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The Board of Investments (BoI) has approved a total of PHP 1.58 trillion in investment pledges as of November, putting it on track to hit its PHP 1.6-trillion target for the year.

In a statement on Wednesday, the Department of Trade and Industry (DTI) said the total investments approved in the first 11 months represent 98.7% of its full-year target.

Year on year, BoI-approved investment pledges rose 43.6% from PHP 1.1 trillion.

The approved investments are primarily in the renewable energy (RE) sector, accounting for PHP 1.35 trillion. This was a 48% increase from a year ago.

The government saw an increase in RE projects after it allowed full foreign ownership in the sector, which was previously capped at 40%.

Other top-performing sectors are air and water transport, which attracted PHP 121.2 billion in investments; real estate with PHP 34.67 billion; manufacturing with PHP 30.4 billion; and water supply, sewerage, waste management, and remediation with PHP 16.28 billion.

Around PHP 10.5 billion of the investment pledges are in the agriculture, forestry, and fishing projects; PHP 8.25 billion for wholesale and retail projects; and PHP 7.26 billion for the information technology and business process management sector.

Of the total, PHP 1.2 trillion came from local investors, while PHP 379.31 billion came from foreign investors.

The top international sources were Switzerland, the Netherlands, Japan, South Korea, Singapore, Thailand, and the United States.

“This growth is fueled by a significant 254% increase in local investments, with Filipino companies contributing PHP 1.06 trillion,” the DTI said.

“The Calabarzon Region is the leading recipient, with PHP 623.19 billion in investments, followed by Central Luzon with PHP 277.08 billion and Western Visayas with PHP 245.95 billion,” it added.

Secretary Frederick D. Go said that the robust investments in key sectors reflect the steady progress in realizing the country’s national priorities.

“This growth is driven by the government’s steadfast implementation of investor-friendly policies — such as the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act,” said Mr. Go.

Last month, President Ferdinand R. Marcos, Jr. signed into law the CREATE MORE Act, which further reduces the corporate income tax to 20% from 25% for registered business enterprises.

Mr. Go, who heads the Office of the Special Assistant to the President for Investment and Economic Affairs, said that the law enhances the country’s competitiveness in attracting local and foreign investments.

“These efforts are vital in sustaining our country’s strong economic growth and ensuring that the Philippines remains a prime investment destination,” he added.

Meanwhile, Trade Secretary Ma. Cristina A. Roque attributed the investment growth to investors’ confidence in the Philippines.

“These figures underscore our commitment to sustained economic growth that transforms the Philippine economy. We are focused on creating a virtuous cycle of growth by empowering the private sector through market-based tools,” she said.

“This underpins the Philippines’ continuously improving investment climate, sending clear signals that we are ‘Making It Happen in the Philippines,’” she added. — Justine Irish D. Tabile

The Philippines’ score in a global anti-money laundering index worsened as its ranking declined to the 49^th place out of 164 countries.

This, as President Ferdinand R. Marcos, Jr. on Wednesday cited the Philippines’ “progress toward exiting” the Financial Action Task Force’s (FATF) “gray list.”

“This is a very, very important item,” Mr. Marcos said in a speech at the 33^rd regular meeting of the Anti-Terrorism Council, based on a transcript from his office.

“I know that it’s not spoken about a great deal in the public domain but nonetheless, as an obstacle to the continuing transformation of our economy, to the continuing transformation of our place in the world, this, us exiting from the gray list is a significant move,” he added.

The Philippines is targeting to exit by February the FATF’s gray list of jurisdictions under increased monitoring for “dirty money” risks. It has been on the gray list for over three years or since June 2021.

In the latest edition of the Basel Anti-Money Laundering (AML) Index published by the Basel Institute on Governance, the Philippines ranked 49^th with an overall score of 5.84 (out of 10). It was worse than its previous rank of 53^rd out of 152 jurisdictions, with an overall score of 5.64.

The index ranks a jurisdiction based on its risks of money laundering and terrorist financing and its capacity to counter them. It uses a 0-10 system, where a score of 10 indicates the highest risk level.

Myanmar topped the Basel AML index with a score of 8.17, followed by Haiti, Democratic Republic of the Congo, Chad and Venezuela.

The Philippines’ score was higher than the global average of 5.30.

“Issues of financial transparency are this region’s main weak spot, with more than half of jurisdictions having a high risk score in the Financial Secrecy Index,” the report said.

In the East Asia and the Pacific region, Myanmar had the highest score, followed by Lao PDR (6^th), China (11^th), Vietnam (15^th), Cambodia (21^st), Solomon Islands (35^th) and Thailand (39^th).

East Asia and the Pacific’s weakest area is financial transparency and standards, it added.

It cited low effectiveness scores for beneficial ownership transparency; the investigation, prosecution and sanctioning of money laundering offenses; and the prevention of proliferation of weapons of mass destruction.

“Almost half of the jurisdictions receive high risk scores for fraud and financial crimes,” it added.

Meanwhile, the countries that scored the lowest risk were San Marino (2.96), Iceland (3.00), Finland (3.07), Estonia (3.16) and Andorra (3.29).

Analysts said that the Philippines still has much to do to address in strengthening its money laundering/terrorist financing systems.

“It is indeed ironic that despite all the talk about the Philippines exiting the gray list, the world’s perception is that money laundering and the related issues in governance have worsened,” Filomeno S. Sta. Ana III, a coordinator of Action for Economic Reforms, said.

At its October plenary, the FATF kept the country in its list of jurisdictions under increased monitoring for dirty money risks.

However, the FATF said it initially determined that the Philippines has “substantially completed” the recommended action items to improve its anti-money laundering and counter financing of terrorism regime.

“Philippine officials and their apologists think that putting in place the technical standards would be enough for us to be taken off from the gray list. But what matters is the substantial compliance of rules,” Mr. Sta Ana said.

Chester B. Cabalza, founding president of Manila-based International Development and Security Cooperation said the country must “show consistency and transparency” in its goal of exiting the gray list.

“We have legal instruments to support and strengthen our institutions. The Philippines must stringently enforce it and prosecute violators to become more compliant,” he added.

Antonio A. Ligon, a law and business professor at De La Salle University in Manila, said: “The country needs to strictly enforce the anti-money laundering laws. Make sure to have strong monitoring measures.”

The FATF is set to conduct an onsite assessment in the Philippines to verify the progress of its action plan and implementation of reforms, which will likely take place early next year.

However, the Basel report also noted that exiting the gray list is just one step in a country’s anti-money laundering journey.

“Being delisted is naturally a cause for celebration and hope, but it’s not the end of the story. FATF standards continue to evolve and to strengthen, so jurisdictions need to constantly improve in order to keep up.”

“Avoiding or graduating from the gray list is one step along a never-ending journey to a resilient system that successfully wards of money laundering and related threats while not limiting financial inclusion and innovation,” it added. – Luisa Maria Jacinta C. Jocson, Reporter

The national government’s (NG) outstanding debt inched up to a fresh high of PHP 16.02 trillion as of end-October amid the peso’s depreciation against the US dollar, the Bureau of the Treasury (BTr) said.

Data from the BTr on Tuesday showed that outstanding debt went up by 0.8% or by PHP 126.95 billion to PHP 16.02 trillion as of end-October from PHP 15.89 trillion as of end-September.

“The increase was primarily driven by the valuation impact of peso depreciation against the US dollar from PHP 56.017 at end-September 2024 to PHP 58.198 at end-October 2024,” the BTr said in a statement.

Year on year, debt jumped by 10.6% from PHP 14.48 trillion. Of the total debt stock, 67.98% came from domestic sources.

As of end-October, outstanding domestic debt slid by 0.4% to PHP 10.89 trillion from PHP 10.94 trillion at the end of September.

Government securities accounted for nearly all of domestic debt.

Year on year, domestic debt increased by 10% from PHP 9.9 trillion.

“The decline was primarily due to the PHP 52.65-billion net redemption of government securities, partially offset by the PHP 6.23-billion escalation in peso conversion of US dollar-denominated domestic debt brought about by the weakened peso,” the BTr said.

Meanwhile, external debt rose by 3.5% to PHP 5.13 trillion at end-October from PHP 4.96 trillion at end-September, the BTr said.

Year on year, external debt increased by 12.05% from PHP 4.58 trillion in the same period a year ago.

“The increase was driven by net foreign loan availments totaling PHP 20.47 billion, as well as foreign exchange movements, which added P152.9 billion to external debt,” BTr said.

The Treasury said the peso depreciation against the US dollar has increased external debt by PHP 193 billion.

“However, this has been tempered by the PHP 40.1-billion effect of favorable third-currency movements relative to the US dollar,” it said.

External debt comprised of PHP 2.42 trillion in loans and PHP 2.71 trillion in global bonds as of end-October.

Broken down, government securities consisted of PHP 2.32 trillion in US dollar bonds, PHP 218.49 billion in euro bonds, PHP 58.2 billion in Islamic certificates, PHP 57.93 billion in Japanese yen bonds, and PHP 54.77 billion in peso global bonds.

Meanwhile, the NG guaranteed obligations at the end-October increased by 10.4% to PHP 411.76 billion from PHP 372.86 billion as of end-September.

“This resulted from PHP 35.85 billion in net availments of domestic guarantees and the P6.15-billion effect of peso depreciation against the US dollar, although partially attenuated by the PHP 3.1-billion downward revaluation in external guarantees linked to third-currencies movements,” the BTr said.

Year on year, NG guaranteed obligations jumped by 14.1% from PHP 361 billion.

“I can only surmise that the increasing fiscal deficit in the face of limited tax revenues will really ultimately result in higher NG debt from the end-Sept. level of PHP 15.9 trillion to over PHP 16 trillion for October,” GlobalSource country analyst Diwa C. Guinigundo said.

The Development Budget Coordination Committee on Monday raised the deficit ceiling for 2024 to PHP 1.52 trillion, representing -5.7% of gross domestic product (GDP) from PHP 1.48 trillion or -5.6% of GDP previously.

“In peso terms, dollar obligations will be higher including the corresponding debt servicing. If the dollar continues to strengthen relative to the peso and other currencies and revenue intake of NG remains limited, the outlook is not exactly encouraging,” Mr. Guinigundo said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said debt remained high as the government borrowed more to fund the budget deficit.

“Weaker peso exchange rate against the US dollar by about 15% since 2022 also effectively increased the peso equivalent of US dollar- and other foreign currency-denominated debt of the National Government,” he added.

Mr. Ricafort said rate cuts by the US Fed and Bangko Sentral ng Pilipinas would help reduce debt servicing costs.

At the end of September, the NG debt as a share of GDP stood at 61.3%, higher than 60.2% a year earlier and 60.1% at end-2023.

This was still above the 60% threshold deemed by multilateral lenders as manageable for developing economies.

The government aims to lower the debt-to-GDP ratio to 60.6% by the end of 2024.

The NG’s debt stock is expected to hit P16.06 trillion at the end of 2024. — Aubrey Rose A. Inosante

Philippine manufacturing activity jumped to a 30-month high in November, as firms anticipate stronger demand in the coming months, a survey by S&P Global showed on Monday.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) rose to 53.8 in November from 52.9 in October. This was the strongest improvement in operating conditions since the 54.1 reading in May 2022.

It also marked the 15th straight consecutive monthly improvement in manufacturing activity in the Philippines.

A PMI reading above 50 means improved operating conditions from the previous month, while a reading below 50 shows deterioration.

“November saw the Filipino manufacturing sector ramping up production in anticipation of greater sales in the coming months,” Maryam Baluch, economist at S&P Global Market Intelligence, said in a report.

“Hiring, purchasing activity and post-production inventories were also raised in preparation. New sales recorded further growth, as demand conditions continued to improve.”

The Philippines posted the highest PMI reading among six Association of Southeast Asian Nation (ASEAN) member countries, followed by Vietnam (50.8) and Thailand (50.2).

Myanmar (49.8), Indonesia (49.6) and Malaysia (49.2) all saw a contraction in PMI in November.

“Last month’s headline improvement was led by a big bounce in the Philippines’ gauge to 53.8 from 52.9, with the archipelago’s stellar outperformance in this survey continuing to mask a lot of the softness across the broader region,” Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said in an e-mailed statement.

The average PMI among the six Southeast Asian economies stood at 50.8.

“Manufacturers eagerly anticipated a sales boost in the months ahead, prompting a notable ramp-up in production during the latest survey period, with growth accelerating from October,” S&P said.

It noted that the increased production went to supporting the growth of new sales, as demand conditions rose for a 15th straight month.

“While the pace of increase moderated to a three-month low, it remained solid and historically strong. The uptick in output was also attributed by companies to inventory building,” S&P said.

S&P said the inventory of finished goods increased for the first time in four months, with the pace of accumulation the fastest in two years.

Manufacturers also ramped up hiring in November.

“Companies expanded their capacity further as job creation was recorded for a third straight month. The pace of increase was just shy of October’s recent peak,” it said.

S&P said purchasing activity increased in November, but this did not result in a rise in pre-production inventories since companies used the inputs for current production.

“Some supply-side challenges acted as headwinds, as adverse weather conditions resulting from the recent typhoons hitting the country and rising inflationary pressures make a difficult environment for manufacturers,” Ms. Baluch said.

S&P noted the November data showed signs that supply chains are still “strained.” It noted that typhoons led to port congestion and flooding “with average lead times lengthening rapidly and to the most significant degree in over three years.”

In November, S&P said that inflationary pressures “intensified” as rising costs of supplies and raw materials led to a faster increase in expenses — the strongest since February 2023.

Charges for Filipino manufactured goods went up in November, as output charge inflation reaching a 21-month high.

“Nonetheless, firms remained optimistic about future output, with hopes that improved demand trends and the upcoming election year will provide a boost to the sector,” Mr. Baluch said.

S&P noted that manufacturers’ sentiment in November was the highest since early 2023.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said factory activity rose as firms made preparations for the Christmas holiday season.

Mr. Ricafort said further rate cuts and a “benign inflation rate” would be beneficial for the economy, including manufacturing, though with some lag effects.

The Monetary Board could deliver another rate cut either at its December policy review or the meeting after, Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. said earlier.

Since starting its easing cycle in August, the BSP has cut rates by 50 basis points, bringing the benchmark rate to 6%. – Aubrey Rose A. Inosante, Reporter

Philippine economic growth may fall short of the government’s target this year amid a slower-than-expected rise in consumption and investment, the ASEAN+3 Macroeconomic Research Office (AMRO) said.

In its latest Annual Consultation Report, AMRO cut its gross domestic product (GDP) growth projection for the Philippines to 5.8% this year from its 6.1% estimate in October.

This would fall below the government’s revised 6-6.5% growth target for 2024.

AMRO said household spending and private investment were weaker than expected this year due to elevated inflation and high interest rates.

“Household consumption, underpinned by a strong labor market and robust remittances, continued to expand, but at a slower pace due to the lagged impact of high inflation.”

“Private investment is gradually rebounding but has yet to reach pre-pandemic levels, partly due to weak investment sentiment amid high interest rates,” it added.

Latest data from the Philippine Statistics Authority (PSA) showed that Philippine GDP growth averaged 5.8% in the first nine months of the year.

For 2025, AMRO retained its growth forecast of 6.3% for 2025.

“The pickup in growth is driven by higher government spending as well as an upturn in external demand and strengthening domestic demand,” it said.

The think tank also expects domestic demand to improve moving forward, which would support growth.

“Private consumption is anticipated to grow faster in the rest of the year, supported by strong labor market conditions, lower inflation and robust overseas remittances.”

“With the start of the monetary policy easing cycle, private investment sentiments are expected to improve,” it added.

However, AMRO said the growth outlook faces “heightened geopolitical risks” that may increase the likelihood of supply disruptions and further global economic fragmentation.

The Philippine economy’s growth momentum could also be “derailed by a sharp slowdown in major trading partners in the near term,” it added.

“Over the long term, the country’s potential growth could be constrained by insufficient infrastructure investment, vulnerabilities to climate change, and prolonged scarring effects caused by the coronavirus disease 2019 (COVID-19) pandemic.”

Consumption growth may still be hampered by elevated inflation, it added.

“Philippine growth prospects, particularly private consumption, are clouded by the risk of high food inflation… Higher costs of basic needs would further reduce households’ ability to afford discretionary items and hence constrain household consumption.”

However, AMRO projects headline inflation to average 3.2% this year and the next.

“Inflation is expected to stay broadly within the target range in the second half of 2024 through 2025, benefiting from the continued easing of global commodity prices and government measures,” it said.

The Bangko Sentral ng Pilipinas (BSP) expects inflation to average 3.1% this year and 3.2% in 2025.

“While upside risks such as wage increases and local food supply shocks remain, the decline in headline inflation is expected to continue in the second half of 2024 due to lower commodity prices of fuel and food, and tariff cuts on imported rice,” AMRO said.

“Meanwhile, inflationary pressure will likely remain moderate due to a positive output gap and second-round effects, following increases in minimum wages and persistently high inflation expectations.”

With inflation expected to remain within target, AMRO said that there is room for the BSP to continue its rate-cutting cycle.

“As inflation will continue to ease within the target band, there is room to adopt a less restrictive monetary policy stance if current growth trends continue,” it said.

“However, if supply-side risks emerge, a whole-of-government approach should be taken to address inflationary pressures.”

Since August, the central bank has lowered borrowing costs by 50 basis points (bps), bringing the key rate to 6%.

The Monetary Board is set to have its last policy review for the year on Dec. 19.

“As year-to-date inflation has returned to the upper half of the target range, the BSP has room to gradually adjust the policy rate to a moderately restrictive stance,” AMRO said.

“This will lend some support to private investment and allow the BSP to rebuild space for renewed policy rate hikes if inflationary risks were to reemerge.”

Meanwhile, AMRO said that the Philippine government’s fiscal consolidation efforts can still be enhanced.

“The current fiscal-monetary policy mix is appropriate and can be adjusted further to support economic growth while rebuilding policy buffers.”

AMRO expects the fiscal stance from this year to 2025 to be “neutral.”

It projects the fiscal deficit settling at 5.7% of GDP this year and 5.6% of GDP in 2025, driven by “robust revenue collection despite higher expenditure.”

“Moving forward, the fiscal balance is expected to gradually decline to 4.2% of GDP by 2028,” it added.

The latest data from the Treasury showed the budget deficit narrowed to PHP 963.9 billion in the January-October period.

The government has set a deficit ceiling of PHP 1.52 trillion this year, equivalent to 5.7% of economic output. It expects to lower the budget gap to 3.7% of GDP by 2028.

Rising debt

Meanwhile, AMRO expects the National Government’s (NG) outstanding debt to rise slightly before easing further.

“Public debt is projected to increase slightly from 60.1% of GDP in 2023 to 60.7% in 2024, due to the government’s sustained funding needs and higher debt servicing costs.”

“However, it is expected to gradually decrease to 57.6% of GDP in 2028, on account of improved fiscal positions and robust economic growth.”

The NG’s debt-to-GDP ratio stood at 61.3% at the end of September, still above the 60% threshold deemed by multilateral lenders as manageable for developing economies.

The government seeks to bring the ratio down to 60.6% by the end of 2024, and below 60% by 2028.

“While the need for strategic adjustments in medium-term fiscal policy to support the economy is recognized, fiscal consolidation should be accelerated when conditions allow,” AMRO said.

“The government is likely to continue its medium-term fiscal consolidation plan at a slower pace to better support economic growth. However, it would be prudent to quicken the pace of fiscal consolidation if conditions allow, as restoring fiscal space remains critical to build greater resilience to external shocks amid elevated uncertainty.”

AMRO recommended efforts to expedite revenue mobilization and increase efficiency, as well as long-term fiscal reforms for fiscal sustainability.

“Overall financial stability remains sound; at the same time, a more active use of macroprudential toolkits could be considered to mitigate the financial stability risks,” it said.

“Some signs of vulnerabilities have emerged in certain areas, such as the household and property sectors, which warrant close monitoring. Meanwhile, the authorities should strengthen the institutional framework to safeguard financial stability and deepen the bond and repo markets.” – Luisa Maria Jacinta C. Jocson Reporter