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The Bangko Sentral ng Pilipinas (BSP) is expected to cut rates for a fourth straight meeting on Thursday, analysts said, amid within-target inflation and weaker-than-expected gross domestic product (GDP).   

A BusinessWorld poll conducted last week showed that 19 out of 20 analysts expect the Monetary Board to reduce the target reverse repurchase rate by 25 basis points (bps) at its policy review on Feb. 13.

If realized, this would bring the benchmark rate to 5.5% from the current 5.75%.

This would also mark the fourth straight meeting the BSP cut rates since it began its easing cycle in August.

In 2024, the central bank slashed borrowing costs by a total of 75 bps.

On the other hand, one analyst expects the central bank to keep interest rates steady at the meeting.

“We are expecting the BSP to cut the policy rate by 25 bps to 5.5% at its Monetary Board meeting,” Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco said.

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said monetary policy normalization is “far from over” amid elevated interest rates.

“I’m expecting the Monetary Board to cut further this week, by another 25 bps, especially with fourth-quarter GDP coming in softer than expectations and with inflation remaining firmly within the BSP’s target range,” he said.

Citi Economist for the Philippines Nalin Chutchotitham said the BSP is likely to deliver a 25-bp cut on Thursday after weaker-than-expected 2024 growth and a moderate inflation outlook.

BSP Governor Eli M. Remolona, Jr. earlier said a rate cut is still “on the table” for this week.

“The central bank might use the slower-than-expected growth last quarter as the primary justification for the cut, along with a stable inflation environment that allows the central bank to focus more on boosting the economy,” Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri, Jr. said.

Chinabank Research said price pressures have remained “generally mild and manageable.”

“Headline inflation staying stable at 2.9% in January, and core inflation even easing slightly, will be a key input to the Monetary Board,” Nomura Global Markets Research analyst Euben Paracuelles said.

Headline inflation remained steady at 2.9% in January, within the central bank’s 2-4% target band.

HSBC economist for ASEAN Aris D. Dacanay said inflation is “not so much of a concern” as the latest consumer price index outturn was well-within target.

Weak growth

Meanwhile, analysts noted that the latest economic output data could prompt further policy easing.

“Having attained its inflation objective in 2024 alongside a target-consistent inflation outlook this year, the BSP has room to trim its policy rate following another disappointing GDP growth estimate,” Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said.

Patrick M. Ella, economist at Sun Life Investment Management and Trust Corp. said that weak GDP is a “more pressing issue” for now so the BSP “needs to support growth from the monetary side.”

“The country’s subdued economic performance for both the fourth quarter and full-year 2024 likewise supports the case for less restrictive monetary policy to help meet the government’s 6-8% target for this year,” Chinabank said.

The Philippines’ GDP grew by a slower-than-anticipated 5.2% in the fourth quarter. This brought full-year 2024 growth to 5.6%, short of the government’s 6-6.5% target.

“Softer GDP data for the second straight quarter and the slowest in 1.5 years or since the second quarter of 2023 would further support local policy rate cuts,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

The BSP chief earlier said the country is growing at a “little bit below capacity.” If the output gap widens further, this would call for more easing, Mr. Remolona added.

“The BSP’s sustained rate action contributes to lower costs of funding and doing business while sowing the seeds for investment-driven growth that can help create jobs and incomes,” Mr. Asuncion said.

Mr. Dacanay said loosening monetary policy will “help raise demand for credit and support growth.”

“This is an important market signal to boost business activity and spending after the disappointing GDP growth report for the last quarter of 2024,” Oikonomia Advisory & Research, Inc. economist Reinielle Matt Erece said.

Peso

Meanwhile, the peso’s recent appreciation could also allow the BSP to continue on its easing cycle.

“The recent stability of the peso could also provide the BSP with more room to consider a rate cut,” Mr. Neri said.

“The currency has strengthened in recent trading sessions following the US government’s decision to postpone its tariffs against Canada and Mexico. While a rate cut could exert pressure on the peso, improving market sentiment may mitigate this.”

The peso closed at PHP 58.03 per dollar on Friday, strengthening by 15 centavos from its PHP 58.18 finish on Thursday. This was its strongest close in more than a month or since its PHP 57.91-per-dollar finish on Jan. 2.

Week on week, the peso likewise rose by 33.5 centavos from its PHP 58.365 finish on Jan. 31.

“Moreover, the BSP might be open also to a higher exchange rate as long as inflation remains within target. A weaker peso could also benefit the economy by boosting the purchasing power of exporters and OFW households,” Mr. Neri added.

Meanwhile, Mr. Dacanay said there is also room for the BSP to narrow its interest rate differential with the US Federal Reserve.

“Currently at 125 bps, history has shown us that the spread between the BSP and the upper-end range of the Fed rate can be as narrow as 100 bps before stoking financial jitters,” he said.

Reuters reported Federal Reserve officials on Friday said the US job market is solid and noted the lack of clarity over how President Donald J. Trump’s policies will affect economic growth and still-elevated inflation, underscoring their no-rush approach to interest rate cuts.

The Fed kept its policy rate steady last month, citing economic uncertainties.

“We think the BSP could still proceed with a 25-bp cut as the resulting interest rate differential, at 100 bps, remains at a comfortable level and would likely not risk a significant depreciation of the peso against the US dollar,” Chinabank Research added.

On the other hand, Moody’s Analytics economist Sarah Tan said the BSP could keep rates on hold on Thursday, noting it seems “too soon” to cut rates amid trade war jitters.

“The BSP will be prudent in monitoring global developments that could reinflate inflation and weaken the strength of the peso,” she added.

Cautious easing

Moving forward, analysts said the central bank will likely remain cautious and could deliver fewer than expected rate cuts this year.

“The BSP will likely maintain its cautious messaging, given persisting inflation risks and increased global uncertainties,” Chinabank Research said.

The central bank earlier warned that the risks to the inflation outlook remain tilted to the upside for this year and 2026.

“Across 2025, we expect monetary policy easing to continue but at a more moderate pace,” Ms. Tan said.

Mr. Remolona had signaled the possibility of cutting by a total of 50 bps this year, saying that 75 bps or 100 bps may be a bit “too much.”

“Although a rate cut remains on the table, we believe the extent of easing this year will be limited,” Mr. Neri said.

“The sizable current account deficit of the economy makes it more vulnerable to external shocks such as global trade tensions. A narrower interest rate differential could also drive portfolio outflows as investors seek higher returns elsewhere,” he added.

Mr. Neri expects a total of 50 bps worth of rate reductions this year.

“Front-loading Mr. Remolona’s preference for a 50-bp rate cut this year with the Fed on hold would be macro-appropriate although this would be at the price of a weaker peso,” Mr. Asuncion said.

On the other hand, Mr. Ella expects the central bank to deliver two rate cuts totaling 50 bps in the first half, keep rates steady in the third quarter before delivering another 25-bp cut in the fourth quarter. – Luisa Maria Jacinta C. Jocson, Reporter

The Philippines’ dollar reserves dipped in January, according to preliminary data by the Bangko Sentral ng Pilipinas (BSP).

Data from the central bank showed gross international reserves (GIR) declined by 3% to USD 103.02 billion at the end of January from USD 106.26 billion at the end of December 2024.

Year on year, dollar reserves inched down by 0.2% from USD 103.27 billion.

“The month-on-month decrease in the GIR level reflected mainly the BSP’s net foreign exchange operations, and drawdown on the National Government’s (NG) deposits with the BSP to pay off its foreign currency debt obligations,” the BSP said.

As of end-January, the level of dollar reserves was enough to cover about 3.6 times the country’s short-term external debt based on residual maturity.

It was also equivalent to 7.3 months’ worth of imports of goods and payments of services and primary income.

“By convention, GIR is viewed to be adequate if it can finance at least three-months’ worth of the country’s imports of goods and payments of services and primary income,” the BSP said.

Ample foreign exchange buffers protect an economy from market volatility and ensure the country can pay its debts in the event of an economic downturn.

BSP data showed foreign currency deposits plunged by 46.3% to USD 733.5 million from USD 1.37 billion a month ago. It also fell by 36.9% from USD 1.16 billion in January last year.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the lower foreign exchange holdings was due to the peso volatility in the past months.

The peso closed at P58.365 versus the greenback at end-January, depreciating by 52 centavos from P57.845 at end-December.

“GIR as of end-January declined for the fourth straight month after some net payment of the National Government’s foreign debt maturities and other obligations denominated in US dollars or other foreign currencies,” Mr. Ricafort added.

Meanwhile, the central bank’s foreign investments dropped by 3.7% to USD 86.13 billion as of January from USD 89.48 billion in the previous month. Year on year, investments inched lower by 1.3% from USD 87.28 billion.

Net international reserves went down by 3% to USD 103 billion as of end-January from USD 106.2 billion as of end-December 2024.

Net international reserves are the difference between the BSP’s reserve assets or GIR and reserve liabilities, such as short-term foreign debt and credit and loans from the International Monetary Fund (IMF).

The country’s reserve position in the IMF declined to USD 671.3 million at end-January from USD 675.6 million in the prior month and from USD 753.9 million a year ago.

Special drawing rights — the amount the country can tap from the IMF — was unchanged at USD 3.73 billion for the second straight month.

On the other hand, reserves in the form of gold were valued at USD 11.75 billion. This was up by 6.8% from USD 11 billion as of end-December, and higher by 14% from USD 10.3 billion a year earlier.

For the coming months, Mr. Ricafort said dollar reserves could be supported by growth in overseas Filipino worker remittance, business process outsourcing revenues, exports and tourism revenues.

The government’s global bond offer in January could also be reflected in the February GIR level, he said.

In January, the NG raised USD 3.3 billion from its triple-tranche offering of US dollar and euro bonds. This was its first global bond issuance for the year.

The central bank expects the country’s GIR to hit USD 110 billion by end-2025. — Luisa Maria Jacinta C. Jocson

The Asian Development Bank (ADB) is eyeing to approve loans related to the Philippine government’s transport, infrastructure and social sector projects as part of its lending program this year.

“I think there will be more programs further down. We continue to support the ‘Build Better More’ agenda of the government,” ADB Country Director for the Philippines Pavit Ramachandran told reporters on the sidelines of an event last week.

“These are continuing projects which we want to make sure are seen to completion and fruition,” he added.

Mr. Ramachandran said one of the loans lined up this year is another package for the North-South Commuter Railway.

“The North-South Commuter Railway is an important investment, something we are committed to support. That will be one of the projects. It’s an ongoing investment but the next tranche of investment has to be approved,” he said.

The North-South Commuter Railway is among the Marcos administration’s 16 flagship infrastructure projects.

The 147-kilometer railway will connect Clark Airport to Calamba, Laguna. The government is targeting its partial operation by the end of 2028. The project has a total funding of around PHP 873 billion and is co-financed by ADB and the Japan International Cooperation Agency (JICA). 

Mr. Ramachandran said the next tranche of financing for the railway would be a “sizable loan.”

“It will be upwards of a billion (dollars) because it’s the Malolos-Clark component of it. These are all contracted sections but it’s about making sure the financing is done.”

Meanwhile, the ADB is also aiming to provide funding for social development projects.

“We are also looking at some social sector projects including support for the food voucher program,” Mr. Ramachandran said.

The amount is yet to be finalized, but the financing for the food voucher program will likely range from USD 300 million to USD 400 million, he added.

In 2023, the Department of Social Welfare and Development (DSWD) launched the pilot of the food stamp program. Under the program, beneficiaries receive electronic transfer cards that are loaded with food credits. The DSWD scaled up the implementation of the program last year.

The multilateral lender also has investments planned for the health sector and infrastructure, Mr. Ramachandran added.

Meanwhile, Mr. Ramachandran said they are still finalizing the full lending program for 2025.

“We haven’t locked in the details of the lending program because we haven’t done what we call our programming mission,” he said.

“That will happen perhaps towards the end of March-April where we’ll sit down with the government and other stakeholders and discuss the details of individual projects, the total. At this stage, we don’t have the full scope of that fully laid out yet.”

The ADB earlier said it is allocating USD 24 billion in lending to the Philippines for 2024 to 2029. — Luisa Maria Jacinta C. Jocson

Philippine unemployment eased to 3.1% in December amid a surge in hiring in the transport and storage sector, bringing the full-year average to a record-low of 3.8%, according to the statistics agency.

Preliminary data from the Philippine Statistics Authority’s (PSA) Labor Force Survey showed the jobless rate in December was unchanged from the same month in 2023, but slightly lower than 3.2% in November.

The number of unemployed Filipinos increased to 1.63 million in December, up from 1.6 million in the prior year but slightly lower than 1.66 million in November.

December also saw the lowest unemployment rate since April 2005, when the statistics agency revised its definition of unemployed to Filipinos aged 15 years and older without a job, available for work and actively seeking one.

For 2024, National Statistician Claire Dennis S. Mapa said the jobless rate averaged 3.8% which is equivalent to 1.94 million jobless Filipinos. This was lower than the 4.4% jobless rate, representing 2.19 million jobless Filipinos, in 2023.

The full-year unemployment rate in 2024 was also the lowest since 2005.

The modest drop in unemployment in December 2024 was attributed to a surge in hiring for transport and storage workers during the holiday season, Mr. Mapa said, noting the sector recorded an additional 184,000 workers month on month.

Year on year, the sector gained 555,000 workers.

“Most of this is from passenger transport by road, and this is an effect of our holiday season,” Mr. Mapa said in mixed English and Filipino at a news briefing in Quezon City.

“We can observe growth in airport shuttle services, taxi operations, and passenger land transportation overall. This indicates positive movement in the sector. Additionally, we’ve seen an increase in the use of buses for public transport,” he added.

Meanwhile, job quality worsened year on year as the underemployment rate slipped to 10.9% (5.48 million), from 11.9% (6.01 million) in December 2023. Month on month, the underemployment rate went up from 10.8% (5.35 million) in November.

This was also the lowest underemployment rate since April 2005 when the PSA redefined underemployment as individuals who are employed but seek additional jobs or work hours.

For 2024, the average underemployment rate fell to 11.9% from 12.3% in 2023. This translated to 5.83 million underemployed Filipinos last year, lower than 5.94 million in 2023, Mr. Mapa said.

Labor Secretary Bienvenido E. Laguesma said the December 2024 Labor Force Survey showed the government’s efforts, with the support of the private sector, are paying off and gaining ground.

“We will continue to work in collaboration with the private sector towards job creation to ensure a more permanent source of income and decent living conditions for our workforce,” he told BusinessWorld in a Viber chat. “If there are more jobs, access to these opportunities will be open to and available for workers, even to those in the informal sector.”

National Economic and Development Authority  Secretary Arsenio M. Balisacan said in a statement that strategies to strengthen the labor market are “crucial to sustaining our economic momentum and providing higher earning opportunities for Filipinos.”

“The government remains committed to advancing both supply- and demand-side measures that will foster a more dynamic labor environment and meet the targets set in the Philippine Development Plan 2023-2028,” he said.

Finance Secretary Ralph G. Recto said the government will continue to push for initiatives that create quality jobs for Filipinos.

“We are focusing heavily on improving education, infrastructure, and human development to ensure that we build a Filipino workforce equipped with the tools and opportunities they need to compete on the global stage,” Mr. Recto said in a statement, emphasizing workforce upskilling.

Employment rate

Meanwhile, the PSA also reported that the employment rate slightly improved to 96.9%, equivalent to 50.19 million employed Filipinos in December from 96.8% in November when there were 49.54 million employed Filipinos.

The employment rate was unchanged from December 2023. However, there were slightly more employed Filipinos at 50.52 million in December 2023.

For 2024, the average employment rate rose to 96.2%, from the 95.6% logged in 2023. This is equivalent to 48.85 million employed Filipinos in 2024, higher than the 2023 average of 48.18 million.

Meanwhile, the labor force participation rate (LFPR) fell to 65.1% in December from 66.6% in December 2023. This represented a labor force of 51.81 million, lower than 52.13 million in December 2023.

University of the Philippines School of Labor and Industrial Relations Assistant Professor Benjamin B. Velasco said the modest decline in LFPR showed persistent challenges in job creation.

“Population will always be increasing, so that is a given. Population growth drives consumption and also production, so it is not a negative factor itself though large increases in population do present a challenge to policy making, including labor market governance,” he said in a Facebook Messenger chat.

“The problem of job creation is also bared in the significant decrease in youth LFPR.”

The youth LFPR declined to 31.9% in December from 34.5% in December 2023. The youth employment rate also dropped to 90.9% in December from 91.8% in the year prior.

Sectoral gains and losses

PSA data also showed agriculture and forestry lost 1.56 million workers year on year in December.

Mr. Mapa attributed the losses to the series of typhoons that hit the country in the fourth quarter, noting that about 557,000 of them were paddy rice farmers.

Workers engaged in planting, transplanting and other related activities lost 424,000 workers year on year in December. Hog farming lost 236,000 jobs as African Swine Fever (ASF) continued to affect production.

Month on month, the agriculture and forestry sector saw the highest increase as an additional 735,000 workers were hired.

At the same time, the sector covering wholesale and retail trade, and repair of motor vehicles and motorcycles, recorded the greatest number of job losses at 391,000 month on month in December.

Mr. Mapa said 294,000 of those job losses came from the retail sales sector that includes stalls, markets, food and beverages, and tobacco products.

About 219,000 workers involved in accommodation and food service activities also lost their jobs in December 2024, despite the surge in holiday activities.

The services sector had the most number of employees, contributing 60.5% to the total workforce.

The agriculture and industry sectors followed, representing 21.3% and 18.3% of the total number of employed individuals, respectively.

WORKERS Wage and salary workers

Wage and salary laborers continued to account for the bulk or 63.1% of employed Filipinos in December 2024, followed by self-employed individuals without any paid employees (28.5%), unpaid family workers (6.8%) and employers in their own family-operated farm or business (1.6%).

Among wage and salary workers, those employed in private establishments accounted for 78.9%, while those employed in government or government-controlled corporations represented 14.4%.

Wage and salary workers are people who are paid for their work in private establishments, government, or their own family-run business, the PSA said on its website.

Federation of Free Workers President Jose Sonny G. Matula urged the government to raise wages to boost workers’ purchasing power and increase demand for local goods and services.

“Contrary to employers’ contention, wage hikes support our farmers, fisherfolk, and informal sector workers because workers buy their products due to increased purchasing power,” he said in a Viber chat.

While the record-low unemployment rate for December 2024 is a good thing, Mr. Matula said it is not surprising.

“Employment almost always goes up because of the increased purchasing power of workers who are consumers, too. Workers doubled or tripled their incomes due to 13^th month and Christmas or year-end bonuses,” he said.

“But before we break out the confetti, let’s not forget: the quality of these jobs still leaves a lot to be desired. Jobs generated were temps.”

On Monday, the House of Representatives approved on second reading a bill granting a P200 hike for minimum wage earners. The Senate approved a counterpart bill for P100 in February last year. – Chloe Mari A. Hufana, Reporter

The Bangko Sentral ng Pilipinas’ (BSP) rate-cutting cycle will be supported by expectations of inflation settling well within target this year, analysts said.

“The low inflation print for January indicated that price pressures were still generally benign and manageable, which supports expectations for inflation to remain within the BSP’s 2-4% target going forward,” Chinabank Research said in a report.

“This should provide room for further interest rate cuts by the BSP,” it added.

The Philippine Statistics Authority on Wednesday reported headline inflation remained steady at 2.9% in January, within the central bank’s 2-4% target band.

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco expects inflation to average 2.7% this year amid “increasingly clear bottoming-out in official core inflation.” 

“Our revised yearly forecast implies that headline inflation should remain relatively steady from here on out, ranging between 2.5% and 3% for the remainder of this year, comfortably within the BSP’s target range,” he added.

The BSP projects inflation to settle at 3.3% this year. It earlier said inflation will likely “remain anchored to the target range over the policy horizon.”

However, risks to the inflation outlook continue to lean towards the upside, it said. Accounting for risks, inflation could average 3.4% this year.

“Looking ahead, while inflation for 2025 is expected to remain within the BSP target range, potential risks such as local weather disturbances and geopolitical tensions must be closely monitored,” Manulife Investment Management Head of Fixed Income Jean O. de Castro said.

Chinabank Research likewise said upside risks to the inflation outlook include adverse weather and geopolitical conflicts, which would “continue to support a cautious approach to policy easing.”

Despite this, analysts expect the BSP to deliver another rate cut at its first policy review for the year next week (Feb. 13).

“This favorable inflation outlook, along with the Philippine economy’s weaker-than-expected performance in both the fourth quarter and full-year 2024, reinforces our view that the BSP will likely cut interest rates by 25 basis points (bps) at its policy meeting next week,” Chinabank said.

The Philippines’ gross domestic product (GDP) grew by a weaker-than-expected 5.2% in the fourth quarter.

This brought full-year 2024 growth to 5.6%, short of the government’s 6-6.5% target.

BofA Securities economist for the Philippines Jojo Gonzales said they expect the central bank to cut rates by 25 bps next week.

“However, if inflation remains stubbornly high in February or March, our expectation for an April cut in policy rates could be at risk,” Mr. Gonzales said.

“Our expectation is for a 25-bp rate cut in February and another 25-bp cut in April, while the US Fed stays on hold,” he added.

BSP Governor Eli M. Remolona, Jr. has said a rate cut is still on the table for its meeting next week.

For 2025, Mr. Remolona said the central bank could cut by a total of 50 bps this year, as 75 bps or 100 bps may be “too much.”

The Monetary Board began its easing cycle in August last year, reducing borrowing costs by a total of 75 bps by end-2024.

Ms. De Castro said that the start of monetary easing will help support economic growth.

“Furthermore, the delayed effects of the BSP’s 75-bp monetary easing in the previous year, alongside expected further rate cuts in 2025, are likely to support economic expansion,” she said.

“By fostering a conducive investment environment and maintaining prudent fiscal and monetary policies, the Philippine economy can work toward achieving its growth objectives.” – Luisa Maria Jacinta C. Jocson, Reporter

Robust household consumption is seen to prop up the economy this year, Fitch Solutions’ unit BMI said, but warned that inflationary pressures and other risks could dampen this outlook.

“We hold a positive outlook for consumer spending in the Philippines in 2025. For 2025, we expect it to be driven mostly by strong economic growth and its feed-through into higher disposable income, as well as a stable labor market,” BMI said in a report.

BMI expects Philippine gross domestic product (GDP) to grow by 6.3% this year and 6.7% in 2026. These projections are within the government’s 6-8% target for both years.

The Philippine economy grew by 5.6% in 2024, missing the government’s 6-6.5% target. 

“A deteriorating external demand will likely be a drag on the Philippines’ GDP. However, the private final consumption expenditure will be positive,” BMI said.

Household spending is seen to accelerate to 5.3% this year, it said. Private consumption, which accounts for about three-fourths of the economy, grew by a lackluster 4.8% in 2024.

Consumer confidence has also shown “upward momentum,” amid the continued recovery from the pandemic, BMI said.

In the central bank’s latest consumer expectations survey, an improvement was seen in consumer confidence for the first quarter of this year and the next 12 months. This, amid a more upbeat outlook on higher income, additional sources of income and more available jobs.

“Easing inflationary pressures will provide relief to real household incomes and enable growth in spending,” BMI said.

“A tight labor market will support spending, as real wage growth returns to positive territory, which will support purchasing power over the year,” it added.

On the other hand, BMI noted that risks continue to weigh on private consumption, such as prolonged high inflation and weaker remittances.

“These risk factors will adversely affect household purchasing power, while geopolitical tensions have also emerged as a risk that is likely to impact inflation and interest rates.”

“Although inflationary pressures have largely eased in many markets, price levels remain high, and many households have not yet experienced real wage growth sufficient to restore purchasing power to their pre-2022-2024 inflationary shock levels.”

BMI expects inflation to average 3.3% this year, in line with the Bangko Sentral ng Pilipinas’ (BSP) own forecast. Headline inflation remained steady at 2.9% in January.

“If nominal income growth does not keep pace with inflation, the purchasing power of consumers will deteriorate, which would be a drag to their spending.”

“Prolonged inflation, particularly in relation to food, will mean that consumers will have to increasingly allocate more of their disposable income towards meeting necessities,” it added.

Meanwhile, the peso is seen to “depreciate slightly” this year and settle at PHP 58 against the dollar.

“Despite the roughly 1.7% depreciation of the peso, this is still a relatively positive outcome compared with the depreciation of 11% seen in 2022 and the 2% seen in 2023.”

“The weaker rate in 2025 is due to the combination of a higher expected consumer price index in the Philippines as well as the US Fed’s hawkish tilt,” it added.

In 2024, the peso weakened by 4.28% to close at PHP 57.845 versus the dollar from its end-2023 finish of PHP 55.37. The local currency sank to the record-low PHP 59-per-dollar level thrice last year.

“While persistent intervention by the BSP in the forex market will help to curb depreciatory pressures on the peso, earlier rate cuts by the BSP relative to the Fed will continue to weigh on the currency.”

“Nevertheless, the relatively stable rate will mean that the Philippines, which remains heavily reliant on imports to meet local demand, will see relative stability in import inflation,” BMI added.

Elevated household debt also poses a risk to consumer confidence, BMI said.

“It not only constrains future borrowing capacity but impacts current disposable income levels. This is particularly true as debt servicing costs rise in response to increases in interest rates.”

“In many markets, central banks rapidly hiked interest rates during the 2022-2023 high inflationary period, reaching levels to which most households have not been accustomed over the past decade,” it said.

From mid-2022 to late 2023, the BSP was the most aggressive central bank in the region as it hiked key rates by 450 basis points (bps) to tame inflation.

The BSP began its easing cycle in August last year, lowering borrowing costs by a total of 75 bps by end-2024. 

“While interest rates will not reach the previous historical lows of the last decade, easing monetary policy will alleviate some debt servicing cost pressures,” BMI said. — Luisa Maria Jacinta C. Jocson

Budget Secretary Amenah F. Pangandaman on Wednesday said the government’s 6-8% gross domestic product (GDP) growth target this year may be adjusted after underwhelming 2024 growth and global uncertainties.

“Let’s wait for it. Maybe, we need to adjust. So, if needed, we’ll do the necessary adjustment,” Ms. Pangandaman, who chairs the Development Budget Coordination Committee (DBCC), told reporters on Wednesday.

The DBCC will conduct its first meeting this year in March.

“All the numbers are already in. We already saw our GDP, inflation, but our employment is still very good. We’ll wait for the others… There’s a policy meeting soon. So, once all the numbers are in, and then we’ll check what’s happening with our peers,” Ms. Pangandaman said.

The Philippine economy grew by a weaker-than-expected 5.6% in 2024, falling short of the government’s revised 6-6.5% target.

Asked if the country could hit 8% growth this year, Finance Secretary Ralph G. Recto earlier told BusinessWorld that “6-6.5% [growth] is doable for 2025.”

Department of Budget and Management (DBM) Principal Economist and Undersecretary Joselito R. Basilio said the DBCC will likely retain the 6% lower band for 2025.

“Most likely retain. The lower part is firmer, meaning it won’t be lowered or raised anymore. Given the reasons for achieving the growth target, such as election spending, and agriculture is okay,” Mr. Basilio told reporters.

Mr. Pangandaman said they will also wait for the Bangko Sentral ng Pilipinas’ (BSP) next policy move.

“The BSP has its own thing. They also crunch their own numbers based on the international outlook… Let’s wait for it. Maybe we need to adjust,” she said.

BSP Governor Eli M. Remolona, Jr. over the weekend said they may cut interest rates by 50 basis points (bps) this year. He said the cuts could be delivered in increments of 25 bps each in the first and second half of the year.

The central bank began its easing cycle in August last year, slashing borrowing costs by a total of 75 bps to 5.75% by end-2024.

Meanwhile, Mr. Basilio said the DBCC could revise the revenue and expenditure program for this year to be “more realistic.”

“Depending on the condition in March. It will be there’s Trump on the outside. Then, our budget is still rolling to 2025. Then, depending on what the finalized revenue measures are,” Mr. Basilio said.

The DBCC expects revenues to hit PHP 4.64 trillion in 2025, while expenditure program was set at PHP 6.182 trillion.

It also kept the deficit ceiling at -5.3% of GDP for 2025.

USAID freeze

At the same time, Ms. Pangandaman said she does not see any downside risks yet associated with recent policies announced by US President Donald J. Trump.

“Nothing yet. As of now, it’s just the pronouncements and most of it is just the policy review of the existing orders and previous policy. So, we wait, we wait, we wait until we get their final agenda in this administration,” she said.

The Trump administration on Tuesday announced that it was going to put on leave all directly hired employees of the US Agency for International Development (USAID) globally and recall thousands of personnel working overseas, Reuters reported. 

USAID programs around the world, including the Philippines, were halted after Mr. Trump ordered a freeze on most US foreign aid to ensure this is aligned with his “America First” policy.

“I think, again, what Trump’s administration said is that they will just review, give them a 30-day review of all the aid that they provide to development countries, otherwise. So, ngayon, hintay muna po tayo,” Ms. Pangandaman said in mixed Filipino and English.

Ms. Pangandaman said the government is hopeful that after the review, the US will still provide funding for projects in the Philippines.

Asked if the government can step in and provide the funding instead, she said: “We don’t know yet. The aid that is being given to us by not just the US but also our other development partners is a bit big. So, let’s see if we can.”

National Economic Development Authority Secretary Arsenio M. Balisacan said he sees no significant impact from the suspension of foreign aid. — Aubrey Rose A. Inosante

The national Government’s (NG) outstanding debt hit P16.05 trillion at the end of 2024 amid higher debt issuances and a stronger dollar, the Bureau of the Treasury (BTr) reported on Tuesday.

Data from the Treasury showed outstanding debt rose by 9.8% or PHP 1.44 trillion from PHP 14.62 trillion at the end of 2023.

Month on month, the debt slipped by 0.2% from the record high PHP 16.09 trillion as of end-November.

“The year-end debt level closely aligned with the  2025 Budget of Expenditures and Sources of Financing projections of PHP 16.06 trillion, reflecting a minimal variance of only 0.03%,” the BTr said.

Outstanding debt as a share of gross domestic product (GDP) inched up to 60.7% as of end-2024 from 60.1% a year earlier, the Treasury said.

This was still slightly above the 60% threshold considered by multilateral lenders to be manageable for developing economies.

It was also a tad higher than the government’s 60.6% debt-to-GDP ratio target for 2024, mainly due to the “lower-than-expected full-year real GDP growth outcome of 5.6%,” the BTr said.

“Nevertheless, the minimal deviation from the programmed debt underscores NG’s effective cash and debt management strategies, including its proactive management of the level and timing of its external debt issuances amidst the volatile exchange rate environment,” it added.

The Treasury attributed the year-on-year increase in the debt stock to the “PHP 1.31-trillion net issuance of debt instruments in line with the government’s deficit program, as well as the PHP 208.73-billion valuation effect of US dollar strengthening.”

The Philippine peso in 2024 closed at PHP 57.845 versus the dollar, weakening by PHP 2.475 or 4.28% from its end-2023 finish of PHP 55.37.

Data from the BTr showed the bulk or 68.1% of total debt stock came from domestic debt, while 31.9% came from external sources.

Domestic debt rose by 9.1% to PHP 10.93 trillion as of end-December from PHP 10.02 trillion at the end of 2023. This was composed mostly of government securities.

“The net issuance of domestic securities contributed PHP 905.31 billion to the annual increase, while local currency depreciation increased the peso valuation of outstanding foreign currency-denominated domestic securities by PHP 7.18 billion,” the Treasury said.

Month on month, domestic borrowings inched up by 0.1% from PHP 10.92 trillion in November.

Meanwhile, foreign borrowings jumped by 11.4% to PHP 5.12 trillion as of end-2024 from PHP 4.6 trillion at the end of 2023.

“The year-on-year increase was mainly due to PHP 401.74 billion in net external debt availments, while the peso depreciation against the US dollar increased external debt valuation by PHP 201.55 billion,” the BTr said.

“Third-currency adjustments provided an PHP 80.74 billion downward valuation offset.”

External debt consisted of PHP 2.68 trillion in global bonds and PHP 2.44 trillion in loans.

Last year, the government raised USD 4.5 billion from the international market. It issued US dollar-denominated global bonds, raising USD 2 billion in May and USD 2.5 billion in August.

Month on month, external debt slipped by 0.9% from PHP 5.17 trillion in November “as local- and third-currency fluctuations reduced the peso valuation of foreign currency-denominated debt by PHP 66.6 billion and PHP 30.68 billion, respectively, while net availments added PHP 48.87 billion.”

As of end-December, the NG’s overall guaranteed obligations slipped by 0.8% to PHP 346.66 billion from PHP 349.44 billion in the previous year.

Month on month, guaranteed debt slumped by 17.9% from PHP 422.04 billion at end-November.

“The month-on-month decline/improvement in the NG outstanding debt is consistent with the stronger peso exchange rate versus the US dollar in December 2024 by 0.775 or 1.3% month on month to close at PHP 57.485 (vs. PHP 58.62 in November 2024),” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

“The stronger peso effectively reduced the peso equivalent of the outstanding NG foreign debt when converted to pesos,” he added.

Mr. Ricafort said outstanding debt “could go up to new record highs” after the NG’s USD 3.3-billion global bond issuance last month.

The Philippines raised USD 3.3 billion from the issuance of dollar and euro-denominated sustainability bonds in January.

The NG’s debt stock is expected to hit PHP 17.35 trillion by end-2025.

The National Government plans to borrow PHP 2.55 trillion this year — PHP 2.04 trillion from the domestic market and PHP 507.41 billion from external sources.

The government is aiming to bring down the debt-to-GDP ratio to 60.4% this year, 60.2% in 2026 and 56.3% in 2028. — A.R.A. Inosante