Archives: Business World Article

The Department of Finance (DoF) is hoping several tax reform measures will be approved by Congress this year despite the upcoming midterm elections.

“The legislators have the option to do public hearings during the break. We can do the work then do just one committee meeting during the resumption to pass the committee report,” DoF Director and Organisation for Economic Co-operation and Development Representative Euvimil Nina R. Asuncion told reporters on the sidelines of an event on Jan. 8.

“We will continue working with the leadership of the House and the Senate to pass the measures.”

The 19^th Congress resumes session on Jan. 14, but will adjourn on Feb. 8 as lawmakers prepare for the start of campaign period. The campaign period for national elective posts starts on Feb. 11, while the campaign for local posts starts on March 28. The elections are scheduled for May 12.

Lawmakers will resume session on June 2 and will adjourn sine die on June 13, formally closing the 19^th Congress.

Ms. Asuncion said the DoF is pushing for the approval of the excise tax on single-use plastics (SUPs), the proposed Government Revenues Optimization through Wealth Tax Harmonization (GROWTH) bill, and reforms for the fiscal regime for the mining industry.

“Instead of doing the CMEPA (Capital Markets Efficiency Promotion Act), we want the GROWTH bill [passed] instead since it covers both capital markets and financial intermediates. Actually, all of the items that are in CMEPA are also in the GROWTH bill. The GROWTH bill is the new Passive Income and Financial Intermediary Taxation Act (PIFITA), basically,” she added.

Ms. Asuncion also said the DoF hopes Congress will approve the bill imposing an excise tax on single-use plastics.

“We’re pushing for that as well. Not just because of revenues, but we really have to start looking at our commitments on climate change… We really see it as causing plastic pollution, especially in our cities. We really have to push for a revenue measure that will really discourage the use,” she said.

The House of Representatives approved its version of the bill in November 2022, while a similar measure is pending with a Senate committee.

Ms. Asuncion said these measures should have been approved last year, and could be deliberated on by the 20^th Congress, which will open on July 28.

“That’s a new Congress again. We will have to explain the measures again and convince different people, depending on who wins in the elections,” DoF’s Ms. Asuncion said.

Albay Rep. Jose Maria Clemente “Joey” S. Salceda, who chairs the House Ways and Means Committee, said in a Viber message that tax reforms would not be delayed by the elections.

“I am not that worried about the elections. We were able to pass significant reforms during the lame duck session last time,” he said.

He noted the CMEPA bill is “well on the way,” while the proposed mining fiscal regime reform bill has a “strong chance” of getting passed before the 19^th Congress ends.

“My preference is we get the Motor Vehicle Road User’s Charge done before the 19^th Congress ends. The rates have not been updated since 2004, and it could yield substantial revenues of up to 52 billion for public transport, road projects, and other transport improvements,” Mr. Salceda said.

Tax amnesty

Meanwhile, DoF’s Ms. Asuncion said the department is looking to introduce a general tax amnesty measure.

“So right now, the estate tax amnesty is still effective. The delinquencies are down. But this is what we will look at if we were to have general tax amnesty,” she said.

“Hopefully we get to introduce it this year. Whether this Congress or the next, that is the question,” she added.

In 2019, then President Rodrigo R. Duterte signed Republic Act 11213 or the Tax Amnesty Act but vetoed the provision for a general tax amnesty due to loopholes. Mr. Duterte only retained the provisions for estate tax amnesty.

“Tax amnesty is but a one-off measure but can result in tax decline in the long run as taxpayers would think they could always avail themselves of amnesty in the future,” Action for Economic Reforms Coordinator Filomeno S. Sta. Ana III said in a Viber message. — AMCS 

The Philippines’ gross domestic product (GDP) is expected to accelerate this year and in 2026 amid strong domestic demand, the United Nations (UN) said.

In its latest World Economic Situation and Prospects report, the UN said it expects the Philippine economy to expand by 6.1% in 2025 and 6.2% in 2026.

“The Philippines is one of the strongest growth performers among East Asian economies,” UN Department of Economic and Social Affairs Economic Affairs Officer Zhenqian Huang said in a follow-up e-mail.

“The anticipated sustained growth reflects robust domestic demand, ongoing public investments, and the positive effects of recent investment policy reforms, along with a vibrant labor market and a growing services sector.”

The UN’s forecasts are both within the government’s 6-8% growth target for this year and the next.

It noted that GDP growth likely averaged 5.6% in 2024, below the government’s 6-6.5% target.

For 2025, the Philippines is projected to be the second-fastest growing economy in the region, just after Vietnam (6.5%) and ahead of Cambodia (6%), Malaysia (4.6%), Thailand (3.1%) and Singapore (2.6%).

“In 2025 and 2026, economic growth in the Philippines is expected to be fueled by strong investment activity and robust private consumption,” Ms. Huang said.

“Monetary easing amid lower inflation will support domestic demand in the near term,” she added.

The Bangko Sentral ng Pilipinas (BSP) began its easing cycle in August, cutting interest rates by a total of 75 basis points (bps) last year. This brought the target reverse repurchase rate to 5.75%.

BSP Governor Eli M. Remolona, Jr. has signaled further cuts this year, citing that there is “still room to ease.”

Full-year inflation settled at 3.2% in 2024, in line with the BSP’s own forecast.

It also marked the first time that annual inflation fell within the central bank’s 2-4% target since 2021, when inflation averaged 3.9%.

Ms. Huang also noted “robust” remittance flows, which will help boost household spending.

Latest data from the central bank showed that cash remittances grew by 3% year on year to $28.3 billion in the January-October period.

“Despite ongoing fiscal consolidation, improved government revenue collection over the past decade has enabled sustained public spending on essential infrastructure to unlock long-term potential,” she said.

Latest data from the Bureau of the Treasury (BTr) showed the National Government’s (NG) budget deficit stood at PHP 1.18 trillion in the 11-month period. Revenues jumped by 15.16% year on year to PHP 4.11 trillion.

“Additionally, the global demand for AI (artificial intelligence)-related electronic products is expected to boost merchandise trade, while services trade will benefit from the ongoing recovery in international tourism.”

On the other hand, Ms. Huang flagged downside risks to the growth outlook.

“Increasing trade tensions, including the possibility of higher tariffs, could undermine merchandise trade performance,” she said.

US President-elect Donald J. Trump, who is set to take office next week, has pledged to impose a 10% universal tariff as well as a 60% tariff on Chinese goods.

“Current account deficits since the end of the pandemic make the economy susceptible to exchange rate volatility, especially if there are unexpected monetary policy shifts by major developed country central banks.”

She also noted how the country is vulnerable to climate shocks and natural disasters, which could lead to “significant economic and social losses.”

A recent study by the Asian Development Bank (ADB) showed the Philippines could potentially lose 18.1% of its GDP by 2070 due to climate change under a high emissions scenario.

Meanwhile, the UN expects headline inflation to remain steady at 3% this year until 2026.

“Inflation in the Philippines has been relatively benign and is projected to remain within the central bank’s target range in the near term,” Ms. Huang said.

This year, the BSP expects inflation to average 3.3%. Its risk-adjusted forecast is at 3.4%.

The downtrend in inflation will be mainly driven by easing price pressures on food, she said.

“While inflation is not a major policy concern at the moment, inflationary pressures are unlikely to dissipate entirely… Potential higher tariffs from trading partners, disruptions to supply chains and trade routes, and climate-related disasters could reignite upward pressure on prices,” Ms. Huang said. – Luisa Maria Jacinta C. Jocson, Reporter

The Philippines’trade deficit in November narrowed to its smallest in three months, as exports and imports both declined, data from the statistics office showed.

Preliminary data from the Philippine Statistics Authority (PSA) showed the country’s trade-in-goods balance — the difference between exports and imports — stood at a deficit of USD 4.767 billion in November, down by 0.04% from the USD 4.769-billion deficit in November 2023.

Month on month, the trade gap slimmed by 17.5% from the revised USD 5.78 billion in October.

November saw the narrowest trade deficit in three months or since the USD 4.39-billion gap in August.

Year to date, the trade deficit widened by 3.2% to USD 49.96 billion from the USD 48.41-billion gap a year ago.

In November, the value of exports declined for the third straight month, falling by 8.7% year on year to USD 5.69 billion from USD 6.23 billion a year ago. Exports dropped by 8.1% month on month.

Exports in November were at the lowest level since USD 5.57 billion in June 2024.

For the first 11 months, exports stood at USD 67.55 billion, slipping by 0.4% from USD 67.83 billion in the same period in 2023.

Meanwhile, imports of goods declined by 4.9% — ending four months of expansion — to USD 10.46 billion in November. This was a reversal of the 1.7% growth in November 2023 and the sharpest import drop since the 7.3% fall in June.

The import value in November was the lowest level in five months or since USD 9.89 billion in June 2024.

Year to date, imports went up by 1.1% to USD 117.51 billion from USD 116.25 billion in 2023.

For 2024, the Development Budget Coordination Committee (DBCC) expects 4% and 2% growth in exports and imports, respectively.

Electronics slump

“Exports were weighed down by soft electronics performance. Imports were down due to lower dollar value of energy imports. Meanwhile capital imports were also lower as an aircraft order that drove previous months’ imports numbers faded in November,” Metropolitan Bank & Trust Co. Chief Economist Nicholas Antonio T. Mapa said in an e-mail.

Manufactured goods, which accounted for bulk of the country’s total exports receipts, fell by 12.9% to USD 4.43 billion in November from USD 5.09 billion in the same month of 2023.

Electronic products, which made up nearly two-thirds of manufactured goods and almost half of total exports, decreased by 20.8% to USD 2.79 billion in November.

More than two-thirds of total exports were composed of semiconductors, which also fell by 33.1% to USD 1.91 billion in November.

Exports of mineral products declined by 5.6% to USD 563.17 million in November, while exports of agro-based products jumped by 51% to USD 456.53 million.

The United States remained the top destination for Philippine-made goods in November, with exports valued at USD 969.09 million accounting for 17% of the total export sales.

It was followed by Japan with USD 916.12 million (16.1% share), China with USD 786.35 million (13.8%), Hong Kong with USD 600.24 million (10.5%), and Singapore with USD 288.11 million (5.1%).

Meanwhile, imports of raw materials and intermediate goods fell by 1.9% to USD 3.849 billion in November, while capital goods dropped by 3.9% to USD 2.911 billion.

Imports of consumer goods increased by 3.7% to USD 2.353 billion in November, while imports of mineral fuels, lubricants and related materials declined by 24% to USD 1.3 billion.

By commodity group, electronic products had the highest import value at USD 2.46 billion in November, up 10.5% from USD 2.227 billion a year ago.

China was the biggest source of imports in November with USD 2.82 billion worth of goods, accounting for 27% of the total import bill.

It was followed by Indonesia with USD 877.77 million (8.4% share), Japan with USD 827.75 million (7.9%), South Korea with USD 774.55 million (7.4%) and United States with USD 621.3 million (5.9%).

Sergio R. Ortiz-Luis, Jr., president of the Philippine Exporters Confederation, Inc., said in a telephone interview that many “challenges,” especially geopolitical tensions, affected the trade performance in November.

“Exports and imports of electronics, which comprise 60% of the total exports, fell the most because of geopolitical issues. Agriculture products also declined amid slow investments coming in the country,” said Mr. Ortiz-Luis in a mix of Tagalog and English.

Mr. Ortiz-Luis also said that loss of investments, particularly from China, weighed on trade.

“Although there are investments coming, the Philippines is still behind compared with other neighboring countries, amid high fuel prices, red tapes, and some government issues in the country,” he said.

Mr. Ortiz-Luis said the trade performance has been improving but “investments are lacking.”

“We are the last choice of investors which preferred more our neighboring countries,” he said. – Lourdes O. Pilar, Researcher

The unemployment rate in November dropped to its lowest in five months as businesses ramped up hiring ahead of the holiday season, the statistics agency said on Wednesday.

Preliminary data from the Philippine Statistics Authority’s (PSA) Labor Force Survey showed the jobless rate fell to 3.2% in November, lower than the 3.9% in October and the 3.6% in the same month last year.

This translated to 1.66 million unemployed Filipinos in November, lower than the 1.97 million in October and 1.83 million a year prior.

The 3.2% was the lowest unemployment rate since June 2024 when it slid to 3.1%.

For the first 11 months of the year, the jobless rate averaged 3.9%, easing from 4.5% a year ago.

Meanwhile, job quality also improved as the underemployment rate declined to 10.8% in November, the lowest since the 9.9% seen in May.  It was also lower than the 12.6% in October and 11.7% in the same month in 2023.

The number of underemployed Filipinos — those who want longer work hours or an additional job — decreased by 728,000 month on month to 5.35 million in November. Year on year, the number fell by 432,000 from 5.79 million.

The underemployment rate averaged 12% in the January-to-November period, falling from 12.4% a year ago.

“Our labor market remains robust, with consistently high employment rates and reduced underemployment. The next step is to expand business and employment opportunities to enable more Filipinos to actively and productively contribute to the economy,” National Economic and Development (NEDA) Secretary Arsenio M. Balisacan said in a statement.

PSA data also showed the employment rate rose to 96.8% in November from 96.1% in October and 96.4% in November 2023.

This is equivalent to 49.54 million employed Filipinos, higher than October’s 48.16 million but a tad lower than 49.64 million in November 2023.

Undersecretary and National Statistician Claire Dennis S. Mapa attributed the job gains in November to the holiday season when businesses hired more workers.

The manufacturing sector saw an annual increase of 784,000 workers to 3.71 million in November, with the majority working on consumer goods, he added.

Of the total, the manufactured bakery products sub-sector added 117,000 workers, while manufacturing of other food products, such as spices and condiments, hired 98,000 more.

On the other hand, accommodation and food service activities gained 528,000 workers to bring the total to 2.9 million in November. This included restaurants and other mobile service activities, which added 310,000 and short-term accommodation services, which hired 97,000 more.

“As expected, during the last quarter — those three months — we typically see growth in accommodation services, restaurants, and, of course, key inputs like food products,” Mr. Mapa said.

Other sectors that posted the most job gains annually were human health and social work activities (303,000); other service activities (239,000); and transportation and storage (190,000).

Month on month, the top five sub-sectors with the biggest job increases were wholesale and retail trade; repair of motor vehicles and motorcycles (746,000); accommodation and food service activities (389,000); other service activities (328,000); manufacturing (231,000); and transportation and storage (113,000).

Farm jobs

However, PSA data showed the agriculture sector shed 1.99 million jobs in November, due to several typhoons that hit the country. This brought the number of people employed in the agriculture sector to 8.71 million in November.

“During the month of November, when the labor force survey was conducted, we experienced [several] typhoons entering the country from Nov. 1 to Nov. 18. These significantly impacted our farmers and fisherfolk,” Mr. Mapa said.

“These are the two sectors that experienced a substantial year-on-year decline in the number of jobs or businesses,” he added.

Mr. Mapa noted corn farmers were “significantly affected” with 400,000 in job losses, while banana farmers lost 312,000 jobs.

Year on year, 213,000 paddy rice farmers lost their jobs in November. There were 298,000 jobs lost in planting, transplanting and other related activities, and 122,000 jobs lost in harvesting and other related activities, Mr. Mapa said.

For the fishing and aquaculture sector, marine fishing jobs fell by 286,000.

According to the PSA, the Labor Force Participation Rate (LFPR) — the economically active population, either employed or unemployed — rose to 64.6% in November from 63.3% in October but lower than 65.9% a year prior.

“While statistically, this drop is not significant (year on year), it still reflects a reduction in absolute numbers,” Mr. Mapa said.

The largest drop in the LFPR was in the 15-24 age group, which fell by 409,000, he added. The 35-44 age group saw an increase of 70,000.

When it comes to gender, the decline was more pronounced among females, with a year-on-year reduction of 239,000.

“This indicates mixed trends, with some age groups contributing to increases while others saw declines,” Mr. Mapa said.

Mr. Balisacan said the government must adopt alternative work arrangements to account for workers’ evolving preferences while considering organizations’ demands.

“We will encourage business upgrading and skills training programs to ensure that these jobs offer competitive wages as our workers raise their productivity by developing their human capital,” he said.

Finance Secretary Ralph G. Recto said the Philippine labor market continues to improve and strengthen due to the decline in inflation and faster economic growth.

“We can expect even more job opportunities to open up for our fellow Filipinos,” he said.

Labor Secretary Bienvenido E. Laguesma said he expects the jobs data to continue to improve in the coming months.

“We look forward and hope that increase in the employment rate will continue and be sustained, unemployment and underemployment rates to be on the downtrend,” he told BusinessWorld in a Viber chat.

Meanwhile, the passenger land transport sub-sector largely contributed to the decline of underemployment in November 2024 as demand increased during the holiday season.

“There was a reduction of approximately 144,000 in the number of underemployed individuals, with passenger land transport being a major contributor to this decrease. This sector also contributed to the earlier reported increase in employed persons, largely driven by activities related to the holiday season, such as transportation and storage,” he said in Filipino.

Another factor in the drop in underemployment was the “other personal service activities” sector, which added 239,000 jobs year on year.

“Many individuals in this sector appear to have transitioned to full-time employment,” Mr. Mapa noted.

“The decline in underemployment year on year was largely driven by transportation and storage, wholesale and retail trade, and domestic services,” he added.

University of the Philippines School of Labor and Industrial Relations Assistant Professor Benjamin B. Velasco said the drop in unemployment was due to the seasonal increase in economic activity in the run-up to the holidays.

He said the positive trend may continue up to the first few months of 2025 as the midterm elections spur an increase in “project-based” employment for ward leaders, election volunteers and political campaigners.

“The problem of course with such seasonal rise in employment (due to holidays or elections) is that it is temporary and part time. It does not respond to the structural constraints in the labor market which results in 4-5% unemployment and low LFPR, especially for women,” he said in a Facebook Messenger chat.

“One sign of the structural limits is the persistent bleak figures of youth employment, shown in the November LFS,” he added. – Chloe Mari A. Hufana, Reporter

Headline inflation could fall to around the 2% range this year amid easing price pressures, analysts said, which would be well below the projection of the Bangko Sentral ng Pilipinas (BSP).

“We maintain our forecast for consumer price index (CPI) inflation to average 2.7% in 2025 which is lower than the 3.2% in 2024, and below BSP’s baseline forecast of 3.3%,” Nomura Global Markets Research analysts Euben Paracuelles and Nabila Amani said in a commentary.

Inflation accelerated to 2.9% year on year in December from 2.5% in November.

This brought the full-year print to 3.2%, matching the Bangko Sentral ng Pilipinas’ (BSP) forecast for 2024. It also marked the first time that full-year inflation fell within the central bank’s 2-4% target since 2021, when inflation averaged 3.9%.

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

HSBC economist for ASEAN Aris D. Dacanay said he expects inflation to average 2.5% in 2025, citing the continued drop in rice prices.

“Nonetheless, we think the acceleration in inflation may be short-lived, as downside risks to global oil prices persist while retail rice prices fall,” he said.

In December, rice inflation sharply slowed to 0.8% from 5.1% in November and 19.6% a year prior.

Rice is one of the biggest factors driving faster inflation, but prices have been declining since the government in July slashed tariffs on rice imports to 15% from 35% previously. This tariff regime is set to be implemented through 2028.

The Philippine Statistics Authority (PSA) has also noted the possibility for rice inflation to turn negative this month.

“Importantly, the output gap remains negative, and we continue to assume that the impact of lower rice import tariffs on food inflation will continue to play out in coming months,” Nomura said.

Nomura said inflation pressures are seen to be “well-contained” amid the government’s continued supply-side measures and its oil price assumptions.

“You also have the deflationary impulse from Chinese goods as trade gets rerouted. And at the same time, risks to global energy prices are tilted to the downside,” Mr. Dacanay said.

“Because if Fed rates are high while mainland China growth is weaker than before, the demand for global energy or at least oil, will actually get reduced, bringing down energy prices and bringing down inflation,” he added.

Meanwhile, Citi economist for the Philippines Nalin Chutchotitham projects inflation to average 3.1% this year, still below the BSP’s forecast.

She said inflation this year will continue to be “well-within policy target” despite upside risks from electricity rate increases.

“We revised up 2025 inflation from 2.8% to 3.1% on the back of planned increases in electricity rates during the first half, noting also potential further adjustments in the remainder of the year, although this may be partly offset by potentially lower oil prices,” Ms. Chutchotitham added.

With inflation expected to remain manageable, the BSP has room to continue its easing cycle.

“We see limited implications for our BSP forecasts because of the still-favorable inflation outlook, which is the main policy driver for BSP despite a more hawkish Fed,” Nomura said.

The BSP kickstarted its rate-cutting cycle in August last year, delivering a total of 75 bps for 2024. This brought the benchmark rate to 5.75% by yearend.

“We still have one more CPI print before the next BSP meeting, and unless we see another sharp pickup in headline inflation to well above 3%, we see no reason for BSP to pause,” Nomura added.

Nomura expects the BSP to deliver 75 bps worth of cuts this year in its first three meetings.

“Despite currency weakness, BSP may continue to cut rates and decouple from the Fed or regional peers, given its assessment of well-anchored inflation expectations and a limited FX (foreign exchange) pass-through,” it added.

The peso fell to the record-low PHP 59-per-dollar level thrice last year, twice in November and once in December.

Meanwhile, Mr. Dacanay sees up to 75 bps of rate cuts by the third quarter, in increments of 25 bps.

“We updated our policy rate forecast and expect a more gradual easing cycle, wherein the BSP — mindful of Fed moves and FX volatility — will cut in alternate rate-setting meetings until the policy rate reaches 5% by the third quarter,” he said.

“However, we do not think the upside surprise in headline inflation derails the policy rate outlook altogether. Looking under the hood, the inflationary pressures seem to be short-lived in nature,” he added.

BSP Governor Eli M. Remolona, Jr. has said the central bank prefers to reduce rates in “baby steps.”

“The current policy rate remains relatively high, and given the time lag in monetary policy, we expect the BSP to continue with its gradual 25-bp rate cuts in February, the second quarter and third quarter,” Ms. Chutchotitham said.

The BSP trimmed the number of Monetary Board meetings to six this year from seven previously, citing the need for more in-depth analysis of data.

“We expect 50 bps more likely to follow in 2026 if inflation stays close to the target midpoint, thus bringing real policy rate closer to historical level and continue to support economic growth,” Ms. Chutchotitham added. – Luisa Maria Jacinta C. Jocson, Reporter