, “with companies challenged to meet sustained demand improvements.”

S&P Global said price pressures further eased in February.

“Although material shortages and transportation costs continued to drive up input prices, the rate of increase was the slowest in the current nine-month sequence of inflation,” it said.

Output prices for Philippine-made goods inched up at the softest pace in 10 months, it added.

“Inflationary pressures eased, thus suggesting that the central bank will continue to proceed with a loosening of its monetary policy. This could in turn boost somewhat weakened business confidence and support further new order growth,” Ms. Baluch said.

The Bangko Sentral ng Pilipinas (BSP) left the benchmark rate unchanged at 5.75% at its Feb. 13 meeting. BSP Governor Eli M. Remolona, Jr. has said the central bank is still in its easing cycle and signaled the possibility of up to 50 basis points worth of reductions this year.

The Monetary Board’s next rate-setting meeting is on April 3.

S&P said manufacturers maintained a positive outlook for production in the coming year, but the degree of confidence fell to a 10-month low.

In an e-mail, Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said the Philippines was the only country in ASEAN that “suffered a loss in momentum” in February.

“[The Philippines] PMI softened for a second straight month to an 11-month low of 51.0, now a far cry from its recent high of 54.3 in December,” he said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the PMI reading reflects the slowdown in demand after the holiday season.

“Furthermore, uncertainties on Trump’s higher US import tariffs and other protectionist policies since his inauguration also a drag on global investments and international trade, including those in the Philippines,” he said.

“However, offsetting positive factor would be election-related spending, the May 12, 2025 midterm elections that could lead to increased spending by the government for various projects, especially infrastructure and other programs before the election ban,” Mr. Ricafort added. – Aubrey Rose A. Inosante, Reporter

Planned local online gambling ban seen to hurt govt revenue

The proposed ban on Philippine inland gaming operators (PIGOs) may hurt National Government (NG) revenues as well as stocks of listed gaming-related companies, analysts said.

Unicapital Securities Equity Research Analyst Jeri R. Alfonso said the government is unlikely to shut down local online gambling operations which generate significant revenues.

“Shutting down online gambling entirely would deal a heavy blow to government funds. In our view, a full-on ban is unlikely,” she said in a Viber message.

Senate President Francis G. Escudero has called for a review of PIGOs, also known as local e-gambling businesses, saying that these are also as harmful as Philippine offshore gaming operators (POGOs).

Mr. Escudero suggested a ban on PIGOs if these are determined to negatively affect the lives of Filipinos. The Philippine government issued a total ban on POGOs last year.

“The gaming industry is a revenue provider for the government, with Philippine Amusement and Gaming Corp. (PAGCOR) ranking as the third-biggest revenue source after the Bureau of Internal Revenue and the Bureau of Customs,” Ms. Alfonso said.

Last year, PAGCOR remitted PHP 4.59 billion in cash dividends to the Bureau of the Treasury. It represented 75% of its net income in 2023.

“Banning local online gaming will unduly deprive the government of billions of pesos in much-needed revenues. The PAGCOR already has a suitable regulatory framework for the industry to make sure we have a viable gaming sector that meets sizable market demand and contributes significantly to the government’s social programs,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

Mr. Colet also said a ban on online gambling could drive Filipinos to use unregulated platforms.

“A ban might have the unintended effect of pushing many participants into a black market, which would be worse for everyone. The better approach is to regulate, not eliminate,” he said.

Gaming-related companies listed on the Philippine Stock Exchange (PSE) closed in the red on Monday.

Shares of Tanco-led digital entertainment company DigiPlus Interactive Corp. dropped by 3.31% or PHP 1.15 to PHP 33.6 apiece, while stocks of gaming technology provider DFNN, Inc. fell by 10.71% or 27 centavos to PHP 2.25 per share.

“With the hanging uncertainty around this issue, we do expect gaming stocks to face volatility in the near term. Given the sector’s sensitivity to regulatory risks, investors must remain cautious on trading the stocks in the gaming sector,” Ms. Alfonso said.

“Rather than a full ban, we think the government will implement stricter policies instead, and not a complete ban. Besides this, thousands of Filipino workers will be displaced once this pushes through,” she added.

Mr. Colet said the ban could be a boon for land-based casinos as they could see more players.

“To a limited extent, (the ban is) potentially good for purely land-based casinos who might see a pickup in foot traffic,” he said

“That said, an outright ban creates regulatory uncertainty around the entire gaming sector because that means there is nothing that would stop the government from banning all forms of gambling altogether,” he added.

On Monday, shares of Bloomberry Resorts Corp., which operates integrated casino-resort Solaire, rose by 5.64% or 18 centavos to P3.37 each.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the proposed ban requires a “balancing act” by legislators.

“This is a delicate balancing act in view of traditional and online versions, which would require consistency in the application of legislation,” he said in a Viber message.

“The traditional version could be controlled better by authorities compared to the online version, given the potential adverse effects on society by both on different levels,” he added.

PAGCOR is eyeing to generate up to PHP 480 billion in gross gaming revenue (GGR) this year, mainly driven by the electronic games segment. It recorded PHP 410.5 billion in GGR for 2024, up by 24.8% from PHP 328.88 billion in 2023.– Revin Mikhael D. Ochave, Reporter

Philippines unlikely to reach 2025 IPO target

The Philippines is unlikely to meet its target of six initial public offerings (IPOs) this year as issuers wait for improved market conditions and higher valuations, according to analysts.

“There’s always been an appetite. I think in terms of our listed companies, there’s still room for growth. There’s quite a number of interesting names which we hope to be able to take to the public. Unfortunately, admittedly, it will largely depend on how the markets perform, especially for the bigger IPOs,” Unicapital, Inc. Senior Vice-President for Investment Banking Pamela Louise Q. Victoriano said on the sidelines of the BusinessWorld Insights: Stock Market 2025 forum last week.

The Philippine Stock Exchange, Inc. (PSE) expects six IPOs in 2025. Some of the most anticipated companies planning to go public this year include Maynilad Water Services, Inc., the water concessionaire for Metro Manila’s west zone; electronic wallet giant GCash; and Cebu-based fuel retailer Top Line Business Development Corp.

“If we see, let’s say, some market improvements in the second half of this year, then we would see a potential for the bigger IPOs to come up. If not, the smaller IPOs would be able to do better,” Ms. Victoriano said.

In 2024, the PSE missed its IPO target, recording only three listings out of the projected six. The companies that went public last year were Citicore Renewable Energy Corp., NexGen Energy Corp., and OceanaGold (Philippines), Inc.

“We are hoping (to reach the target IPOs). We hope to see GCash, but it depends, of course, on market conditions,” April Lynn C. Lee-Tan, first vice-president and corporate strategy and chief investor relations officer of COL Financial Group, Inc., said during the forum.

Ms. Tan said many companies are interested in listing, but current market conditions and low valuations are unfavorable.

“The better the valuations, the more companies you will see tapping the market,” Ms. Tan said.

Sought for comment, Chinabank Capital Corp. Managing Director Juan Paolo E. Colet said achieving the six-IPO target would be challenging.

“Given current circumstances, the target of six IPOs is likely to be very difficult to achieve. We need a significant improvement in equity market conditions to drive IPOs. At this time, our estimate is only three IPOs at best,” Mr. Colet said in a Viber message.

Globalinks Securities and Stocks, Inc. Head of Sales Trading Toby Allan C. Arce said the PSE faces multiple hurdles in meeting its capital-raising and IPO targets.

“PSE’s success in meeting its IPO and capital-raising goals remains uncertain but achievable with strategic planning and favorable conditions. Further monitoring of economic indicators and market policies will provide clearer insights,” Mr. Arce said in a Viber message.

Clear policies promoting IPOs and private placements, as well as market diversification, are key to achieving the PSE’s target listings this year, he added.

For 2025, the Philippine stock market is expected to recover, driven by easing inflation and potential rate cuts by the central bank.

“It is the first time in two years that we’re bullish on this market,” First Metro Securities Brokerage Corp. First Vice-President and Equity Research Division Head Reuben Mark Angeles said during the BusinessWorld Insights: Stock Market 2025 forum.

Mr. Angeles said the PSE index (PSEi) is projected to reach 7,600 by year-end.

The PSEi closed 2024 at 6,528.79, up 1.2% from its 6,450.04 finish in 2023. This marked the first time the benchmark index ended higher since 2019. – Ashley Erika O. Jose, Reporter

Poll: Inflation likely eased in February

Headline inflation likely slowed in February amid the decline in prices of rice and other key commodities, analysts said.

A BusinessWorld poll of 18 analysts conducted last week yielded a median estimate of 2.6% for the February consumer price index (CPI). This was within the Bangko Sentral ng Pilipinas’ (BSP) 2.2%-3% forecast for the month.

If realized, February inflation would be slower than the 2.9% in January and the 3.4% clip in the same month in 2023.

This would also be the lowest monthly print in four months or since the 2.3% recorded in October.

The Philippine Statistics Authority is scheduled to release February inflation data on Wednesday (March 5).

“Upward price pressures for the month include higher electricity rates and oil prices, and an increase in the prices of key agricultural commodities such as fish and meat,” the BSP said in a statement.

However, these were likely offset by lower prices of rice, fruits, and vegetables as well as negative base effects, it added.

“Softer gasoline and diesel prices, weaker US dollar, easing electricity and rice prices will act as an offset to broad food prices from a year ago,” Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (UnionBank), said.

Easing rice prices likely caused the CPI to go down this month, analysts said.

“(Our) February inflation forecast is at 2.6% due to falling rice prices as a result of additional supply in the market due to the declaration of the food security emergency,” Reinielle Matt M. Erece, economist at Oikonomia Advisory and Research, Inc., said.

The Department of Agriculture (DA) last month declared a food security emergency on rice, which allowed the National Food Authority (NFA) to release buffer stocks at subsidized prices. Local government units can buy NFA rice at P33 per kilo and sell it to the public at P35 per kilo.

On Feb. 15, the DA also lowered the maximum suggested retail price (MSRP) of 5% broken imported rice to P52 per kilo from P55 previously. This was further slashed to P49 per kilo, starting March 1.

“The biggest driver of the deceleration was likely rice. Not only were there favorable base effects on rice, but rice prices fell on a month-on-month basis,” Aris D. Dacanay, economist for ASEAN at HSBC Global Research, said.

Chinabank Research said the slowdown in inflation in February was mainly driven by lower prices of rice as well as vegetables.

Meanwhile, Mr. Dacanay said retail fuel prices began easing in February amid falling global prices.

In February, pump price adjustments stood at a net decrease of P0.05 a liter for diesel and P0.90 a liter for kerosene. However, gasoline had a net increase of P2.1 a liter.

“Further, world oil prices are on a downtrend, and while a slight increase in domestic energy prices is observed, we expect that prices overall will stabilize,” Mr. Erece said.

Meanwhile, ANZ Research said utilities and transport inflation likely eased year on year in February due to favorable base effects.

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco also noted a “softening in inflation in housing and utilities, transport and restaurant and accommodation services.”

The stronger peso during the month could also tame inflation, analysts said.

“The peso exchange rate appreciated against the US dollar so far in February versus in recent months, the strongest for the peso in nearly two months,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

“This could help ease importation costs and overall inflation,” he added.

The peso closed at PHP 57.995 against the greenback at end-February, appreciating by 37 centavos from its PHP 58.365 per dollar finish at end-January.

“Owing to the relative stable prices of consumer products added to strong showing of the peso against the dollar, the inflation for the month of February is expected to go down,” Emmanuel J. Lopez, professorial lecturer at the University of Santo Tomas Graduate School, said.

Inflationary pressure

On the other hand, analysts noted factors such as high electricity rates could have driven up February inflation.

“Slightly higher electricity prices also offset the decline in crude oil prices,” Citi Economist for the Philippines Nalin Chutchotitham said.

Manila Electric Co. (Meralco) raised the overall rate by P0.2834 per kilowatt-hour (kWh) to P12.0262 per kWh in February from P11.7428 per kWh in January.

“Inflation drivers in February include price hikes in electricity and local petroleum products as well as higher prices of select food items such as meat, fish, fruits, and vegetables,” Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco said.

Save for rice, other key food items could potentially stoke inflation during the month.

“Price pressures will show up in the food and utilities baskets,” Moody’s Analytics economist Sarah Tan said.

“Notably, onion prices soared in February — as much as 70% higher than the prior month. Surging prices have prompted officials to inspect onion warehouses to ensure that supply is not being withheld from the market amid the ongoing harvest season,” she added.

Data from the Agriculture department showed that the retail price of local red onion averaged P174.01 per kilogram as of end-February.

“However, substantial price pressures were seen in food items other than rice. Prices of cabbages, bitter melons, onions, and eggplants rose within the range of 30-50% year on year as supply conditions remain tight from past typhoons,” Mr. Dacanay said.

In the coming months, headline inflation is expected to remain within the 2-4% target band.

“On balance, the inflation outlook remains benign with food inflation expected to ease in the near to medium term,” ANZ Research said.

The BSP expects inflation to average 3.5% this year, accounting for risks.

The favorable inflation outlook should prompt the central bank to continue on its easing cycle, analysts said.

“We think that overall inflation staying below the midpoint of the official 2-4% target will allow the BSP to cut rates by 25 basis points (bps) at its next policy meeting in April,” ANZ said.

Ms. Tan said the next rate cut could come as early as April “should inflation sustainably remain close to the midpoint of the target range and the peso stabilize.”

The Monetary Board’s next rate-setting meeting is scheduled for April 3.

“From what I see, BSP will resume rate cutting in April as we now know BSP was planning to cut this month, but a last-minute policy uncertainty increase caused the delay,” Sun Life Investment Management and Trust Corp. economist Patrick M. Ella said.

Weak economic output will also make space for the central bank to continue easing.

“If inflation expectations continue to be subdued and anchored, we think that the MB (Monetary Board) has room to trim the policy rate to support GDP (gross domestic product) growth and as follow up to the recent RRR (reserve requirement ratio) cut,” Mr. Asuncion said.

The BSP last month announced it will cut the RRR of universal and commercial banks and nonbank financial institutions with quasi-banking functions by 200 bps to 5% from 7%, effective March 28.

“A stable inflation print but a faltering GDP growth is a signal for the central bank to do a rate cut at their next meeting,” Mr. Erece said.

“Although they have cut reserve requirements for banks, a policy rate cut can boost investments and spending which are the country’s primary drivers of growth.”

UnionBank expects a total of 50 bps worth of cuts this year.

On the other hand, analysts said that the BSP may continue to remain cautious.

“Looking ahead, even with inflation remaining within the BSP’s 2-4% target range, we think the BSP will likely maintain its cautious stance while awaiting clarity on global trade policies and their impact on inflation and growth,” Chinabank said.

The BSP unexpectedly kept interest rates steady at 5.75% in February, its first policy meeting for the year.

This put a pause to its easing cycle, as it slashed borrowing costs by a total of 75 bps last year through 25-bp cuts in three straight meetings.

BSP Governor Eli M. Remolona, Jr. said “global trade uncertainties” prompted the policy hold.

However, he said the central bank is still in easing mode and signaled the possibility of up to 50 bps worth of reductions this year. – Luisa Maria Jacinta C. Jocson, Reporter

USD 284-M hot money exits Philippines in Jan.

More foreign capital continued to exit the Philippines, yielding a net outflow for a second straight month in January, according to the Bangko Sentral ng Pilipinas (BSP).

Transactions on foreign portfolio investments registered with the central bank through authorized agent banks posted a net outflow of USD 283.69 million during the month.

This was 274.1% higher than the USD 75.83-million net outflow recorded in January 2024.

However, this was a 41.8% drop from the USD 487.37-million outflow in December.

Foreign portfolio investments are commonly referred to as “hot money” due to the ease by which these flows enter or leave the country.

Central bank data showed gross outflows amounted to USD 1.6 billion in January, up by 3.9% from USD 1.54 billion in the previous month. It also jumped by 22.2% from USD 1.31 billion in the same month a year ago.

The United States accounted for more than a third of total outflows (34.9%) or USD 559.27 million.

Meanwhile, gross inflows rose by 25% to USD 1.32 billion in January from USD 1.06 billion in December. Year on year, inflows went up by 6.8% from USD 1.24 billion.

The bulk of investments (67.9%) were in peso government securities, while the rest (32.1%) went into Philippine Stock Exchange (PSE)-listed securities, mainly banks, transportation services, property, holding firms and food, beverage and tobacco.

Investments from the United Kingdom, Singapore, the United States, Ireland and Luxembourg accounted for 89% of the total foreign inflows in January.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the continued investment outflow may be attributed to US President Donald J. Trump’s trade policies.

“Markets priced in possible higher US import tariffs, trade wars, and other protectionist policies that would lead to fewer Fed rate cuts; slower global trade, investments, and overall global and local economic growth as a result,” he said.

Economies are anticipating the impact of Mr. Trump’s punitive tariff proposals. This could result in “tit-for-tat” retaliatory measures, which could lead to a widespread trade war.

Reuters reported Mr. Trump on Saturday ordered a new trade investigation that could heap more tariffs on imported lumber, adding to existing duties on Canadian softwood lumber and 25% tariffs on all Canadian and Mexican goods due next week.

The new tariff probe follows Mr. Trump’s order on Tuesday for a new Section 232 into copper imports, aimed at rebuilding US production of a metal critical to electric vehicles, military hardware and the power grid.

“However, Fed officials and the markets still on a wait-and-see stance on the impact of Trump’s tariffs and other protectionist measures on US inflation that could determine future Fed rate cuts that could be matched locally, going forward,” Mr. Ricafort added.

Financial markets now expect the Federal Reserve to resume cutting interest rates in June following a pause in January to give policy makers time to assess the economic impact of the administration’s policies, Reuters reported.

BSP Governor Eli M. Remolona, Jr. has said they are recalibrating their models to better take into account these “global trade uncertainties.” This after it delivered a surprise pause, opting to keep key rates steady at 5.75% at its meeting last month.

In 2024, the country posted a net inflow balance of USD 2.1 billion last year, a turnaround from the USD 248.84-million outflow in 2023.

Inward foreign investments registered with authorized agent banks include Philippine Stock Exchange-listed securities, peso-denominated government securities, peso time deposits with banks with minimum tenor of 90 days, other peso debt instruments, unit investment trust funds, and other instruments such as Exchange Traded Funds and Philippine Depositary Receipts.

“In addition, registration of said investments with the BSP, through the authorized agent banks, may not necessarily coincide with either trade or settlement date of the underlying transaction, and thus, such registration may be effected even after the actual foreign investment transaction has long been completed,” the central bank said. — Luisa Maria Jacinta C. Jocson with Reuters

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