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Philippine factory activity ended 2024 on a high as December growth was the fastest since November 2017, driven by an increase in production and new orders, S&P Global said on Thursday.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) rose to 54.3 in December from 53.8 in the previous month.

This matched the April 2022 print and was the strongest improvement in operating conditions since the 54.8 reading in November 2017.

A PMI reading above the 50 mark denotes improvement in operating conditions, while a reading below 50 signals deterioration.

“The Filipino manufacturing sector ended 2024 on a positive note, with further improvements in demand resulting in sharp and significant increases in new orders and output,” Maryam Baluch, economist at S&P Global Market Intelligence, said in a report.

The Philippines’ PMI reading remained the fastest among six Association of Southeast Asian Nations (ASEAN) member countries in December. It was ahead of Thailand (51.4), Indonesia (51.2) and Myanmar (50.4).

A contraction in manufacturing activity was seen in Vietnam (49.8) and Malaysia (48.6).

In its report, S&P Global said output and new orders “positively influenced” the Philippines’ PMI reading in December.

“Sharp expansions in both new orders and output were reported, supported by anecdotal evidence of robust underlying demand trends, product diversification, and new client acquisitions,” it said.

International markets saw a resurgence in demand, leading to the first uptick in new export orders in five months, S&P Global said.

An increase in production requirements prompted manufacturers to hike purchasing activity, with input buying rising at the highest rate in nearly two years.

“A sustained increase led to a resumption of pre-production inventory building, following two consecutive months of contraction,” it said.

S&P Global said vendor performance deteriorated sharply in December, although at a slower pace than in November.

“The surge in purchasing activity strained supply chains, causing traffic and port congestion, according to panelists,” it said.

Manufacturers trimmed staffing levels in December, ending three straight months of hiring.

“While production efficiency allowed manufacturers to stay on top of tasks at hand, it also led to a slight drop in employment, thereby ending a three-month streak of job creation. However, this could be a temporary blip, especially if demand remains resilient as anticipated throughout 2025,” Ms. Baluch said.

S&P Global said rising costs for materials and suppliers were passed on to clients, although data showed easing inflationary pressures.

“December highlighted a moderation in inflationary pressures, marking a shift from the spike observed in November. In fact, cost burdens and output charges rose at historically muted rates,” Ms. Baluch said.

Manufacturers kept an optimistic outlook for 2025, although the level of confidence slid to a four-month low.

“Firms remained confident that output would rise over the coming year, amid hopes that demand trends will strengthen further and plans to launch new products,” S&P Global said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said factory activity improved in December due to the “peak in demand for many businesses/industries during the fourth-quarter Yuletide holiday season.”

“Faster manufacturing PMI data would be a bright spot for the Philippine economy that could fundamentally lead to faster GDP (gross domestic product) growth, as one of the leading economic indicators,” he said.

In an e-mail, Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said the Philippines remained an outperformer in manufacturing in the region.

The Philippines’ PMI reading was above the ASEAN average of 50.7 in December. For 2024, the ASEAN PMI reading averaged 51.

He noted the manufacturing PMI for ASEAN was “weaker than we expected, though the headline dip was caused primarily by the bloc’s more developed members hitting a brick wall at the end of last year.”

Mr. Chanco said the ASEAN PMI data suggest factory activity should remain stable in the near term.

In a separate report, S&P Global said manufacturing firms in the ASEAN region were optimistic for the year ahead, although the degree of confidence dropped to the lowest in eight months.

“While the 2025 output outlook remains positive, it waned slightly. Growth in new orders remains mild and heavily dependent on domestic demand, while weak international demand continues to hinder growth,” Ms. Baluch said. – Aubrey Rose A. Inosante, Reporter

Philippine inflation is seen to remain within target in 2025, analysts said, paving the way for the central bank to continue its easing cycle.

“Looking ahead, inflation will likely be contained reflecting the moderation in global commodity prices, and administrative measures such as tariff cuts on food items, particularly tariff cuts on imported rice from July,” the ASEAN+3 Macroeconomic Research Office (AMRO) Senior Economist Andrew Tsang said.

AMRO expects inflation to settle within the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target range for 2024 and 2025.

“Specifically, average inflation is projected to be 3.2% in 2025, the same level as in 2024, which is a substantial decline from the 6% in 2023,” Mr. Tsang added.

Philippine headline inflation averaged 3.2% in January-November 2024. In 2024, monthly inflation prints have so far stayed within the BSP’s target band except for the 4.4% spike in July.

The BSP expects inflation to average 3.2% in 2024 and 3.3% in 2025.

“We still expect the Philippines’ inflation to remain within the BSP’s 2-4% target range,” Krisjanis Krustins, director at Fitch Ratings’ Asia-Pacific Sovereigns team and primary sovereign ratings analyst for the Philippines, said.

“In my new view, considering all risks and given past and current information, inflation in 2025 will still generally fall within the target range,” Enrico P. Villanueva, a senior lecturer at the University of the Philippines Los Baños Economics Department, said.

The Philippines has grappled with elevated inflation since 2022 amid external headwinds and supply-chain disruptions. From April 2022 to November 2023, inflation breached the 2-4% target band.

“The inflation outlook for 2025 largely hinges on external factors like commodity prices and exchange rates, as well as domestic supply-side management,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said.

“While the BSP’s easing cycle is likely to continue, its trajectory will depend on inflation trends, peso stability, and global monetary policy movements,” he added.

Price risks

However, analysts flagged potential risks that could stoke inflation anew in 2025.

“There is always a risk that a component of the consumer price index (CPI) will go up, like in electricity and wages as pointed out in BSP medium-term inflation path,” Mr. Villanueva said.

He said that these must be viewed as “regular possibilities.”

“What is crucial for policy making, though, is the severity, likelihood and correlation of these risks. Are the risk possibilities severe and likely enough to occur and will these stand out or be offset by price declines for other items in the consumer basket?” he added.

The BSP earlier said that the risks to the inflation outlook for 2025 and 2026 remain tilted to the upside.

“There could be some upside risk to inflation due to robust economic growth and increases in minimum wages,” Mr. Tsang likewise said.

He cited shocks such as supply-side disruptions due to natural disasters, which could drive up food prices.

“Climate change impacts through potential strings of strong typhoons can make landfall and wreak havoc in Luzon and the Visayas,” Union Bank of the Philippines, Inc., Chief Economist Ruben Carlo O. Asuncion said.

The Philippines has remained the most at-risk country globally for 16 straight years, according to the latest edition of the World Risk Index (WRI), which measures a country’s exposure to natural disasters and societal capacity to respond.

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

“Meanwhile, worsening geopolitical tensions in other regions, such as Ukraine and the Middle East, could raise the risk of global supply disruption leading to sharp spikes in commodity prices and shipping costs, and cause another round of upward pressures on inflation,” Mr. Tsang said.

“The impact would be exacerbated if there were to be a sharp depreciation of the peso caused by external shocks,” he added.

Mr. Rivera said the depreciation of the peso due to a stronger dollar or trade imbalances “could increase import costs, exacerbating inflation pressures.”

The peso has closed at its record low of PHP 59 per dollar thrice in 2024.

“The biggest risks to the inflation outlook stem from external developments, in particular trade policy, inflation and interest rates in the US, through their impact on the Philippine peso,” Mr. Krustins added.

Mr. Asuncion also noted the spillovers that could come from the incoming Donald J. Trump administration. Mr. Trump is set to assume the US presidency on Jan. 20.

Economists have warned of the potential impacts of Mr. Trump’s protectionist trade policies on the Philippines, which heavily relies on the United States for business and economic activities.

The US is also the country’s top export destination and top source of remittances.

The country’s reliance on imports also makes it more vulnerable to external shocks, Mr. Rivera said.

“Robust consumer spending driven by improving employment and remittance inflows might create demand-pull inflation as well as the rebound in tourism that could further elevate inflation from the services sector,” he added.

Still, Mr. Tsang noted that the BSP’s risk-adjusted inflation forecasts would still fall within its 2-4% target range. Accounting for risk factors and scenarios, the BSP still sees inflation settling within the target band, with its risk-adjusted forecasts at 3.2% for 2024, 3.4% for 2025, and 3.7% for 2026.

“Despite these risks, if global oil prices stabilize and domestic food supply constraints are addressed, inflation could remain within the BSP’s 2-4% healthy target range. However, managing supply-side pressures will be vital,” Mr. Rivera said.

“Inflation may still remain within target, giving enough room for the BSP to continue its easing cycle, providing economic activities to expand, especially if the government would be prepared to deal with these flagged risks,” Mr. Asuncion added.

Further monetary easing

The central bank has room to continue its policy loosening amid expectations of within-target inflation, the analysts said.

“With inflation expected to remain within target, the BSP will also likely continue its rate-cutting cycle,” Mr. Asuncion said.

Mr. Tsang said the pace of the BSP’s rate-cutting cycle will likely be “gradual and data dependent.”

“Over the past two years, a forceful monetary policy tightening during 2022 and 2023 that brought the policy rate to a 17-year high, together with the government’s direct measures, has helped bring headline inflation back to within the BSP’s inflation target of 2–4%,” he said.

In 2024, the Monetary Board reduced the target reverse repurchase (RRP) rate by 75 basis points (bps) with a 25-bp cut at each of its August, October and December meetings to bring its policy rate to 5.75%.

“From our point of view, there is room to gradually adjust the policy rate to a less restrictive stance in light of lower inflation,” Mr. Tsang added.

Mr. Krustins said the central bank “may still be able to deliver some further rate cuts, but the pace will likely be slower in light of the external risks to the Philippine economy.”

“Given the calibrated behavior of the BSP in the past years, monetary policy in 2025 may continue to adopt a cautious approach in the first half of the year, closely monitoring both inflation and external conditions,” Mr. Rivera said.

Mr. Krustins expects the BSP to ease rates by 100 bps, while Mr. Asuncion forecasts a total of 75 bps worth of cuts in 2025.

“If and as inflation continues to ease and global financial conditions improve, the BSP could reduce policy rates further by another 25 bps to 50 bps by (end-2025), potentially bringing the benchmark rate closer to 5%,” Mr. Rivera said.

BSP Governor Eli M. Remolona, Jr. has said that delivering up to 100 bps worth of cuts in 2025 may be “too much,” but noted that they are “neither more dovish nor less dovish.”

He also signaled the possibility of delivering a rate cut at the Monetary Board’s first policy meeting in 2025.

Economic growth will also be a key consideration for the central bank’s policy stance, Mr. Asuncion said.

“The BSP would be looking at how the economy performs in the fourth quarter and first quarter of 2025 and if the corresponding economic performance would warrant more rate easing support,” he added.

The Philippine economy grew by 5.2% in the third quarter of 2024, the slowest pace in five quarters.

On the other hand, factors that could derail the BSP’s easing cycle include a strong dollar and the pace of the US Federal Reserve’s own easing cycle, analysts said.

“The main risk factor at the moment would be further strengthening of the dollar, for example due to the imposition of tariffs by the new US administration,” Mr. Krustins said.

“However, risks are skewed towards more gradual easing. We note that the interest rate differential between the US and the Philippines is narrower now compared with historical norms,” he added.

Mr. Rivera said a strong dollar or higher-than-expected Fed rates “could pressure the BSP to maintain a more neutral stance to avoid capital outflows and peso depreciation.”

The Fed began its easing cycle in September 2024 with an outsized 50-bp cut and followed it up with two 25-bp reductions at its November and December meetings, bringing its target rate to 4.25%-4.5%.

However, the US central bank has signaled the possibility of slower easing this year amid inflation concerns, with Mr. Trump’s tariff proposals expected to stoke prices.

Further easing by the BSP is also “challenged by elevated global or domestic prices that might force the BSP to hold rates steady or even pause the easing cycle,” Mr. Rivera added.

“What can derail monetary easing is the thinking that all risks to inflation have to be eliminated (that is impossible), and that a high interest rate is the solution to price shocks, which usually affect supply rather than demand,” Mr. Villanueva said.

Keeping the economy “hostage” to elevated interest rates that could dampen demand due to risks “does not seem to be a rational stance,” he added.

“Shocks by their nature are unexpected in both their timing and impact. The best way to deal with it is to arrest it when it comes and make the economy more resilient for such possibilities,” Mr. Villanueva said.

“Preparation is done not through high rates but through measures that improve market efficiency such as diversification of supply sources, readiness to adjust tariffs and fees, and temporary cash subsidies.” – Luisa Maria Jacinta C. Jocson, Reporter

Philippine President Ferdinand R. Marcos, Jr. on Monday signed into law the P6.326-trillion national budget for 2025 but vetoed more than P194 billion worth of line items that he said were inconsistent with his administration’s priorities.

These include appropriations for certain programs of the Department of Public Works and Highways (DPWH) and unprogrammed funds that increased four times, Mr. Marcos said during the signing ceremony for the budget at the presidential palace.

“Cognizant that our resources are finite, and our people’s needs are plenty, we need to carefully curate the particulars of the budget, so much so that even grand ambitions and great plans must be tempered,” the president said.

“We must exercise maximum prudence, otherwise we run the risk of increasing our deficit and debt and derailing our development agenda for our country.”

The PHP 6.326-trillion national budget is 0.4% lower than the PHP 6.352-trillion spending plan that the Department of Budget and Management (DBM) submitted to Congress in August. This is equivalent to 22% of the projected gross domestic product (GDP) in 2025.

Mr. Marcos was initially scheduled to sign the budget on Dec. 20, but it was postponed to allow a more “rigorous” review after questions were raised over revisions made by the bicameral conference committee.

The items that have been vetoed by Mr. Marcos included PHP 26.065 billion worth of projects under the DPWH and projects worth PHP 168.24 billion under “unprogrammed appropriations.”

Public Works Secretary Manuel M. Bonoan said the projects that have been vetoed were “not ready for implementation.” “It will take us sometime anyway to make sure that these will be implemented right away,” he said in mixed English and Filipino.

Mr. Marcos also noted that unprogrammed appropriations under the Congress-approved budget bill increased by 300%.

At a briefing after the signing ceremony, Budget Secretary Amenah F. Pangandaman said unprogrammed appropriations now account for 4.7% of the General Appropriations Act of 2025, “consistent” with the standard that standby funds should only be 5% of the total budget.

She said the education sector will still receive the highest allocation with PHP 1.053 trillion, amid questions on the legality of massive budget cuts faced by the Department of Education (DepEd).

The education sector is composed of DepEd, state universities and colleges (SUCs), the Commission on Higher Education (CHED), and the Technical Education and Skills Development Authority (TESDA).

Ms. Pangandaman said the DPWH will now have a PHP 1.007-trillion budget for 2025, lower than the PHP 1.034-trillion funding approved by Congress.

Aside from the vetoed items, Mr. Marcos said there will be “conditional implementation” on certain items to make sure “the people’s funds are utilized in accordance with their authorized and stated purposes.”

This includes the Ayuda sa Kapos Ang Kita Program (AKAP), which was originally implemented by the Department of Social Welfare and Development (DSWD) but will now be co-implemented with the Department of Labor and Employment (DoLE) and the National Economic and Development Authority (NEDA).

The implementation of AKAP, which provides one-time cash assistance of up to PHP 5,000 for workers “will be strategic, leading to the long-term improvement of the lives of qualified beneficiaries, while guarding against misuse and duplication,” Mr. Marcos said.

Executive Secretary Lucas P. Bersamin told reporters that AKAP will have strict guidelines, but did not rule out the possibility of local politicians seeking funding for their constituents.

“Don’t be naive. Don’t be naive,” he said. “Always, in our life here in the Philippines, there must be somebody to initiate.”

He added that the National Government is not fully knowledgeable of local situations. “It should come from lower levels.”

Public finance analyst Zyza Nadine M. Suzara said the direct veto on P168 billion worth of items under unprogrammed appropriations “does not significantly alter the structure of the 2025 national budget,” which means that “pork remains huge in the DPWH budget.”

“In the first place, projects under unprogrammed appropriations cannot be released unless there are certain conditions,” she said in an X message. “The President and the economic managers simply conceded to the decisions of the bicam.”

Education

Meanwhile, Ms. Pangandaman reiterated that unprogrammed appropriations can be used for DepEd’s computerization program.

“As long as we have additional revenues from the DoF (Department of Finance), we can actually augment or increase the budget of DepEd, especially for its computerization program,” she said.

Members of the bicam had reduced DepEd’s budget by PHP 12 billion, including PHP 10 billion for its computerization program.

Enrico P. Villanueva, who teaches money and banking at the University of the Philippines Los Baños, said bicam members inflated the DPWH budget by PHP 288 billion, but the President reduced this “only by PHP 26.1 billion, which is not even 10% of the Congress-dictated increase.”

“For many Filipinos, that Congress-initiated increase is deemed as pork barrel, because it did not undergo the consultative budgeting process involved in making the National Expenditure Program,” he said in an X message. “People also view infra projects as a source of corruption and possible funding for the 2025 elections.”

“If the President wanted to address the concerns of the people, it should have vetoed the DPWH budget increase substantially if not totally.”

Ibon Foundation Executive Director Jose Enrique “Sonny” A. Africa said the President’s last-minute effort to veto a few items was aimed at averting “an obvious Constitutional challenge where the entire education sector budget is lower than even just the DPWH’s.”

“The tiny PHP 26.1-billion cut in the DPWH budget was just enough to be able to claim that the education sector budget defined as DepEd, SUCs, CHED and TESDA combined is more than DPWH’s PHP 1.007 trillion,” he said in a Facebook Messenger chat.

Mr. Africa also noted the PHP 1.055-trillion allocation for the education sector is less than the PHP 1.13-trillion budget for infrastructure, which includes the PHP 1.007 trillion for the DPWH’s projects and PHP 123.7 billion for the Department of Transportation’s projects.

A reenacted budget should have been used for the first quarter of the year, he said, while constructing “a socially rational people-biased 2025 budget deliberated transparently.”

However, Mr. Marcos said in his speech that a reenacted budget would “delay vital programs and jeopardize targets for economic growth.”

The Marcos administration may have averted operating under a reenacted budget but it disregarded health and other forms of social protection “that can increase the contribution of labor to overall productivity,” Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University, said via Messenger chat.

PhilHealth

Another analyst said the President failed to address concerns on the removal of state subsidy for the Philippine Health Insurance Corp. (PhilHealth), the agency responsible for the implementation of universal healthcare.

“It’s frustrating, it’s heartbreaking, and very unheroic on the day of Rizal anniversary,” Health advocate and former Health department advisor Anthony C. Leachon said of the President’s inaction on the defunding of PhilHealth.

Mr. Marcos vowed to expand PhilHealth members’ benefits in his speech, a move that Mr. Leachon said was a mere “lip service.”

“Without the funds, how can you increase the benefits? You cannot increase the benefits by not giving the PHP 74-billion subsidy,” he said in a phone interview.

Mr. Marcos earlier defended the bicam’s move to defund PhilHealth, citing its reserve funds.

PhilHealth’s reserve funds, which are not surplus funds and are meant to decrease the amount of members’ contributions as well as expand services for them, will be eroded in two to three years, Mr. Leachon said.

“And you’re not supposed to spend that because they have a big mistake in saying that the reserve funds are surplus funds. These are contingency funds that should be used to expand the benefit package, reduce the premium, and reduce the out-of-pocket expenses,” he said.

Meanwhile, the President also subjected 11 other items to conditional implementation, such as DSWD’s “PAyapa at MAsaganang PamayaNAn Program, the Rice Competitiveness Enhancement Fund and support for foreign-assisted programs.

The use of excess funds from the annual tariff revenue from rice imports will also be subjected to guidelines of the departments of Finance and Agriculture.

Four items in the 2025 budget were also put under general observation to “clarify changes made by Congress.”  These items include the payment of additional compensation for the organizational structure of the Senate and the House of Representatives, as well as the two chambers’ electoral tribunals and the Commission on Appointments. – Kyle Aristophere T. Atienza, Reporter

The National Government’s (NG) budget deficit widened to PHP 213 billion in November, as revenue collections dipped and spending accelerated, Treasury data showed.

Data from the Bureau of the Treasury (BTr) showed the budget deficit more than doubled to PHP 213 billion in November from PHP 93.3 billion in the same month last year.

Month on month, this was a reversal of the PHP 6.3-billion surplus in October.

In November, revenue collections slipped by 0.61% to PHP 338.3 billion from PHP 340.4 billion a year ago, due to the 70.7% decline in non-tax revenue collections.

Non-tax revenues plunged to PHP 15.9 billion in November from PHP 54.3 billion a year ago which included a one-off PHP 23.8-billion remittance of additional dividends from the Bangko Sentral ng Pilipinas (BSP).

Revenues from the Treasury slumped by 80.86% year on year to PHP 7.9 billion, while those from other offices fell by 37.83% to PHP 8 billion.

On the other hand, tax revenues rose by 12.7% to PHP 322.4 billion in November from PHP 286.1 billion in the same month a year ago.

Collections by the Bureau of Internal Revenue (BIR) went up by an annual 17.77% to PHP 247.6 billion in November.

“The year-on-year positive growth in the BIR collections for November 2024 can be attributed to the double-digit rise in collections from income taxes, value-added tax (VAT), excise taxes, and documentary stamp tax (DST). The increase in income tax can be attributed to the influx of taxpayers filing for their third Quarterly Income Tax Return on or before Nov. 15 of the current taxable year,” the BTr said.

Collections by the Bureau of Customs (BoC) fell by 1.69% year on year to PHP 72.4 billion in November, “driven by lower year-on-year collections from import duties and excise taxes, but it was counterbalanced by higher VAT collections.”

Meanwhile, NG expenditures jumped by 27.13% to PHP 551.3 billion in November from PHP 433.6 billion a year ago.

“The notable expansion can be attributed to higher capital expenditures for road and defense infrastructure projects, social protection and education-related programs, as well as personnel services requirements,” the BTr said.

The faster spending in November was also attributed to the local government units’ (LGU) higher National Tax Allotment shares, as well as the release of special shares in the proceeds of national taxes.

Primary spending — which refers to total expenditures minus interest payments — rose by 25.85% to PHP 484.6 billion year on year in November.

Interest payments increased by 37.29% to PHP 66.7 billion in November from PHP 48.5 billion in the same month in 2023.

Wider deficit

Meanwhile, the budget deficit ballooned to PHP 1.18 trillion in the January-to-November period from the PHP 1.11-billion deficit last year. This represents 79.29% of the PHP 1.5-trillion full-year deficit ceiling.

For the 11-month period, revenue collection climbed by 15.16% to PHP 4.11 trillion from PHP 3.56 trillion a year ago.

“Nevertheless, the year-to-date collection of PHP 4.11 trillion, which represents 96.12% of the PHP 4.3-trillion revised full-year program, outperformed the previous year’s 11-month total by 15.16%,” the BTr said.

Tax collections went up by 11.51% to PHP 3.55 trillion as of end-November. BIR revenues increased by 13.88% to PHP 2.67 trillion, which already makes up 93.64% of the PHP 2.8-trillion revised program.

Collections by the BoC inched up by 4.68% to PHP 850 billion in the January-to-November period. This is equivalent to 90.46% of the full-year target of PHP 939.7 billion.

“The positive year-to-date growth can be primarily attributed to the higher year-on-year collections from import duties, VAT, and excise taxes as a result of a higher value of non-oil imports (net of rice), PHP/USD exchange rate, and value and volume of petroleum oil imports, among others,” BTr said.

On the other hand, nontax revenues increased by 45.6% to PHP 555.3 billion as of end-November.

The Treasury’s revenues rose by 7.57% to PHP 232.7 billion due to “higher interest on advances from GOCCs (government-owned and -controlled corporations), guarantee fees, and the NG share from PAGCOR (Philippine Amusement and Gaming Corp.) income.”

“Furthermore, BTr’s year-to-date income has already surpassed the revised full-year program of PHP 187 billion for 2024 by 24.43%,” it said.

Revenues from other offices surged by 95.46% to PHP 322.6 billion in the 11-month period, surpassing the revised PHP 262.6-billion full-year program by 22.84%.

For the January-to-November period, the government spending jumped by 12.96% to PHP 5.28 trillion, accounting for 91.78% of the revised PHP 5.8-trillion full-year expenditure program.

Primary spending increased by 11.4% to PHP 4.6 trillion, while interest payments grew by 24.25% to PHP 705.3 billion.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the November budget deficit mainly reflected the faster government expenditures.

“This also reflected increased debt servicing/interest costs amid increased debt incurred since the COVID-19 (coronavirus disease 2019) pandemic… and also amid still relatively higher interest rates locally and globally… and still relatively weaker peso exchange rate that increased the peso equivalent of foreign debt interest and principal payments,” he said.

Mr. Ricafort also pointed out the year-on-year decline in Customs revenues in November was “partly due to reduced tariff rate on imported rice that partly reduced government revenues.”

President Ferdinand R. Marcos, Jr. ordered rice tariffs to be cut to 15% from 35% previously, until 2028.

Customs Commissioner Bienvenido Y. Rubio earlier estimated around P16.34 billion in foregone revenue in the second semester due to the lower rice tariffs.

“One measure that would help reduce the NG’s budget deficit and also reduce additional borrowings/overall debt by the NG would be the increased remittance of dividends and surplus by some GOCCs,” Mr. Ricafort said.

Mr. Ricafort said further rate cuts by the BSP and the US Federal Reserve would help ease debt servicing costs and narrow the budget deficit.

“However, continued budget deficits in recent months would still lead to more National Government borrowings and overall debt, thereby would require more tax and other fiscal reform measures in an effort to bring down further the NG debt-to-GDP ratio to below the international threshold of 60%,” he added.

Filomeno S. Sta. Ana III, coordinator of Action for Economic Reforms, said despite the BIR’s “aggressive” efforts against smuggling, the tax effort has to increase.

“Still and all, tax effort has to increase but the administration dislikes increasing taxes even though some taxes are efficient and politically acceptable to the public like the ‘health taxes,’ taxes on alcohol, soda and ultra-processed food, vape and heated tobacco products, cigarettes,” Mr. Sta. Ana said. — Aubrey Rose A. Inosante