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The 2025 national budget will focus on keeping inflation under control, addressing the economic scarring from the pandemic, boosting infrastructure investments, and adapting global trends in digital transformation, the Department of Budget and Management (DBM) said.

Budget Secretary Amenah F. Pangandaman last week issued the National Budget Call in a memorandum, asking government agencies to begin preparing their budget proposals for 2025.

The proposed 2025 national budget is set at PHP 6.12 trillion, according to the Development Budget Coordination Committee. This is 6.1% higher than the PHP 5.768-trillion national budget for 2024.

“The Fiscal Year 2025 budget aims to continuously address the socioeconomic issues our country has been facing, e.g., high food prices, increasing fuel prices, and the scars that the pandemic has left, among others,” the DBM said.

The government is targeting 6.5-7.5% gross domestic product (GDP) growth this year, but the outlook is clouded by risks to inflation, tight borrowing costs, and a global slowdown.

To tame inflation, the Bangko Sentral ng Pilipinas (BSP) has tightened interest rates by 450 basis points from May 2022 to October 2023, bringing the key rate to a 16-year high of 6.5%.

Aside from addressing economic issues, the 2025 spending plan will also support infrastructure investments, with emphasis on flagship infrastructure projects approved by the National Economic and Development Authority.

“However, increased infrastructure spending will not, in any way, detract from the full support provided to the poorest, lagging, climate change and disaster risk vulnerable areas nor the social sector, and basic public services,” the DBM said.

The government also seeks to adopt emerging global trends on digital transformation to boost and foster efficiency, effectiveness, and transparency of service delivery.

The 2025 budget will also include funds for capacity-building programs for local government units (LGUs) such as competency-enhancing interventions, resource generation, public financial management, leadership and development planning, among others.

This is aimed at helping LGUs in assuming the devolved functions and services from the National Government, as mandated by the Supreme Court’s Mandanas-Garcia ruling.

The DBM said the proposed 2025 budget and its priorities will be anchored on the government’s commitment to achieve the 2030 Agenda for Sustainable Development.

“With six years remaining until the 2030 Agenda, there is a need to accelerate the progress or reverse the negative trends to achieve the global goals of establishing a transformative vision towards economic, social, and environmental sustainability,” it said.

The 2025 budget proposals should include the priorities and policy directions of the Marcos administration, citing the government’s medium-term fiscal framework, the eight-point socioeconomic agenda and the Philippine Development Plan for 2023-2028.

However, due to the impact of the country’s debt burden and competing demands from government agencies, the budget allocation for 2025 will be optimized.

“As part of the evaluation process, the government will consider how the agencies utilized their previous year budget and the implementation progress of their mandated programs and projects to ensure that only those agency proposals, which are implementation-ready, are included in the budget,” the DBM said.

The DBM said agencies should provide the necessary supporting documents such as concrete program plans and designs that outline procurement and implementation milestones.

The budget should also ensure regional plans are in line with national priorities “to achieve equitable regional investment opportunities and growth,” it added.

“In particular, the National Government’s 2025 budget shall provide funds for agencies’ regional programs which are responsive to the needs of the poorest, disadvantaged and lagging LGUs,” the Budget department added.

According to the DBM memorandum, government agencies should submit their signed hard copies of the 2025 budget proposals between March 25 and April 22.

The proposed 2025 national budget will be submitted to Congress on July 22. — Keisha B. Ta-asan

Factory activity in the Philippines expanded at a slower pace in December, reflecting modest growth in new orders and output across the sector, S&P Global said on Tuesday.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) stood at 51.5 in December, lower than the nine-month high of 52.7 in November.

S&P Global said the headline index showed only a modest improvement in operating conditions. At 51.5, the December figure was the weakest in three months or since the 50.6 reading in September.

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

“The year concluded with yet another expansion across the Filipino manufacturing sector. Output and new orders continued to rise, albeit at softer rates,” Maryam Baluch, an economist at S&P Global Market Intelligence, said in a report released on Tuesday.

The headline PMI measures manufacturing conditions through the weighted average of five indices: new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%) and stocks of purchases (10%).

S&P Global said the easing manufacturing growth in December was mainly due to a “notable softening” in new orders, which grew at the slowest pace in four months.   

“Moreover, total sales growth was focused domestically as the demand picture across international export markets deteriorated, with manufacturers reporting a fresh and solid fall in new export sales in December,” it said.

Manufacturing output also grew at the weakest pace in three months, S&P Global said. Despite this, output growth remained robust amid a steady rise in new orders.

“Firms also noted growing supply-side challenges with average lead times lengthening again in December. Congestion and longer delivery times for imports were blamed for delays. Moreover, vendor performance deteriorated at the greatest extent in five months,” it said.

S&P Global noted that manufacturing firms slashed jobs in December, as employment dropped for the second straight month.

“The main concern in the sector remains the further curtailment of workforce numbers. Evidence of spare capacity and a cooldown in new order growth prompted redundancies,” Ms. Baluch said.

S&P Global said Philippine manufacturers also reported increased inflationary pressures as prices of fuel, materials, and shipping rose. This prompted firms to hike selling prices.

Headline inflation may have eased to 4% in December, based on a median estimate in a BusinessWorld poll last week. If realized, December inflation would be a tad slower than 4.1% in November and significantly lower than 8.1% in December 2022.

The local statistics agency will release the December inflation data on Jan. 5.

“Sluggish demand from overseas markets and tight borrowing conditions across the country will act as headwinds as we move into 2024. That said, inflationary pressures are expected to pose less of a threat than seen at the start of 2023, despite gaining pace during December,” Ms. Baluch added. 

Still, Filipino manufacturers remained optimistic for the new year as business confidence rose to a four-month high, according to S&P Global.

“Hopes of improving demand conditions and plans for increased marketing campaigns boosted optimism,” it said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said factory activity expanded in December, due to the seasonal increase in importation, manufacturing, and other production activities since the third quarter of 2023.

However, elevated inflation and borrowing costs may have weighed on investments, including those in the manufacturing sector, Mr. Ricafort said.

“Furthermore, softer manufacturing and services PMI data for many developed countries around the world… partly reduced the demand for exports and somewhat dragged on some local manufacturing activities,” he said.

Second fastest in Asia
The Philippines recorded the second-highest PMI reading among six Southeast Asian countries in December, just behind Indonesia (52.2).

Manufacturing activity in Vietnam (48.9), Malaysia (47.9), Thailand (45.1) and Myanmar (42.9) contracted in December.

On average, the Association of Southeast Asian Nations (ASEAN) headline PMI dropped to 49.7 in December, easing from 50 in November.

S&P Global said the ASEAN headline PMI contracted for the third time in four months.

“Central to the deterioration in operating conditions was a quicker fall in new orders. Inflows of new work fell for the fourth month running in December, which in turn weighed on production growth,” it said.

Security Bank Corp. Chief Economist Robert Dan J. Roces said the slower growth in December may be attributed to difficulties in supply chain management, possible shifts in consumer demand, fluctuations in prices of raw materials, and changes in overall economic conditions.

“(The Philippines) still outperformed ASEAN’s 49.7 though. We calculated that the Philippines’ average monthly PMI was at 52.2 in the fourth quarter, the highest in three quarters,” he said.

He also noted that a recovery in the manufacturing sector may contribute to the Philippines’ faster gross domestic product (GDP) growth, adding that GDP expansion could average 5.8% in the fourth quarter of 2023.

China Banking Corp. Chief Economist Domini S. Velasquez said global economic headwinds continued to weigh on the manufacturing sector.

“Data from China and the rest of Asia pointed to softer activities towards the end of the year. Bellwether manufacturing countries, especially with regard to semiconductors, such as Taiwan and South Korea posted contractions in December,” she said.

For this year, the Philippine manufacturing sector is expected to grow modestly amid easing inflation.

“The easing of inflationary pressures is expected to support domestic demand, while a recovery in the semiconductor industry is likely to boost external demand in 2024. These factors should contribute to a gradual improvement in the manufacturing sector’s performance,” Ms. Velasquez added. — By Keisha B. Ta-asan, Reporter

The Philippines has yet to fulfill several action plans more than two years since it was placed under the “gray list” of the Financial Action Task Force (FATF), the country’s dirty money watchdog said.

But the Anti-Money Laundering Council (AMLC) is still hoping the Philippines will be able to exit the FATF’s gray list this year, and to avoid a possible inclusion in the blacklist.

At a Palace briefing, AMLC Executive Director Matthew M. David said the Philippines still has to address eight out of the 18 action plan items it had committed to comply with to be removed from the gray list.

“The most challenging action item is regarding terrorism financing prosecution. We need to file more terrorism financing cases and the one in charge of complying with this action item are the law enforcement agencies, including the AMLC,” he said.

Other remaining action plans include the effective risk-based supervision of nonfinancial businesses and professionals, mitigating risk associated with casino junkets, and streamlining access to beneficial ownership information, Mr. David said.

The Philippines has been in the global financial crime watchdog’s gray list of jurisdictions under increased monitoring for dirty money risks since June 2021.

Since the Philippines had failed to meet the FATF’s January 2023 deadline to comply with the action plans, Mr. David said the government has a self-imposed goal of exiting the gray list this month.

“The longer we are on the gray list, the bigger the possibility or the higher the risk that we will enter the blacklist,” he said.

Only three countries are currently in the FATF’s blacklist — North Korea, Iran and Myanmar.

President Ferdinand R. Marcos, Jr. on Tuesday presided over the  sectoral meeting on the status of the Philippines in FATF gray list.

“The President also directed the agencies of government to continue with their actions and to continuously sustain good coordination among themselves, between the law enforcement and other government agencies,” Mr. David said.

Enrico P. Villanueva, who teaches banking at the University of the Philippines Los Baños, said banks have done a lot of work and investments in order to manage risks related to money laundering and terrorism financing. Nonbank entities need to do more to catch up, he noted.

“For banks, improvement can still be made on drilling down customer accounts to the ultimate beneficial owners,” he said, noting that beneficial ownership information should be digitized and accessible to regulators and law enforcement agencies.

For nonbank entities, Mr. Villanueva said the regulator should impose penalties such as monetary fines or suspension of business licenses “to communicate seriousness in enforcement.”

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the Philippines needs to lift the Bank Secrecy Law to make banking regulations at par with those of its Southeast Asian neighbors.

“It will also help in facilitating the integration of the country’s capital markets into the region,” he said via Messenger chat.

Should the Philippines be blacklisted by FATF,  Mr. Ricafort said investments and other fund flows into the Philippines would be affected.

Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila University, called on the government to reverse its policy on offshore gambling.

“A first order of business should be the elimination of offshore gambling which is susceptible to money laundering schemes,” he said. “But of course, this should involve a whole-of-government approach which apparently this government has not done.”

In March 2020, then-senator Franklin M. Drilon flagged that millions of dollars brought into the Philippines between December 2019 and February 2020 might have been laundered through Philippine Offshore Gaming Operators (POGOs), which refer to Chinese gambling companies that offer online gambling services to markets outside the Philippines.

The Marcos administration began a crackdown on many POGOs after a spate of kidnappings that targeted their Chinese workers.

“The President has reiterated the government’s high-level political commitment and directed all government agencies concerned to swiftly address the remaining deficiencies in relation to the gray-listing of the Philippines,” Mr. David said at the Tuesday briefing.

He said investor confidence and even the country’s credit rating may be affected if the Philippines remains on the gray list.

“It may also affect foreign direct investments in the Philippines because if you don’t exit the gray list, they may think that our anti-money laundering, combating terrorism financing system is not adequate enough, or sufficient enough or strong enough,” he added.

Rommel C. Banlaoi, chairman of the Philippine Institute for Peace, Violence, and Terrorism Research, recognized the passage of The Terrorism Financing Prevention and Suppression Act of 2012, which was complemented by a 2020 law that amended the country’s Anti-Terrorism Act of 2001.

The two laws as well as the decline of terrorist threats would be enough for the Philippines to exit from the FATF’s gray list.

The country’s anti-terrorism financing measures should consider the emerging global financial landscape, Chester B. Cabalza, founder of Manila-based International Development and Security Cooperation, said via Messenger chat.

Mr. Cabalza cited the introduction of bitcoins, online transactions, and virtual wallets.

Mr. Villanueva said the action plan items needed to get out of the gray list may be challenging but not impossible.

“They just require bureaucratic or political will. For societies or governments that tolerate wrongdoings, political will may be wanting,” he said. — Kyle Aristophere T. Atienza

The number of companies that registered in the Philippines had surpassed the 2022 level as of end-November, led by domestic stock corporations, according to the Securities and Exchange Commission (SEC).

In a statement on Tuesday, the corporate regulator said electronic registration hit a record 46,455 in 11 months, exceeding 42,936 in the past year for an 8% growth.

Domestic stock corporations contributed 74% or 34,140 of newly registered corporations, while domestic nonstock corporations accounted for 21% or 9,727, the SEC said. Partnerships accounted for 5% or 2,453.   

More than a third or 16,734 of the newly registered firms were domestic stock corporations with fewer than five incorporators, while 14% were one-person corporations.   

The National Capital Region had the highest company registration at 39% or 18,342, followed by Calabarzon at 16% or 7,217, Central Luzon at 11% or 5,107, Central Visayas at 7% or 3,443, and Davao at 4% or 1,969.   

“Majority or 85% are from the service sector, with the wholesale and retail trade industry group registering 9,859 (21%) new firms, followed by other service activities at 9,756 (21%),” the SEC said.   

The regulator attributed the record number to its digital initiatives that cut the registration time, including electronic registration that started in April 2021, as well as its one-day submission and electronic registration of companies introduced five months later.   

“In the past five years, the SEC has fiercely advocated digital transformation to achieve efficiency and accessibility in the corporate sector,” SEC Chairman Emilio B. Aquino said in the statement. “The back-to-back record highs seen in 2022 and 2023 for company registration prove that we are succeeding in making doing business easier in the Philippines.”

“As we start a new year, the SEC is ready to further take advantage of automated processes in place, as well as develop new systems to ensure the smooth delivery of services to the transacting public,” he added. — Revin Mikhael D. Ochave