Archives: Business World Article

The sustainability of Philippine debt is not currently a matter of serious concern, the World Bank (WB) said, noting however that the government still needs to rebuild fiscal buffers to prepare for future shocks.

“There is no cause for serious concern (over debt sustainability… Most countries would dream of having the kind of debt-to-GDP (gross domestic product) ratios we have here,” World Bank Senior Economist Jaffar Al-Rikabi told reporters last week on the sidelines of an event.

Philippine debt-to-GDP was 63.1% at the end of the third quarter, rising from 60.1% a year earlier.

The rule of thumb for healthy levels of debt for developing countries is 60%, which the government has informally abandoned in favor of a new 70% benchmark.

Asked if the record PHP 17.65-trillion debt stock at the end of November poses concerns for debt servicing, Mr. Al-Rikabi said it is “normal” for such levels to increase with inflation and fiscal deficits.

The Bureau of the Treasury will release the fourth-quarter debt-to-GDP ratio when the Philippine Statistics Authority (PSA) reports full-year and fourth-quarter GDP.

“We still don’t have Q4 data, but in our projection, if you looked at the outlook slides, we are generally reassured that the fiscal situation is very sustainable,” he said.

In its Philippine Economic Update, the World Bank said it expects sovereign debt to start declining after 2026.

National Government debt is projected to peak at 62.5% of GDP in 2026 before declining to 61.4% by 2028.

Mr. Al-Rikabi also noted that public debt remains “sustainable,” noting that the majority of the debt is long-term and peso-denominated.

“Because if debt held (is) non-peso-denominated or short-term, that usually is much more volatile and is exposed to external shocks instead of just domestic shocks,” he said.

He also noted that the debt ratio was low at 40% leading up to the COVID-19 pandemic, when the government had to take on much more debt to fund the pandemic containment effort and stimulate the economy.

“What we want to see on public debt, on servicing costs, is fiscal consolidation program being implemented,” he said.

“We want to rebuild fiscal space so that the country can act for future crisis. You had a lot of fiscal space back then. You’ll have fiscal space in the future,” he added.

Mr. Al-Rikabi said the government should take control of rising interest payments to avoid squeezing out productive spending.

“You want to spend more of your budget on education, on health, on effectively implementing infrastructure projects. You don’t want it to go increasingly on interest expenditure, which has grown over the last few years,” he said.

For 2026, the government has budgeted PHP 2.01 trillion for debt service, with PHP 1.06 trillion going to amortize principal and PHP 950 billion to interest payments.

Mr. Al-Rikabi said the bank expects the economy to expand 5.3% in 2026 and 5.4% in 2027.

“We do see deceleration for this year. We’re projecting around 5.1% (in 2025). Maybe with fourth-quarter data, it ends up being weaker. I don’t know. Or maybe around the same,” he said.

The revised government target is 5-6% for 2026 and 5.5-6.5% for 2027.

Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., projected a faster economic growth for the Philippines at 5.3% in 2025.

“Mainly because we’re a consumption-driven economy. We have one of the longest Christmases. People tend to forget when the calendar starts the ber-months it’s Christmas,” Mr. Ravelas said in a John Clements Consultants, Inc. event on Jan. 8.

“People talk about spending. This has been a major driver over the last two weeks of December. I think that could probably prop up the fourth quarter,” he said.

Mr. Ravelas sees the economy growing by 5.6% in 2026 and 5.8% in 2027.

Economy Secretary Arsenio M. Balisacan has said that GDP growth likely slowed to 4.8-5% in 2025 due to the flood control corruption scandal, prompting economic managers to temper their goals through 2027.

“We may have seen peak negative sentiment, unless somebody gets jailed (over the corruption scandal),” he said.

Mr. Ravelas said the peso may settle between PHP 61 and PHP 65 over the next three years, after the currency fell to a record low of PHP 59.35 on Jan. 7.

“A weaker peso should be good for the Philippines even though we’re a net importing country, because we need to sell the Philippines as an investment destination,” he added. — Aubrey Rose A. Inosante, Reporter

The Philippines’ dollar reserves as of end-December exceeded the Bangko Sentral ng Pilipinas’ (BSP) estimate for the year as it reached over USD 110 billion.

Based on preliminary central bank data, the country’s gross international reserves (GIR) amounted to USD 110.873 billion at end-December, slipping by 0.34% from the USD 111.254 billion seen in the previous month.

However, this was 4.34% higher than the USD 106.257-billion foreign reserves recorded in 2024 and breached the BSP’s revised full-year projection of USD 109 billion.

GIR refers to the central bank’s foreign assets held mostly as investments in foreign-issued securities, foreign exchange, and monetary gold, among others.

These are supplemented by claims to the International Monetary Fund (IMF) in the form of reserve position in the fund and special drawing rights (SDR).

In a statement released late Wednesday, the BSP said the level of dollar reserves as of end-2025 is enough to cover about four times the country’s short-term external debt based on residual maturity.

It also equates to 7.4 months’ worth of imports of goods and payments of services and primary income, well above the three-month standard.

“The latest GIR level ensures availability of foreign exchange to meet balance of payment 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.

Record-high gold

BSP data showed that the country’s gold holdings rose by 3.06% to its highest yet at USD 18.578 billion as of end December. This exceeded the previous record of USD 18.026 billion at end-November. Year on year, it surged by 68.8% from USD 11.006 billion.

However, the central bank’s foreign investments stood at USD 87.009 billion by end-2025, slipping by 1.1% from USD 87.975 billion as of end-November and by 2.76% from USD 89.476 billion at end-2024.

This decline dragged the foreign reserves lower during the period, though tempered by record-high gold holdings, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said.

“The monthly decrease in the GIR (was) again largely due to the latest month-on-month decline in foreign investments… but positively offset by the continued month-on-month increase in gold holdings… to a new record high of USD 18.577 billion,” he said in a commentary.

Mr. Ricafort noted that gold prices in the global market climbed by 1.9% month on month in December, even hitting a fresh high of USD 4,549.92 per ounce on Dec. 26.

Meanwhile, the BSP’s foreign exchange holdings climbed by 6.51% to USD 647.2 million from USD 612.8 million at end-November. However, it plunged by 52.64% from USD 1.367 billion last year.

The Philippines’ reserve position in the IMF dipped by 0.14% month on month to USD 727.3 million at end-December from USD 728.3 million. Year on year, it grew by 7.65% from USD 675.6 million.

SDRs — the amount the Philippines can tap from the IMF’s reserve currency basket — were unchanged month on month at USD 3.912 billion but increased by 4.02% from USD 3.761 billion at end-2024.

“The dip in GIR this month is mainly due to debt payments and BSP’s moves to stabilize the peso, plus lower gold valuations,” Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said in a Viber message.

BSP Governor Eli M. Remolona, Jr. has said that they have been carrying out minimal interventions in the foreign exchange market amid the peso’s recent volatility.

For this year, Mr. Ravelas said debt servicing may continue to add pressure on the country’s GIR level, although inflows from remittances, tourism and the business process outsourcing (BPO) sectors may provide some buffer.

“Moving forward, expect a slight softening as debt servicing continues, but steady inflows from OFWs (overseas Filipino workers), BPOs, and tourism will keep our external position resilient.”

For this year, the central bank expects GIR to end at USD 110 billion, up from its previous forecast of USD 106 billion. — Katherine K. Chan, Reporter

 

Finance Secretary Frederick D. Go was sworn in as a Monetary Board member on Thursday, the Bangko Sentral ng Pilipinas (BSP) said.

BSP Governor and Monetary Board Chair Eli M. Remolona, Jr. administered Mr. Go’s oath at the BSP head office in Manila.

He joins the other Monetary Board members Benjamin E. Diokno, Romeo L. Bernardo, Rosalia V. De Leon, Jose L. Querubin and Walter C. Wassmer.

“I am honored to accept my appointment to the Monetary Board and sincerely thank the President for his continued trust and confidence,” Mr. Go said in a statement.

“I will pursue the strategic alignment of fiscal and monetary policies in support of the Board’s mandate to maintain price stability and safeguard our financial system. I look forward to working with my fellow Monetary Board members in building an economy that is resilient, robust, and inclusive for every Filipino,” he added.

Mr. Go replaced former Finance chief and now Executive Secretary Ralph G. Recto as the representative of the Cabinet in the BSP’s policymaking body.

He was appointed as Finance secretary in November last year. Prior to that, he served as the special assistant to the President for investment and economic affairs.

This year, the Monetary Board is set to have six policy meetings, with the first one to be held on Feb. 19. The other reviews are scheduled for April 23, June 18, Aug. 27, Oct. 22 and Dec. 17. — Katherine K. Chan

The Philippines’ unemployment rate unexpectedly rose year on year in November 2025 despite the start of the holiday hiring season, as bad weather and job losses in key industries outweighed the usual fourth-quarter lift, data from the Philippine Statistics Authority (PSA) showed.

Preliminary results of the Labor Force Survey (LFS) put the jobless rate at 4.4% in November, up from 3.2% a year earlier, though lower than 5% in October. This translated to about 2.25 million jobless Filipinos, compared with 1.66 million in November 2024 and 2.54 million in the previous month.

Labor Secretary Bienvenido E. Laguesma said the November figures were unexpected given the seasonal pattern of stronger hiring toward the yearend.

“Yes, I am surprised because, as you pointed out, ‘ber’ months are associated with increased hiring. Note, however, that the November 2025 stats are better than the October 2025 figures indicating recovery,” he told BusinessWorld.

National Statistician and PSA Undersecretary Claire Dennis S. Mapa said the year-on-year weakening in the jobs market reflected weather-related disruptions and employment declines across several major sectors.

“[There were] two major typhoons in November last year, including Tinio, and their impact was widespread,” he told a news briefing on Wednesday. He noted that the storms disrupted economic activity, transport and supply chains, affecting hiring and job retention across regions.

In the first 11 months of 2025, the unemployment rate averaged 4.19%, higher than the 3.9% average recorded in the same period in 2024.

The November employment data also showed mixed signals. The number of employed Filipinos rose to 49.26 million in November from 48.62 million in October, pointing to some seasonal recovery.

However, employment remained below the 49.54 million recorded in November 2024, underscoring the lingering effects of disruptions earlier in the year.

As a result, the employment rate slipped to 95.6% in November from 96.8% a year earlier, though slightly better than 95% in October.

Mr. Mapa said the typical hiring boost during the “ber months” was weaker than expected. He noted that there were 49.26 million employed people in November 2025, 277,000 fewer than a year earlier.

The impact was most visible in sectors sensitive to mobility, such as tourism and logistics.

The average employment rate for the first 11 months of 2025 stood at 95.8%, lower than the level recorded in the comparable period in 2024.

Uunderemployment

Data from the PSA showed underemployment rate fell to 10.4% in November from 10.8% in November 2024 and 12% in October. This was the lowest underemployment rate in nine months or since 10.1% in February.

The ranks of underemployed Filipinos — those who want longer work hours or an additional job — dropped to 5.11 million in November from 5.35 million a year earlier and 5.81 million in October.

Year to date, the average underemployment rate stood at 12.26%, inching up from 12% a year earlier.

Labor force participation rate rose to 64% in November from 63.6% in October but slipped from 64.6% a year earlier. This translated to a labor force of 51.52 million in November, higher than the 51.16 million in October and 51.2 million in No-vember 2024.

PSA data showed job losses were concentrated in industries directly affected by adverse weather conditions and weaker consumer activity in November.

Accommodation and food service activities had the largest year-on-year decline, shedding 309,000 jobs. Losses were concentrated on restaurants and mobile food service activities, which cut 191,000 positions, followed by short-term accommodation activities with a reduction of 76,000 jobs, and event catering services, which declined by 23,000.

Wholesale and retail trade, including the repair of motor vehicles and motorcycles, also saw jobs drop by 258,000 year on year.

Employment declines were also recorded in retail sales in stalls and markets dealing in food, beverages, and tobacco, as well as buyer stalls and motor vehicle sales. Other service activities shed 250,000 jobs, driven largely by cuts in personal wellness services and domestic services.

Jobs in manufacturing fell by 150,000, reflecting continued weakness in the sector. Mr. Mapa said the semiconductor and electronics sector, in particular, lost 106,000 jobs year on year in November.

He said that manufacturing of other food products and the processing and preserving of fruits and vegetables also posted notable job losses, partly due to supply-chain disruptions and reduced operating days following the typhoons.

“These sectors — accommodation and food service activities, wholesale and retail trade, other service activities, and manufacturing — contributed to the decline in the number of employed persons, which in turn pushed unemployment higher year on year,” Mr. Mapa said.

Some sectors, however, recorded employment gains. Public administration and defense, including compulsory social security, added 185,000 jobs year on year, while education employment increased by 176,000, partly reflecting continued hiring in government and public institutions.

Better in December?

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., told BusinessWorld that the relatively higher unemployment rate in November was “partly due to the series of typhoons, storms, flooding that led to weather-related disruptions that reduced business days, sales, incomes for some businesses, consumers, and other institutions.”

 

For Chinabank Research, the decline in manufacturing jobs, particularly those in the production of semiconductors and other electronic components, reflected the impact of recent typhoons on business operations.

“Looking ahead, the sector continues to face risks from the challenging external environment, though a pickup in domestic demand could help support factory activity and improve job prospects,” it said.

Chinabank Research said it expects holiday demand in December to have provided support to employment and consumption at the end of 2025.

“December might show better data with stronger holiday-driven demand, though this seasonal boost will likely wane this month. This year, we expect the labor market to remain generally robust and support a recovery in consumption growth,” it added.

Mr. Ricafort said the labor market may have improved in December 2025 amid peak seasonal demand, better weather conditions, and increased economic activity.

“Nevertheless, unemployment rate at 3%-4% levels is still considered among the best in about 20 years or since revised records started in 2005,” he said.

Mr. Ricafort also pointed to the government’s planned catch-up spending in 2026, anchored on governance reforms and anti-corruption measures, as a potential boost to investor confidence, economic growth, and employment going forward.

In a statement, the Department of Economy, Planning, and Development (DEPDev) said the latest LFS results underscore the need to strengthen workforce competitiveness and business resilience amid persistent disruptions.

“The government is prioritizing investments in skills development, lifelong learning, and social protection systems to enable workers to transition across sectors and withstand economic shocks. Strengthening workforce competitiveness is one of the key elements to attract investments that generate quality jobs,” DEPDev Secretary Arsenio M. Balisacan said in a statement.

For his part, Mr. Laguesma said the Department of Labor and Employment, in collaboration with the private sector, will ramp up efforts to come up with “better employment results” in the coming months. — Erika Mae P. Sinaking

The Philippines’ total outstanding debt inched up to a fresh high of PHP 17.65 trillion as of end-November, the Bureau of the Treasury (BTr) said.

Latest data from the Treasury showed that the National Government’s (NG) outstanding debt went up by 0.49% to P17.65 trillion in November from PHP 17.56 trillion at end-October 2025.

The debt level is already 1.7% above the projected year-end level of PHP 17.36 trillion.

November also marked the fifth month in a row that the end-2025 debt projection was breached.

Year on year, NG debt jumped by 9.94% from PHP 16.05 trillion at the end of November 2024.

“The month-on-month increase was underpinned by the net issuance of domestic and external debt, which was partly offset by significantly lower valuations of foreign currency-denominated obligations due to the peso’s appreciation,” the BTr said in a statement on Wednesday.

The peso appreciated against the US dollar from PHP 58.771 at the end of October to PHP 58.729 at the end of November 2025.

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

In November, the bulk or 68.66% of the debt stock came from domestic sources, while the rest came from external sources.

The BTr said it continues to borrow mainly from domestic creditors and in local currency to keep debt levels “sustainable.”

“This is because peso obligations do not fluctuate with foreign exchange rates and the payment of interest redounds to the benefit of Filipino investors, further boosting domestic income,” it said.

Domestic debt inched up by 0.6% to PHP 12.12 trillion as of end-November from PHP 12.05 trillion as of end-October. This is mainly composed of government securities.

At end-November, debt was already 0.6% higher than the PHP 12.04-trillion year-end domestic debt projection.

“This (increase) was driven by the PHP 71.85 billion in net issuance of government securities, despite a PHP 0.12-billion reduction in peso valuation on retail dollar bonds,” the BTr said.

Since the start of 2025, domestic debt jumped by 10.86% or PHP 1.19 trillion. Of this, PHP 1.18 trillion came from fresh issuances and PHP 2.52 billion “was caused by the weakening of the peso from its level at the end of 2024.”

Year on year, domestic debt rose by 10.95% from PHP 10.92 trillion recorded in November 2024.

Meanwhile, external debt stood at PHP 5.53 trillion as of end-November, up 0.26% from PHP 5.52 trillion in the previous month. This also exceeded the PHP 5.32-trillion external debt projection by 4.07%.

“This is due to the PHP 22.84 billion in net loan availment for the month, which was offset by the PHP 8.73 billion in downward valuation adjustments caused by favorable foreign exchange movements,” the Treasury said.

The BTr noted that the stronger peso against the US dollar trimmed foreign currency debt valuation by PHP 3.94 billion. At the same time, third-currency movements, such as the Japanese yen and the euro, contributed another PHP 4.79 billion to the valuation cut.

Year on year, foreign debt climbed by 7.81% from PHP 5.13 trillion in 2024.

Foreign debt was composed mainly of PHP 2.82 trillion in global bonds and PHP 2.71 trillion in loans.

External debt securities totaled PHP 2.39 trillion in US dollar bonds, PHP 258.77 billion in euro bonds, PHP 58.73 billion in Islamic certificates, PHP 57.01 billion in Japanese yen bonds, and PHP 54.77 billion in peso global bonds.

“The NG’s external financing operations remained prudent, measured, and anchored on long-term debt sustainability considerations,” the BTr said.

“External borrowings continue to be largely concessional and program-based, offering very long maturity terms and relatively lower interest costs, thereby supporting a cost-effective and resilient debt profile.”

Since the start of the year, NG external debt jumped by 8.01% or PHP 410.04 billion.

“Of the total, P276 billion was due to new loans and bonds, while P134.04 billion was net adjustments to valuation linked to peso depreciation against foreign currencies in the first eleven months of 2025,” it added.

For November, NG-guaranteed obligations increased by 3.38% to PHP 356.04 billion from the end-October level of PHP 344.41 billion.

The BTr attributed the monthly increase to the net availment of domestic guarantees by the Power Sector Assets and Liabilities Management Corp., amounting to PHP 12.71 billion.

However, external guaranteed repayments and favorable exchange rate movements tempered the increase by PHP 0.42 billion and PHP 0.66 billion, respectively, it added.

Year on year, NG-guaranteed obligations fell by 15.64% from PHP 422.03 billion.

Wake-up call

Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said the record-high debt is a “wake-up call.”

“The challenge now is balancing fiscal discipline with growth,” he said in a Viber message.

Mr. Ravelas also urged the government to accelerate infrastructure and investment projects that generate jobs and revenue, while keeping borrowing focused on productive spending.

“Otherwise, higher debt means higher interest costs — and less room to maneuver,” he said.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that the higher debt stock in November partly reflected new government securities issued to cover the wider fiscal gap in recent months.

The budget deficit swelled to PHP 1.26 trillion as of end-November from the PHP 1.18-billion deficit in the same period in 2024.

“The weaker peso exchange rate vs. the US dollar over the past 3.5 years by about 16% effectively increased the peso equivalent of the outstanding National Government external debts when converted to pesos,” he said in a Viber message.

Asked if the government would be able to bring down debt to PHP 17.36-trillion programmed level, he said: “Already beyond the target, with possible budget deficits still in December 2025.”

Meanwhile, Mr. Ravelas said a weaker peso and failure to address the country’s issues would inflate the debt in 2026.

NG debt as a share of gross domestic product (GDP) went up to 63.1% at end-September from 60.1% in the same period last year. This is above the 60% threshold deemed sustainable for developing countries.

The Department of Finance expects the NG debt-to-GDP ratio to ease to 61.3% by end-2025 and eventually fall to 58% by 2030. — Aubrey Rose A. Inosante

Further monetary policy easing might come as early as the Monetary Board’s first meeting for 2026 amid subdued inflation and dismal economic growth last year, the Bangko Sentral ng Pilipinas (BSP) said. 

Asked about the likelihood of a February cut, BSP Governor Eli M. Remolona, Jr. said: “(It’s) on the table. Unlikely pero puwede naman (but we could deliver it).”

Mr. Remolona said that the latest December inflation print of 1.8% is a “reasonably low rate,” even as it quickened from 1.5% in November. Year on year, it slowed from 2.9% in December 2024.

Philippine economic growth in 2025 also likely fell below the government’s target, he added.

“I can say that we’re very close to where we want to be in terms of policy,” he told journalists in Mandaluyong City. “There’s a chance that we may cut some more, and there’s also a chance that we may not move at all. But there’s not a lot of probability that we will raise in 2026.”

The Monetary Board ended last year with a fifth straight 25-basis-point (bp) cut at its Dec. 11 meeting, bringing the key policy rate to its lowest in over three years at 4.5%.

It has so far delivered 200 bps in total cuts since it began its easing cycle in August 2024.

The central bank chief said the country’s gross domestic product (GDP) may have expanded by 4.6% last year as the flood control corruption scandal continued to drag consumer and investor confidence.

This would be below the government’s 5.5%-6.5% target for the year and also lower than the Development Budget Coordination Committee’s (DBCC) latest projection of 4.8%-5%.

“There was a loss of confidence of investors. So, investments came down. Consumption also came down,” Mr. Remolona said.

“When you realize that your taxes are not really going into infrastructure spending, masakit ’yon eh (that’s painful)… It’s more painful when you know it’s going to the wrong guys. So, that has a big effect,” he added.

In the third quarter, GDP growth slumped to an over four-year low of 4% amid allegations that Public Works officials, lawmakers and private contractors received kickbacks from anomalous flood control projects.

Economic managers have since conceded that the economy likely failed to meet the government’s growth target for 2025.

Meanwhile, the BSP has repeatedly said following its December meeting that further easing is now limited and would depend on economic developments in the country.

Mr. Remolona said they may only deliver two 25-bp cuts if growth slows to below 5% this year due to weak demand.

“If we cut two more times, medyo ibig sabihin nu’n, things are worse than we thought (that might mean that things are worse than we thought). So, that would require a bad surprise in the data,” Mr. Remolona said.

“If growth is much slower than we anticipated. We’re saying that for 2026, growth will be 5.4%. If it goes below 5%, then there’s ground for one more cut beyond the 25 bps,” he added.

For 2026, the central bank sees GDP growth averaging 5.4%, noting that the economy will likely remain sluggish in the first half before picking up in the second half.

“Mahaba pala ’tong impact eh ’yung loss of confidence (The impact of the loss of confidence may be prolonged)… it will continue through the first half of 2026,” Mr. Remolona said, noting that a 5.4% growth is “not bad” considering the flood control scandal.

The DBCC on Monday revised its growth target for this year to 5-6% from the 6-7% goal previously.

Economic growth may further improve to 6.2% in 2027, the BSP chief added, settling near the upper bound of the administration’s 5.5%-6.5% revised goal.

The Monetary Board is set to have its first policy meeting this year on Feb. 19. — Katherine K. Chan

Manufacturing output growth fell to a seven‑month low in November, weighed down by weak domestic consumption and sluggish export demand.

Preliminary results of the Philippine Statistics Authority’s (PSA) latest Monthly Integrated Survey of Selected Industries showed factory output, as measured by the volume of production index, fell by 1.5% year on year in November, a reversal from the revised 1% growth in October.

Year on year, the decline slowed from the 4.5% drop in November 2024.

The November reading was the slowest output growth in seven months or since the 2.4% decline in April 2025.

On a monthly basis, November’s output contracted by 2.8%, reversing the 5% growth in October. Stripping out seasonality factors, it slipped by 3.5%.

Year to date, factory output fell by 0.1%, a reversal from the 0.7% growth in the same period in 2024.

PSA data showed the November manufacturing performance was mainly due to the slower month-on-month growth in food products (4.2% in November from 8.1% in October); and the decline in coke and refined petroleum products (-11.4% from -2.7%); and beverages (-2.8% from 4.9% growth).

“Manufacturing output contracted by 1.5% in November, reflecting a sharper deterioration in operating conditions as the Philippines Manufacturing Purchasing Managers’ Index (PMI) fell to 47.4 from 50.1, driven by weak domestic and export demand and typhoon‑related production disruptions,” Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said in an e-mail.

S&P Global PMI fell to over a four-year low of 47.4 in November, a reversal from the 50.1 in October.

“Beyond these, we continue to monitor declining export orders, softer purchasing activity, thinning inventories, and early signs of labor shedding — signals consistent with a sector adjusting to both global headwinds and domestic supply constraints,” added Mr. Asuncion.

Nicholas Antonio T. Mapa, chief economist at Metropolitan Bank & Trust Co., said the manufacturing performance reflected the slowdown in economic activity in the third quarter.

“In particular, softer household consumption may have weighed on volume of production,” he said in an e-mail.

In the third quarter, GDP grew by 4%, the slowest in over four years. This brought the nine-month average growth to 5%, below the government’s 5.5%-6.5% target.

Philippine Chamber of Commerce and Industry Chairman Sergio R. Ortiz-Luis, Jr. said that the decline in November came after most orders were frontloaded in the first nine months of 2025.

“Actually, both local and export production were fast-tracked in the first three quarters of the year… There was front-loading for year-end deliveries. So, production tapered down in the fourth quarter,” said Mr. Luis-Ortiz in mixed English and Tagalog in a phone call.

Capital utilization averaged 77.4% in November, slightly lower than October’s 77.6%. All sectors have reached an average capacity utilization rate of more than 60% during the month.

Going forward, Mr. Asuncion anticipates a “modest” improvement in December and “gradual” recovery through 2026. 

“Our view is that while November’s slump reflects temporary disruptions and cyclical demand softness, forward sentiment remains constructive. Manufacturers posted their strongest optimism since November 2024, and with domestic demand expected to firm up alongside an eventual BSP (Bangko Sentral ng Pilipinas) easing cycle… consistent with medium‑term projections that see manufacturing output trending higher toward 2026,” said Mr. Asuncion.

Mr. Mapa said a gradual recovering in manufacturing is likely as “inventories decline and demand returns over the next few months.”

“Manufacturing looks like to grow especially in export, but not as fast as we would like to, it will continue to grow but still we are left behind by our neighbors due to weak demand,” said Mr. Ortiz-Luis. — Lourdes O. Pilar

The Asian Development Bank (ADB) said household consumption in the Philippines is likely to rebound in 2026 on the back of easing inflation and interest rates, after a corruption scandal and adverse weather dampened spending in recent months.

However, analysts warned that depending on tax relief to spur consumption could undermine fiscal consolidation efforts.

ADB Country Director for the Philippines Andrew Jeffries said household final consumption expenditure, which accounts for over 70% of the economy, is expected to “strengthen in 2026 amid low inflation and accommodative monetary policy.”

“More broadly, policies need to focus on raising incomes and reducing vulnerability,” he said in an e-mailed statement to BusinessWorld.

Mr. Jeffries said these measures should include expanding higher‑quality employment, boosting productivity through skills upgrading, and targeted social protection for vulnerable households.

This comes as private consumption growth moderated in the third quarter of 2025, particularly discretionary spending on recreation, hotels and restaurants, partly due to weather‑related disruptions, he said.

Data from the Philippine Statistics Authority (PSA) showed household final consumption expenditure slowed to 4.1% in the third quarter from 5.2% a year ago.

This was the slowest since the 4.8% contraction in the first quarter of 2021. Excluding pandemic years, it was the slowest growth in private spending since the 2.6% increase in the third quarter of 2010.

The PSA will release the fourth-quarter and annual 2025 preliminary gross domestic product (GDP) data, including household consumption, on Jan. 29.

Despite the slower growth in the third quarter, the ADB said spending on essentials, particularly food, remained resilient, supported by low inflation.

Inflation picked up to 1.8% in December from 1.5% in November. This brought the average to 1.7% in 2025.

For 2026, the central bank sees inflation accelerating to 3.2%, but still within the 2-4% target band.

The Bangko Sentral ng Pilipinas (BSP) has so far delivered a total of 200 bps in cuts since August 2024, after it lowered its policy rate by 25 bps to an over three-year low of 4.5% at its Dec. 11 meeting, amid subdued inflation and sluggish growth.

The Monetary Board is scheduled to hold six regular policy meetings in 2026, with the first one set on Feb. 19.

Tax relief?

To spur household demand and ease public concerns over flood control issues, a lawmaker had proposed giving tax relief to Filipinos, but analysts were divided, saying the measure could lift spending but risk undermining fiscal consolidation.

Senator Erwin T. Tulfo filed a bill in the Senate in October to provide a one-time, one-month income tax holiday for individual taxpayers receiving compensation income, effective on the first payroll month immediately following the bill’s approval.

Senate Bill No. 1446, or the One-Month Tax Holiday bill, remains pending at the committee level.

“A tax relief will only delay fiscal consolidation,” Foundation for Economic Freedom President Calixto V. Chikiamco told BusinessWorld on Tuesday.

The Marcos administration aims to bring the deficit down to PHP 1.56 trillion, or 5.5% of GDP, in 2025, and eventually to PHP 1.55 trillion, or 4.3% of GDP, in 2028.

Mr. Chikiamco noted that many factors influence consumer spending, such as unemployment, inflation, and wage growth.

“Depreciation of the peso will increase OFW (overseas Filipino worker) incomes and spur consumer spending without decreasing government revenues,” he added.

The peso has breached the PHP 59-a-dollar mark several times since November and sank to a record low of PHP 59.22 on Dec. 9.

Meanwhile, Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., argued that tax relief can boost private consumption, but the program has to be “smart and targeted.”

“Tax relief can help revive spending, especially after a year of high prices and tight budgets,” he said.

“Focus on essentials like VAT (value-added tax) breaks on food and utilities, and give relief to lower- and middle-income families who are more likely to spend,” Mr. Ravelas added.

However, he said tax relief must be “time-bound,” and paired with job creation and price stability, so people feel confident to open their wallets.

“The problem on spending is due to the uncertain environment due to ‘floodgate,’ the government should fix its trust issues so confidence will come back,” Mr. Ravelas said, referring to the flood control mess.

Meanwhile, the ADB’s Mr. Jeffries said improving VAT efficiency and sustaining gains in tax administration through digitalization are key to raising government revenue.

“The proposed tax on single-use plastic bags is a notable measure, serving both revenue and environmental objectives by helping address plastic and solid-waste challenges,” he said.

BIR Commissioner Charlito Martin R. Mendoza earlier said the proposed tax measure is projected to generate between PHP 6 billion and PHP 10 billion annually, “depending on the rate and coverage.”

“Beyond taxation, sustained improvements in expenditure efficiency and public financial management are crucial, particularly to strengthen investment planning, project execution, and governance,” Mr. Jeffries said. — Aubrey Rose A. Inosante, Reporter