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The Philippine Economic Zone Authority (PEZA) has approved PHP 160.44 billion worth of investments as of Dec. 7, surpassing its full-year target.

“Locator investments represented the bulk of the increase in investments, particularly reinvestments by existing locators,” PEZA Director-General Tereso O. Panga said in a Viber message.

According to Mr. Panga, the value of the projects approved from January to Dec. 7 has already exceeded its full-year target of PHP 154.77 billion.

The tally is also 14% higher than the PHP 140.7-billion worth of projects approved in the same period a year ago.

The amount of approved PEZA investments is still expected to increase. Mr. Panga said the PEZA Board will have its last meeting for the year on Dec. 19.

PEZA data showed 24 projects worth a combined PHP 19.56 billion were approved during last week’s board meeting. However, this was lower than the 13 projects worth PHP 83.65-billion approved a year ago.

Of the 24 approved projects, 21 were locator projects, while three were developer projects.

Twelve of the locator investments are from existing enterprises with new and expansion projects, while the remaining four are from new businesses.

The three developer-operator projects are information technology centers to be developed in Capas, Tarlac; Bataraza, Palawan; and San Miguel, Tarlac.

By sector, the export sector accounted for the bulk or 14 of the projects that were greenlit last week. Four projects involve facilities enterprise, while three were information technology projects.

The projected direct employment of 4,515 from the projects approved last week is almost seven times the 643 projected employment from the projects approved a year ago.

Despite the lower investments, the value of the projected exports from the projects approved on Dec. 7 is five times higher at $286.9 million than the $56.47 million last year.

“We don’t have economic zone exports by destination. But whatever is reflected in the Philippine Statistics Authority’s (PSA) data on commodity exports, around 60% of that comes from PEZA,” Mr. Panga said.

From January to Dec. 7, PEZA has approved a total of 221 projects, 13.9% higher than the 194 projects greenlit during the same period a year ago.

Exports from the 221 projects are expected to reach USD 3.71 billion, nearly double the $1.98-billion projected exports from the 194 projects approved in the same period last year.

Last month, Mr. Panga said that PEZA is still expecting the entry of more investments that have a combined worth of over PHP 50 billion.

If realized, this will bring back PEZA investments to the P200-billion to PHP 250-billion level or the 2012 and 2015 peak years of its investment approvals. — By Justine Irish D. Tabile, Reporter

Philippine economic growth is expected to moderate in the coming months amid weakening consumption and gross capital formation, ING Bank N.V. Manila said.

In an article on its website dated Dec. 13, ING said it expects Philippine gross domestic product (GDP) growth to settle at 5.3% this year and further ease to 4.5% by 2024.

“Philippine GDP growth surprised on the upside in the third quarter and has, for the most part, outperformed our expectations. Despite this, we believe challenges to the outlook remain with household spending appearing stretched and fiscal spending possibly reaching its limits,” ING Senior Economist Nicholas Antonio T. Mapa said.

The economy grew by 5.9% in the third quarter, bringing the nine-month average to 5.5%. This is still below the government’s 6-7% target range this year.

For 2024, the government is targeting 6.5-8% growth.

Mr. Mapa said that GDP growth may not be robust and could moderate next year as private consumption, which accounts for about three-fourths of GDP, is growing at a slower pace.

“We had initially expected spending on basic food items to recover as inflation moderated by mid-2023. However, spending on these items has remained flat. This trend could be explained by the unexpectedly strong household spending at restaurants, with households substituting having meals at home for dining out,” ING said.

Household consumption grew by 5% in the third quarter, the weakest pace in two years. This was also slower than 8% a year ago and 5.5% in the previous quarter.   

Mr. Mapa also said that slower wage growth may mean consumers will cut back on spending.

“With wage adjustments carried out generally once a year, a sharp increase in wages is not likely to take place until mid-2024 at the earliest. The outlook for only modest wage growth suggests that household spending is not likely to rebound sharply next year even if inflation remains within target,” he said.

Gross capital formation, or the investment component of the economy, will likely continue to decline.

“We will likely need to see a sharp rebound in imports of both capital machinery and raw materials before we can expect a recovery for capital formation and given the restrictive monetary policy stance, we could see capital formation staying in the red for at least the first half of next year,” Mr. Mapa said.

Gross capital formation slipped by 1.6% in the third quarter, ending nine straight quarters of growth. This was also a reversal of the 18.2% expansion a year ago and 0.3% in the second quarter.

The boost in government expenditure during the third quarter may be difficult to sustain.

“As noted earlier, government spending was one of the drivers of third-quarter GDP. However, we remain skeptical that it will be a reliable source of growth to power momentum in the coming quarters. The main reason for this is the limited space for fiscal authorities to increase spending due to elevated debt levels,” Mr. Mapa added.

Government spending rose by 6.7% in the July-September period, a turnaround from the 7.1% contraction in the second quarter. Government agencies were ordered to draft catch-up plans for spending amid low budget utilization in the first half.

Mr. Mapa emphasized that ramping up government spending will be key to strong growth in 2024.

“The wild card for growth next year, however, will be government spending, which is expected to be capped by elevated debt levels. We believe that GDP growth can outperform our initial base case scenario but only if government spending is able to expand by double digits for all of 2024,” he added.

Net exports growth is also unlikely to continue.

“Net exports, which have positively contributed to growth for two straight quarters, are likely to revert to a negative contribution to GDP as early as the fourth quarter. With exports likely to struggle next year, we expect the overall trade deficit to remain substantial enough to keep the current account balance in deficit territory and ultimately weigh on overall GDP growth momentum for next year,” Mr. Mapa said.

“We could see upside to this outlook should inflation slow sharply, which could free up some purchasing power for households while an eventual easing of monetary policy by the second half of 2024 should help bolster investment activity,” he added.

INFLATION
Meanwhile, ING expects Philippine inflation to average 4.1% next year. This is still above the central bank’s 2-4% target and its 3.7% baseline forecast.

“We forecast inflation to average 4.1% year on year next year with much of the price pressures driven by supply-side factors such as drought, imported energy price adjustments and a shortage of fish,” Mr. Mapa said.

He said demand-side pressures will be “relatively muted” as consumption is expected to moderate and government spending “will be unable to ramp up spending in a manner that could be inflationary.”

The BSP will also likely continue its tightening path next year, ING said.

“Despite price pressures emanating mainly from the supply side, we believe (BSP Governor Eli M. Remolona, Jr.) will not hesitate to hike rates should inflation indeed flare up next year,” Mr. Mapa said.

The BSP on Thursday kept rates steady at a 16-year high 6.5% for a second straight meeting. From May 2022 to October, the central bank raised borrowing costs by a total of 450 basis points (bps).

Rate cuts are also more likely off the table for next year, ING said. “Thus, we expect the BSP to tighten monetary policy for most of 2024 with only a slim chance for a rate cut towards the end of the year should inflation cool and if global central banks begin to cut rates by midyear,” he added. — Luisa Maria Jacinta C. Jocson

The Philippines has kept the 11^th spot but at a lower overall score in a ranking of 12 Asia-Pacific countries on their performance in corporate governance (CG) and environmental, social, and corporate governance (ESG).

The 2023 CG Watch biennial survey by nonprofit association Asian Corporate Governance Association (ACGA) showed that the Philippines maintained its previous ranking in 2020, besting only Indonesia. The survey looked into the countries’ market performance and practices.

According to the report, the Philippines scored 37.6 in the 2023 ranking, down from a score of 39 in 2020, citing the country’s policy focus being “elsewhere” and the securities regulator’s “lacks resources.” 

Australia secured the top spot with a score of 75.2, followed by Japan at 64.6, Singapore at 62.9, Taiwan at 62.8, Malaysia at 61.5, India at 59.4, Hong Kong at 59.3, Korea at 57.1, Thailand at 53.9, and China at 43.7. 

The rankings were based on seven categories, namely: government and public governance; regulators on funding, capacity building, and reform, and enforcement regulators; corporate governance rules; listed companies; investors; auditors and audit regulators; and civil society and media. 

ACGR data showed that the Philippines scored higher in categories such as government and public governance at 29 versus 28 in 2020; CG rules at 48 from 45; investors at 25 from 21; and auditors and audit regulators at 62 from 60. 

However, the country scored lower in terms of regulators at 25 from 27; listed companies at 48 from 55; and civil society and media at 33 from 36. 

“Our goal in CG Watch is to give a diagnosis of the health of CG systems across APAC (Asia-Pacific). More than 20 years after the Asian Financial Crisis there is no doubt that most of the region is in better shape. We hope our scores and rankings help each market to pinpoint next steps for improvement,” ACGA Secretary General Jamie Allen said. 

Meanwhile, a separate survey done by Hong Kong-based capital markets and investment group CLSA Ltd. showed that the Philippines ranked last among the 12 APAC countries in terms of the CLSA CG score. 

The Philippines came out with a score of 49.3 in the 2023 CLSA CG ranking, lower than the 50.5 score in 2020. 

“Our analysis of CG scores by thematic characteristics revealed that gender-diverse firms have the highest CG scores, followed by privately-owned enterprises, large caps and manager-run companies; while state-owned firms score the lowest,” CLSA said.

CLSA reveals CG winners and losers by sector and examines CG scores by corporate characteristics as well as CG’s relationship with broader ESG scores and shareholder value creation.

“The Asian region is characterized by extreme weather events, shifting demographics and geopolitical uncertainties. Now more than ever it has become increasingly crucial to comprehend the connection between effective corporate governance, ESG, and shareholder returns,” CLSA Head of Sustain Asia Research Seungjoo Ro said. 

Sought for comment, SEC Commissioner McJill Bryant T. Fernandez said via Viber message that the regulator has been consistent in promoting corporate governance and protecting minority investors, through policies and regulations consistent with international best practices.

“This can be attested by, among others, the recognitions from both domestic and international bodies, as well as engagements with stakeholders here and abroad,” he said.

He added that the SEC “was neither consulted nor interviewed” about the report.

“To be circumspect, the Commission will go over the entire report and commits to provide substantive comments thereon soonest,” he said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that greater emphasis on ESG compliance is needed since it has been linked to good business practices. 

“Global and local regulators have already encouraged compliance with ESG standards for both issuers and investors even before the pandemic, which somewhat disrupted business, market, and other economic activities,” Mr. Ricafort said in a Viber message. 

“There should be greater emphasis on ESG compliance as this has become one of the important considerations by foreign investors in recent years, as ESG compliance is tied to good business practices,” he added.

Mr. Ricafort added that corporate regulators should have more funding to support more ESG compliance initiatives.

“More funding is needed to bankroll more ESG compliance initiatives amid limited financial resources of the government due to budget deficits especially since the pandemic,” Mr. Ricafort said. — By Revin Mikhael D. Ochave, Reporter