Trade gap widens to USD 5.09 billion in Jan.

The Philippines’ trade-in-goods deficit widened to a three-month high in January as both exports and imports picked up, the Philippine Statistics Authority (PSA) reported on Friday.

The trade deficit could further worsen this year as the US trade war escalates, analysts said.

Preliminary data from the PSA showed the country’s trade balance — the difference between the values of exports and imports — ballooned to a USD 5.09-billion deficit from USD 4.14-billion deficit in December and the USD 4.36 billion gap a year earlier.

The latest figures showed the widest trade deficit in three months since the USD 5.81-billion deficit in October 2024.

PSA data showed that year on year, merchandise exports in January grew by 6.3% to USD 6.36 billion, surpassing the 6% growth projection set by the Development Budget and Coordination Committee (DBCC) this year.

Month on month, exports grew by 12.2%. This ended four straight months of export decline.

By value, it was the highest since the USD 6.75 billion in August 2024.

Imports went up by 10.8% year on year to USD 11.45 billion in January. Month on month, it grew 16.7%, ending two months of decline.

Imports growth also exceeded the 5% projection set by the DBCC. The value of imports was the highest in three months or since the USD 12 billion in October last year.

“The fact that it [electronics and semiconductors] has been negative for a number of months implies that the demand for our semiconductor, is not as hot as the newer, more powerful semiconductors in the world which is really used for AI industry,” George N. Manzano, economist from the University of Asia and the Pacific, said in a phone interview.

Electronic products, the country’s main export commodity as these account for more than half of exports in January, saw a 2.6% decline to USD 3.37 billion in January from the USD 3.46 billion in the same month in 2024.

Semiconductors, which accounts for almost 40% of total exports and three-fourths of electronic products that month, also contracted by 6.8% year on year to USD 2.52 billion.

These declines were offset by the double-digit increases seen in other manufactured goods (up by 66.6% to USD 471.07 million), coconut oil (up 80.3% to USD 249.05 million), and other mineral products (up by 33.1% to USD 247.09 million).

“The fact that our exports are also increasing, that’s also a good indicator,” Mr. Manzano said.

The United States remains the top destination of locally made goods in January, with exports valued at USD 1.13 billion, accounting for 17.7% of total export sales.

This was followed by Japan with USD 945.80 million (14.9%), Hong Kong with USD 722.81 million (11.4%), China with USD 645.57 million (10.1%), and Singapore with USD 266.48 million (4.2%).

Meanwhile, import of electronic products grew by 14.2% to USD 2.51 billion in January, while mineral fuels, lubricants and related materials went up by 7.1% to USD 1.62 billion.

Other import commodities that saw increases were transport equipment (up by 8.5% to USD 906.22 million), industrial machinery and equipment (up by 20% to USD 592.90 million), and iron and steel (up by 17.8% to USD 497.35 million).

China is still the biggest source of imports in January with USD 3.31 billion worth of goods, making up 28.9% of the total imports.

It was followed by Japan with USD 912.71 million (8% share), Indonesia with USD 892.95 million (7.8%), South Korea with USD 862.27 million (7.5%), and US with USD 690.81 million (6%).

George T. Barcelon, chairman of the Philippine Chamber of Commerce and Industry, said in a phone interview that the country’s trade deficit has been increasing over the past few years.

“Locally, we are not producing enough competitive products for the local supplier or manufacturer to serve the market. And as such, it’s cheaper to import. We have quite a big deficit with all the world but also with the ASEAN countries. So those are gaps that must be filled,” Mr. Barcelon said.

“Because every time we have a trade deficit, in other words, it translates to giving jobs to countries outside, and the jobs are not here in our country,” he added.

Mr. Barcelon also mentioned the uncertainties brought about by the looming trade war by the US government under the Trump administration.

“One of the issues on the mind of businessmen is how our trade will go, because our biggest market is still primarily North America,” he said.

“When you’re uncertain, people will not really going to be eager to invest…there is not much investment since they’re waiting whether the trade war is going to actually happen,” he added in a mix of Filipino and English.

“So that’s like the biggest thing right now in the world economy, what the US will do. Because the US is such a big buyer of our exports,” he said.

In a research note, Chinabank Research said that outlook for the industry may remain bleak this year as ongoing efforts may materialize in the long run.

Chinabank Research added that a significant risk will arise if Mr. Trump proceeds with his plan to impose 25% tariffs on semiconductors this year.

It also said that the shortfall in trade deficit “could widen further this year, with major risk coming from increased uncertainties on global trade policy, as well as Trump’s plan to impose reciprocal tariffs as the US is the top destination for Philippine exports.”

Markets are preparing for the potential impact of the trade policies by US President Donald J. Trump, such as reciprocal tariffs on all countries that tax US imports.

Mr. Trump on Thursday will impose 25% tariffs on Mexican and Canadian goods starting on March 4, along with an additional 10% duty on Chinese imports of medicines, Reuters reported. Early in February, Mr. Trump imposed 10% levy on Chinese imports. — Kenneth H. Hernandez

Budget gap exceeds full-year ceiling

The national government’s (NG) budget deficit narrowed year on year in 2024, but overshot the target by 1.48%, the Bureau of the Treasury (BTr) said.

Data from the Treasury released on Thursday showed that the budget deficit shrank by 0.38% or PHP 5.7 billion to PHP 1.506 trillion in 2024 from PHP 1.512 trillion in 2023.

However, it exceeded the PHP 1.48-trillion deficit ceiling set by the Development Budget Coordination Committee.

“The slight variance versus the PHP 1.484-trillion deficit program was primarily due to a higher outturn in government spending including those charged to unprogrammed appropriation, as well as defrayment of accounts payables,” the Treasury said.

As of end-2024, the deficit as a share of gross domestic product (GDP) settled at 5.7%, lower than 6.2% at end-2023 but slightly higher than the target of 5.6%.

BTr data showed revenue collection jumped by 15.56% to PHP 4.42 trillion and exceeded its PHP 4.27-trillion target due to better-than-expected non-tax revenue collections.

“This is equivalent to 16.72% of GDP, the highest revenue effort in the last 27 years, since 1997,” the Treasury said.

Tax revenues rose by an annual 10.83% to PHP 3.8 trillion in 2024 but fell short of the PHP 3.82-trillion target by 0.51%.

Collections by the Bureau of the Internal Revenue (BIR) increased by 13.29% year on year to PHP 2.852 trillion, driven by increased value-added tax (VAT) collections. It surpassed the PHP 2.849-trillion target by 0.09%.

On the other hand, the Bureau of Customs’ (BoC) revenues went up by 3.79% to PHP 916.7 billion in 2024 but fell short of the PHP 939.7-billion target by 2.45%

The BTr attributed the lower Customs collections to the reduced tariff on rice and selected electric vehicles, as well as the extension of lower tariffs on meat products.

“The increase is attributable to the growth across duties, VAT, and excise collections, which is among the effects of the bureau’s strengthened digitization, inspection, and border protection efforts implemented during the year,” the BTr said.

Meanwhile, nontax revenues surged by 56.61% to PHP 618.3 billion in 2024, exceeding the full-year target PHP 449.6 billion by 37.53%.

“The better-than-expected outturn was primarily due to strengthened efforts to generate windfall collections such as that from the Public-Private Partnership (PPP) concession fee (PHP 30 billion) and the PHP 167.2-billion fund balance transfers from the Philippine Health Insurance Corp. (PHIC) and Philippine Deposit Insurance Corp. (PDIC),” the Treasury said.

“Deducting the fund balance transfers, total nontax collections of PHP 451.1 billion still exceeded the adjusted full-year program by 0.33% (PHP 1.5 billion).”

The Treasury’s income grew by 24.48% to PHP 283.4 billion last year and surpassed the PHP 187-billion target by 51.52%. This was due to “higher dividend remittances, interest advances from government-owned and -controlled corporations, guarantee fees, and NG share from the Philippine Amusement and Gaming Corp. profits.”

Revenue from other offices more than doubled to PHP 335 billion from PHP 167.2 billion in 2023. It also exceeded its PHP 262.6-billion program by 27.56%.

At the same time, government expenditures rose by an annual 11.04% to PHP 5.925 trillion in 2024. This was 2.97% higher than its PHP 5.754-trillion annual program.

“The strong disbursement performance was largely driven by infrastructure and other capital outlays of the Department of Public Works and Highways (DPWH),” the BTr said.

It also cited the “maintenance and other operating expenses for various health and social protection programs, and personnel services expenditures due to the implementation of the first tranche of salary adjustments of qualified civilian government employees.”

Primary spending — which refers to total expenditures minus interest payments — increased by 9.65% to PHP 5.16 trillion last year. It was 3.43% higher than the programmed PHP 4.999 trillion.

Interest payments (IP) jumped by 21.48% to PHP 763.3 billion due to the “higher interest rates and less favorable foreign exchange rate conditions.” However, it was 0.02% lower than the revised program of PHP 763.4 billion.

December deficit

In December alone, the NG’s budget deficit also sharply narrowed by 17.82% to PHP 329.5 billion from PHP 401 billion in the same month in 2023.

Revenue collection rose by 20.99% to PHP 314.7 billion in December, as tax revenues inched up by 2.01% to PHP 251.6 billion.

Broken down, BIR collection went up by 5.48% to PHP 183.8 billion, while Customs collection slipped by 6.38% to PHP 66.7 billion.

Meanwhile, nontax revenues surged by 369% to PHP 63.1 billion, as Treasury revenues climbed by 348% to PHP 50.7 billion.

On the other hand, government spending fell by 2.55% to PHP 644.2 billion in December.

Primary spending slid by 2.36% to P586.2 billion while interest payments dropped by 4.45% to PHP 58 billion.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the slightly lower deficit in 2024 largely reflected higher government expenditures.

“Higher prices and election-related spending could have partly led to the increase in government expenditures in 2024,” he said.

Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message that the fiscal performance “demonstrates a delicate balancing act between revenue mobilization and expenditure management amid macroeconomic headwinds.”

“While the deficit narrowed slightly to P1.506 trillion, the achievement is noteworthy given the substantial 21.48% surge in interest payments that created significant expenditure pressure,” he said.

“The narrowing deficit trajectory, despite missing the precise target, still represents significant fiscal consolidation progress, with the deficit-to-GDP ratio improving from 6.2% to 5.7%, continuing the favorable trend since the post-pandemic high of 8.6% in 2021,” Mr. Roces added. — A.R.A. Inosante

BSP seen to bring down RRR to zero by 2028

Big banks’ reserve requirements are seen to be slashed further to zero in the near term, Security Bank said.

“Our forecast is that even in the next couple of years, there will still be cuts,” Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco said in mixed English and Filipino.

Mr. Taningco said they expect the central bank to reduce the reserve requirement ratio (RRR) by 200 basis points (bps) next year, 150 bps in 2027 and another 150 bps in 2028.

This would bring the current 5% reserve requirement for big banks to zero by 2028.

Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. earlier said the central bank is eyeing to bring down banks’ reserve requirements to zero before his term ends in 2029.

The BSP last week 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.

It will also reduce the RRR for digital banks by 150 bps to 2.5%, while the ratio for thrift lenders will be lowered by 100 bps to 0%.

Rural and cooperative banks’ RRR has been at zero since October, the last time the BSP cut reserve requirements.

From a high of 20% in 2018, the central bank has since brought down the RRR to single-digit levels.

Further lowering reserve requirements could lead to further financial intermediation and make the usage of capital more efficient, Mr. Taningco said.

“It would lead to more growth prospects because you have additional funds,” he added.

The RRR is the portion of reserves that banks must hold onto rather than lending out. When a bank is required to hold a lower reserve ratio, it has more funds to lend to borrowers.

Several economists estimated that the RRR cut will release PHP 300 billion to nearly PHP 400 billion of additional liquidity in the economy.

For this round, Security Bank estimated that PHP 325 billion will be injected into the financial system.

“This was part of the plan, gradual (reduction) every year until it reaches zero. The timing was just what we didn’t expect, it came a bit early.”

Mr. Taningco said there is a need to make sure the reductions are implemented at a gradual pace as the central bank is juggling inflation, growth and exchange rate stability.

“More liquidity is inflationary. So, it’s a balance. That’s why it’s gradual and not one time, big time. In theory, we could bring the 5% down to zero, but that would be inflationary.”

The central bank has said the risks to the inflation outlook have become “broadly balanced” for this year and the next.

It expects inflation to average 3.5% this year and 3.7% in 2026, both within the 2-4% target range.

“If we go from 5% to zero, how many billions is that? That’s already about a trillion. If it’s done all at once, the peso may weaken significantly. So, we are trying to avoid that excessive volatility,” Mr. Taningco added.

For the past months, the peso has been under pressure amid the dollar surge. The local unit fell to the record-low PHP 59-per-dollar level thrice last year, twice in November and once in December.

The RRR cut would also boost bank lending, Mr. Taningco said, though this may not necessarily be “substantive” growth.

The latest BSP data showed bank lending jumped by 12.2% year on year to PHP 13.1 trillion in December, its fastest growth in two years. — Luisa Maria Jacinta C. Jocson

SEC pushes on with anti-dirty money reforms

The Securities and Exchange Commission (SEC) is ramping up reforms by launching a beneficial ownership registry, tightening oversight of financial institutions and non-profits, and drafting new crypto asset regulations to ensure the Philippines does not return to the Financial Action Task Force’s (FATF) “gray list,” its chairman said.

“The next two years will be crucial as the Philippines prepares for another mutual evaluation, where the country’s AML/CFT standards will be assessed for compliance with global standards,” SEC Chairperson Emilio B. Aquino said during a briefing on Thursday.

“Failure to address identified risks — such as gaps in beneficial ownership transparency, enforcement actions, or emerging financial threats — could increase our risk of going back to the gray list,” he added.

The FATF last week removed the Philippines from its list of jurisdictions under increased monitoring for “dirty money” risks.

The country had been on the gray list for over three years, since June 2021. The dirty money watchdog said the Philippines’ removal was due to progress in addressing strategic deficiencies in anti-money laundering, countering the financing of terrorism, and proliferation financing (AML/CFT/CPF).

In 2027, the Philippines will undergo a new assessment, during which the FATF will verify whether the measures remain in place.

The SEC said it will continue cooperating with other government agencies and authorities to combat money laundering and other illicit financial activities.

Project harbor

The SEC plans to launch the Hierarchical Applicable Relations and Beneficial Ownership Registry (Project HARBOR) this year. This will serve as a “registry of beneficial ownership information that will be easily accessible to partner agencies through data-sharing agreements.”

“Project HARBOR’s features will include automated data validation, configurable access levels for authorized users, and analytical tools for identifying complex ownership structures.”

The registry aims to streamline beneficial ownership disclosures, promote regulatory transparency, and enhance compliance with global AML/CFT standards.

“Project HARBOR will modernize how we manage beneficial ownership data, reducing manual interventions and facilitating a secure, efficient disclosure process for corporations, thereby addressing concerns over the accuracy of beneficial ownership information submitted to the SEC,” Mr. Aquino added.

Non-profit organizations

The SEC also said it will continue to monitor the non-profit organization (NPO) sector through regular offsite and onsite examinations.

“The SEC has committed to continuing outreach and knowledge-sharing activities for the NPO sector, while also encouraging unincorporated entities to register with the Commission to reduce their risk of being used for money laundering and terrorist financing.”

The FATF, in its statement, emphasized that the Philippines’ reform measures should not impede legitimate nonprofit activities.

“We recognize the important role that non-profit organizations play in nation-building through the advocacies they put forward,” Mr. Aquino said.

“At the SEC, our goal in regulation is to improve corporate governance without unduly burdening legitimate NPO activities,” he added.

The SEC said it is also streamlining processes and removing redundancies by prioritizing engagement with NPOs through capacity-building initiatives instead of imposing additional regulatory requirements.

Financial institutions
“Aside from the NPO sector, the SEC is also strengthening enforcement of AML/CFT policies over financial institutions under its jurisdiction, including brokers, dealers, lending and financing corporations, and other securities dealers, in line with its mandate as the country’s capital market regulator.”

Mr. Aquino said the SEC is also closely monitoring virtual currencies and other digital assets.

“To mitigate risks, the Commission is drafting new rules on crypto-asset service providers (CASPs) to enhance oversight and supervision of businesses engaged in offering, trading, and other activities involving innovative financial products.”

The draft guidelines for CASPs have already been released for public consultation, the SEC added.

“The SEC reiterates its commitment to implementing the necessary measures in compliance with evolving global AML/CFT standards, ensuring that the Philippines’ presence on the FATF gray list will finally become a thing of the past,” Mr. Aquino said.

Impact

The banking, financial institutions, and financial technology sectors could see a boost in investment.

“There are a lot of potential venture capitalists and private equity firms interested. They will bring in their money as long as the country is not seen as a high-risk investment destination. Now, with our removal from the gray list, the Philippines has become more attractive. Investors no longer have to worry,” Mr. Aquino said.

In 2002, the FATF blacklisted the Philippines for having no legal anti-money laundering framework. The country was removed from the blacklist a year later after the passage of the Anti-Money Laundering Act.

Last year, President Ferdinand R. Marcos, Jr. directed all relevant agencies to work toward the country’s removal from the gray list by October.

In July, Malacañang issued an executive order mandating all government offices to adopt the National Anti-Money Laundering, Counter-Terrorism Financing, and Counter-Proliferation Financing Strategy 2023–2027. – Luisa Maria Jacinta C. Jocson, Reporter

Philippine stock market seen to bounce back this year

The Philippine stock market is likely to bounce back this year, amid easing inflation and further rate cuts by the central bank, analysts said.

“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 on Wednesday.

“For the last two years, we’ve been very bearish. And we see a lot of things that have turned around. And we see that at the end of the year, we will see stronger equity market performance.”

Mr. Angeles said PSEi is expected to hit the 7,600 level by yearend.

The PSE index (PSEi) closed 2024 at 6,528.79, up by 1.2% from its 6,450.04 finish in 2023. This marked the first time the bellwether index closed higher since 2019.

He noted the Philippine economy is on a “clear growth path,” with the midterm elections and favorable base effects to stimulate consumption this year.

April Lynn C. Lee-Tan, first vice-president and corporate strategy and chief investor relations officer of COL Financial Group, Inc., said there would be more opportunities for growth in the stock market, especially if foreign investments come in.

“We have a general positive outlook because of cheap valuation. The trends last year were high interest rates, high inflation, which are no longer the case now,” Ms. Lee-Tan told BusinessWorld on the sidelines of the forum.

Michael Gerard D. Enriquez, president of Sun Life Investment Management and Trust Corp., gave a moderate projection of 7,500 for the PSEi, which depends on further rate cuts, resilient corporate earnings growth and inflation is maintained at current levels.

He gave a conservative estimate of 6,608 for the PSEi if there are fewer-than-expected rate cuts, a weaker peso and heightened geopolitical tensions.

He said his “aggressive” outlook of 8,512 for the PSEi could materialize if the local currency starts to recover, the central bank implements more rate cuts and if there is renewed foreign interest in Philippine equities.

The Bangko Sentral ng Pilipinas (BSP) surprised markets after it left the benchmark rate unchanged at 5.75% at its Feb. 13 meeting. This after the central bank cut rates at three straight meetings since it began its easing cycle in August.

BSP Governor Eli M. Remolona Jr. has said the Monetary Board may slash benchmark interest rates by a total of 50 basis points (bps) this year as “policy insurance” against risks, with the cuts likely to be done in 25-bp increments each in the first and second half.

Ms. Lee-Tan said that the Philippines is less vulnerable to the US President Donald J. Trump’s tariff threats, as the country only accounts for 1% of US imports. She also noted the country is driven mainly by consumption, making it less affected by Mr. Trump’s protectionist policies.

Mr. Trump has announced this month its plans to impose tariffs on auto, chip, and pharmaceutical imports over the course of the year.

The US President has also tightened immigration policies, which may affect remittances of overseas Filipinos workers (OFW). Around 40% of remittances are from the OFWs in the US.

Mr. Angeles noted that investor confidence may be negatively impacted if remittances are significantly affected.

Unicapital Inc. Senior Vice-President for Investment Banking Pamela Louise Q. Victoriano said she sees the PSEi ending at the 7,800 level by yearend.

“Opportunities continue to persist. We are cautiously optimistic, we feel that the fundamentals for the Philippines are still there, and this represents good long-term growth prospects for the country,” Ms. Victoriano said.

BDO Securities Corp. Head Trader Jasper M. Jimenez said investors should diversify their portfolios but should favor stock market investments.

“Investors’ portfolios have to adapt to the changing market conditions. The stock market today is very different from before, we see a very fast appreciation due to market reasons. In terms of size, they can take advantage of this,” Mr. Jimenez said.

Analysts also noted that market reforms, such as the proposed reduction of sales transaction tax, are expected to boost stock market activity.

Mr. Angeles said European funds are likely to go back to the local stock market after the Philippines’ recent exit from the Financial Action Task Force’s “gray list.” – Ashley Erika O. Jose, Reporter

Peso strengthens amid market caution over Trump’s higher tariffs

The peso appreciated against the dollar on Wednesday amid market caution due to uncertainty stemming from US President Donald J. Trump’s planned tariffs.

It closed at PHP 57.88 a dollar, five centavos stronger than its P57.93 finish on Tuesday, according to Bankers Association of the Philippines data posted on its website.

The peso opened at PHP 57.87 against the dollar. It weakened to as much as PHP 57.92 and strengthened to as much as PHP 57.855 against the greenback. Dollars exchanged fell to USD 1.09 billion from USD 1.38 billion on Tuesday.

“The dollar-peso traded cautiously amid uncertainties on Trump’s trade policies and ahead of US GDP data tomorrow,” a trader said by telephone.

Mr. Trump on Monday said tariffs against Canada and Mexico would proceed as scheduled, ostensibly from March 4.

The dollar pulled off an 11-week low versus major peers, helped by a rebound in short-term Treasury yields even as a run of weak economic data weighed on investor sentiment.

The Canadian dollar slipped to a two-week low and the Mexican peso was weaker with a new round of tariffs from Mr. Trump’s administration due to hit those neighbors next week.

“Currency markets remain fickle,” DBS analysts wrote in a client note, citing swings in the dollar over the course of this week.

In terms of the US economy, “sentiment has been shaky for a while and any miss in data would place downward pressure on yields,” they said. “We suspect that this risk-off move may have further to go and expect US yields to maintain a downward bias in the short term.”

The dollar index, which measures the currency against six major rivals, added 0.3% to 106.51 in the Asian afternoon, rising from this week’s low of 106.13, the weakest level since Dec. 10.

The dollar index weakened 0.5% on Tuesday after the US Conference Board said its consumer confidence index dropped 7 points, its largest fall since August 2021, to 98.3, well short of the 102.5 estimate of economists polled by Reuters.

The result added to other weak data, pushing expectations toward two quarter-point interest rate cuts by the Federal Reserve over the remainder of this year, with the next likely coming in July, according to market pricing.

The two-year US Treasury yield declined as low as 4.074% on Tuesday for the first time since Nov. 1, but was up at 4.1271% on Wednesday.

“US data flow on net is now disappointing expectations, calling into question the US exceptionalism narrative that had been USD supportive,” said Tapas Strickland, head of market economics at National Australia Bank.

Lower global crude oil prices also supported the peso on Wednesday, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

Brent crude rose 0.3% or 24 cents to USD 73.26 a barrel by 7:35 a.m. GMT. US West Texas Intermediate (WTI) crude oil futures rose 0.3% or 23 cents to USD 69.16, according to Reuters.

These were up from Tuesday, when oil prices fell about 2% to a two-month low, with Brent futures falling 2.4% or USD 1.76 to settle at USD 73.02 a barrel, while US WTI crude fell 2.5% or USD 1.77 to USD 68.93.

The trader expects the peso to trade at PHP 57.70 to PHP 58 a dollar on Thursday, while Mr. Ricafort sees it moving from PHP 57.75 to PHP 57.95. — Aaron Michael C. Sy, Reporter with Reuters

PEZA OKs PHP 23-B investments in Feb.

The Philippine Economic Zone Authority (PEZA) approved PHP 22.78 billion in investment pledges in February, an increase of 130.5% from PHP 9.89 billion worth of pledges approved a year ago.

At a meeting on Feb. 20, the PEZA Board approved 26 new and expansion projects that are expected to generate USD 241.79 million in exports and create 7,793 jobs.

Nine of the projects are in export manufacturing, while eight are information technology and business process management projects.

Four of the projects are economic zone (ecozone) developments, while three are domestic market projects and two are involved in developing facilities.

The projects are in Metro Manila, Calabarzon, Central Luzon, Central Visayas, Western Visayas, Ilocos Region and Davao Region.

The recent approvals include a PHP 10.45-billion investment to develop an ecozone where South Korean companies can establish their operations.

“With the Philippines-South Korea free trade agreement now in effect, PEZA is collaborating with the Bases Conversion and Development Authority for the creation of this multifaceted ecozone,” PEZA said.

“[It] will accommodate multiple sectors, including manufacturing, agro-industrial, tourism and information technology, further enhancing economic opportunities and sectoral development,” it added.

In the first two months, PEZA approved 39 new and expansion projects worth PHP 52.93 billion. The amount is more than four times the PHP 12.1 billion worth of investment pledges approved a year earlier.

“PEZA’s rising investments reflect its dedication to supporting various sectors and propelling the country’s economic progress,” said PEZA Director-General Tereso O. Panga.

“By attracting projects from priority industries such as emerging technologies in the EMS-SMS (electronics manufacturing services-semiconductor manufacturing services) sector and fostering strategic collaboration with the pharmaceutical industry, among others, PEZA continues to draw investments that stimulate regional economic growth and advance the nation’s industrial landscape,” he added.

PEZA said it is on track to hit its target to approve about PHP 235 billion in investment pledges this year, which is 9-10% higher than the PHP 214.18-billion pledges approved in 2024.

PEZA said investments from domestic market enterprises (DME) have been increasing, accounting for PHP 37.97 billion or 71% of the investment pledges approved in the January-to-February period.

Since 2024, the agency has approved 15 DME projects worth over PHP 130 billion, three of which are expected to enjoy a longer set of incentives after investing over PHP 15 billion.

Meanwhile, Trade Secretary and PEZA Board Chairman Ma. Cristina A. Roque said the higher investment approvals could also be attributed to the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act.

“The CREATE MORE Act is a game changer in the entry of foreign direct investments into the country, which encourages more international investors to come given the longer set incentives being offered,” she said.

President Ferdinand R. Marcos, Jr. in November signed the CREATE MORE Act, which seeks to make the country more competitive and attractive to investors.

PEZA said it anticipates the entry of more investments after the CREATE MORE Act’s implementing rules and regulations (IRR) were signed last week.

“The IRR supports PEZA’s core mandate to drive investment growth, create jobs and promote sustainable development, especially in the countryside. We now provide even more benefits to investors who wish to locate in the Philippines,” Mr. Panga said.

The IRR provides clearer guidelines on the transitory rules for pre-CREATE registered business enterprises (RBE) to continue receiving their previously granted tax incentives. The RBEs may also avail themselves of additional incentives or measures under CREATE MORE. — Justine Irish D. Tabile

Philippines hopeful for US support of Luzon Economic Corridor

The Philippines is hoping the United States under the Trump administration will continue supporting the Luzon Economic Corridor (LEC), the Office of the Special Assistant to the President for Investment and Economic Affairs (OSAPIEA) said.

“We need to inquire from the Trump administration what their plans are for that. Although we are still very positive, we are still very hopeful,” Secretary Frederick D. Go, who heads OSAPIEA, told reporters last week.

“I think we have been a very good ally of the US, so I believe that they will reciprocate that with tangible economic benefits for our country,” he added.

The Luzon Economic Corridor is being undertaken via a trilateral commitment among the Philippines, US and Japan.

In April 2024, then-US President Joseph R. Biden, then-Japanese Prime Minister Fumio Kishida and Philippine President Ferdinand R. Marcos, Jr., launched a steering committee to drive infrastructure development in the LEC.

The initiative aims to enhance the connectivity of Luzon’s key economic areas — Subic Bay, Clark, Metro Manila and Batangas.

Mr. Go said other countries have also expressed interest in joining the initiatives for the Luzon Economic Corridor.

“While the US and Japan were leading the Luzon Economic Corridor, since that time the UK, Sweden, Korea, and Australia have all signified very serious intent,” he added.

Mr. Go also said funding for the feasibility study of one of the flagship projects of the Luzon Economic Corridor, the Subic-Clark-Manila-Batangas cargo railway, would not be affected by the US government’s pause on foreign aid funding.

After assuming office on Jan. 20, Mr. Trump ordered a 90-day pause on foreign aid to review if these programs are aligned with his “America First” policies.

However, Foundation for Economic Freedom President Calixto V. Chikiamco said the US might pull out of the Luzon Economic Corridor, which was initiated under Mr. Biden.

“It’s a Biden initiative. Most likely it will be scrapped by Trump,” he said in a Viber message.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the Luzon Economic Corridor is not consistent with Mr. Trump’s protectionist policies.

“This could partly run counter to Trump’s protectionist policies that encourage American and other global businesses to invest and create more jobs in the US,” he said in a Viber message.

He said Mr. Trump has been cutting costs in the US government, which could threaten US subsidies, grants, and assistance for its closest allies.

“Trump could reverse Biden’s other programs related to this. An exemption would be on US defense cooperation and related spending, which were signaled to be not adversely affected,” he added.

The Luzon Economic Corridor is the first project of the US-initiated Partnership for Global Infrastructure and Investment in the Indo-Pacific.

It seeks to accelerate investments in high-impact infrastructure projects such as railways, ports, clean energy, semiconductor supply chains and agribusiness.

Meanwhile, Finance Secretary Ralph G. Recto said he would support the reduction of tariffs on US-made vehicles under a free trade agreement (FTA) with the US.

“We’re now working on a free trade agreement with the European Union (EU)… We’re open to a free trade agreement also with the United States. I would bat for a reduction in tariffs on US vehicles,” Mr. Recto said in a CNN interview on Tuesday.

The Philippines is in talks with the EU for a free trade deal. Philippine government officials earlier said there appears to be “renewed interest” from the US on a bilateral FTA with the Philippines.

To recall, Mr. Trump during his first term met with then-President Rodrigo R. Duterte in Manila in 2017 and released a joint statement on the FTA deal and agreed to discuss it under the US-Philippines Trade and Investment Framework Agreement.

Mr. Recto said he proposed lower tariffs on US-made vehicles “knowing that President Trump is interested in protecting and promoting US auto makers.”

Mr. Recto reiterated that he is not worried about the implication of Mr. Trump’s aggressive tariff policies considering the Philippine economy is driven mostly by domestic consumption.

The Philippines is unlike China, Vietnam and its other Southeast Asian peers, which are more export-oriented, he said. “We have a trade deficit when it comes to goods. We have a robust BPO industry and we feel that that will continue.”

“In fact, they’re more interested in investing in the Philippines’ BPO industry,” he added.

US officials are studying global reciprocal tariffs. Mr. Trump has said he wants to impose tariffs on all countries that have tariffs on US goods.

He has also said he wants to slap 25% tariffs on imports of cars, pharmaceuticals and semiconductors. — Justine Irish D. Tabile and Aubrey Rose A. Inosante

InstaPay, PESONet transactions jump to PHP 1.8T

The value of transactions done via InstaPay and PESONet has increased by 38.2% as of end-January, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Central bank data showed transactions coursed through the two automated clearing houses had jumped to PHP 1.8 trillion as of end-January from PHP 1.31 trillion a year ago.

The combined volume of transactions done via InstaPay and PESONet likewise surged by 58.4% to 160.2 million from 101.2 million a year ago.

The value of PESONet transactions climbed by 32% year on year to PHP 1.05 trillion in January from PHP 797.4 billion last year.

The volume of transactions that went through the payment gateway also rose by 20.6% to 9.6 million from 8 million.

Meanwhile, the value of transactions done through InstaPay jumped by 47.8% to PHP 750.6 billion from PHP 507.8 billion in the previous year.

The volume of InstaPay transactions stood at 150.6 million, higher by 61.6% from 93.2 million in the year-ago period.

PESONet and InstaPay are automated clearing houses that were launched in December 2015 under the central bank’s National Retail Payment System framework.

PESONet caters to high-value transactions and may be considered as an electronic alternative to paper-based checks.

Meanwhile, InstaPay is a real-time, low-value electronic fund transfer facility for transactions up to PHP 50,000 and is mostly used for remittances and e-commerce.

“The consistent strong double-digit growth in transactions in recent months continued to reflect the adoption of online banking and electronic fund transfers including e-wallets by more Filipinos over the years,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Latest BSP data showed digital payments made up 52.8% of the volume of retail transactions in 2023, higher than the 42.1% share in 2022.

In terms of value, 55.3% of retail transactions in 2023 were done online, higher than the 40.1% the year prior.

The BSP said the increase in digital payments was driven by wider use of online transaction channels among people and businesses, with the coronavirus pandemic accelerating the shift.

“Furthermore, more Filipinos find greater value and convenience in using both of these instead of using checks and other over-the-counter transactions,” Mr. Ricafort said.

“Both of these, using online banking apps and e-wallets also promote further financial inclusion especially in unbanked areas,” he added.

The central bank wants online payments to make up 60-70% of the country’s total retail transaction volume by 2028. – Luisa Maria Jacinta C. Jocson, Reporter

SEC to open repo market to nonbank financial firms

The Securities and Exchange Commission (SEC) is pushing to expand the government securities (GS) repurchase agreement (repo) market to further deepen the country’s capital market.

“The repo market is envisioned to support the market-making activities of government securities dealers in the country. Expanding this market provides us with another opportunity to improve liquidity, manage short-term funding, and boost overall market activity,” SEC Chairperson Emilio B. Aquino said in a media release on Tuesday.

This initiative aims to enhance liquidity and broaden market participation by allowing nonbank financial institutions to engage in repos, extending beyond GS-eligible dealers, the SEC said.

A repo is a short-term agreement where one party sells government securities and agrees to repurchase them at a later date, effectively serving as a secured loan.

The SEC assumed oversight of the market in 2020 and has since explored ways to diversify participation beyond GS-eligible dealers.

Last year, the Bangko Sentral ng Pilipinas and the Bankers Association of the Philippines proposed including fund managers and trust entities in the GS repo market to further develop the country’s capital markets.

The SEC has also collaborated with the Bankers Association of the Philippines and the Asian Development Bank to organize the Global Master Repurchase Agreement (GMRA) Workshop, which aims to equip stakeholders with the knowledge and tools needed to implement the GMRA framework, it said.

“To complement all these efforts, the SEC is also working to identify the most appropriate self-regulatory organization for the Philippine repo market to ensure its long-term viability,” the SEC added. — Ashley Erika O. Jose

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