BSP says April rate cut still ‘on the table’

The Bangko Sentral ng Pilipinas (BSP) could resume its easing cycle as early as its next meeting on April 10, its top official said.

BSP Governor Eli M. Remolona, Jr. said a rate cut is still “on the table” at the Monetary Board’s meeting next month, signaling “a few more” rate cuts for the rest of the year.

“Let me say that we see ourselves still on the easing cycle. We are expecting to cut a few more times this year. But how much, we haven’t determined,” he said at a forum.

Mr. Remolona also confirmed that the Monetary Board’s next meeting would be moved to April 10 from April 3.

“When we think we’re on track, more or less on track, we stay with baby steps, which means 25 basis points (bps) at a time,” he said.

The central bank unexpectedly kept rates steady at its February policy review, opting to keep the benchmark at 5.75%.

This after it delivered three straight 25-bp cuts at each of its meetings in August, October and December.

“If things look much worse than we thought — that’s what we call a hard landing — it can be up to 50 bps of a cut, even more, but as long as we’re more or less on track, it will be 25 bps at a time,” Mr. Remolona said.

However, a hard landing or a recession scenario is “highly unlikely,” he added.

The Philippine economy grew by a slower-than-expected 5.2% in the fourth quarter, bringing 2024 growth to 5.6%. The full-year growth was well below the 6-6.5% target.

This year, the government is targeting 6-8% growth.

Mr. Remolona said the central bank considers several scenarios in its policy decisions.

“There’s the baseline scenario, which is kind of saying we’ll cut by this many times the rest of the year. Then we have a hawkish scenario, which means fewer cuts. And then there’s the dovish scenario, which means more cuts than the baseline,” he said.

“We compare those three scenarios and how we see inflation evolving, how we see growth evolving. It’s a balancing act between inflation and growth and so we have to weigh the different factors.”

The BSP chief also noted they are still reworking the current models to account for risks.

At their February meeting, Mr. Remolona said “global trade uncertainties” were the primary reason behind the policy hold.

“There are still a lot of numbers to look at. Of course, we’re recalibrating our models to take account of uncertainty,” he said.

Headline inflation sharply eased to 2.1% in February from 2.9% in January and 3.4% a year ago.

The February print was also below the 2.2%-3% forecast from the central bank.

“We did miss the inflation number on the low side, lower than the bottom of our range. If we’re going to miss it, that’s the way to miss it, right? So, we’re happy about that miss,” Mr. Remolona said.

“Then we’ll look at all the other numbers, and then we’ll decide on April 10 whether to ease further or not to ease.”

Further RRR cuts

Mr. Remolona also cited the possibility of another reserve requirement ratio (RRR) cut, possibly within the year.

Asked if the BSP could slash reserve requirements again before the year ends, he said this was “possible.”

“For me, 5% is still high. But I’m just one vote. We’re seven on the Monetary Board. But it can’t be sudden because we need to control the liquidity that’s coming out,” he 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.

Digital banks’ RRR will also be cut by 150 bps to 2.5%, while the ratio for thrift lenders will be lowered by 100 bps to 0%.

Rural and cooperative banks’ RRR has been zero since October, the last time the BSP cut reserve requirements.

Big banks’ RRR can be brought down to zero eventually, Mr. Remolona said. “It can be zero. In the US, the RRR is zero.”

The BSP chief said there is a “subtle difference” between the policy rate and reserve requirement. Reducing either one stimulates the economy, he said.

“But the policy rate, there’s a kind of cycle, you don’t want to lower it and then raise it the next time. You want to just keep going in baby steps.”

“The reserve requirement, you can just stop. You lower it, that’s it, and then there’s no kind of cycle that you have to worry about. The markets are disrupted when you change the cycle, especially with the policy rate.”

Eye on peso

Meanwhile, Mr. Remolona said they are closely monitoring the movements of the peso.

“We always worry about the exchange rate. But not for the reasons other people worry about the exchange rate. We worry about the exchange rate because if it moves too much, especially when it weakens, it can be inflationary.”

The peso closed at PHP 57.225 per dollar on Tuesday, strengthening by 18.5 centavos from its PHP 57.41 finish on Monday.

The peso had been under pressure late last year, falling to the record-low PHP 59-per-dollar level thrice.

“We monitor the exchange rate. But not because we want the peso to stay low or to stay high. We monitor it because of the possible inflation consequences,” he added.

Mr. Remolona also clarified how the central bank manages its gold reserves.

“Gold as an asset, it’s a very poor investment. The return is negative because it has custody fees. Our gold is in the Bank of England, we pay there so they can store our gold. That’s where the market is,” he said in mixed English and Filipino.

“But it’s very volatile. So, by itself, it’s a very poor investment. It’s risky and the average return is negative.”

Latest BSP data showed the value of the central bank’s gold holdings went up by 2.5% to $12.5 billion at end-February from $11.75 billion a month ago. It likewise jumped by 16.6% from $10.34 billion in the same period in 2024.

“But if you hold it as a part of a large portfolio, and our portfolio is mainly dollar assets, it’s a good hedge… especially when there are geopolitical (uncertainties),” he said.

Mr. Remolona said the central bank sold gold reserves as prices of the precious metal increased, so the gold in the BSP’s reserves breached the “ideal ratio of between 8% and 10%.”

Most of the BSP’s gold reserves are in the Bank of England, with a small amount kept by the New York Federal Reserve. – Luisa Maria Jacinta C. Jocson, Reporter

Banks’ bad loan ratio up in January

Philippine banks’ asset quality worsened as the industry’s gross nonperforming loan (NPL) ratio rose in January, according to data from the Bangko Sentral ng Pilipinas (BSP).

Preliminary data from the central bank showed the bad loan ratio rose to 3.38% in January from 3.27% in December. This was the highest in two months or since the 3.54% in November.

However, this was lower than 3.44% in the same month in 2024.

Data from the central bank showed the amount of soured loans went up by 2.5% to PHP 512.83 billion in January from PHP 500.43 billion a month earlier.

Year on year, bad loans rose by 11.3% from PHP 460.76 billion.

Loans are considered nonperforming once they remain unpaid for at least 90 days after the due date. These are deemed as risk assets since borrowers are unlikely to pay.

The total loan portfolio of the banking system stood at PHP 15.18 trillion as of end-January, down by 1% from PHP 15.32 trillion at end-December. Year on year, it jumped by 13.4% from PHP 13.38 trillion a year ago.

Past due loans increased by 4.6% month on month to PHP 633.07 billion from PHP 605.22 billion. It likewise climbed by 10.8% from PHP 571.56 billion a year earlier.

This brought the past due ratio to 4.17%, higher than 3.95% in December but lower than 4.27% a year ago.

Meanwhile, restructured loans inched up by 0.3% to PHP 311.22 billion in January from PHP 310.44 billion in December. It rose by 3.1% from PHP 302 billion in January 2024.

Restructured loans accounted for 2.05% of the industry’s total loan portfolio, a tad above the 2.03% in the month prior but lower than 2.26% in January 2024.

Banks’ loan loss reserves amounted to PHP 488.48 billion, up by 1.6% from PHP 480.64 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.

Lenders’ NPL coverage ratio, which gauges the allowance for potential losses due to bad loans, slipped to 95.25% in January from 96.04% in December and 100.29% in 2023.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the uptick in the NPL ratio reflects the continued growth in bank loans.

Latest data from the BSP showed bank lending jumped by 12.8% to P13.02 trillion in January, its fastest pace in over two years.

“The higher NPL in January may be reflective of higher loan demand during the holiday season up until the start of 2025 but I don’t think this is a cause for concern on liquidity,” Reinielle Matt M. Erece, economist at Oikonomia Advisory and Research, Inc., said.

“Slow economic growth that we saw in the last quarter may also be a cause of struggle in the repayment of these loans due to slow earnings growth,” he added.

The central bank’s rate-cutting cycle in the latter half of the year also bolstered demand for loans, Mr. Ricafort said.

The BSP began its easing cycle in August last year and slashed borrowing costs for three straight meetings, reducing the key rate by a total of 75 basis points (bps) by end-2024.

“The slight monthly pickup on NPL ratio may have to do with the seasonal slowdown in sales, earnings, and other business activities upon crossing the new year from the Christmas holiday season that is considered one of highest in sales for many businesses,” he added.

For the coming months, Mr. Ricafort said the recent cut in banks’ reserve requirement ratio (RRR) could infuse liquidity into the financial system and boost banks’ loans and investments.

Effective March 28, the BSP will cut the RRR of universal and commercial banks and nonbank financial institutions with quasi-banking functions by 200 bps to 5% from 7%.

It will also reduce the RRR for digital banks by 150 bps to 2.5%, while the ratio for thrift lenders will be lowered by 100 bps to 0%.

Rural and cooperative banks’ RRR has been zero since October, the last time the BSP cut the reserve requirements.

“We expect NPLs to improve in the remaining months of the year as interest rates go down and as faster economic growth supports higher incomes for consumers and businesses alike, helping them meet their obligations,” Mr. Erece added. — Luisa Maria Jacinta C. Jocson

Meralco hikes rates for households this March

Typical households in areas served by Manila Electric Co. (Meralco) can expect higher electricity bills this month as the power distributor is set to hike rates by PHP 0.2639 per kilowatt-hour (kWh) due to higher transmission charge and feed-in tariff allowance (FIT-All).

The upward adjustment pushed the overall rate to PHP 12.2901 per kWh in March from PHP 12.0262 per kWh in February, the company said in a statement on Tuesday.

Households consuming 200 kWh will see their monthly electricity bills go up by around PHP 53. Those consuming 300 kWh, 400 kWh, and 500 kWh will have to pay an additional PHP 79, PHP 106, and PHP 132, respectively.

Meralco attributed the rate increase to the conclusion of the one-time refund on regulatory reset fee, equivalent to PHP 0.2264 per kWh for its customers. The refund was implemented last month as ordered by the Energy Regulatory Commission (ERC).

Also contributing to higher rates was the PHP 0.1294 per kWh increase in transmission charge due to higher ancillary service charges incurred by the National Grid Corp. of the Philippines. The transmission charge for March also covered the second of three monthly collections for the recovery of costs of reserve market suppliers.

The ERC directed the recovery of the remaining 70% of the reserve market settlement fees incurred in March last year. This will be reflected in customers’ bills until April.

Adding to the upward adjustment was the implementation of the new FIT-All rate of PHP 0.1189 per kWh, which was higher than the previous rate of PHP 0.0838 per kWh.

The FIT-All is a uniform charge billed to all on-grid electricity consumers to support the development and promotion of renewable energy.

Other charges, which included taxes, increased by PHP 0.0416 per kWh.

“Such increases were mitigated by the lower generation charge for February supply month that impacted the March billings of Meralco customers. The reduction is almost 17 centavos per kWh in generation charge,” Joe R. Zaldarriaga, Meralco vice-president and head of corporate communications, said in Filipino during a briefing.

The generation charge fell by PHP 0.1686 per kWh to PHP 7.0517 from PHP 7.2203 per kWh last month due to lower costs from Meralco’s supply sources.

The peso appreciation against the US dollar pushed down the charges from independent power producers (IPP) and power supply agreements (PSA) to PHP 1.0143 per kWh and P0.2934 per kWh, respectively. Around 98% of IPP costs and 61% of PSA costs were dollar-denominated.

The peso closed at PHP 57.995 on Feb. 28, strengthening by 37 centavos from its PHP 58.365 finish on Jan. 31.

Charges in the Wholesale Electricity Spot Market (WESM), the trading floor of electricity, decreased by PHP 0.2247 per kWh due to the improved supply situation in Luzon.

IPPs, PSAs, and WESM accounted for 31%, 47%, and 22% respectively of the company’s total energy requirement for the period.

“Pass-through charges for generation and transmission are paid by Meralco to the power suppliers and the grid operator, respectively; while taxes, universal charges, and FIT-All are all remitted to the government,” Meralco said.

The company’s distribution charge has not moved at PHP 0.0360 per kWh since August 2022.

Lawrence S. Fernandez, Meralco vice-president and head of utility economics, said prices at the spot market might shoot up after the declaration of a yellow alert over the Luzon grid last week.

“Let’s see what will happen for the rest of the month. Demand has moderated a bit after that one time of yellow alert. So, we’ll have to see what the situation will be for the rest of the month,” he said.

Meanwhile, Mr. Zaldarriaga said Meralco’s energy requirements are fully covered by its suppliers as the summer season approaches.

“We entered into an emergency power supply agreement to cover our requirements, especially during peak load come the summer months. Although it has not been officially declared, we already feel the impact of the temperature levels on our demand,” he said.

“So, as long as there will be no unplanned and forced outages from the plants and as long as transmission will be able to supply the load coming from the power plants, we don’t see any problems come the summer months,” he added.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by 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

Treasury fully awards reissued bonds

The government made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday as the papers attracted strong demand amid better risk sentiment and after Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. signaled a possible rate cut next month.

The Bureau of the Treasury (BTr) raised PHP 30 billion as planned via the reissued 10-year bonds it auctioned off on Tuesday as total bids reached PHP 81.761 billion or almost thrice as much as the amount on offer.

The bonds, which have a remaining life of seven years and six months, were awarded at an average rate of 6.143%. Accepted bid yields ranged from 6.12% to 6.15%.

“With its decision, the Committee initially raised the full program of PHP 30 billion while accepting further subscription through the tap facility. The total outstanding volume for the series is currently at PHP 358.6 billion,” the Treasury said in a statement.

The average rate of the reissued papers was 17.5 basis points (bps) higher than the 5.968% fetched for the series’ last award on Feb. 11, but 60.7 bps lower than the 6.75% coupon for the issue.

This was also 4.7 bps above the 6.096% quoted for the seven-year bond — the benchmark tenor closest to the remaining life of the papers on offer — but 3 bps lower than the 6.173% seen for the same bond series at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.

“Strong demand was seen following the drop in US Treasury yields overnight. This morning, BSP Governor Remolona also said a cut is on the table for the April 10 Monetary Board meeting, adding to improvement in risk sentiment,” a trader said in a text message.

Stocks slumped globally on Monday, while US bond yields dropped as investor worries about the potential economic slowdown were exacerbated after President Donald J. Trump did not rule out a recession resulting from his tariffs, Reuters reported.

MSCI’s global stock index fell more than 2% for its biggest one-day drop since August while Nasdaq led Wall Street losses, ending down 4% for its steepest percentage loss since Sept 2022.

Investors had started seeking safety as early as Sunday when Mr. Trump in a Fox News interview talked about a “period of transition” while declining to predict whether his tariffs on China, Canada and Mexico would result in a US recession.

MSCI’s gauge of stocks across the globe fell 19.37 points or 2.27% to 832.73 after touching its lowest level since Jan. 13.

In fixed income, yields fell with US government bonds in demand after the Trump interview cut into investor confidence.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 10.4 bps to 3.898% from 4.002% late on Friday, on track for their largest daily drop since September.

The yield on benchmark US 10-year notes fell 9.3 bps to 4.225%, while the 30-year bond yield fell 6.9 bps to 4.548%.

Meanwhile, Mr. Remolona on Tuesday 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.

In a move that surprised the market, the Monetary Board in February paused its nascent 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.

He earlier said that the central bank will likely continue reducing interest rates by 25 bps at a time, with 50 bps in cuts still on the table this year.

The BSP last year cut benchmark rates by a total of 75 bps via three consecutive 25-bp reductions since it began its easing cycle in August, bringing the policy rate to 5.75%.

The BTr is looking to raise PHP 147 billion from the domestic market this month, or PHP 22 billion from Treasury bills and PHP 125 billion from T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at PHP 1.54 trillion or 5.3% of gross domestic product this year. — A.M.C. Sy with Reuters

PSEi snaps winning run amid US recession fears

Philippine stocks snapped their six-day winning streak on Tuesday, joining the decline in global markets, amid recession fears in the United States.

The Philippine Stock Exchange Index (PSEi) dropped by 2.42% or 154.22 points to close at 6,206.55 on Tuesday, while the broader all shares index fell by 1.71% or 64.33 points to 3,684.59.

“The local bourse broke its six-day rally, weighed by negative spillovers from Wall Street. This comes amid recession fears in the US driven by their tariff policies,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“Philippine shares were sold down, fueled by investor worries that uncertainty surrounding tariff policies could lead the global economy into a recession. Concerns about the US have been escalating over the past month and was amplified by recent comments from the White House,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

Emerging market (EM) stocks remained under pressure on Tuesday, as concerns over a US economic slowdown which could lead to a recession weighed on equities, Reuters reported.

MSCI’s index for EM stocks was down 0.4% by 0832 GMT, with South Korean shares closing more than 1% lower, though a higher close in China and Hong Kong helped offset some losses.

Wall Street sold off sharply overnight, with the S&P 500 closing down 8.6% from its Feb. 19 record high, shedding over $4 trillion in market value since then and nearing a 10% decline that would represent a correction for the index.

US President Donald J. Trump’s tariff plans have stoked market volatility after the president late last week suspended the 25% tariffs on Canadian and Mexican goods which had come into effect on March 4. He had initially announced tariffs earlier this year and then postponed them by a month to early March.

Over the weekend, Mr. Trump declined to predict whether the US could face a recession, spurring a selloff in risk assets worldwide.

All sectoral indices closed in the red on Tuesday. Property sank by 4.45% or 102.72 points to 2,203.89; services retreated by 3.33% or 70.03 points to 2,031.68; industrials dropped by 2.13% or 189.30 points to 8,692.13; holding firms decreased by 1.77% or 94.02 points to 5,198.99; mining and oil went down by 1.75% or 156.03 points to 8,739.41; and financials declined by 0.78% or 18.63 points to 2,360.10.

“Only three index members closed with gains this Tuesday, led by Bank of the Philippine Islands, climbing 0.68% to PHP 132.80,” Mr. Tantiangco said.

Value turnover rose to PHP 7.71 billion on Tuesday with 753.65 million shares traded from the PHP 6.41 billion with 627.42 million issues exchanged on Monday.

Decliners overwhelmed advancers, 157 versus 58, while 41 names closed unchanged.

Net foreign selling stood at PHP 350.28 million on Tuesday versus the PHP 1.41 billion in net buying seen on Monday. — R.M.D. Ochave with Reuters

2024 FDI net inflows inch up as Dec. tally hits 11-year low

Net inflows of foreign direct investments (FDI) into the Philippines inched up by just 0.1% in 2024 but plunged in December to its lowest monthly tally in 11 years, amid uncertainty in global trade, data from the central bank showed.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed FDI net inflows edged higher to USD 8.93 billion in 2024 from USD 8.925 billion in 2023, ending two straight years of declining inflows.

The 2024 FDI tally was also the highest in two years but below the BSP’s forecast of USD 9 billion.

Investments in equity and investment fund shares rose by 13.1% to USD 2.7 billion in 2024 from USD 2.39 billion in 2023.

Net foreign investments in equity capital climbed by 42.4% to USD 1.54 billion last year from USD 1.08 billion in 2023.

Placements increased by 4.3% to USD 2.17 billion, while withdrawals fell by 37.1% to USD 628 million.

BSP data showed these placements mainly came from Japan (38%), the United Kingdom (35%), the United States (10%), and Singapore (8%).

Investments were mostly channeled into manufacturing (68%), followed by real estate (12%), and information and communication (5%) industries.

Meanwhile, net investments in debt instruments stood at USD 6.23 billion, down by 4.7% from USD 6.53 billion in 2023.

Reinvestment of earnings likewise declined by 11.2% to USD 1.17 billion from USD 1.31 billion.

December slump

In December alone, FDI net inflows plunged by 85.2% to USD 110 million from USD 743 million in the same month in 2023.

Month on month, inflows likewise fell by 88% from USD 922 million.

December saw the lowest FDI net inflow in 11 years or since the USD 102.16 million recorded in December 2013.

“While nonresidents’ net equity capital investments rose, FDI declined due to increased debt repayments by resident corporations to their nonresident direct investors,” the BSP said.

The higher debt repayments brought net investments in debt instruments to an outflow of USD 19 million in December, a reversal of the USD 618-million inflow in the same month in 2023.

Reinvestment of earnings declined by 14.7% year on year to USD 80 million in December from USD 94 million a year ago.

On the other hand, net investments in equity capital other than the reinvestment of earnings jumped by 58% to USD 49 million in December from USD 31 million in the previous year.

This as equity capital placements dropped by 19.4% to USD 185 million, while withdrawals slid by 31.5% to USD 136 million.

By source, the bulk of equity capital placements in December came from Singapore (42%), followed by Japan (23%), and the United States (16%).

These were invested mainly in information and communication (40%), manufacturing (20%), financial and insurance (13%), construction (9%), and real estate industries (8%).

Meanwhile, investments in equity and investment fund shares went up by 3.3% to USD 129 million in December from USD 125 million.

“The sharp decline in net FDI inflows in December is concerning, as it suggests both short-term financial pressures on local firms and potential shifts in investor sentiment toward the economy,” Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said.

He said the higher debt repayments suggest resident firms are “prioritizing deleveraging over reinvesting capital, which may reflect tighter financial conditions or concerns over profit margins.”

“Policy uncertainty and global economic risks may have dampened investor sentiment, leading firms to delay or scale down expansion plans in the Philippines,” Mr. Rivera added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the slump in investment flows could be due to uncertainties from the protectionist policies by US President Donald J. Trump.

This may have “encouraged more investments and jobs in the US rather than outside the US that could reduce FDIs globally,” he added.

Prior to assuming office in January, Mr. Trump had announced his plans to impose tariffs on major trading partners, such as China, Canada and Mexico, as well as an across-the-board reciprocal tariff on all countries that tax US imports.

Mr. Ricafort also cited tensions between China and the Philippines as well as weather disturbances that could have disrupted investment activity.

“The drop in FDI could also reflect competitiveness challenges, such as high operating costs, infrastructure bottlenecks, and concerns about regulatory stability,” Mr. Rivera added.

For the coming months, Mr. Ricafort said investment flows could be supported by the implementation of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act.

“This could make foreign investors become more decisive in locating in the country amid enhanced incentives for foreign investors,” he added.

Further interest rate cuts by the US Federal Reserve and BSP could also lower financing costs and attract more FDIs in the country, Mr. Ricafort said.

Despite the surprise policy pause in February, the BSP has said it is still in easing mode.

BSP Governor Eli M. Remolona, Jr. has said there is a possibility of up to 50 basis points of rate cuts this year. The central bank kept the key rate steady at 5.75% last month, citing global trade uncertainties.

“Higher global interest rates make borrowing more expensive, discouraging new investments,” Mr. Rivera said.

Mr. Rivera noted that countries like Vietnam and Indonesia may have attracted more FDI “due to stronger incentives or more favorable business environments.”

“Investors may be waiting for clarity on key economic reforms, tax policies, and regulatory frameworks before committing capital,” he added.

On the other hand, Mr. Ricafort said the tariff war would continue to weigh on FDI inflows in the coming months.

“(These) all encourage foreign investors to locate in the US to avert higher import tariffs and create more jobs in the US as part of Trump’s America-first policy,” he added.

The central bank expects to end 2025 with a USD 10-billion net FDI inflow.

The BSP noted that its FDI data are distinct from the investment data of other government sources as it covers actual investment flows.

“In contrast, the approved foreign investments data published by the Philippine Statistics Authority are sourced from Investment Promotion Agencies. These represent investment commitments, which may not necessarily be fully realized in a given period.” – Luisa Maria Jacinta C. Jocson, Reporter

Thrift banks to request lower liquidity ratio

Thrift banks will ask the Bangko Sentral ng Pilipinas (BSP) to lower the minimum liquidity ratio (MLR) for the industry to 16%, as the reserve requirement ratio (RRR) cut takes effect later this month.

“I’m sure they will be open to that. Especially now that we have a 0% [RRR] already. So, let’s see. We will continue to probably request from them (the BSP),” Chamber of Thrift Banks (CTB) President and CARD SME Bank Vice-Chairperson Mary Jane A. Perreras told reporters on the sidelines of the CTB General Membership Meeting on Friday.

Last year the BSP rejected the thrift banking industry’s call to reduce the MLR, saying there was no need. It noted the 20% MLR was “appropriate,” as it ensures that thrift banks “have adequate liquid assets to withstand potential stress events while continuing to meet their clients’ funding needs.”

“During the pandemic it was at 16%. Now they have brought it back to 20%. So hopefully they can bring it back even if little by little,” Ms. Perreras said.

In April 2020, the BSP lowered the MLR for stand-alone thrift banks, rural banks and cooperative banks to 16% from 20% to help these lenders meet clients’ demand for funds during the pandemic.

This regulatory relief measure expired at the end of 2022, bringing the MLR back to 20%.

Ms. Perreras said the BSP could reconsider its earlier stance due to the expected increase in loan volume after the RRR cut takes effect.

The RRR for thrift lenders will be reduced by 100 basis points to 0%, effective March 28. The RRR is the portion of reserves that banks must hold onto to ensure they can meet liabilities in case of sudden withdrawals. When a bank is required to hold a lower reserve ratio, it has more funds to lend to borrowers.

“That (RRR cut) will increase the volume of loans, hopefully. Because there will be more liquidity that will be in the market. And we’re still also hoping that after the RRR is reduced to zero, the MLR could be reduced next,” she said.

Ms. Perreras said a reduction in MLR would further boost lending.

“We’re hoping that maybe that would be next. Because that is much better for us, especially for banks to be able to lend more… I’m sure they have reasons why they are keeping it at 20%. But we hope that they would also reconsider our request,” she said.

Thrift loans

Meanwhile, Ms. Perreras said loans disbursed by thrift banks could hit around P900 billion this year, driven by the RRR cut and increased lending to small businesses and the agriculture sector.

“I think this growth will continue this year. Especially that now, we have a zero-reserve requirement (ratio). So, that loan portfolio, we expect that to be growing because we have more liquidity to do more loans outside,” she said.

In 2024, thrift banks disbursed loans worth P770 billion, Ms. Perreras said in a speech on Friday. This was around 15% higher than the P667.63-billion loans in 2023.

She told reporters that the sector’s net income and assets could grow by 6-7% this year.

However, cybersecurity issues continue to pose a risk for the sector.

“I think most of the banks are experiencing this, but because of the numerous solutions providers that are going to be very helpful for all the banks, not only the big banks but the big and the small banks, I think we will try to really fight this off,” Ms. Perreras said.

The thrift banking industry’s total assets grew by 6% to P1.1 trillion in 2024 from P1.04 trillion in 2023.

“Total capital reached P174 billion up by 10.7% from P157 billion. Capital adequacy ratio (CAR) is a strong 17.88%, very much above the 10% minimum required CAR. Nonperforming loan ratio remained manageable at 6.66%,” Ms. Perreras added.

This year, the CTB is looking at increasing loans for small businesses, as well as agricultural firms, which are typically affected by natural calamities.

“We have a lot of disasters and usually the affected sector is agriculture. So, while we are still working on development and making this a bigger sector. We will also look at the other sectors like the small and medium enterprises,” she said. — Aaron Michael C. Sy

Gov’t upsizes T-bill award amid robust demand

The government hiked the volume of Treasury bills (T-bills) it awarded on Monday as rates were below secondary market levels on growing expectations that the Bangko Sentral ng Pilipinas (BSP) will resume its easing cycle next month following slower-than-expected February inflation.

The Bureau of the Treasury (BTr) raised PHP 30.8 billion from the T-bills it auctioned off on Monday, higher than the PHP 22-billion plan, as total bids reached PHP 90.598 billion, more than four times as much as the amount on offer and higher than the PHP 85.474 billion in tenders recorded on Feb. 24.

The strong demand prompted the government to double the accepted noncompetitive bids for the 91- and 182-day securities to P5.6 billion and to P6.4 billion for the 364-day T-bill, the Treasury said in a statement.

Broken down, the Treasury borrowed PHP 9.8 billion via the 91-day T-bills, higher than the PHP 7-billion plan, as tenders for the tenor reached PHP 35.628 billion. The three-month paper was quoted at an average rate of 5.178%, declining by 10.5 basis points (bps) from the 5.283% seen at the previous auction, with the BTr only accepting bids with this yield.

The government also made a PHP 9.8-billion award of the 182-day securities, above the programmed PHP 7 billion, as bids stood at PHP 30.05 billion. The average rate of the six-month T-bill was at 5.48%, 13 bps lower than the 5.61% fetched last week, with accepted rates ranging from 5.49% to 5.568%.

Lastly, the Treasury raised PHP 11.2 billion via the 364-day debt papers, more than the PHP 8 billion placed on the auction block, as demand for the tenor totaled PHP 24.92 billion. The average rate of the one-year debt inched up by 0.3 bp to 5.773% from 5.77% previously, with bids accepted carrying yields of 5.755% to 5.779%.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.2702%, 5.5681%, and 5.7941%, respectively, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the Treasury.

The government upsized its T-bill award on Monday as average rates were all lower than prevailing secondary market yields amid robust demand, the Treasury said.

“The latest Treasury bill average auction yields again slightly corrected lower for the second straight week after slightly rising for three straight weeks after the latest inflation unexpectedly eased to 2.1%, a pleasant surprise near the lower end of the BSP’s inflation target of 2-4%,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

This could support a 25-bp cut in borrowing costs as early as next month, he said.

“Demand was strong due to renewed interest in positioning given the recent decline in inflation. Looking forward, there are chances of another rate cut in April,” a trader said in a phone interview.

Philippine headline inflation slowed to 2.1% in February from 2.9% in January, the government reported last week. This was the slowest monthly print in five months or since the 1.9% in September 2024.

This was also below the BSP’s 2.2%-3% forecast for the month and the 2.6% median estimate in a BusinessWorld poll of 18 analysts.

The Monetary Board will next meet to discuss policy on April 3.

Analysts said slower February inflation gives the BSP room to resume its rate-cut cycle at next month’s meeting following its surprise pause at last month’s review.

BSP Governor Eli M. Remolona, Jr. last month said the central bank is still in easing mode, signaling the possibility of up to 50 bps worth of cuts this year.

The Monetary Board has delivered 75 bps in reductions to borrowing costs since it began its easing cycle in August 2024, with the policy rate now at 5.75%.

The trader added that investors swamped the offer as they sought to lock in returns ahead of the upcoming cuts in banks’ reserve requirement ratios (RRR) by month-end, which would free up about PHP 300 billion in liquidity.

Effective March 28, the RRR of universal and commercial banks and nonbank financial institutions with quasi-banking functions will be cut by 200 bps to 5% from 7%. Digital banks’ ratio will go down by 150 bps to 2.5%, while the ratio for thrift lenders will be lowered by 100 bps to 0%.

Rural and cooperative banks’ reserve ratio has been at 0% since October, which was the last time the BSP cut reserve requirements.

The RRR is the portion of reserves that banks must hold onto to ensure they can meet liabilities in case of sudden withdrawals. A lower ratio means banks have more liquidity, which they can use to fund their loans.

On Tuesday, the BTr will offer PHP 30 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of seven years and six months.

The Treasury is looking to raise PHP 147 billion from the domestic market this month, or PHP 22 billion from T-bills and PHP 125 billion from T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at PHP 1.54 trillion or 5.3% of gross domestic product this year. — A.M.C. Sy

PSEi surges to 6,300 level on BSP rate cut hopes

Philippine shares rallied for a sixth consecutive day on Monday as investors expect the Bangko Sentral ng Pilipinas (BSP) to resume its easing cycle as early as next month amid the positive outlook for inflation, especially with the implementation of measures to bring down food prices.

The benchmark Philippine Stock Exchange index (PSEi) rose by 0.99% or 62.48 points to end at 6,360.77, while the broader all shares index rose by 0.66% or 24.72 points to 3,748.92.

This was the PSEi’s highest close in nearly seven weeks or since it finished at 6,378.86 on Jan. 23.

“The local bourse rose, still on hopes that the Bangko Sentral ng Pilipinas will further ease its monetary policies following the significant slowdown in our inflation last February. Robust 2024 corporate results also helped in sustaining the market’s climb,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“Philippine share continued the recovery, getting a boost from the better-than-expected CPI (consumer price index) reading and strengthening peso. Investors also came into the market also US equities bounced back on Friday,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

Headline inflation sharply eased to 2.1% in February from 2.9% in January and 3.4% a year ago, marking the slowest inflation print in five months, the government reported last week.

This was also below the BSP’s 2.2%-3% forecast for the month and the 2.6% median estimate in a BusinessWorld poll of 18 analysts.

The February print brought average inflation to 2.5% in the first two months, well within the central bank’s 2-4% target.

The Monetary Board will review policy on April 3. Analysts said slower inflation last month will allow the BSP to resume its easing cycle following its surprise pause at the February review.

“The PSEi gained for the sixth straight trading day after the MSRP (maximum suggested retail price) for pork took effect today as part of the non-monetary measures to further bring down pork prices and overall inflation,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

All sectoral indices closed in the green on Monday. Mining and oil surged by 3.73% or 320.65 points to 8,895.44; property increased by 1.41% or 32.25 points to 2,306.61; industrials rose by 1.22% or 107.76 points to 8,881.43; services went up by 0.95% or 19.94 points to 2,101.71; holding firms climbed by 0.79% or 41.81 points to 5,293.01; and financials inched up by 0.64% or 15.26 points to 2,378.73.

Value turnover rose to PHP 6.41 billion on Monday with 627.42 million shares exchanged from the PHP 6.33 billion with 528.06 million issues traded on Friday.

Advancers beat decliners, 122 versus 76, while 48 names were unchanged.

Net foreign buying surged to PHP 1.41 billion on Monday from PHP 158.85 million on Friday. — R.M.D. Ochave

Dollar reserves rise to USD 107B in Feb.

The Philippines’ dollar reserves rose to USD 106.65 billion as of end-February, according to the Bangko Sentral ng Pilipinas (BSP).

Preliminary data from the central bank showed gross international reserves (GIR) rose by 3.3% month on month from USD 103.27 billion as of end-January.

This was also 4.6% higher than USD 101.99 billion in the same period a year ago.

The dollar reserves were also the highest in three months or since the USD 108.49 billion posted in November.

Ample foreign exchange buffers protect the country from market volatility and ensure that it is capable of paying its debts in the event of an economic downturn.

“The month-on-month increase in the GIR level reflected mainly the National Government’s (NG) net foreign currency deposits with the BSP, which include proceeds from its issuance of Republic of the Philippines global bonds,” the central bank said.

In January, the NG raised USD 3.3 billion from the sale of 10-year and 25-year fixed-rate global bonds and seven-year euro sustainability bonds. It was NG’s first global bond offering for the year.

BSP data showed the level of dollar reserves as of end-February is enough to cover about 3.8 times the country’s short-term external debt based on residual maturity.

It is also equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income.

The rise in dollar reserves was also due to the “upward valuation adjustments in the BSP’s gold holdings due to the increase in the price of gold in the international market, and net income from the BSP’s investments abroad.”

The value of the central bank’s gold holdings went up by 2.5% to USD 12.5 billion at end-February from USD 11.75 billion a month ago. It likewise jumped by 16.6% from USD 10.34 billion in the same period in 2024.

Foreign investments stood at USD 89.41 billion as of end-February, up by 3.5% from USD 86.37 billion as of end-January and by 3.4% from USD 86.45 billion a year prior.

Meanwhile, net international reserves increased by 3.3% to USD 106.6 billion from USD 103.2 billion as of end-January.

Net international reserves refer to the difference between the BSP’s reserve assets (GIR) and reserve liabilities, including short-term foreign debt, and credit and loans from the International Monetary Fund (IMF).

The BSP’s reserve assets also include foreign investments, foreign exchange, reserve position in the IMF and special drawing rights (SDR).

Reserves with the IMF dipped by 0.2% to USD 670.2 million as of end-February from USD 671.3 million a month earlier. It also declined by 10.9% from USD 752.5 million in the year-ago period.

SDRs — or the amount which the Philippines can tap from the IMF’s reserve currency basket — edged higher by 0.2% to USD 3.74 billion from USD 3.73 billion in the previous month. Year on year, it dropped by 1.1% to USD 3.78 billion.

“The increase in GIR reflects strong external buffers, which are crucial for shielding the economy against external shocks,” Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the rise in GIR was due to the NG’s latest global bond issuance and continued gains in gold holdings.

“Gold holdings continued to improve, largely reflecting and consistent with the 2.1% monthly gain in world gold prices, which again posted new record highs recently partly due to some flight to safe havens such as gold amid the recent global market volatility,” he said.

Mr. Ricafort also noted the increase in foreign investments amid gains in the prices of US Treasuries in February.

“The benchmark 10-year US Treasury yield already eased to 4.3%, among the lowest in three months,” he added.

For the coming months, Mr. Ricafort said the GIR could be supported by the continued growth in overseas Filipino worker (OFW) remittances, business process outsourcing (BPO) revenues, exports and the quicker recovery in foreign tourism revenue.

“OFW remittances are also expected to remain resilient, helping bolster reserves. BPO and tourism can generate foreign exchange inflows that can strengthen GIR,” Mr. Rivera added.

Oikonomia Advisory and Research, Inc. economist Reinielle Matt M. Erece likewise said the GIR will be driven by “strong OFW remittances, foreign investments, a weak peso, and trade diversion.”

The BSP is expecting a GIR level of USD 110 billion for this year.

Mr. Rivera said the central bank’s forecast for dollar reserves this year is attainable, though this would depend on the BSP’s intervention in the FX market.

“A depreciating peso could lead to higher import costs, increasing demand for the US dollar which may put pressure on reserves. However, a weaker peso also benefits dollar-earning sectors, which could offset some of the risks,” Mr. Rivera said.

“A higher import bill due to infrastructure projects and rising oil prices could widen the deficit, requiring the BSP to use reserves to stabilize the peso,” he added.

The peso closed at P57.206 per dollar on Friday, strengthening by 11.4 centavos from its P57.32 finish on Thursday. This was the peso’s best finish in nearly five months or since its P57.205-a-dollar close on Oct. 11, 2024.

“A weak peso is not necessarily disadvantageous, as it makes exports more competitive in international markets. Higher exports mean more dollar inflows,” Mr. Erece said.

“Add to that the ongoing trade conflict among large producers, which can be an opportunity for the Philippines to be an alternative trading partner for other countries.” – Luisa Maria Jacinta C. Jocson, Reporter

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