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President Ferdinand R. Marcos, Jr. is pushing for more incentives for the semiconductor industry, following a meeting with the Private Sector Advisory Council (PSAC) on Tuesday.

At the meeting with the PSAC-Education and Jobs Sector Group (PSAC-EJSG), Mr. Marcos emphasized the importance of the semiconductor industry, as semiconductors account for a significant portion of Philippine exports.

“Actually, we really need to push on the semiconductor industry. It’s because, again, it’s not something that we had in mind but the situation — considering how much money we make as the income we get from exports already,” he was quoted in a statement as saying during the meeting.

The Palace said the PSAC-EJSG recommended a “review” of the implementing rules and regulations (IRR) of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act to include a specific provision on incentives for the semiconductor industry.

Mr. Marcos signed the CREATE MORE Act into law in December. The interim IRR was also released last month.

“We’ll do it through the IRR, perhaps. Because it took us such a while to get the CREATE MORE in the first place,” Mr. Marcos said. “So maybe it’s just another incentive scheme.”

The President said there is no specific provision on incentives for the semiconductor companies under the CREATE MORE law, which provides incentives for other industries such as car manufacturing.

The PSAC-EJSG presented a “roadmap” for the semiconductor and electronics industry during Tuesday’s meeting. It also recommended the creation of a National Education and Workforce Development Plan, although there were no details provided.

Electronics is the single-biggest export industry in the Philippines, accounting for nearly 60% of total Philippine merchandise exports. The bulk of these exports are finished semiconductor products that are incorporated into electronic devices.

Latest data showed semiconductor exports fell by an annual 33.1% to USD 1.91 billion in November, amid soft global demand.

“The push for incentives for semiconductor locators aligns with the Philippines’ goal of strengthening its position in the global semiconductor value chain, which is critical for economic growth, technological advancement, and job creation,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said.

“Positioning the Philippines as a hub for semiconductor production or assembly can yield long-term economic benefits,” he said in a Facebook Messenger chat.

He said neighboring countries like Vietnam, Malaysia, and Thailand offer competitive incentive packages for semiconductor locators, “creating pressure for the Philippines to follow suit.”

“The CREATE Act is designed to offer rationalized tax incentives to attract and retain investors. However, it may not explicitly address the unique needs of semiconductor locators, such as the capital-intensive nature of the industry,” said Mr. Rivera.

“That is, semiconductor firms require significant upfront investments in technology and facilities.”

He noted that semiconductor projects often take years before getting returns, “necessitating longer or more flexible incentive structures.”

“Adding specific provisions to the IRR for semiconductor locators would signal that the Philippines recognizes these needs and is committed to becoming a global player in this space,” he said.

Think thank InfraWatch convenor Terry L. Ridon said incentives are insufficient to ensure the semiconductor sector’s expansion “for as long as other binding constraints remain unresolved, such as corruption, high energy prices and red tape.”

Mr. Ridon noted high energy prices remain the biggest threat to the Philippines’ semiconductor sector.

Mr. Marcos signaled incentives for semiconductor locators after US President Donald J. Trump took office on Jan. 20.

The US and the Philippines under then President Joseph R. Biden have committed to boosting their semiconductor partnerships, particularly under the US CHIPS Act.

The Department of Trade and Industry has said it is eyeing to produce 128,000 engineers for the local semiconductor industry with support from the US under the CHIPS Act.

The Philippine Economic Zone Authority’s (PEZA) economic zones are home to 482 electronics manufacturing services and semiconductor manufacturing services (EMS-SMS) companies that provide critical back-end support to their principal clients in the US.

“Most of these are longstanding American RBEs (registered business enterprises) that have made the Philippines their manufacturing hub in the region,” PEZA Director-General Tereso O. Panga said.

He noted that many of these companies have received support from the CHIPS Act’s International Technology Security and Innovation Fund to “enhance the host country’s electronics’ manufacturing capability and supply-chain resilience.”

The Semiconductor and Electronics Industries in the Philippines Foundation, Inc.  in December said exports of semiconductor and electronic products are likely to be flat in 2025 amid a “tough business environment and low demand.”

“The semiconductor industry has been our bread and butter as far as exports go. And yet, this has remained a low value-added product with very high costs since a large part of the imports are being imported,” Ateneo de Manila University economics professor Leonardo A. Lanzona said via Messenger chat.

He said further incentives for semiconductor players “will only increase the opportunity costs of this product since we will forego the production of alternative products that may also deserve such incentives.”

“Worse, changing the law simply for semiconductor locators indicates that this product is no longer competitive with its survival simply dependent on government support,” he added. “This is the opposite of trade efficiency or market discipline.” – Kyle Aristophere T. Atienza, Reporter

The Department of Finance’s (DoF) Privatization and Management Office (PMO) will release next month new guidelines allowing for the submission of unsolicited bids for state assets. 

“We are looking to publish the privatization guidelines. It has been approved. Only the actual publication is left. Our publication in the Official Gazette has been moved by another month,” Finance Undersecretary Catherine L. Fong told reporters at a briefing on Jan. 16.

The Privatization Council (PrC) approved the Guidelines on the Privatization and Disposition of Government Assets on Sept. 6 last year. The rules, which seek to institutionalize the PrC’s policies and decisions over the years, will be published in newspapers by next month.

Ms. Fong said among the key revisions is allowing unsolicited offers for assets in the PMO’s database. She noted 28,000 titles in the PMO database are small assets of about 200 square meters, which can be accessible to “ordinary Filipinos.” 

“This is an innovation — the first time allowing unsolicited proposals,” Finance Secretary Ralph G. Recto said.

Aside from unsolicited proposals, the new guidelines will also allow negotiated sales and direct purchases by present occupants of the residential properties, and the accreditation of real estate brokers to assist in the sale of properties.

This will help the government meet its PHP 101.01-billion privatization revenue goal for this year, which is more than double the PHP 42.12-billion target in 2024.

PMO is the marketing arm of the government concerning transferred assets, government corporations, and other properties assigned to it by the PrC.

Ms. Fong said unsolicited proposals will be published and can be subject to a challenge, similar to public-private partnership (PPP) projects.

Most of the assets are located in the province. She said the PMO is exploring options that would allow more Filipinos to purchase their own homes.

“The Land Bank of the Philippines is also interested in joining. They want to have a fire sale with their repossessed assets. There are a lot of government assets that are too small,” Ms. Fong said.

Meanwhile, the government also hopes to dispose of idle assets that require high maintenance costs and face legal challenges.

According to DoF data, PHP 4.4 billion was collected from the PMO disposition efforts in 2024, “with proceeds coming from the litigated assets, income from leases and dividend income.” This was significantly higher than PHP 1.94 billion in 2023.

Among the assets to be sold are the Caliraya-Botocan-Kalayaan (CBK) hydroelectric power plant complex, which has a minimum valuation of USD 300 million.

It will be auctioned off in April by the Power Sector Assets and Liabilities Management Corp. (PSALM). CBK has a 25-year build-rehabilitate-operate-transfer contract with state-owned National Power Corp. that will expire in 2026.

Mr. Recto said this could reach USD 1 billion if it becomes a part of the green energy auction. The DoF is working with the Department of Energy to increase the value of the assets.

The DoF is also planning to sell the property where the amusement park Star City is located in Pasay City.

“We want to sell Star City, but it is tied to Sukuk bonds. We have to balance the Treasury’s need for assets for Sukuk bonds, which is not easy to replace because it requires leasing, not just any property,” Ms. Fong said.

Star City is owned by Star Parks Corp., a subsidiary of Elizalde Holdings Corp. It is under a lease agreement with Philippine International Corp., which will expire in 2026.

If replacement is an option, Ms. Fong said the PMO will choose an asset without a lease, but it has to match the PHP 15-billion zonal value of the Star City property.

Filomeno S. Sta. Ana III, cofounder and coordinator of Action for Economic Reforms said the government’s reliance on privatization is “a lazy way of raising revenues.”

It is a “one-off source of revenues and thus unsustainable,” he said.

Instead, the DoF should raise more “efficient” taxes.

“A good example of an efficient tax is the excise tax on harmful products like tobacco, vape/e-cigarette, alcohol, soda and ultra processed foods.” he said. 

Mr. Sta. Ana said that the overall revenue collection is getting a boost from nontax revenue, including the fund transfers by the Philippine Health Insurance Corp., Philippine Deposit Insurance Corp. and other state-run agencies. These fund transfers are now being challenged in the Supreme Court.

Meanwhile, the DoF said around P23.94 billion in private capital through PPP projects is expected to be mobilized in 2025.

It noted that 97 PPP projects were added to the pipeline after the PPP Code was signed into law in December 2023. The implementing rules and regulations took effect on April 6, 2024.

These PPP projects include the Cavite Bus Rapid Transit System, School Infrastructure Project Phase III, and the Department of Education-Senate Teacher’s City. — Aubrey Rose A. Inosante

The Philippines’ balance of payment (BoP) surplus sharply narrowed in 2024, falling short of the central bank’s full-year projection.

Data from the Bangko Sentral ng Pilipinas (BSP) showed the full-year BoP position stood at a surplus of USD 609 million last year, plunging by 83.4% from the USD 3.672-billion surplus at end-2023.

This was also much lower than the BSP’s full-year projection of USD 3.5 billion.

The BoP shows a glimpse of the country’s transactions with the rest of the world. A surplus shows that more funds came into the country, while a deficit means more money fled.

“Based on preliminary data, the decline in the cumulative BoP surplus was due to higher trade-in-goods deficit and lower net receipts from trade in services and net foreign borrowings by the National Government (NG),” the BSP said.

Data from the local statistics agency showed the trade deficit widened by 3.2% year on year to USD 49.96 billion in the January-November period.

Outstanding external debt rose to a record USD 139.64 billion as of end-September, data from the BSP showed.

“This decline was partly muted, however, by the continued net inflows from personal remittances as well as net foreign portfolio and direct investments,” the central bank added.

In December alone, the BoP swung to a deficit of USD 1.508 billion, a reversal of the USD 642-million surplus a year earlier.

“The BoP deficit in December 2024 reflected the BSP net foreign exchange operations and drawdown on the NG deposits with the BSP to pay off its foreign currency debt obligations.”

Last year, the government raised USD 2 billion from global bonds in May and another USD 2.5 billion from its dollar bond offer in August.

At its end-December position, the BoP reflects a gross international reserve (GIR) level of USD 106.3 billion, down by 2% from USD 108.5 billion as of end-November.

“Specifically, the latest GIR level ensures availability of foreign exchange to meet balance of payments financing needs, such as for payment of imports and debt service, in extreme conditions when there are no export earnings or foreign loans,” the central bank said.

The level of dollar reserves was enough to cover 7.5 months of imports and payments of services and primary income. It is also equivalent to about 3.7 times the country’s short-term external debt based on residual maturity.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the wider BoP deficit in December was partly due to the trade shortfall in recent months.

“There is persistent import growth, particularly in energy, food and capital goods that likely outpaced export performance,” said John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies.

“The ongoing decline in exports due to weaker global demand particularly from major trading partners like China has exacerbated the trade deficit, a major component of the current account,” he added.

Mr. Ricafort said the peso volatility, especially from November to December, might have affected the BoP position.

“The strong US dollar also increased debt servicing costs for US dollar-denominated obligations,” Mr. Rivera added.

At end-2024, the peso closed at PHP 57.845, declining by PHP 2.475 or 4.28% from its end-2023 finish of PHP 55.37 against the dollar.

The peso fell to a record-low PHP 59 level thrice last year — twice in November and once in December.

Mr. Rivera said the recovery in tourism receipts and business process outsourcing revenues might not have been enough to “fully offset the drag from the trade imbalance.”

“Also, the government and private sector’s efforts to settle maturing foreign debt obligations may have contributed to outflows in the financial account, worsening the overall BoP position,” he added.

For the coming months, the BoP could improve if structural inflows continue to increase, Mr. Ricafort said.

“Any improvement in BoP data and in GIR data for the coming months could still help provide a greater cushion for the peso exchange rate versus the US dollar especially against any speculative attacks, as well as help strengthen the country’s external position,” he said.

Recent reforms would also help attract more investments into the country, Mr. Ricafort said.

In November, President Ferdinand R. Marcos, Jr. signed into law the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy.

The law expands fiscal incentives and lowers the corporate income tax on certain foreign enterprises.

The BSP projects a BoP surplus of USD 2.1 billion for 2025, equivalent to 0.4% of gross domestic product. – Luisa Maria Jacinta C. Jocson, Reporter

The Philippines is expected to be the second-fastest growing economy in Southeast Asia in 2025, as further monetary easing boosts domestic demand, the ASEAN+3 Macroeconomic Research Office (AMRO) said on Tuesday.

In its Regional Economic Outlook quarterly update, AMRO said Philippine gross domestic product (GDP) is projected to expand by 6.3% this year, unchanged from the forecast in December.

“We kept the growth forecast at 6.3%. That’s among the highest in the region and that’s partly because the Bangko Sentral ng Pilipinas (BSP) has started to also ease monetary policy.” AMRO Chief Economist Hoe Ee Khor said at a virtual news briefing on Tuesday.

This is within the Development Budget Coordination Committee’s 6-8% GDP growth target for 2025 until 2028.

The growth projection for the Philippines is the second-fastest among Association of Southeast Asian Nations (ASEAN) members, behind Vietnam (6.5%), but ahead of Cambodia (5.8%), Indonesia (5.1%), Malaysia (4.7%), Laos (4.6%), Thailand (3.1%), Brunei Darussalam (3%), Singapore (2.7%) and  Myanmar (1%).

In the ASEAN+3 region, the Philippines is also ahead of China (4.8%), Hong Kong (2.6%), South Korea (1.9%) and Japan (1.3%).

“The (central bank) governor has announced that there’s scope for them to continue to ease because the real interest rate is still pretty high. And we see signs that the economy is beginning to respond,” Mr. Khor said.

Since it began its easing cycle in August 2024, the BSP has lowered interest rates by 75 basis points (bps).

BSP Governor Eli M. Remolona, Jr. has signaled a rate cut at the Monetary Board’s first policy meeting on Feb. 13.

AMRO said stronger domestic demand and exports would support its growth outlook for the Philippines.

The think tank said tourism arrivals in the Philippines and Singapore remained below pre-pandemic levels, while the rest of the region recovered with the help of tourists from China.

Data from the Department of Tourism showed that international tourist arrivals increased by 9.15% to 5.95 million but missed its 7.7 million target in 2024.

For 2024, AMRO said the Philippine economy likely grew by 5.8%, falling short of the government’s 6-6.5% target.

“The Philippines is one of the stronger, faster-growing economies in the region. This year, we had shaved the growth down to 5.8%, but that’s because the third quarter was very weak,” Mr. Khor said.

In the third quarter, Philippine GDP expanded by a weaker-than-expected 5.2% due to bad weather affecting spending and agriculture.

This brought the average to 5.8% in the first nine months of the year. Fourth-quarter and full-year 2024 GDP data will be released on Jan. 30.

At the same time, AMRO kept its headline inflation forecast for the Philippines at 3.2% for 2025, slightly lower than the BSP’s 3.3% average forecast. In 2024, inflation averaged 3.2%.

Risks to outlook

Meanwhile, the ASEAN+3 region is projected to grow by 4.2% this year, same as the growth in 2024.

ASEAN is forecast to grow by 4.8% this year, slightly faster than 4.7% in 2024.

“Growth will be mainly driven by domestic demand, with firm external demand providing continued support. Nonetheless, regional growth has been revised downward from the 4.4% in the October 2024 update mainly to reflect the baseline assumption of the US increasing tariffs on imports from China in the second half of 2025,” AMRO said.

US President Donald J. Trump has vowed to impose tariffs of up to 60% on imported Chinese goods and 25% for Canadian and Mexican imports, as well as a 10% universal tariff.

“The higher tariffs are expected to increase prices in the US and constrain private sector spending. As a major export market for most ASEAN+3 economies, the resulting decline in demand from the US would weigh on regional exports,” AMRO said.

AMRO said regional growth could be lower by 0.1 percentage point in 2025.

“The impact would be considerably worse if affected economies were to retaliate, with growth being potentially 0.6 percentage point lower instead,” it added.

AMRO said the negative impact would likely build up in the next few years as demand weakens.

“Consequently, tariff retaliation could result in regional growth declining by 1-2 percentage points by 2026-2027 — marking the slowest regional growth since the Asian Financial Crisis (excluding the pandemic years of 2020-2022),” the think tank said.

Other risks to the regional outlook include a sharper growth slowdown in the US and Europe, tighter global financial conditions, a spike in global commodity prices and shipping costs and slower growth in China.

“Beyond the immediate risk of higher protectionism, the ongoing geoeconomic fragmentation and geopolitical tensions would weigh on the longer-term growth prospects of regional economies, particularly the trade-dependent ones,” AMRO said.

The region’s aging population and failure to address climate change could also impact economic growth, it added. – Aubrey Rose A. Inosante, Reporter

Most chief executive officers (CEO) based in the Philippines are optimistic about economic growth prospects despite worries over a shortage of skilled workers and technological disruption, a survey showed.

In the PwC 28^th Global CEO Survey, 78% of Filipino CEO respondents said they expect domestic economic growth to improve in the next 12 months.

On the other hand, 9% of the Filipino executives said they expect gross domestic product growth to stay the same in the next 12 months, while 13% said they expect a decline.

PwC’s 28^th Global CEO Survey gathered 4,701 responses from CEOs globally from October to November 2024. Of the total, 1,520 are from the Asia-Pacific region, including 32 from the Philippines.

For the next 12 months, 38% of the CEOs said that they are very confident about revenue growth, 38% are moderately confident, while 19% are only slightly confident.

Meanwhile, 44% of the CEOs said that they are optimistic about revenue growth in the next three years, 38% said they are moderately confident, and 13% said they are only slightly confident.

Filipino CEOs also expressed confidence in headcount expansion, with 59% saying they are planning to hire more workers in the next 12 months, higher than the global average of 42%.

“This commitment to human capital signals a long-term vision of strengthening capabilities to support business strategies,” PwC said.

However, 13% of Philippine CEOs said they would be decreasing headcount in the next 12 months, lower than  the 17% global average.

The survey showed Filipino executives cited shortage of skilled workers (28%) and technological disruption (28%) as their primary concerns, alongside macroeconomic volatility (19%) and inflation (16%).

PwC said the skill gap is especially prevalent in data analytics, digital transformation and emerging technologies.

“These immediate challenges are particularly critical because they directly impact business sustainability,” PwC said.

“These challenges emphasize the need for people and organizational reinvention, including more targeted investments in digital transformation and workforce development,” it added.

PwC said Filipino CEOs are making progress in addressing skill gaps and technological disruptions, with 75% having been able to develop innovative products and services and 65% forging partnerships with universities and managed service  providers.

The survey also showed Philippine-based executives’ confidence in the potential of artificial intelligence (AI), with 75% of Filipino CEOs personally trusting having AI, including generative AI, being embedded into key processes in their companies. This was higher than the global average of 67%.

The majority or 88% of the business leaders said they expect moderate to large AI integration in their business processes, workflows and technology platforms in the next three years.

Meanwhile, the CEOs also see moderate to large AI integration in workforce and skill development (75%), new product or service development (69%), and core business strategy (60%).

PwC Philippines Deals and Corporate Finance Managing Partner Mary Jade Roxas-Divinagracia said AI would not only help businesses in automating routine tasks but also uncover deeper insights into consumer behavior.

“Ultimately, the impact of AI depends on how it is used. Businesses that thoughtfully embed AI into their strategies will not only enhance operations but also uncover opportunities for transformative growth,” she said in a statement.

PwC Philippines Chairman and Senior Partner Roderick M. Danao said the rapid advancement of AI and digital technologies are reshaping how businesses operate today.

“While reinvention is essential for navigating these changes, it requires careful planning and measured implementation with a focus on skill development and workforce readiness to meet future demands,” he said in the statement.

“By strategically adopting new technologies, leaders can create meaningful opportunities for their organizations and work to ensure long-term viability,” he added.

According to the report, 69% of Filipino CEOs believe that their businesses will only remain economically viable as long as 10 years if they continue on their current path, which reflects concerns about changes in technology and consumer preferences, as well as increased competition. This was higher than the 42% global average.

Meanwhile, only 31% said their businesses would be viable even after 10 years on their current path, lower than the 55% global average.

“Without significant changes to their business models, operational processes and technological capabilities, organizations risk becoming obsolete in an increasingly dynamic market environment,” PwC said. “To keep up, CEOs must focus on fundamental transformation rather than incremental improvements.” — Justine Irish D. Tabile

Still-elevated rice prices could stoke inflation and threaten the Bangko Sentral ng Pilipinas’ (BSP) pace of monetary easing, GlobalSource Partners said.

“Such a precarious rice situation does not promise bright prospects for domestic inflation,” GlobalSource Partners Country Analyst Diwa C. Guinigundo said in a report.

“Given the inflationary impact of an expected weakening of the peso-dollar exchange rate, the uptrend in rice prices coupled with creeping fuel price increases and the reported price hikes of 63 goods in February could generate more price pressures.”

Headline inflation averaged 3.2% last year, the first time that full-year inflation fell within the central bank’s 2-4% target since 2021. It was also the slowest since 2.4% in 2020.

“The BSP would have to be careful in issuing forward guidance that commits itself to more rate reductions in the next meetings of the Monetary Board,” Mr. Guinigundo said.

“The supply side does not appear to be supportive of its 2-4% target,” he said, noting that inflation risk-adjusted forecasts for 2025 and 2026 stand at 3.4% and 3.7%, respectively.

For this year, the BSP expects inflation to average 3.3%. Accounting for risks, inflation could average 3.4%.

The Monetary Board delivered a total of 75 basis points of rate cuts last year, bringing the benchmark to 5.75%.

“Since the weight of rice at 8.9% dominates the weight of food in the consumer price index and food weighs heaviest among all the other components, economists and inflation forecasters fear of another surge in inflation this year and the next,” Mr. Guinigundo said.

The Agriculture department has announced plans to declare a food security emergency for rice. This would allow the release of buffer stocks of local rice from the National Food Authority to be sold at subsidized prices.

Mr. Guinigundo said this activity could be a “potential source of corruption.”

“Many buffer stocks could be declared aging and discounted only to be resold with minimal polishing. Given the forthcoming election, local government units  could also use them to win votes,” he said adding that the impact of this move would be “minimal.”

Rice prices were supposed to start declining after the government slashed tariffs on rice imports, Mr. Guinigundo said.

“This did not happen because one, domestic rice production remained weak; and two, profiteering from reduced tariffs did not cease but only benefited importers, wholesalers and retailers who were reported to have engineered the artificial shortage of the food staple.”

President Ferdinand R. Marcos, Jr. issued an executive order that reduced tariffs on rice imports to 15% from 35% until 2028. This took effect in July.

“The problem remains because agricultural policy to stabilize prices of key commodities continues to focus on market dynamics rather than on production and agricultural productivity,” Mr. Guinigundo said.

Rescheduled meeting

Meanwhile, the Monetary Board’s first policy meeting this year was rescheduled to Feb. 13 from Feb. 20, the central bank said on Tuesday.

This as BSP Governor Eli M. Remolona, Jr. is set to attend the Financial Action Task Force (FATF) plenary and meetings in France from Feb. 17-20.

The Philippines has been on the FATF’s gray list since June 2021. Government officials are hopeful that the country can exit the gray list this year. — Luisa Maria Jacinta C. Jocson