Philippine services trade slumps in 2024

The Philippines’ services trade slumped in 2024 as exports grew at a much slower pace than imports, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Preliminary central bank data showed the country’s trade in services fell by 19.8% to USD 14.58 billion in 2024 from USD 18.18 billion in 2023.

This as service exports rose by just 7.5% year on year to USD 51.98 billion from USD 48.33 billion compared with imports, which jumped by 24% to USD 37.4 billion from USD 30.15 billion.

Broken down, other business services accounted for the bulk of overall services, posting a USD 15.57-billion balance.

These include services related to research and development; professional and management consulting; and technical, trade-related and other business services.

This was followed by telecommunications, computer and information services (USD 5.93 billion), and manufacturing services on physical inputs owned by others (USD 4.91 billion)

On the other hand, shortfalls were recorded in transport services (-USD 3.87 billion), travel (-USD 3.04 billion), financial services (-USD 2 billion), and insurance and pension (-USD 1.91 billion).

The services industry is a key growth driver of the Philippine economy.

“This may reflect the higher base in services exports, especially BPO (business process outsourcing) revenues, given the sharp increase over the past 2 years or so, so mathematically growth already nearing GDP (gross domestic product) growth as a result,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Latest data from the Philippine Statistics Authority (PSA) showed that the services sector grew by 6.7% in the fourth quarter, slowing from 7.4% in the same period in 2023. It accounted for 62% of total GDP.

The IT and Business Process Association of the Philippines (IBPAP) said it booked USD 38 billion in revenue last year, 7% higher than USD 35.5 billion in 2023.

“The Philippines’ free trade agreements over the past 15 years and the more globalized services due to increased digitization including more online businesses as well as increased outsourcing may have increased services imports,” Mr. Ricafort said.

“This also may reflect increased competition for services, similar to merchandise, especially in terms of getting the lowest price possible in other countries.”

Service imports also saw an increase amid the “specialization of other developed countries where there is strict observance of intellectual property rights especially on technology solutions and other higher end of the supply chain for services.”

IBPAP also earlier said the Philippines should raise the value-added content of its offerings to minimize the impact of US protectionism.

“There is a need for the Philippines to develop higher end of the services supply chains such as having high-tech ecozones that would be similar to Silicon Valley to encourage local development of new startups that have the potential to become local industry giants,” Mr. Ricafort said.

The government must also find ways to “attract and retain local talent rather than being lost to overseas competition where there are opportunities for high-end service professionals especially for the tech sector.”

He also cited the need to harness and integrate artificial intelligence (AI) and machine learning in the sector.

Under the Philippine Development Plan, the government expects to book USD 48.15 billion in services exports this year.

Current account

Meanwhile, latest data from the BSP showed the current account deficit (CAD) widened by 41.4% to USD 17.5 billion last year from the USD 12.39 billion in 2023.

This breached the USD 10.4-billion forecast set by the BSP for the year.

It also marked the second-largest current account deficit on record, after the USD 18.3-billion gap recorded in 2022.

This brought the CAD as a share of gross domestic product (GDP) to 3.8% in 2024, larger than the 2.8% ratio posted a year prior.

“The higher current account deficit emanated from lower net receipts in trade in services and a higher deficit in trade in goods,” the BSP said.

“However, this was offset partly by higher net receipts in the primary and secondary income accounts.”

In the fourth quarter alone, the current account deficit skyrocketed to USD 4.6 billion from USD 1.04 billion in the same quarter in 2023.

“The sharp widening of the CAD can be explained by the surge of imports of capital goods and energy, partly due to elevated oil prices and infrastructure-driven demand, while export growth remained weak, particularly in electronics,” Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said.

“Sluggish global trade conditions and weak demand from key markets like China and the European Union also played a role,” he added.

Mr. Ricafort said the wider current account deficit reflects the trade deficit in 2024.

The country’s full-year trade balance grew by 3.1% year on year to a USD 54.21-billion deficit in 2024 from USD 52.59 billion a year ago, its widest trade gap in over two years.

“While BPO revenues and tourism receipts improved, the growth was not enough to offset the trade imbalance,” Mr. Rivera said.

“Transport and logistics costs remained elevated, impacting net services. Multinational firms repatriating profits and increased interest payments on external debt contributed to the larger deficit.”

For the coming months, the current account could be impacted by tariff policies by the United States, Mr. Ricafort said, which could “slow down global trade, investments, employment and overall global GDP growth.”

Markets are pricing in US President Donald J. Trump’s shifting tariff policies on its biggest trading partners, namely, China, Mexico and Canada. Proposals of a reciprocal tariff on all countries that tax US imports continue to loom over the markets.

“Exports could see moderate recovery, especially if global electronics demand picks up, but downside risks remain,” Mr. Rivera said.

“Remittances and BPO revenues are expected to continue supporting external accounts, but a strong peso could temper growth. The pace of import growth will be key if infrastructure spending remains aggressive and oil prices stay high, the deficit could remain elevated.”

This year, the central bank expects the current account deficit to reach USD 12.1 billion or 2.4% of economic output. — Luisa Maria Jacinta C. Jocson

Market seeks new leads to maintain momentum

Philippine stocks may move sideways this week as the market looks for fresh leads to maintain its momentum amid lingering uncertainty over the Trump administration’s tariff plans.

On Friday, the bellwether Philippine Stock Exchange index (PSEi) rose by 0.83% or 52.04 points to end at 6,294.11, while the broader all shares index increased by 0.54% or 20.2 points to 3,721.60.

Week on week, however, the PSEi slipped by 0.07% or 4.18 points from the 6,298.29 close on March 7.

“Local equities seesawed for most of the week as sentiment weighed the impact of local political and economic headlines,” online brokerage firm 2TradeAsia.com said in a market note. “While the macro narrative continues to oscillate widely between inflation-interest rate anxieties and geopolitics, the unfolding of the earnings season shows a sharp contrast: data show outperformance in our monitored sectors, with earnings growth in the double digits.”

For this week, Philippine shares could be range-bound, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“The local market is still trying to maintain the upward momentum it started after bottoming on Jan. 31. To keep the uptrend, however, it must surpass its recent high of 6,279.42 touched last March 25. Currently, the market is testing its 50-day exponential moving average,” Mr. Tantiangco said. “At its current position, the market remains undervalued, leaving rooms of opportunities for long-term investors.”

“However, downside risks remain, mainly the global economic risks brought by the US protectionist trade policies. On a positive note, the peso has been strengthening recently. A continuation of this is expected to help in sustaining the market’s rise. Investors are also expected to watch out for the remaining fourth quarter and full-year 2024 corporate reports. Strong results are also expected to help in driving the market higher.”

Mr. Tantiangco put the PSEi’s major support at 6,000 and major resistance at 6,400.

For his part, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort placed the PSEi’s support at 6,000 and resistance at 6,300-6,530.

“The PSEi continued to gains after recent political noises remained manageable so far…However, as a matter of prudence, the markets could still be on a wait-and-see mode if there would be risk of political noises in the coming days, but would remain noises for as long as there are no large protest rallies and no other forms of destabilization that could distract the government from more important priorities,” he said via Viber.

2TradeAsia.com put the PSEi’s immediate support at 6,000 and resistance at 6,400.

“Reasons to tilt toward cautious optimism are becoming more opaque, but keep in mind that broader markets remain entrenched in macro uncertainty. March inflation data that could eventually pave way for an April rate cut might provide the escape velocity the PSEi requires to approach 6,500,” it said. — Revin Mikhael D. Ochave

Manila Water rate hike to take effect in April

Customers of Manila Water Co., Inc. will see higher water bills starting in April as the east zone concessionaire seeks to recover losses incurred from foreign exchange movements, according to the Metropolitan Waterworks and Sewerage System Regulatory Office (MWSS RO).

At the same time, west zone concessionaire Maynilad Water Services, Inc. deferred the implementation of its rate adjustment to the third quarter.

At a briefing on Thursday, MWSS RO Chief Regulator Patrick Lester N. Ty said that the agency approved the tariff increase of PHP 0.04 per cubic meter for Manila Water as part of its foreign currency differential adjustment (FCDA) for the second quarter.

“Because of the FCDA, there is going to be an increase from P0.61 to P0.65 or a P0.04 increase, resulting in an all-in tariff of P61.08 compared to P61.04 [in the first quarter],” Mr. Ty said.

The FCDA is a quarterly reviewed tariff mechanism used by the MWSS. Water concessionaires are allowed to adjust their rates based on fluctuations in foreign exchange rates to manage the impact on their foreign currency-denominated loans. These loans were used to finance the concessionaires’ projects to expand and improve water and sewerage services.

According to Manila Water, the FCDA is based on the peso-dollar exchange rate as of December 2024 versus September 2024.

“There was a 4.24% increase in the USD exchange rate, which a bigger percentage of our loans are denominated in,” it said.

The peso weakened against the US dollar in the fourth quarter of 2024, closing at its record low of PHP 59 thrice (on Nov. 21, Nov. 26, and Dec. 19.).

The peso traded at the PHP 57 to PHP 59 per dollar range in the fourth quarter of 2024, and at the PHP 55 to PHP 58 per dollar range in the third quarter of 2024.

For the second quarter, Manila Water customers who consume 10 cubic meters or less will see their bills increase by PHP 0.21 to PHP 255.04 from PHP 254.83 in the first quarter.

Those consuming 20 cubic meters will see their monthly bills go up by PHP 0.45 to PHP 563.92, while those consuming 30 cubic meters will see their bills increase by PHP 0.90 to PHP 1,149.65.

Enhanced lifeline customers and low-income customers will not see any bill adjustments.

Meanwhile, the MWSS said Maynilad deferred the implementation of the upward tariff adjustment of PHP 0.09 per cubic meter to the third quarter.

“Maynilad has opted to defer its scheduled adjustment to mitigate the immediate financial pressure to consumers. This deferment, which will see the adjustment applied in the next quarter, is a business decision and it’s not a waiver,” Mr. Ty said.

In a statement, Maynilad confirmed it deferred the FCDA, which was driven by peso depreciation against the dollar. It noted the concession fees or the MWSS loans it “inherited” are largely denominated in US dollar.

“Maynilad regularly evaluates various factors when implementing FCDA adjustments, including foreign exchange movements and their impact on our loan obligations,” it said.

“While the mechanism allows for quarterly adjustments, we considered it prudent to maintain rate stability for this period. Moving forward, FCDA adjustments will continue to be applied as needed, based on prevailing conditions.”

Last year, the MWSS Board of Trustees issued a resolution approving the FCDA guidelines prepared by MWSS RO, which became effective on Aug. 21, 2024.

“Please take note that the two concessionaires will not earn any income for the FCDA. This adjustment, based on the foreign currency exchange fluctuations, is purely pass-on amount and this will not result in any income on the part of Manila Water or Maynilad,” Mr. Ty said.

Beginning January this year, the two concessionaires implemented water rate hikes following the approval of the regulator as part of the third tranche of approved tariffs for the 2023-2027 rate rebasing period.

Rate rebasing is done every five years, accompanied by a performance review and validation of the two concessionaires’ projected cash flows. It also sets the water rates in a manner that allows the water suppliers to recover their expenditures.

Manila Water serves the east zone network of Metro Manila, covering parts of Marikina, Pasig, Makati, Taguig, Pateros, Mandaluyong, San Juan, portions of Quezon City and Manila, and several towns in Rizal province.

Maynilad serves parts of Manila, Quezon City, and Makati, as well as Caloocan, Pasay, Parañaque, Las Piñas, Muntinlupa, Valenzuela, Navotas, and Malabon. It also supplies water to the cities of Cavite, Bacoor, Imus, and the towns of Kawit, Noveleta, and Rosario in Cavite province.

Metro Pacific Investments Corp., which has a majority stake in Maynilad, is one of three Philippine units of First Pacific Co. Ltd., the others being Philex Mining Corp. and PLDT Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — Sheldeen Joy Talavera

Banking system assets up 9.3% as of end-Jan.

The Phlippine banking industry’s total assets jumped by 9.3% year on year as of end-January, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Banks’ combined assets rose to PHP 27.11 trillion as of end-January from PHP 24.81 trillion in the same period a year ago.

Month on month, total assets slid by 1.2% from PHP 27.43 trillion as of end-December.

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 sector’s total loan portfolio inclusive of IBL and RRP climbed by 13.7% to PHP 14.69 trillion as of end-January from PHP 12.92 trillion in the same period a year ago.

Net investments, or financial assets and equity investments in subsidiaries, went up by 5.8% to PHP 7.68 trillion as of end-January from PHP 7.25 trillion a year prior.

Net real and other properties acquired increased by 9.3% year on year to PHP 117.14 billion from PHP 107.13 billion in the same period in 2024.

On the other hand, cash and due from banks amounted to P2.65 trillion as of end-January, down by 1.4% from PHP 2.69 trillion a year earlier.

Banks’ other assets jumped by 7.4% to PHP 1.98 trillion from PHP 1.84 trillion in the previous year.

Meanwhile, the total liabilities of the banking system rose by 9.2% to PHP 23.71 trillion from PHP 21.71 trillion in the year-ago period.

“Philippine banks’ total asset growth is consistent with the fact that they are among the most profitable industries in the country, with earnings growth much faster than GDP growth for the country’s largest banks,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

“As a result, relatively large earnings partly add to the capital of banks, on top of banks’ various fund-raising activities through capital markets or strategic investors.”

Latest data from the BSP showed the net profit of the country’s banking industry rose by 9.76% year on year to PHP 391.28 billion in 2024.

The growth in total assets is also consistent with strong lending activity, Mr. Ricafort said.

Bank lending jumped by 12.8% to PHP 13.02 trillion in January, its fastest pace in over two years, separate central bank data showed.

Mr. Ricafort also noted the manageable bad loan ratio which could “partly improve banks’ asset quality, profitability, and overall total resources.”

The banking industry’s nonperforming loan ratio rose to 3.38% in January from 3.27% in December. However, this was lower than 3.44% in the same month in 2024.

“The Philippines remains one of the fastest-growing economies in Asia, so the banking industry would be one of the biggest beneficiaries in terms of faster growth in loans, deposits, spreads, fee income, and overall revenues,” Mr. Ricafort added. Luisa Maria Jacinta C. Jocson, Reporter

BSP seeks to amend rules on forwards, swaps

The Bangko Sentral ng Pilipinas (BSP) is proposing amendments to regulations on non-deliverable exchange forward and swap contracts involving the peso, which will allow the pre-termination or cancellation of contracts before maturity date, among others.

In a draft circular, the central bank released proposed amendments to the Manual of Regulations for Banks (MORB) on non-deliverable foreign exchange forward (NDF), non-deliverable swap (NDS) and non-deliverable cross currency swap (NDCCS) contracts involving the peso.

“The BSP is cognizant that NDFs, including its variants NDS and NDCCS may, directly or indirectly, create system-wide risks even if there is no delivery of principal amounts and even when such non-deliverable FX (foreign exchange) derivatives are used as a hedge.”

“To mitigate the buildup of systemic risks and protect against undue concentration in market usage, the following prudential guidelines are set in place,” it added.

The draft circular seeks to define NDCCS as “a variation of a cross-currency swap wherein the differences between the exchange rates and interest rates are settled on a cash basis, without necessitating the delivery of either of the cash flows on the two currencies involved in the swap.”

The proposed rules also remove the definitions of peso NDF, peso NDF sale to nonresidents, and onshore non-deliverable forwards. It instead includes definitions for peso NDS and peso NDCCS.

“All NDF, NDS and NDCCS contracts with residents shall be settled in Philippine pesos,” it added.

The BSP also removed the provision that states that NDF contracts cannot be pre-terminated before their fixing date.

“Pre-termination or cancellation of an NDF, NDS or NDCCS contract before its maturity date shall be allowed, subject to mutual agreement between the counterparties and appropriate disclosure of the terms and conditions on the pre-termination or cancellation, including the settlement amount (e.g., market-to-market value of the contract) and the responsible party that will assume the cost of pre-termination or cancellation, among others,” it said.

“Furthermore, if an NDF, NDS or NDCCS contract is pre-terminated or canceled, contracting parties may only enter into another NDF, NDS or NDCCS contract for the same underlying transaction if there is a change in the original financial terms of the underlying transaction.”

The draft circular proposes guidelines on limits for banks’ peso NDF, peso NDS and peso NDCCS exposures.

“To mitigate any potential buildup of systemic risks, a bank’s total gross exposures to all forms of Peso NDF, Peso NDS and Peso NDCCS transactions, i.e., the sum of the notional amount of the sale and purchases for both onshore and offshore transactions shall be limited to a fixed percentage of the bank’s capital base.”

Under the draft rules, the exposure is capped at 20% of qualifying capital for domestic banks while foreign bank branches shall have a limit equal to 100% of their qualifying capital.

However, this limit does not apply to peso NDF transactions with the BSP, it added.

“A bank with purchases and sell position against a counterparty with the same fixing date may consolidate said positions for the purpose of bilateral net settlement.”

The draft rules also include NDS and NDCCs in the higher capital charge applicable to NDFs.

They also detail the reportorial requirements for NDF, NDS and NDCC transactions, which shall be covered by the report on non-deliverable forward and swap transactions.

“Pre-terminated and canceled NDF, NDS and NDCCS transactions that were used by a bank as end-user, as defined in Section 613 of the MORB, shall be submitted under the new report namely Report on Pre-termination and Cancellation of Non-Deliverable Forward and Swap Transactions.”

“The pre-terminations and cancellations shall be subject to an assessment of reasonableness and frequency tests to determine its validity. All outstanding NDF, NDS and NDCCS transactions shall likewise be included in the calculation of the capital adequacy ratio (CAR) and reflected in the CAR report.” — Luisa Maria Jacinta C. Jocson

Stocks rise on bargain hunting, US inflation data

Philippine stocks recovered on Thursday on bargain hunting following their two-day drop and with data showing slower US consumer inflation in February.

The bellwether Philippine Stock Exchange index (PSEi) rose by 0.75% or 46.81 points to 6,242.07, while the broader all shares index climbed by 0.53% or 19.6 points to 3,701.4.

“The local market bounced back this Thursday as investors hunted for bargains following two straight days of decline,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message. “Helping in today’s rebound are the lower-than-expected February inflation in the US and the robust fourth quarter and full-year 2024 corporate results onshore.”

“Philippine investors resumed their bargain hunting after investors calmed down after the latest US consumer price index (CPI) came out. Wall Street was able to even close mixed after a rough start,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

US consumer prices increased moderately in February as higher shelter costs were partially offset by cheaper airline fares, giving the Federal Reserve room to keep interest rates unchanged next week while monitoring the economic impact of a trade war, Reuters reported.

The CPI rose 0.2% last month, the smallest gain since October, after accelerating 0.5% in January, the Labor Department’s Bureau of Labor Statistics said.

In the 12 months through February, the CPI increased 2.8% after climbing 3% in January. Economists polled by Reuters had forecast the CPI would gain 0.3% and advance 2.9% on a year-on-year basis.

With the economic outlook deteriorating because of tariffs, financial markets expect the Fed to resume cutting rates in June after it paused its easing cycle in January. The central bank’s benchmark overnight interest rate is currently in the 4.25%-4.5% range, having been reduced by 100 basis points since September.

Majority of sectoral indices posted gains on Thursday. Mining and oil surged by 2.97% or 257.66 points to 8,926.71; financials rose by 2.4% or 56.47 points to 2,401.53; services went up by 1.71% or 34.41 points to 2,040.47; and holding firms increased by 0.4% or 20.87 points to 5,223.56.

Meanwhile, property dropped by 1.54% or 34.56 points to 2,196.74 and industrials went down by 0.72% or 63.31 points to 8,667.55.

“BDO Unibank, Inc. was the day’s index leader, climbing 3.95% to PHP 158. Alliance Global Group, Inc. was at the bottom, falling 3.23% to PHP 6.30,” Mr. Tantiangco said.

Value turnover went down to P5.65 billion on Thursday with 1.04 billion shares exchanged from the PHP 5.98 billion with 741.54 million issues traded on Wednesday.

Decliners narrowly beat advancers, 93 versus 90, while 45 names were unchanged.

Net foreign buying increased to PHP 436.10 million on Thursday from PHP 2.62 million on Wednesday. — Revin Mikhael D. Ochave with Reuters

BSP to ensure nation will stay out of ‘gray list’

The Bangko Sentral ng Pilipinas (BSP) said it is working to ensure that the country will not return to the Financial Action Task Force’s (FATF) “gray list,” citing the need to crack down on digital technology threats.

“Just because we are off the gray list does not mean that we are done. We have to make sure we do not get back into the gray list,” BSP Governor Eli M. Remolona, Jr. said at a forum on Tuesday.

“In the past, we go in, we go out. This time, we are determined to stay out of the gray list,” he added.

The FATF last month removed the Philippines from its list of jurisdictions under increased monitoring for “dirty money” following a successful on-site visit and completion of the recommended action plan.

The country was on the FATF’s gray list for over three years or since June 2021.

The dirty money watchdog noted the Philippines’ progress in addressing the strategic anti-money laundering and countering the financing of terrorism and proliferation financing deficiencies.

The BSP chief said they are undergoing a national risk assessment after the country’s exit from the gray list.

“Part of that means looking at our risks again. We look at the whole economy to figure out what else can lead to risks of money laundering, what else can lead to terrorism financing and so on.”

The FATF’s next assessment of the country is slated for 2027. “We want to make sure that we pass that evaluation,” Mr. Remolona said.

The assessment will have the FATF verify that the measures are sustained and still in place.

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

Mr. Remolona said they are closely monitoring innovations in technology amid the numerous threats in the digital space.

“Digital technology is evolving, and digital technology is the preferred means for money laundering actors to take money in,” he said.

“We have to look at digital technology and what it’s doing. These guys are very innovative as you know, right? It’s essentially an arms race between us and them so we have to keep up with the arms race. That’s why we’re doing risk assessment.”

Earlier data from Moody’s Investors Service showed that from 2018 to 2023, the Philippines was among the top five countries in Southeast Asia with money laundering activity events added over the five-year period.

The number of money laundering events added in the Philippines jumped by 45% from 2022 to 2023.

The Anti-Financial Account Scamming Act was signed into law last year. It aims to protect consumers from financial cybercrimes by penalizing violations.

Malacañang also last year 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.

“In the meantime, we can reap the benefits of our delisting from the FATF gray list. That delisting renews investor confidence,” Mr. Remolona said.

“It paves the way for the restoration of correspondent bank relationships. It helps our overseas Filipino workers (OFWs), but it is more than that. It helps to convince foreign investors to come in. Makes it easier for foreign banks to deal with our banks.”

The central bank earlier said exiting the gray list will help support OFWs by making remittances and cross-border payments faster and more affordable. — Luisa Maria Jacinta C. Jocson

Energy dep’t readies large-scale renewable energy auction

The Department of Energy (DoE) is set to offer a total of 10,478 megawatts (MW) of renewable energy (RE) capacity, which includes some that will be paired with battery energy storage systems (BESS), under the fourth round of the green energy auction (GEA-4) program.

The DoE is planning to auction off 3,940 MW of ground-mounted solar capacity, 48 MW of roof-mounted solar capacity, 3,000 MW of floating solar capacity, and 2,390 MW of onshore wind capacity, based on the notice of auction posted on its website.

The government will also offer integrated RE and energy storage system (IRESS) totaling 1,100 MW in solar generation capacity, along with undisclosed storage capacity.

A BESS is a type of energy storage system that uses batteries to store electrical energy from the grid and releases it when needed to augment supply or improve power quality.

The GEA program (GEAP) aims to promote RE as one of the country’s primary sources of energy through competitive selection. RE developers compete for incentivized fixed power rates by offering their lowest price for a certain capacity.

The DoE is targeting to install 7,523 MW in RE capacity in Luzon, 2,143 MW in Visayas, and 812 MW in Mindanao.

The projects resulting from the auction are scheduled to come online between 2026 and 2029. The supply contract for winning RE projects will be for 20 years, starting from the commercial operation date of the plant.

“The release of the TOR (terms of reference) for GEA-4 underscores the Philippines’ commitment to transitioning to clean energy while ensuring energy security. By ensuring a transparent and competitive selection process for renewable energy projects, we are accelerating the shift toward a more sustainable, secure, and resilient energy system,” Energy Undersecretary Rowena Cristina L. Guevara said in a statement.

The TOR sets out the technical, financial, and commercial requirements that will govern project selection, ensuring a transparent and competitive bidding process.

The DoE said that it will release updated GEAP guidelines to clarify the qualifications of eligible suppliers and ensure fair pricing mechanisms for projects under the program.

Under the new guidelines, qualified suppliers must either hold an RE service contract or possess a certificate of authority issued under the Revised Omnibus RE Guidelines.

“GEA-4 is expected to drive substantial investment in renewable energy, reinforcing its role as a key pillar of the Philippines’ energy transition,” the DoE said.

As a flagship government initiative, the program is seen to contribute to the country’s goal of achieving a 35% share in the power generation mix by 2030.

Asked to comment, Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said that offering such a large capacity in a single auction “sends a clear and strong message to investors about the Philippine government’s dedication to renewable energy development.”

“This large-scale opportunity could attract both local and international investments, showcasing the RE sector as a lucrative and stable avenue for growth,” Mr. Arce said in a Viber message.

“It further positions the country as a regional leader in green energy, potentially fostering long-term partnerships and technology transfer,” he added.

Last month, the DoE announced that GEA-3 attracted 7,500 MW worth of bids, exceeding the auction goal of 4,650 MW. The auction round covered pumped-storage hydro, impounding hydro, and geothermal.

An auction round dedicated to offshore wind projects is also set to launch in the third quarter of 2025, stepping up towards the Philippines’ goal to attain offshore wind power generation by 2028. – Sheldeen Joy Talavera, Reporter

Philippine shares slip as Trump tariff concerns weigh

PHilippine shares slipped further on Wednesday as losses on Wall Street due to the Trump administration’s trade policies spilled over to the domestic market.

The benchmark Philippine Stock Exchange index (PSEi) shed 0.18% or 11.29 points to end at 6,195.26 on Wednesday, while the broader all shares index inched down by 0.07% or 2.79 points to 3,681.80.

“The market fell further as investors took cues from Wall Street’s fall, driven by recession fears and cautious trading ahead of the release of the US inflation report,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“The market slipped anew on continued concerns about Trump’s erratic trade policy and a potential slowdown in the US economy,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

Wall Street closed lower on Tuesday. The Dow Jones Industrial Average index fell by 1.14% or 478.23 points to 41,433.48; the S&P 500 index sank by 0.76% or 42.49 points to 5,572.07; and the Nasdaq Composite index lost 0.18% or 32.22 points to end at 17,436.10.

US President Donald J. Trump’s increased tariffs on all US steel and aluminum imports took effect on Wednesday, stepping up a campaign to reorder global trade in favor of the US and drawing swift retaliation from Europe, Reuters reported.

Mr. Trump’s action to bulk up protections for American steel and aluminum producers restores effective global tariffs of 25% on all imports of the metals.

Mr. Trump’s hyper-focus on tariffs since taking office in January has rattled investor, consumer and business confidence in ways that economists worry could cause a US recession and further lag on the global economy.

Mr. Trump initially threatened Canada with doubling the duty to 50% on its steel and aluminum exports to the US but backed off after Ontario province suspended a move to impose a 25% surcharge on electricity exports to the states of Minnesota, Michigan and New York.

Meanwhile, February US consumer price index data were set to be released overnight.

Sectoral indices ended mixed on Wednesday. Services declined by 1.26% or 25.62 points to 2,006.06; mining and oil retreated by 0.8% or 70.36 points to 8,669.05; and financials went down by 0.63% or 15.04 points to 2,345.06.

Meanwhile, property increased by 1.24% or 27.41 points to 2,231.3; industrials climbed by 0.44% or 38.73 points to 8,730.86; and holding firms rose by 0.07% or 3.7 points to 5,202.69.

Value turnover declined to P5.98 billion on Wednesday with 741.54 million issues traded from the PHP 7.71 billion with 753.65 million shares exchanged on Tuesday.

Decliners outnumbered advancers, 127 versus 77, while 40 names were unchanged.

Net foreign buying stood at P2.62 million on Wednesday versus the PHP 350.28 million in net selling recorded on Tuesday. — R.M.D. Ochave with Reuters

Philippine banks to stay resilient, Moody’s says

The Philippine banking system is seen to remain resilient amid support from a strong macroeconomic environment, Moody’s Ratings said, with profits expected to be stable amid robust credit growth.

“We maintain a stable outlook for the Philippines’ (Baa2 stable) banking system. Strong economic growth underpinned by further rate cuts and stabilized inflation in 2025 will drive credit demand and support loan quality,” the debt watcher said in a report.

“Banks’ profitability will remain broadly stable as net interest margin compression will be modest because of the weak monetary policy transmission to banks’ lending rates in the Philippines.”

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed the net profit of the country’s banking industry rose by 9.76% year on year to PHP 391.28 billion in 2024.

Moody’s said Philippine banks’ capitalization is expected to remain strong.

“Capital levels will remain high, as strong shareholder support and internal capital generation keep pace with high credit growth,” it said.

It expects bank’ credit growth to accelerate to an estimated 12% this year amid declining interest rates and surge in business activity and consumer sentiment.

Bank lending jumped by 12.8% to PHP 13.02 trillion in January, its fastest pace in over two years, central bank data showed.

“Reserve ratio requirement cuts by the central bank will also drive credit growth, by releasing more liquidity for banks to channel into lending,” Moody’s added.

The RRR of universal and commercial banks and nonbank financial institutions with quasi-banking functions will be reduced by 200 bps to 5% from 7% later this month. BSP Governor Eli M. Remolona, Jr. has said big banks’ RRR can be brought down to zero eventually.

“Strong credit growth and the increasing share of higher-yielding retail and small and medium enterprise (SME) loans will also support yields,” it said.

However, Moody’s noted that retail loans have been growing by 35% over the past two years, “posing loan seasoning risks.”

“Policy rate cuts will support borrowers’ debt repayment capacities, which will mitigate potential loan quality deterioration from the seasoning of newer retail and SME loans.”

The BSP began its easing cycle in August last year, slashing borrowing costs by a total of 75 basis points (bps) to bring the policy rate to 5.75%.

“Meanwhile, the quality of loans to large conglomerates will remain solid, notwithstanding the concentration risks they pose to banks,” Moody’s said.

“Loan loss reserves will decrease, but the larger Philippine banks will continue to have stronger buffers against any loan losses, compared to the smaller banks.”

Banks’ loan loss reserves amounted to P488.48 billion, up by 1.6% from P480.64 billion in December and by 5.7% from PHP 462.12 billion a year ago. This brought the January loan loss reserve ratio to 3.22% from 3.14% in December and 3.45% in the same month in 2024.

“Banks continue to reduce their real estate exposure and we expect stable operating conditions in the sector in 2025,” Moody’s added.

Banks’ real estate exposure ratio dropped to 19.55% at end-September from 19.92% at end-June and from 20.55% at the end of September in 2023. This was the lowest real estate exposure ratio recorded in five years or since the 19.5% as of September 2019.

Meanwhile, Moody’s expects credit costs to rise “modestly” as banks grow their retail and SME loan portfolios, but this can be offset by their loan loss reserves.

“Funding and liquidity in the banking system will remain robust,” it added.

Growth outlook

Moody’s Ratings expects the Philippine economy to grow by 6% this year and next, which will benefit banks.

The credit rater’s forecast is at the low end of the government’s 6-8% growth target for 2025 and 2026.

Philippine gross domestic product grew by 5.6% in 2024, well below the government’s 6-6.5% goal for the year.

“Although global uncertainties pose upside risks to inflation, we expect it to remain between 2% and 4%, which will support further policy rate cuts in 2025,” it said.

“As a result, domestic consumption and investments will improve, giving further stimulus to the economy,” it said. “Given the country’s consumption-led economic model, we expect the impact of higher tariffs on the Philippines under the Trump administration to be muted compared to its regional peers.”

On Tuesday, Mr. Remolona said a rate cut is “on the table” at the Monetary Board’s policy meeting next month, which has been rescheduled to April 10 from April 3 previously.

He added that the BSP is still on easing mode and expects to slash benchmark borrowing costs by “a few more times” this year.

The Monetary Board in February unexpectedly paused its rate-cut cycle, which Mr. Remolona said was a “prudent” move amid uncertainty over the trade policies of US President Donald J. Trump and their potential impact on the Philippines. – Luisa Maria Jacinta C. Jocson, Reporter

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