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YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits went down on Wednesday, with investors betting on rate cuts this year amid easing inflation.

The central bank’s term deposit facility (TDF) attracted bids amounting to PHP 345.778 billion on Wednesday, below the PHP 360 billion on the auction block as well as the PHP 368.126 billion seen a week ago for a PHP 300-billion offer.

Broken down, tenders for the seven-day papers reached PHP 189 billion, a tad higher than the PHP 185 billion auctioned off by the central bank. However, this was below the PHP 203.117 billion in bids for a PHP 160-billion offer seen the previous week.

Banks asked for yields ranging from 6.5% to 6.615%, a wider and lower band compared with the 6.5525% to 6.6175% seen a week ago. This caused the average rate of the one-week deposits to decline by 1.06 basis points (bps) to 6.5877% from 6.5983% previously.

Meanwhile, bids for the 14-day term deposits amounted to PHP 156.778 billion, lower than the PHP 175-billion offering and the P165.009 billion in tenders for a PHP 140-billion offer on Jan. 3.

Accepted rates were at 6.5675% to 6.65%, narrower than the 6.5625% to 6.65% margin recorded a week ago. With this, the average rate for the two-week deposits inched down by 0.03 bp to 6.6200% from the 6.6203% logged in the prior auction.

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

The term deposits and the 28-day 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 following signals of possible cuts in borrowing costs after inflation eased to a 20-month low in December, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Finance Secretary and Monetary Board member Benjamin E. Diokno on Monday said the BSP could cut borrowing costs by as much as 100 bps this year and mirror the future policy moves of the US Federal Reserve.

“So, a 75-basis-point cut by the Fed this year could actually be matched by the central bank. Or even 100 bps. Right now, the policy rate is at 6.5%, so I see something like 5.5% by the end of 2024,” Mr. Diokno said in an interview with Bloomberg TV. 

The BSP kept its policy rate steady at a 16-year high of 6.5% at its December meeting. This was after the Monetary Board tightened rates by 450 bps from May 2022 to October 2023 to help bring down elevated inflation.

Preliminary data released by the Philippine Statistics Authority on Friday showed headline inflation slowed to 3.9% in December from 4.1% in November and 8.1% a year ago.

This is the first time inflation hit the 2-4% target in nearly two years and was the slowest reading in 22 months or since 3% in February 2022.

However, the 2023 inflation average stood at a 14-year high of 6%. This was above the 5.8% in 2022 and marked the second straight year that average inflation breached the BSP’s 2-4% target.

BSP Governor Eli M. Remolona, Jr. earlier said the Monetary Board is not considering any rate cuts in the coming months or until inflation is firmly within their 2-4% goal.

The BSP will have its first policy review for this year on Feb. 15. — Keisha B. Ta-asan

THE PHILIPPINE banking sector’s total assets climbed by 9.9% year on year as of end-November 2023, mainly driven by the continued growth in loans.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed banks’ assets stood at PHP 24.37 trillion as of November from PHP 22.18 trillion a year ago.

Banks’ assets are mainly supported by deposits, loans, and investments. These include cash and due from banks as well as interbank loans receivable (IBL) and reverse repurchase (RRP), net of allowances for credit losses. 

The banking industry’s total loan portfolio inclusive of IBL and RRP rose by 9.4% to PHP 12.88 trillion as of end-November from PHP 11.77 trillion in the comparable year-ago period.

Net investments — or financial assets and equity investments in subsidiaries — increased by 9.7% to PHP 7.02 trillion from PHP 6.4 trillion in the previous year.

On the other hand, cash and due from banks dropped by 2.6% to PHP 2.66 trillion in the eleven-month period against PHP 2.73 trillion a year ago.

Net real and other properties acquired (ROPA) inched up by 1.8% to PHP 105.02 billion from PHP 103.15 billion in the same period in 2022.

Other assets stood at PHP 1.72 trillion, surging by 47% from PHP 1.17 trillion a year ago.

Meanwhile, the total liabilities of the banking system grew by 9.5% to PHP 21.34 trillion in the first eleven months of 2023 from PHP 19.49 trillion in the comparable year-ago period.

“The improvement in loan growth, as well as the continued growth in deposits largely led to the high single-digit growth in banks’ total assets,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Furthermore, sustained strong growth in banks’ net income also contributed to the continued growth in total assets and capital, as this also showed more lending and investment activities, as well as the continued growth in banks’ capital,” he said. 

Latest BSP data showed outstanding loans by big banks rose by 7.1% to $11.3 trillion in October from USD 10.55 trillion a year earlier.   

The October credit growth was faster than the 6.5% expansion seen in September, marking the fastest pace in bank lending in two months or since the 7.2% seen in August.

The banking industry’s nonperforming loan (NPL) ratio also inched down to 3.41% in November from 3.44% in the previous month but still above 3.35% a year prior. It marked the lowest NPL ratio since the 3.4% in September.   

However, bad loans inched up by 1.1% to PHP 454.281 billion in November from PHP 449.454 billion in the prior month. Year on year, it rose by 11.3% from PHP 408.097 billion in November 2022.

Lenders’ total loan portfolio expanded by 9.3% year on year to PHP 13.34 trillion as of November.

Separate BSP data also showed the Philippine banking industry’s profits climbed by 10.4% to PHP 270.352 billion in the January-to-September period from PHP 244.876 billion last year. — Keisha B. Ta-asan

The country’s unemployment rate dropped to another record low in November, as businesses ramped up hiring ahead of the holiday season, the Philippine Statistics Authority (PSA) said on Tuesday.

Preliminary results of the PSA’s Labor Force Survey (LFS) showed the unemployment rate fell to 3.6% in November from 4.2% in the previous month and in November 2022.   

November’s jobless rate was the lowest record since the PSA revised the definition of “unemployed” in April 2005 to refer to people aged 15 years and older without a job and are available for work and actively seeking one.

The number of unemployed Filipinos decreased by 12.3% or 257,000 to 1.83 million in November from 2.09 million in October. It was also 15.8% or 343,000 lower than the 2.18 million jobless Filipinos in November 2022.

For the first 11 months of 2023, the unemployment rate stood at 4.5%, well below the 5.3%-6.4% target under the Philippine Development Plan.

“We noticed there are more employed persons (in November) at 49.64 million compared to October’s 47.8 million. In terms of numbers, this is a significant increase month on month. Of course, we saw this not just in November but during the fourth quarter because of the holidays,” PSA Undersecretary and National Statistician Claire Dennis S. Mapa said in Filipino during a briefing. 

The underemployment rate — the share of those already working but still looking for more work or longer working hours to total employed population — remained at 11.7% for a second straight month in November. Year on year, it was lower than the 14.4% in November 2022.

This translated to 5.79 million Filipinos looking for additional jobs or longer working hours, 188,000 more than October’s 5.6 million. On a yearly basis, this was lower by 1.37 million from 7.16 million underemployed Filipino workers.

Year on year, the underemployment rate averaged 12.4%, lower than 14.4% in 2022.

PSA data showed the labor force participation rate (LFPR) — the proportion of the total labor force in the working-age population of 15 years old and over — increased to 65.9% from 63.9% in October and was the highest since 66.1% in June 2023.

Month on month, the size of the labor force grew by 1.58 million to 51.47 million.

Year on year, the LFPR was lower than 67.5% in the same month in 2022. The size of the labor force in November decreased by 413,000 from last year’s 51.88 million.

“The (annual) decline was mainly due to reduced participation of young people (34.4% from 40%) and women (55.4 % from 57.8%) in the labor force, influenced by family responsibilities, schooling, and age-related factors,” the National Economic and Development Authority (NEDA) said in a statement.

For the first 11 months, the LFPR averaged 64.8% from 64.5% in the same period a year ago.

NEDA Secretary Arsenio M. Balisacan said expanding the digital economy, particularly micro, small, and medium enterprises, would help address the year-on-year drop in the labor force and boost jobs this year.

“Digitalization enables alternative work arrangements, particularly for the youth, women, and those in the creative sector. This will help address the declining labor force,” he said in a statement.

The employment rate — the share of the employed Filipinos to the total working force — rose to 96.4% in November from 95.8% in October and November 2022.

Mr. Mapa said the employment rate was also the highest since April 2005.

The number of employed people stood at 49.64 million in November, up by 1.83 million from October’s 47.8 million and by around 70,000 from 49.7 million in November 2022.

From January to November, the employment rate averaged 95.5%, slightly up from 94.5% a year ago.

“We will take full advantage of the liberalization reforms intended to attract investments in the Philippines, especially in digital infrastructure. Upgrading our infrastructure will attract investments that generate high-quality jobs,” Mr. Balisacan said.

The services sector remained the top employer in November with an employment rate of 59.5% of the total population, followed by agriculture and industry at 24.6% and 15.9%, respectively.

Year on year, higher employment was seen in agriculture and forestry with a 1.24 million increase. This was followed by construction (up by 453,000), and transportation and storage (308,000).

“Agricultural employment is extremely variable because of the seasonality of work and because it is still the sector of last resort for so many Filipino jobseekers,” Sonny A. Africa, executive director of think tank Ibon Foundation said in a Viber message.

Meanwhile, the manufacturing sector recorded the highest year-on-year job losses at 1.39 million in November.

“Brisk economic activities continued to drive down the country’s unemployment rate. This is partially helped by seasonal factors but still below 2022’s comparable figure,” China Banking Corp. Chief Economist Domini S. Velasquez said in an e-mail.

On average, an employed Filipino worked 40.2 hours, down from October’s 41.2 average hours but higher compared with 39.3 hours in November 2022.

Philippine Institute for Development Studies Senior Research Fellow Roehlano M. Briones expects the labor market to continue to improve.

“I don’t expect it to go down much further, [as] it is already approaching the natural rate of unemployment. [It] cannot be attributed only to seasonality because the rate was higher 12 months ago,” Mr. Briones said in a Viber message.

Ms. Velasquez also sees higher employment opportunities from the services sector amid slowing inflation.

“The industry sector will likely be a mix of improving construction outlook and moderating manufacturing activities,” she added. — Mariedel Irish U. Catilogo

Business taxpayers will no longer have to pay the annual registration fee with the Bureau of Internal Revenue (BIR) starting this year.

In an advisory, the BIR said it will stop collecting the annual registration fee from business taxpayers effective Jan. 22 in compliance with the Republic Act No. 11976 or the Ease of Paying Taxes Act.

President Ferdinand R. Marcos, Jr. signed the Ease of Paying Taxes Act into law on Jan. 5.

“As a result, business taxpayers are exempt from filing BIR Form No. 0605 and paying the PHP 500 annual registration fee on or before Jan. 31 every year,” it said.

The BIR said that business taxpayers with existing certificate of registration, which includes the registration fee, will remain valid. They can have the certificate of registration updated or replaced at the Revenue District Office where they are registered on or before Dec. 31, 2024.

The Ease of Paying Taxes Act aims to modernize tax administration, update the taxation system, and protect taxpayer rights and welfare.

The law amends several sections of the National Internal Revenue Code of 1997, such as the introduction of a taxpayer classification system and a risk-based classification for VAT refund claims.

Taxpayers may also now file returns electronically or manually to any authorized agent bank, Revenue District Office, or authorized tax software provider.

The law also mandates the BIR to adopt an “integrated digitalization strategy by providing automated end-to-end solutions for the benefit of taxpayers.”

The agency is also ordered to develop an Ease of Paying Taxes and digitalization roadmap to ensure ease of tax compliance and streamlining of tax processes.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that the amendments under the Ease of Paying Taxes Act will improve the ease of doing business in the country.

“This is consistent with the overall efforts to reduce business costs, make it more convenient, and encourage more people to do business and also pay taxes for their fair share of nation-building,” he said in a Viber message.

Mr. Ricafort said that simplifying tax processes for businesses will help boost revenues and promote better transparency.

Philippine Chamber of Commerce and Industry President Eunina V. Mangio said in a statement that the passage of the law is a welcome development for the business community.

“I hope this law, coupled with proper implementation and monitoring, will significantly ease the paying of taxes in the country,” she said.

Ms. Mangio also said that the law could help attract more foreign investors.

“We need to harmonize and streamline our processes for us to attract investors into the country. Otherwise, we will remain low in the ease of doing business,” she added.

BIR collection
Meanwhile, Finance Secretary Benjamin E. Diokno said the BIR should surpass its collection target for this year.

“We have much to accomplish in 2024. Thus, I urge the agency to not just meet, but exceed its collection targets this year and beyond,” Mr. Diokno said in a press release on Monday.

The BIR is expected to collect PHP 3.05 trillion this year, based on the latest Budget of Expenditures and Sources of Financing.

Data from the Treasury showed that BIR revenues stood at PHP 2.34 trillion in the January-to-November period, accounting for 88.77% of its PHP 2.64-trillion full-year target.

The agency collects about 70% of government revenue.

DoF data also showed that the BIR filed a total of 221 cases against tax evaders before the Department of Justice in the 11-month period. These cases had estimated liabilities worth PHP 13.24 billion.

“Meanwhile, 38 cases with an estimated tax liability of PHP 5.06 billion were filed with the Court of Tax Appeals (CTA) during the said period,” the department added.

In the first 11 months, the BIR also collected PHP 410.94 million and issued 186 closure orders against businesses in violation of value-added tax (VAT) requirements. — By Luisa Maria Jacinta C. Jocson, Reporter

Factory output expanded in November, but the activities related to food items continued to drag the overall manufacturing sector.

Preliminary results of the Philippine Statistics Authority’s (PSA) latest Monthly Integrated Survey of Selected Industries showed factory output, as measured by the volume of production index (VoPI), rose by 1.9% year on year in November.

The November output was faster than the revised 1.5% recorded in October.

This is the highest print in two months or since the 10.4% recorded in September.

On a monthly basis, November’s output grew by 2.7%, a reversal from the 1.2% contraction in the previous month. Stripping out seasonality factors, manufacturing that month edged up by 0.7%, a reversal from the 4.1% drop in October.

Year to date, factory output averaged 5.1%, lower than the 45% growth a year ago.

To compare, S&P Philippines Manufacturing Purchasing Managers’ Index (PMI) rose to 52.7 in November, higher than the of 52.4 in October. A PMI reading of above 50 means improvement in operating conditions compared with the previous month, while a reading below 50 shows deterioration.

PSA said the annual growth of the VoPI in November can be attributed to  the faster rise in transport equipment (17.1% from 5.8% in October), as well as the smaller declines in beverages (-11.6% in November from -34.4% in October), and chemical and chemical products (-2.4% from -10.9%).

Several industry divisions posted slower growth, such as printing and reproduction of recorded media (8.6% from 26.3%), basic pharmaceutical products and pharmaceutical preparations (15.5% from 16.5%), electrical equipment (29.9% from 30.5%), and coke and refined petroleum products (37% from 46.9%).

However, the PSA said 13 industry divisions recorded annual declines during the month, led by machinery and equipment except electrical (-27% from -23.1%); leather and related products, including footwear (-26% from -29%); fabricated metal products, except machinery and equipment (-25.4% from -16.4%); wearing apparel (-24.3% from -20%); and wood, bamboo, cane, rattan articles, and related products (-20.2% from -42%).

Average capacity utilization — the extent to which industry resources are used in the production of goods — averaged 74.8% in November, slightly higher than October’s 74.3% in the previous month.

All industry divisions have reached an average capacity utilization rate of more than 60%.

“Manufacturing activity related to food items were the drag on overall manufacturing with production of other items compensating for the decline in those items. This may reflect the struggles experienced by the agriculture sector which posted negative growth in the third quarter,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.

Mr. Mapa added that the manufacturing industry will likely help support growth, but gross domestic product (GDP) growth will likely remain largely driven by the services sector. — By Lourdes O. Pilar, Researcher