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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

The Philippine economy will continue to accelerate from this year to 2026 as domestic demand remains robust, the International Monetary Fund (IMF) said, but warned risks are tilted to the downside due to possible external shocks.

At the same time, Finance Secretary Ralph G. Recto said that the Philippines likely failed to hit its 6-6.5% growth goal for 2024, amid typhoons.

“If it hits 6% in the fourth quarter, I’ll be happy with that. I don’t think it will hit 6% for 2024, but I think it will surpass 6% in 2025,” Mr. Recto told reporters on Jan. 16.

For the first nine months of 2024, Philippine growth averaged 5.8%, the same as the IMF’s projection for the full year. Preliminary fourth-quarter and full-year gross domestic product (GDP) data will be released on Jan. 30.

In its latest World Economic Outlook  update, the IMF kept its GDP forecasts for the Philippines at 6.1% this year and 6.3% for 2026, the same as its projections in October.

These would fall within the government’s 6-8% GDP target for 2025 and 2026.

“Growth for 2025-2026 is projected to be primarily driven by domestic demand, namely consumption and investment,” an IMF spokesperson said in an e-mail.

“Consumption growth will be supported by lower food prices and gradual monetary policy easing,” it added.

Latest data from the Philippine Statistics Authority showed household consumption, which accounts for over three-fourths of the economy, jumped by 5.1% in the third quarter from 4.7% a quarter ago.

“Investment growth is expected to pick up on the back of a sustained public investment push, gradually declining borrowing costs and acceleration in the implementation of public-private partnership projects and foreign direct investments (FDI), following recent legislative reforms,” the IMF said.

Gross capital formation, the investment component of the economy, expanded by 13.1% in the third quarter, a turnaround from the 0.3% dip a year ago.

However, the IMF said that the balance of risks to the growth outlook is tilted to the downside, citing external risks.

“Some of the main downside risks include recurrent commodity price volatility, and new supply shocks, which may necessitate tighter monetary policy to anchor inflation expectations,” it said.

The IMF also cited shocks such as geopolitical tensions which could disrupt trade and other financial flows.

“Higher for longer policy rates in advanced economies (could cause) capital outflows, and tighter financial conditions,” it added.

The multilateral institution also cited climate shocks and extreme weather events which would lead to economic losses.

“There are also upside risks to the outlook, including from higher-than-expected growth in private investment through public-private partnerships, higher inward FDI following a faster-than-expected global recovery, or stronger reform momentum,” it added.

Inflation

Meanwhile, the IMF said it expects inflation to remain within the central bank’s 2-4% target range in the near to medium term.

It projects headline inflation to average 2.8% this year and 3% in 2026.

“However, risks are tilted to the upside, as rising geopolitical tensions, extreme climate events, and recurrent commodity price volatility continue to pose upside risks to inflation,” it said.

Headline inflation averaged 3.2% in 2024, well within the central bank target.

This year, the Bangko Sentral ng Pilipinas (BSP) expects inflation to average 3.3%.

The IMF said the central bank can gradually lower borrowing costs and “move toward a neutral stance.”

“With inflation and inflation expectations returning to the target and the opening of a negative output gap, continued reduction of the policy rate will be appropriate,” it said.

The BSP slashed interest rates by 75 basis points (bps) last year, delivering three straight rate cuts since it began its easing cycle in August.

The central bank has signaled further easing this year as the current policy rate at 5.75% is still in “restrictive territory,” BSP Governor Eli M. Remolona, Jr. earlier said.

“Along the declining rate path, the BSP must ensure that its stance continues to anchor inflation and inflation expectations firmly within the target band.”

“Amidst prevailing uncertainty, a data-dependent approach, and clear and effective communication around policy settings will be important to manage expectations and provide clarity on the BSP’s reaction function,” it added. – Luisa Maria Jacinta C. Jocson, Reporter

Government spending is likely to slow in the first half of 2025 due to the election ban on public works and congressional insertions in the national budget, the Department of Budget and Management (DBM) said.

Budget Assistant Secretary Romeo Matthew T. Balanquit said government spending in the first two quarters “might be lower” compared with the same period in 2024 due to the public works ban ahead of the May elections.

The Commission on Elections (Comelec) will implement a ban on public works on March 28 or 45 days before the May 12 elections. Social welfare dole-outs are also prohibited during the period.

The Development Budget Coordination Committee earlier said there “may be a slowdown in project execution during the first half of 2025 on account of the upcoming midterm national and local elections.”

However, the DBM said that infrastructure spending ahead of the election will not be “disrupted” by the election ban, as “the phasing of the projects is already planned, especially in the transport sector.”

“The only infrastructure projects affected are those worth PHP 707 billion, covering over 12,900 projects, the bulk of which are under the Department of Public Works and Highways (DPWH),” DBM Undersecretary Goddes Hope O. Libiran said.

At the same time, Mr. Balanquit said budget releases may be slower as the congressional adjustments under the 2025 General Appropriations Act will be subject to a process called For Issuance of Special Allotment Release Orders (FISARO) before being released.

The SARO will only be released once agencies meet the necessary requirements and secure approvals from the Executive Secretary and the Office of the President.

“Now, the release might not be that significant because of the PHP 757-billion [adjustments], which is around 11% or 12% of the total budget. So, it’s really a big amount,” Mr. Balanquit told reporters on Jan. 16.

Last year, most of the national budget was already released around the first month without the required conditions.

Meanwhile, former Finance Secretary Margarito B. Teves said that spending on public works usually falls in April and May during election years due to the 45-day ban.

“However, we see the impact as minimal given that the National Government always seeks the exemption of infrastructure projects from the ban, particularly those of national significance,” he told BusinessWorld in an e-mail over the weekend.

Mr. Teves added that the ban will affect projects at the local and district levels more than those at the national level.

“Historically, government spending and therefore gross domestic product spending has dipped slightly on a quarter-to-quarter basis, but an uptick is usually shown in the quarter after the elections,” Ateneo School of Government Dean Philip Arnold “Randy” P. Tuaño told BusinessWorld.

He added that the government had already disbursed a “significant amount” on infrastructure projects, months before the election period started.

The Comelec has exempted 48 infrastructure projects of the Public-Private Partnership  Center such as the Metro Manila Subway Project.

“We will expect a continuation of infrastructure growth in the run-up to the May period,” Mr. Tuaño said.

For the rest of 2025, Mr. Teves said the level of public spending on infrastructure will largely depend on the improvement in the absorptive capacity of the DPWH to carry out projects given that it received more than PHP 1 trillion in the national budget.

“Moreover, the frequency and severity of adverse weather conditions such as typhoons could cause disruptions and delays in the implementation of infrastructure projects especially those in the hard-hit areas,” he said. — Aubrey Rose A. Inosante