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Former Senator Ralph G. Recto, who pushed higher value-added taxes (VAT) in the Senate in the early 2000s, has been appointed Finance secretary, according to Senate President Juan Miguel F. Zubiri.

Mr. Recto, who was elected Batangas congressman in 2022 and served three six-year terms as a senator, is set to take his oath at the Presidential Palace on Friday, according to news reports quoting his wife, former Batangas lawmaker and actress Vilma Santos-Recto.

He will replace Benjamin E. Diokno, who served as central bank governor under the Duterte administration.

“In the Senate, we always regarded him as the resident numbers genius,” Mr. Zubri said in a statement as he welcomed the appointment of Mr. Recto.

“This was not just for his mathematical ability, but more importantly for his ability to immediately see the big picture implications of these numbers.”

Presidential Communications Office chief Cheloy Velicaria-Garafil confirmed Mr. Recto will take his oath as Finance secretary before President Ferdinand R. Marcos, Jr. on Friday. Also scheduled to take his oath is former Robinsons Land Corp. President and Chief Executive Officer Frederick D. Go, who was appointed Special Assistant to the President for Investment and Economic Affairs.

Mr. Recto and Mr. Diokno did not reply to requests for comment.

In an interview with Bloomberg TV on Monday, Mr. Diokno refused to comment on reports that he will be replaced.

“My relationship with the President is confidential and before making any announcement, I have to clear that with the President,” he said.

Mr. Recto was elected representative of the 6^th district of Batangas in 1992 and served three terms. He was first elected to the Senate in 2001 at the age of 37, the youngest among his colleagues in the upper chamber at that time. There, he chaired the committees on Ways and Means and on Trade and Industry.

However, the grandson of the late Filipino statesman Claro M. Recto lost his Senate reelection bid in 2007 after pushing to raise the VAT by 2 points to 12%.

Then-president Gloria Macapagal-Arroyo appointed him as director-general of the National Economic and Development Authority in 2008 but left after one year.

He made a Senate comeback in 2010 and consecutively secured the seat in the following elections until 2022.

“More than most, he understands how to bridge the gap between the abstractions of mathematics and the very concrete realities that we face as a nation,” Mr. Zubiri said. “So, I have no doubt that he will be a good Finance secretary, who will continue to push the country along on the road to greater economic prosperity.”

House Ways and Means Chair Jose Maria Clemente S. Salceda said Mr. Recto’s longstanding relationship with the Congress would help.

“His experience and network will be crucial in enacting meaningful reforms to address the rising cost of living, create employment and expand our fiscal space,” he said in a Facebook Messenger chat.

Mr. Salceda noted that Mr. Recto was one of the authors of the 1997 Comprehensive Tax Reform Program during his tenure in the House.

“I am optimistic that key tax reforms pending in the Senate will also move faster with his appointment, due to his relationships in that chamber, as well as his ability to broker viable compromises,” the lawmaker said.

Mr. Recto’s appointment signals a “pivotal shift towards policies that are not only economically sound but also socially responsible and politically astute,” Terry L. Ridon, a former lawmaker and convenor of think tank InfraWatch PH, said in a Facebook Messenger chat.

He said Mr. Recto’s comprehensive background in both the Executive and Legislative branches of government empowers him to “bring a holistic perspective to economic policy.”

“Heading the government’s economic team in this time of economic turmoil and global unease requires a leader who has shown a track record for pursuing economic decisions that do not put the public at greater risk,” he added.

Gary Ador Dionisio, dean of the De La Salle – College of Saint Benilde School of Diplomacy and Governance, said the appointment of Mr. Recto shows there is dissatisfaction with the former Finance leadership and that Mr. Marcos wants to consolidate his own team.

“This will help President Marcos to pursue his new economic agenda under the leadership of Secretary Recto,” he said via Messenger chat. “Since Secretary Recto is also a long-time politician his political capital will be helpful to President Marcos in consolidating both his political and economic network.”

Philip Arnold P. Tuaño, dean of the Ateneo School of Government, said Mr. Recto would bring a policy perspective to the plans of the Finance department, “which is critical to the advancement of some of the proposed tax reforms which still need to be done.”

Mr. Tuaño said Mr. Recto would not be spared from questions on whether he might just last one year as Finance secretary to run for Senator in 2025, “similar to his NEDA director-general appointment in 2008 and his resignation to run for Senator in 2009.”

Assessing the performance of Mr. Recto’s predecessor, Mr. Ridon said Mr. Diokno had issued “cautionary statements” against suspending value-added and excise taxes on petroleum products, “standing in stark contrast to the urgent relief needed by the populace.”

“His insistence on the potential harm to the economy and government finances overlooks the immediate benefits such a suspension could provide, especially in light of the recent surge in fuel prices,” the policy analyst said.

He also recalled that Mr. Diokno opposed the implementation of a price cap on rice in September last year, with the outgoing secretary saying it was made without the input of economic advisors. The price cap order had also been opposed by Mr. Diokno’s colleagues at the University of the Philippines School of Economics.

“The biggest red flag that earned the ire of the public is Diokno’s repeated claim that the central bank has done enough to control inflation, despite the unabated price hikes and their impact on the average Filipino,” Mr. Ridon said. — By Kyle Aristophere T. Atienza, Reporter

The Philippines’ gross domestic product (GDP) is projected to grow faster this year as easing inflation will help boost “revenge spending,” analysts said.

First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said they expect GDP growth at 6% this year, still below the government’s 6.5-7.6% target.

“I think they will not be able to make the 6.5% unless foreign investments come in. And so far, if we look at 2023, foreign investments were actually down significantly… but we have to see how things pan out in the coming months,” Victor A. Abola, an economist at UA&P, said at a briefing in Makati City on Thursday.

FMIC and UA&P projected full-year GDP to average 5.5% in 2023, still below the government’s 6-7%. The economy grew by 5.5% in the nine-month period. 

The Philippine Statistics Authority (PSA) is set to release full-year 2023 GDP data on Jan. 31.

“Growth will accelerate from 5.5% (in 2023) to 6% (in 2024), driven by the services sector, particularly, transport, accommodations, and food services, which are experiencing revenge spending,” Mr. Abola said.

Filipino consumers are expected to continue to splurge this year, which will help drive growth.

“We’re just seeing the beginning of (revenge spending) because high inflation has sort of toned down that expansion. So, I think that we’ll see faster GDP growth in 2024,” Mr. Abola said.

Improved employment will also boost the economy this year, Mr. Abola said, citing the record low jobless rate seen in November.

The country’s unemployment rate fell to 3.6% in November from 4.2% in the previous month and a year ago, marking an 18-year low. In November, the number of employed people also rose to 49.64 million from 47.8 million in October and 49.7 million in November 2022.

FMIC Executive Vice-President Daniel D. Camacho said the BSP will likely keep rates steady for the first half.

“Our fearless forecast for yearend is a reduction of 75 bps to 125 bps across the curve,” Mr. Camacho said. “We do not foresee a cut in BSP rates in the first half but possibly one or two in the second half of the year which will further push rates downwards.”

The benchmark rate is currently at 6.5%, the highest in 16 years. From May 2022 to October last year, the BSP raised borrowing costs by a total of 450 bps.

“I think the BSP will be quite slow in cutting rates, the first one is 25 bps likely in June and depending on the Fed moves, it will probably mimic the rate cuts in the second half,” Mr. Abola added.

The Monetary Board is set to have its next policy review on Feb. 15.

Optimistic outlook
Meanwhile, BMI Asia Country Risk Analyst Shi Cheng Low said Philippine GDP growth is seen to pick up to 6.2% in 2024 from a likely 5.7% in 2023.

“There are two main reasons behind our more optimistic view. One is easing inflation… which is really good news for household incomes and (will) support private consumption,” Mr. Low said.

“We expect the resilience in private consumption to remain throughout 2024 and on top of that, because we are expecting cuts in the second half of the year, this will actually help a rebound in investment growth,” he added.

Mr. Low noted easing price pressures will also prompt the BSP to loosen policy in the second half of this year.

Inflation averaged 6% for 2023, slightly higher than 5.8% in 2022. This marked the second straight year that inflation breached the BSP’s 2-4% target band.

This year, the central bank expects full-year inflation to ease to 3.7% and 3.2% in 2025.

Mr. Low also said foreign direct investment (FDI) net inflows to the Philippines will pick up in 2024.

“Because we are expecting rate cuts in major economies in the second half of the year including the Fed, we expect FDIs to pick up significantly, at least, in terms of foreign investments into the Philippines,” he said.

The BSP expects FDI net inflows to have reached USD 8 billion at the end of 2023, before accelerating to USD 10 billion by end-2024.

Debt
FMIC’s Mr. Abola said he also expects debt as a share of GDP to ease further this year.

“We’re seeing that it will ease to 60.4% this year and continue next year to about 59%. We are on the way to providing more fiscal space, with faster growth and lower interest rates,” he added.

The National Government’s debt-to-GDP ratio stood at 60.2% as of end-September. This is still slightly above the 60% threshold considered by multilateral lenders to be manageable for developing economies.

The government is targeting to bring the ratio to below 60% by 2025.

On the other hand, Mr. Abola said that the government must also work on beefing up its gross international reserves.

“We need to rebuild our gross dollar reserve because (it) is not very ideal for the environment in which we have global markets that we can easily move money around,” he said.

Latest data from the BSP showed that dollar reserves slipped by 0.3% to USD 102.45 billion as of end-December from USD 102.72 billion in November. — Luisa Maria Jacinta C. Jocson and Keisha B. Ta-asan

Philippine shares bounced back on Thursday after the World Bank said it expects the country to be among the fastest growing economies in Southeast Asia this year and ahead of the release of latest US consumer inflation data.

The 30-member Philippine Stock Exchange index (PSEi) gained by 67.62 points or 1.03% to close at 6,613.73 on Thursday, while the broader all shares climbed by 26.12 points or 0.75% to end at 3,495.76.

“The World Bank’s projection that the Philippines will be one of the fastest-growing economies in Southeast Asia this 2024 was cheered by many,” Philstocks Financial, Inc. Research and Engagement Officer Mikhail Philippe Q. Plopenio said in a Viber message.

In its latest Global Economic Prospects, the multilateral lender projected Philippine gross domestic product (GDP) to expand by 5.8% in 2024, same as its forecast in December.

The projection is the fastest among Southeast Asian economies, tied with Cambodia (5.8%), and ahead of Vietnam (5.5%), Indonesia (4.9%), Malaysia (4.3%), Lao People’s Democratic Republic (4.1%), Timor-Leste (3.5%), Thailand (3.2%), and Myanmar (2%).

However, this is below the Development Budget Coordination Committee’s 6.5-7.5% growth target for 2024.

The Philippine Statistics Authority will release fourth-quarter and full-year 2023 GDP figures on Jan. 31.

“This Thursday, the local market rose… due to positive cues from Wall Street overnight as investors positioned ahead of the December US inflation report,” Mr. Plopenio added.

“Philippine shares settled higher as investors made bets ahead of the US December inflation reading,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan likewise said in a Viber message.

December US consumer price index data were set to be released overnight.

Back home, the majority of sectoral indices closed higher on Thursday except for services, which dropped by 9.02 points or 0.55% to 1,606.15.

Meanwhile, financials rose by 50.47 points or 2.81% to 1,843.91; industrials climbed by 111.54 points or 1.23% to 9,180.52; mining and oil increased by 73.88 points or 0.77% to 9,558.56; holding firms went up by 40.19 points or 0.64% to 6,301.29; and property gained by 9.03 points or 0.31% to end at 2,891.56.

“Among the index members, Jollibee Foods Corp. was at the top, climbing 3.92% to P259.80. JG Summit Holdings, Inc. lost the most, dropping 1.71% to PHP 40.20,” Mr. Plopenio said.

Value turnover declined to PHP 5.27 billion on Thursday with 346.84 million issues changing hands from the PHP 11.57 billion with 518.12 million shares seen the prior day.

Advancers outnumbered decliners, 100 to 67, while 51 names closed unchanged.   

Net foreign buying increased to PHP 648.31 million on Thursday from PHP 557.38 million on Wednesday. — R.M.D. Ochave

THE PHILIPPINES’ trade-in-goods deficit hit USD 4.69 billion in November, the widest gap in seven months due to flattish import growth and the continued decline in exports amid sluggish global demand.

Preliminary data from the Philippine Statistics Authority (PSA) showed the deficit jumped by 26.3% from the USD 3.72-billion gap a year ago. It was also wider than the revised USD 4.39 billion in October.

November marked the widest trade deficit since the USD 4.84-billion gap in April. The last time the country swung to a trade surplus was in May 2015 with USD 64.95 million.

Merchandise exports contracted by 13.7% to USD 6.13 billion, the third straight month of decline, though slower than the 17.5% drop in October. This was a reversal from the 13.1% growth a year ago.

November also saw the smallest export value since USD 4.9 billion in April.

On the other hand, the value of the country’s import bill inched up 0.02% year on year to USD 10.82 billion.

November saw the first growth in imports after nine straight months of annual decline. The flattish growth was still better than the 2.4% decline in October and the 1.5% drop in November 2022.

The month’s import bill had the biggest value in three months or since the USD 10.83 billion in August.

For January to November, the trade deficit narrowed to USD 48.98 billion from the USD 53.72-billion gap a year earlier.

Exports fell by 8.4% to USD 67.03 billion at end-November, while imports declined by 8.6% to USD 116.01 billion. The government expects exports to have declined by 4% in 2023, and imports to have dropped by 3%.

Analysts attributed the wider trade gap to the continued decline in exports, particularly semiconductors.

In a Viber message, Security Bank Corp. Chief Economist Robert Dan J. Roces said the November data showed the “export slump overshadowing steady imports.”

Outbound sales of manufactured goods, which made up 81.4% of the total exports, sank by 17.5% to USD 4.99 billion.

“Exports declined for the third consecutive month mainly due to the weakness in the sales of semiconductors, the country’s largest export,” China Banking Corp. Chief Economist Domini S. Velasquez said in a separate Viber message.

Electronic products, accounting for the bulk of the manufactured goods and more than half of the total exports, slumped by 24.7% to USD 3.44 billion.

Semiconductors, making up 80% of electronic products and 45.3% of November exports, slid by 25.7% to USD 2.78 billion.

Mr. Roces noted imports were “unexpectedly flat” in November, ending nine straight months of decline.

“Consumer goods accelerated for a second month thanks to holiday spending, while capital goods (+0.1%) were flat, albeit halting seven months of contraction,” he added.

Imports of raw materials and intermediate goods, which accounted for 36.2% of the total import bill, fell by 3.8% to USD 3.92 billion in November.

Mineral fuels, lubricants, and related materials also dropped by 7.8% annually to USD 1.56 billion.

Meanwhile, capital and consumer goods rose by 0.1% and 15.4%, respectively, to USD 3.03 billion and USD 2.27 billion.

The United States was the top destination of locally made products in November with a 16% share worth USD 1.14 billion.

Japan was the Philippines’ second-biggest export trading partner with a 13.2% share worth USD 938.3 million. Exports to China were valued at USD 876.27 million, equivalent to a 12.3% share.

On the other hand, China remained the Philippines’ main source of imported goods with a value of USD 2.6 billion, accounting for 24% of the total. Imports from Indonesia were valued at USD 1.15 billion (10.6% of the total), while imports from Japan reached USD 943.57 million (8.2%).

“Overall, the trade balance remained in substantial deficit. This development suggests that the current account is likewise in shortfall and points to sustained pressure on the peso in the coming months,” Nicholas Antonio T. Mapa, senior economist at ING Bank N.V. Manila, said in a note.

Mr. Roces said the trade deficit likely further widened in the fourth quarter.

“Weaker trade could derail economic growth. The lack of capital goods imports is worrisome given that this is a leading indicator of investments and GDP (gross domestic product) growth. Hopefully, we see this improve this year as the government undertakes more infrastructure projects,” Ms. Velasquez said.

For the first nine months of 2023, Philippine GDP expanded by 5.5%, below the government’s 6-7% full-year target. – Andrea C. Abestano, Researcher

THE WORLD BANK (WB) expects the Philippines to be among the fastest-growing economies in Southeast Asia this year.

In its latest Global Economic Prospects, the multilateral lender projected Philippine gross domestic product (GDP) to expand by 5.8% in 2024, same as its forecast in December.

The Philippine growth projection is the fastest among Southeast Asian economies, tied with Cambodia (5.8%), and ahead of Vietnam (5.5%), Indonesia (4.9%), Malaysia (4.3%), Lao People’s Democratic Republic (4.1%), Timor-Leste (3.5%), Thailand (3.2%) and Myanmar (2%).

However, this is below the Development Budget Coordination Committee’s (DBCC) 6.5-7.5% growth target for 2024.

The World Bank’s growth forecast for the Philippines is also higher than its 4.5% projection for East Asia and the Pacific.

The multilateral lender sees slower growth in the region due to the “anticipated deceleration in economic activity in China.”

Other risks to the growth outlook include geopolitical tensions in the Middle East that could lead to higher oil prices, dampened global trade, tightening financial conditions, and climate-related disasters, it said.

“Extreme weather events, the frequency of which has increased in recent decades as a result of climate change, also pose a downside risk to the regional outlook,” it added.

In the Philippines, the government is preparing for the potential impact of the El Niño weather event this year.

The latest bulletin from the state weather bureau showed that El Niño will likely persist from March to May, when dry season crops are often harvested.

National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan earlier said El Niño would likely affect the agriculture sector and drive food prices higher, which could threaten the inflation downtrend.

On the other hand, the multilateral lender said resilient domestic demand could spur growth drivers in the East Asia and Pacific region.

“Modest inflation, and in many cases robust labor markets supported by buoyant service activity, are anticipated to sustain household spending,” it said.

“In some economies, increased government spending, including on social protection and public sector wages, will also support demand,” it added.

However, investment inflows may be dampened due to lagged effects from policy tightening and elevated public debt, the World Bank said.

For 2025, the World Bank maintained its GDP projection for the Philippines at 5.8%, the same as its previous forecast. This would be below the government’s 6.5-8% growth goal.

At 5.8%, the Philippines is expected to be the third-fastest growing economy in Southeast Asia next year, behind Cambodia (6.1%) and Vietnam (6%).

The bank also kept its growth forecast for 2023 at 5.6%, which would fall short of the government’s 6-7% GDP target.

The Philippine Statistics Authority (PSA) is set to release fourth-quarter and full-year 2023 GDP data on Jan. 31.

INFLATION

Meanwhile, the World Bank said headline inflation in the East Asia and Pacific region might ease slightly amid “moderating global commodity prices, improved food supplies and well-anchored inflation expectations.”

In its December update, the multilateral lender projected Philippine inflation to settle at 3.6% this year and 3% in 2025.

In 2023, inflation averaged 6%, the highest in 14 years. This also marked the second straight year average inflation breached the 2-4% target.

The Bangko Sentral ng Pilipinas (BSP) expects inflation to average 3.7% this year and 3.2% in 2025.

“Despite inflation receding below target in many economies, interest rates are expected to remain broadly unchanged in 2024 on account of tight monetary policy in major advanced economies, lingering concerns about weakening exchange rates and capital outflows, and the potential for a resurgence in inflation,” the World Bank said.

The Philippine central bank raised borrowing costs by 450 basis points from May 2022 to October last year, bringing the key rate to a 16-year high of 6.5%.

BSP Governor Eli M. Remolona, Jr. has said the central bank would only consider policy easing if inflation settles comfortably within the target. – Luisa Maria Jacinta C. Jocson, Reporter