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INFRASTRUCTURE SPENDING slumped by nearly 20% in December, but still exceeded the full-year program, the Department of Budget and Management (DBM) said.

Latest data from the DBM showed that spending on infrastructure and other capital outlays fell by 19.8% or PHP 36.3 billion to PHP 146.7 billion in December 2024 from PHp 183 billion in the same month in 2023.

“This was attributed to the combined impact of the base effects of high capital disbursements in 2023, as well as the ongoing processing and release of cash allocations for payments of completed and ongoing capital outlay projects of various departments/agencies during the latter part of 2024,” the DBM said.

For the full-year, expenditures on infrastructure and other capital outlays jumped by 10.1% to PHP 1.33 trillion from PHP 1.2 trillion in 2023. This also exceeded the PHP 1.24-trillion program by 6.7%.

The DBM attributed the faster infrastructure spending to the implementation of the Department of Public Works and Highways’ (DPWH) banner infrastructure projects as well as defense modernization projects of the Department of National Defense.

DBM data showed overall infrastructure disbursements rose by 8.9% to P1.545 trillion in 2024 from PHP 1.42 trillion in 2023. It exceeded the PHP 1.473-trillion program for 2024 by 4.9%.

“This was equivalent to 5.8% of GDP, well within the 5-6% target for 2024 and sustaining the 5.8% outturn in 2023,” the department said.

Infrastructure disbursements also include infrastructure components of subsidy and equity to government-owned and -controlled corporations and transfers to local government units.

“This was credited mainly to the accelerated infrastructure spending of the DPWH for its accelerated implementation of construction activities, particularly from carry-over or previous years’ projects, progress billings from completed ongoing infrastructure projects, as well as the direct payments made by development partners for foreign-assisted rail projects of the Department of Transportation,” the DBM said.

Oikonomia Advisory and Research, Inc. Economist Reinielle Matt M. Erece said the P122.2-billion increase in infrastructure and capital outlays in 2024 was partly driven by defense modernization programs of the government.

“This can be in response to the heightened geopolitical tensions felt by a lot of countries,” he said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said faster infrastructure spending last year can be partly attributed to preparations for the May elections.

“(This is) part of the preparations for the midterm elections, as basis for accomplishments that are consideration for the voters to choose some candidates based on their completed projects and programs,” he said.

Mr. Ricafort said the government likely expedited infrastructure projects in the first three months of 2025 ahead of the election ban.

The Commission on Elections’ ban on public works spending began on March 28 and will run for 45 days. The midterm elections are scheduled for May 12.

Mr. Erece said he expects slower infrastructure spending as the government “reviewed and removed some of the unprogrammed appropriations and other expenses that the administration felt were unneeded, at least in the short term.” — Aubrey Rose A. Inosante

Factory output in the Philippines unexpectedly contracted for the first time in 19 months in March, as manufacturers cut output amid uncertainty surrounding US tariff policies.

The S&P Global Philippine Manufacturing Purchasing Managers’ Index (PMI) came in at 49.4, slipping from the 51 reading in February.

March marked the first time that PMI, a closely monitored gauge of economic sentiment, fell below the neutral 50 level since August 2023. It also ended 18 straight months of growth.

A PMI reading below 50 shows a deterioration in operating conditions from the previous month, while a reading above 50 signals an improvement.

“The Filipino manufacturing sector indicated a renewed deterioration in operating conditions in March. Furthermore, the health of the sector worsened at the strongest pace since August 2021,” Maryam Baluch, economist at S&P Global Market Intelligence, said in a report.

S&P Global’s Association of Southeast Asian Nations (ASEAN) data showed the Philippines, Thailand (49.9), Myanmar (49.8) and Malaysia (48.8) all posted contractions in March.

Indonesia recorded the highest PMI reading (52.4) in March, followed by Vietnam (50.5).

The Philippines’ PMI reading also fell below the 50.8 average for ASEAN in March.

In its report, S&P Global said Philippine companies cut output in March amid a fresh decline in new orders.

“Goods producers experienced a modest decline in manufacturing output in March, marking the end of an 11-month growth sequence,” it said.

S&P Global noted factory orders dropped in March after 18 months of expansion.

“Panelists noted that growing competition and fewer clients led to a reduction in new orders, with output scaled back as a result. The growth in new export orders seen previously also dissipated, with March data signaling a marginal drop in new business from overseas,” Ms. Baluch said.

As production fell, manufacturing firms paused hiring activity in March.

“Levels of unfinished work also fell, after being accumulated at the strongest pace in nearly two years in the prior survey period. Panelists indicated that they had sufficient manpower to meet order requirements and finish any pending tasks,” S&P Global said.

Also, S&P Global said a “modest” increase in price pressures was seen in March. Higher material prices pushed companies to hike their charges, it added.

“However, both cost burdens and output charges rose at rates that were weaker than their respective historical averages,” it said.

Despite the challenges in March, Philippine manufacturers still had an upbeat outlook for production.

“Nonetheless, businesses remain optimistic in their year-ahead production forecasts, with confidence levels at a four-month high. Optimism was reflected in firms’ decisions to maintain their purchasing activity and build stocks,” Ms. Baluch said.

As firms anticipated higher output in the coming months, buying activity rose for a 16^th straight month in March.

“Moreover, firms chose to expand their inventories, with stocks of purchases recording a fresh rise, and post-production inventories growing at a modest but historically solid rate,” it said.

S&P Global Marketing Intelligence Economics Associate Director Jingyu Pan said Philippine manufacturers’ optimistic production outlook stems from expectations of election spending and lower interest rates.

“But on the long-run basis, I think, yeah, a lot of them are also very much concerned over the impact on tariffs on what that might actually mean as well for production in the next year,” she said on Money Talks with Cathy Yang on One News on Wednesday.

US President Donald J. Trump is scheduled to announce a new round of reciprocal tariffs on US trading partners on Wednesday 2000 GMT (Thursday, 4 a.m. Philippine time). These tariffs are expected to take effect immediately after Mr. Trump’s announcement. 

The Washington Post reported on Tuesday that White House aides have drafted a proposal to impose tariffs of around 20% on most imports to the US.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the contraction in factory activity may indicate manufacturers’ “cautious mode” ahead of Mr. Trump’s tariff announcement.

He noted higher US tariffs and other protectionist policies could slow global trade, investments, employment and other economic activities, as well as hurt the global economy. — Aubrey Rose A. Inosante

The national government’s (NG) budget deficit ballooned to PHP 171.4 billion in February despite double-digit revenue growth, the Bureau of the Treasury (BTr) reported on Wednesday.

Data from the BTr showed the budget deficit widened by 4.11% to PHP 171.4 billion in February from the PHP 164.7-billion gap in the same month last year.

Month on month, this was a reversal of the PHP 68.4-billion surplus in January.

In February, revenues jumped by 12.39% to PHP 251.8 billion from PHP 224 billion a year earlier, as tax revenues increased by 10.9% to PHP 234.3 billion.

Collections by the Bureau of Internal Revenue (BIR) jumped by an annual 15.7% to PHP 159.7 billion in February, while Bureau of Customs’ (BoC) revenues inched up by 1.71% to PHP 71.8 billion.

“The growth in the BIR’s February collection was primarily due to higher collections from corporate income tax (CIT), personal income tax (PIT), excise tax on tobacco and alcohol products, value-added tax (VAT), and documentary stamp tax (DST),” the BTr said.

Nontax revenues rose by 37.11% year on year to PHP 17.4 billion in February.

“The increase was partly attributed to the one-off remittance of the Department of Agrarian Reform’s share of penalties imposed on lending institutions for noncompliance with the mandatory Agri-Agra credit requirement under Republic Act 10000,” the BTr said.

During the month, Treasury income went up by 21.9% to PHP 7.9 billion due to higher interest income from NG deposits, managed funds, and NG’s share of Philippine Amusement and Gaming Corp.’s (PAGCOR) profit.

Revenues from other offices — which consisted of other nontax revenue, privatization proceeds fees, charges and grants — also rose by 53.04% to PHP 9.5 billion.

Meanwhile, NG expenditures went up by 8.88% to PHP 423.2 billion in February from PHP 388.7 billion a year ago.

This was mainly due to higher capital expenditures of the Department of Public Works and Highways, which were used for progress billings and payment of right-of-way acquisition for various infrastructure projects.

More disbursements were also made by the Department of Health and Department of Social Welfare and Development for their programs.

Primary spending — the total expenditures minus interest payments, went up by 9.95% to PHP 374.8 billion in February.

Interest payments inched up by 1.29% to PHP 48.4 billion in February amid higher coupon payments on domestic securities. However, it was offset by lower foreign payments.

 Two-month deficit

In the January-to-February period, the budget deficit swelled to PHP 103.1 billion from PHP 76.7 billion a year ago.

“The NG’s total revenue collections and expenditures maintained double-digit year-on-year (YoY) growth during the first two months of 2025, which puts it on track to hit fiscal targets for the year,” the BTr said.

Revenues went up by 11.32% to PHP 718.9 billion in the two-month period, as tax collections rose by 12.64% to PHP 671.9 billion.

BIR revenues jumped by 15.31% to PHP 514.7 billion due to higher VAT collections, CIT, PIT, final withholding tax on government securities, and DST.

“The BIR’s continued progress in revenue performance is credited to its ongoing improvements in tax payment systems and collection efficiency,” the BTr said.

Collections by BoC went up by 4.91% to PHP 151 billion, which mirrored the 4.93% increase in import goods in the January-to-February period.

“BoC’s continuous modernization, border protection, and capacity development efforts have enabled the bureau to maintain its positive performance in the first two months of the year,” the Treasury said.

On the other hand, non-tax revenues slipped by 4.67% to PHP 47 billion “partly due to lower receipts from Malampaya proceeds.”

Revenues from other offices declined by 10.48% to PHP 23.4 billion while the Treasury income inched up by 1.86% to PHP 23.7 billion due to the increased NG share in PAGCOR’s profits.

On the other hand, state spending grew by 13.76% to PHP 822 billion in the January-February period from PHP 722.5 billion a year ago.

Primary expenditures rose by 11.43% to PHP 669.1 billion as of end-February.

Interest payments also increased by 25.26% to PHP 152.9 billion.

“The growing deficit shows the faster growth of disbursements, especially for social and infrastructure programs, compared to the revenue generation capability of the government,” Oikonomia Advisory and Research, Inc. economist Reinielle Matt M. Erece told BusinessWorld in a Viber message.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the February budget deficit widened as expenditures increased by PHP 34.5 billion despite the P27.8-billion increase in revenues.

Mr. Ricafort expects another budget surplus in April “due to the seasonal increase in yearly tax collection/filing in view of the April 15 deadline set by the BIR.”

“The recent tax reform measures in terms of the 12% VAT imposed on foreign digital services providers and the 1% withholding taxes on online sellers… would help increase the country’s recurring tax revenues, narrow the budget deficit, and improve the overall fiscal performance,” he said.

Meanwhile, Mr. Erece said the budget deficit may continue to widen this year.

“We expect the deficit to continue growing this year, both as a result of an election year, as well as reflective of higher debt servicing costs in response to the higher borrowings they have incurred and will incur this year. The growing deficit calls the need for better revenue generation, especially in tax collections, to slowly close the gap of the national budget,” he said.

For this year, the NG’s deficit ceiling is capped at PHP 1.54 trillion or 5.3% of gross domestic product (GDP). – Aubrey Rose A. Inosante, Reporter

The Nationbal Government’s (NG) outstanding debt rose to a fresh high of PHP 16.63 trillion as of end-February, the Bureau of the Treasury (BTr) reported.

Latest data from the BTr showed that the debt jumped by 1.96% from PHP 16.31 trillion at the end of January.

Year on year, outstanding debt went up by 9.57% from PHP 15.18 trillion as of end-February 2024.

“The rise was primarily driven by the net issuance of new domestic and external debt to support more public programs and projects,” the BTr said in a statement on Tuesday.

Despite hitting another record high, the Treasury said the outstanding debt “remains manageable.”

NG debt is the total amount owed by the Philippine government to creditors such as international financial institutions, development partner-countries, banks, global bondholders and other investors.

“Nevertheless, the increase was partially offset by the strengthening of the peso against the US dollar, which appreciated from PHP 58.375 at the end of January to PHP 57.99 at the end of February, helping manage foreign debt obligations,” it added.

The bulk or 67.5% of the total debt was owed to domestic creditors, while the rest was owed to foreign creditors.

“This financing mix reflects a prudent approach to debt management to help mitigate exposure to external risks while taking advantage of the country’s liquid domestic market,” the BTr said.

Domestic debt, which was composed of government securities, increased by 1.26% to PHP 11.22 trillion as of end-February from P11.08 trillion as of end-January.

Year on year, it also rose by 6.12% from PHP 10.58 trillion in February 2024.

“This was mainly due to PHP 140.72 billion in net domestic financing, as the PHP 268.25-billion gross issuance of government securities exceeded redemptions of PHP 127.53 billion for the month,” the BTr said.

However, the rise in domestic debt was tempered by the peso appreciation against the US dollar, which reduced the overall valuation by PHP 1.1 billion.

Meanwhile, external debt rose by 3.44% to PHP 5.41 trillion from PHP 5.23 trillion in the previous month.

Year on year, foreign debt climbed by 17.52% from PHP 4.6 trillion.

“This was attributed to the net availment of foreign borrowing amounting to PHP 193.71 billion and the PHP 20.41-billion net appreciation effect on third currency-denominated debt,” the BTr said.

“However, these factors were partially offset by a PHP 34.48-billion reduction due to the peso appreciation against the US dollar,” it added.

External debt was composed mainly of PHP 2.53 trillion in loans, and PHP 2.88 trillion in government securities.

“For the month, the NG secured a total of PHP 197.3 billion in external financing, including PHP 190.82 billion through a triple-tranche global bond issuance comprised of 10- and 25-year USD bonds (USD 2.25 billion), and 25-year EUR bonds (1 billion euros) and PHP 6.48 billion in project loans,” the Treasury said.

The BTr said the project loans will fund rail projects through the Japan International Cooperation Agency (PHP 3.86 billion) as well as physical connectivity and health sector efforts with the Asian Development Bank (PHP 1.71 billion).

For February, NG-guaranteed obligations slipped by 1.49% to PHP 341.11 billion as of end-February from the end-January level of PHP 346.27 billion.

Year on year, it fell by 1.11% from PHP 344.93 billion.

“The decrease resulted from the net repayment of both domestic and external guarantees, amounting to PHP 5.83 billion and PHP 0.15 billion, respectively,” the BTr said.

However, this was partially offset by the PHP 1.43-billion net appreciation effect on third currency-denominated guarantees, it added.

Oikonomia Advisory and Research, Inc. Economist Reinielle Matt M. Erece said the increase in the debt level reflected new government borrowings.

“This trend may continue this year as the government plans to borrow again, mainly from domestic sources, to support their programs,” he said.

“Moreover, the forecasted peso depreciation against the US dollar may inflate the dollar value of foreign debt,” Mr. Erece added.

He also said the debt is still manageable “as long as the government continues to enhance its revenue generation, and (economic) growth exceeds the growth in expenditures.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the higher NG debt level is due to the need to finance the budget deficit.

“There is a need to bring down the share of debt servicing costs as a percentage of the total national budget as a test of the need for more tax reform and other fiscal reform measures to structurally narrow the budget deficit and curb the growth in overall debt in view of the large borrowings/debt since the COVID-19 pandemic,” he said.

Mr. Ricafort said there is a need to bring the NG debt-to-gross domestic product (GDP) ratio below the international threshold of 60%.

Outstanding debt as a share of GDP inched up to 60.7% as of end-2024 from 60.1% a year earlier.

The NG’s outstanding debt is projected to reach PHP 17.35 trillion by end-2025. – Aubrey Rose A. Inosante, Reporter

Bank lending growth slowed in February, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Outstanding loans of universal and commercial banks rose by 12.2% year-on-year to PHP 13.03 trillion in February from PHP 11.61 trillion in the same period in 2024. This was slower than the 12.8% expansion in January, which was the fastest in two years.

Year on year, the growth in lending was faster than the 8.7% increase in February 2024.

On a seasonally adjusted basis, big banks’ outstanding loans inched up by 0.6% month on month.

Central bank data showed outstanding loans to residents climbed by 12.6% to PHP 12.7 trillion in February, slower than the 13.3% growth in January.

Meanwhile, loans to nonresidents declined by 3.2% to PHP 324.82 billion in February, slightly better than the 3.5% decline in the previous month.

Outstanding loans to residents for production activities expanded by 11.2% to PHP 11.08 trillion last month, slower than 11.8% in January.

“The growth was driven largely by increased lending to key industries such as electricity, gas, steam and air-conditioning supply (21.5%); wholesale and retail trade, repair of motor vehicles and motorcycles (13.7%); manufacturing (0.9%); construction (12.7 %); and transportation and storage (20.6%),” the BSP said.

On the other hand, consumer loans jumped by 24.1% in February to PHP 1.62 trillion, slightly slower than 24.4% in the previous month.

BSP data showed credit card loans rose by an annual 28.9% to PHP 950.97 billion in February.

Loans for motor vehicles went up by 19.2% to PHP 470.13 billion in February, while salary-based general purpose consumption loans rose by 11.5% to PHP 158.16 billion.

“Loan growth still grew on a month-on-month basis. The year-on-year growth is still among the fastest in more than two years and also more than twice faster than GDP (gross domestic product) growth,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Bank lending’s continued expansion in February was also supported by lower borrowing costs, he added.

Since August last year, the central bank has brought down benchmark interest rates by a total of 75 basis points (bps) to 5.75%.

The Monetary Board kept benchmark rates unchanged at its Feb. 13 meeting.

For the next few months, Mr. Ricafort said the BSP’s further easing could lift demand for loans.

BSP Governor Eli M. Remolona, Jr. said last week that there is a “good chance” that the Monetary Board will cut rates by 25 bps at their April 10 review.

He said the BSP remains on an easing cycle and could reduce borrowing costs by as much as 75 bps this year, depending on data.

MONEY SUPPLY

Meanwhile, domestic liquidity (M3) grew by 6.3% in February, slower than the 6.8% expansion in January, preliminary BSP data showed.

M3 — which is considered as the broadest measure of liquidity in an economy — increased to PHP 17.98 trillion from PHP 16.92 trillion a year earlier.

Month on month, M3 dipped by 0.3% on a seasonally adjusted basis.

Data from the BSP showed domestic claims increased by 10.1% during the month, slower than 10.9% in January.

“Claims on the private sector grew by 12.3% in February from 13.1% in the previous month, driven by continued expansion in bank lending to nonfinancial private corporations and households,” the BSP said.

The growth in net claims on the central government eased to 5.9% in February from 7.4% in the previous month due to lower National Government borrowings.

Meanwhile, growth in net foreign assets (NFA) in peso terms quickened to 5.8% last month from 2.6% in January.

“The BSP’s NFA expanded by 8.9%, reflecting the increase in gross international reserves. Meanwhile, the NFA of banks declined, largely due to higher foreign currency-denominated bills and bonds payable,” it added. — Aaron Michael C. Sy, Reporter