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More short-term foreign investments flowed out of the Philippines than what entered in October, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Transactions on foreign investments registered with the central bank through authorized banks posted a net outflow of USD 529.68 million in October, higher than the USD 328.19-million outflow in the same month a year ago.

This was also a reversal of the USD 1.03-billion net inflow in September.

These foreign portfolio investments are also called “hot money” due to the ease by which these funds enter and leave the economy.

Central bank data showed gross outflows of hot money increased by 56.7% to USD 2.01 billion in October from USD 1.28 billion a year ago. It also jumped by 33.4% from the USD 1.5-billion outflows in September.

“The US remains to be the top destination of outflows, receiving USD 889.06 million (or 44.2%) of total outward remittances,” the BSP said.

Meanwhile, gross inflows rose by 55.1% to USD 1.48 billion from USD 954.38 million in the same month a year prior. Month on month, gross inflows declined by 41.5% from USD 2.53 billion.

The top five investor economies during the month were the United Kingdom, Singapore, the United States, Luxembourg and Malaysia, accounting for the bulk or 87.8% of foreign portfolio investment inflows.

Most of the investments (54.5%) went to Philippine Stock Exchange-listed securities in banks; holding firms; transportation services; property; and food, beverage and tobacco. The rest (45.5%) went to peso government securities.

In the January-October period, BSP-registered foreign investments yielded a net inflow of USD 2.49 billion, a turnaround from the USD 715.43-million outflow in the same period in 2023.

Broken down, gross inflows stood at USD 15.02 billion, while gross outflows amounted to USD 12.52 billion in the first 10 months.

The BSP expects foreign portfolio investments to yield a net inflow of USD 4.2 billion in 2024.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said more hot money exited the country as geopolitical risks in the Middle East triggered profit taking in global and local markets.

“Regional geopolitical tensions and local economic risks, such as fiscal consolidation and concerns over growth momentum, have likely added to investors’ cautious stance,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies said.

Markets were also pricing in Donald J. Trump’s win ahead of the US presidential elections last November, Mr. Ricafort said. Mr. Trump’s protectionist policies were expected to stoke US inflation and impact the US Federal Reserve’s easing cycle.

“The Fed’s monetary policy stance likely weighed on investor sentiment. While expectations of easing US policy rates could eventually attract funds, the current cautious environment contributed to capital outflows,” Mr. Rivera said.

For the coming months, Mr. Ricafort said more short-term capital could enter the country amid the recent cut in banks’ reserve requirement ratio (RRR).

The BSP reduced the RRR for universal and commercial banks and nonbank financial institutions with quasi-banking functions by 250 basis points to 7% from 9.5%, effective on Oct. 25.

“(This) would have infused about P400 billion into the banking system in terms of more loanable funds by banks, as well as more funds by banks for investments in bonds and other fixed-income investments, stocks, foreign currencies, property and other investments,” he added.

The country’s improved credit rating outlook will also support investor sentiment, Mr. Ricafort said.

Last week, S&P Global Ratings affirmed the Philippines’ investment grade rating on Tuesday and raised its outlook to “positive” from “stable,” reflecting the country’s strong growth potential and improved institutional strength. — Luisa Maria Jacinta C. Jocson

The national government’s (NG) gross borrowings fell in October as it borrowed significantly less from the domestic market, the Bureau of the Treasury (BTr) said.

Data from the BTr showed that total gross borrowings dropped by 42.6% to PHP 129.26 billion in October from PHP 225.2 billion in the same month a year ago.

Month on month, gross borrowings declined by 64.8% from PHP 367.18 billion in September.

Gross domestic borrowings slumped by 61.37% to PHP 67.46 billion in October from PHP 174.63 billion last year. The October 2023 tally reflected the government’s PHP 71.78-billion retail onshore dollar bond issuance.

In October this year, domestic borrowings consisted of PHP 45 billion in fixed-rate Treasury bonds (T-bonds) and PHP 22.46 billion in Treasury bills (T-bills).

Meanwhile, gross external debt increased by 22.21% to PHP 61.8 billion in October from PHP 50.57 billion a year ago.

This consisted of PHP 49.89 billion in program loans and PHP 11.91 billion in project loans.

“(The lower gross borrowings) could be partly brought by the budget surplus in October 2024 and the narrower budget deficit for the first 10 months of 2024 that fundamentally reduced the need for additional borrowings/debt by the National Government,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

In October, the NG posted a PHP 6.3-billion budget surplus, a turnaround from the PHP 34.4-billion deficit in the same month a year ago. This brought the 10-month budget deficit to PHP 963.9 billion, slimming from PHP 1.02 trillion gap a year ago.

“Furthermore, increased dividends/remittance of earnings/surplus of some GOCCs [government-owned or -controlled corporations] to the National Government in recent months also partly helped reduce the need for the NG to borrow,” Mr. Ricafort said.

As of October 2024, 52 GOCCs already remitted P95.9 billion in dividends, up 51% higher from the same period last year, the Department of Finance said last week.

“It is possible that the decline in the October borrowing is due to the fact that there are expectations that interest rates would decline further and some banks and investment houses have been undertaking a wait-and-see attitude before purchasing government securities,” Philip Arnold “Randy” P. Tuaño, dean of the Ateneo School of Government, told BusinessWorld via e-mail over the weekend.

The BSP has cut benchmark rates by a total of 50 basis points at its August and October meetings.

Ten-month period

Meanwhile, BTr reported that gross borrowings in the January-to-October period jumped 22.98% to PHP 2.43 trillion from PHP 1.98 trillion a year ago.

The bulk or 76.69% of the 10-month gross borrowings were from domestic sources.

Domestic debt stood at PHP 1.86 trillion, a 22.64% increase from PHP 1.52 trillion a year ago.

It was made up of P1.07 trillion in fixed-rate T-bonds, P584.86 billion in retail T-bonds, and P209.38 billion in T-bills.

External debt in the first 10 months rose by 24.09% to PHP 566.25 billion from PHP 456.31 billion a year prior.

This was composed of PHP 256.24 billion in global bonds, PHP 223.04 billion in program loans, and PHP 86.97 billion in new project loans.

For the rest of the year, Mr. Tuaño said that borrowings are still expected to increase in peso value terms as the budget deficit continues to widen.

The Treasury is possibly waiting for interest rates to decline further and thus limited sales of government securities in October, he added.

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

“Going forward, lower US and local rate cuts would help reduce the NG’s interest payments/debt servicing costs, thereby would reduce the need for additional NG borrowings,” Mr. Ricafort said.

This year’s borrowing plan is set at PHP 2.57 trillion, with PHP 1.92 trillion coming from domestic sources and PHP 646.08 billion from overseas, according to the latest Budget of Expenditures and Sources of Financing data. – Aubrey Rose A. Inosante, Reporter

Headline inflation may have accelerated in November but still remained within the 2-4% target band, the Bangko Sentral ng Pilipinas (BSP) said.

The central bank’s month-ahead forecast showed that inflation likely settled within the 2.2%-to-3% range in November, slower than the 4.1% print in the same month a year ago.
However, the upper end of the forecast would be faster than the 2.3% recorded in October.

The Philippine Statistics Authority (PSA) is scheduled to release November inflation data on Dec. 5.

“Increased prices of vegetables, fish, and meat due to unfavorable weather conditions, higher electricity rates and petroleum prices, and the depreciation of the peso are the primary sources of upward price pressures this month,” the BSP said in a statement.

The Philippines was hit by several storms this month. Latest data from the Agriculture department showed that agricultural damage due to tropical cyclones Nika, Ofel and Pepito reached PHP 785.68 million.

In November, pump price adjustments stood at a net increase of PHP 1.7 a liter for gasoline, PHP 3.2 a liter for diesel and PHP 1.6 a liter for kerosene.

Manila Electric Co. (Meralco) also raised the overall rate by PHP 0.4274 per kilowatt-hour (kWh) to PHP 11.8569 per kWh in November from PHP 11.4295 per kWh in October.

The peso sank to the PHP 59-per-dollar level twice this month so far, hitting the record low on Nov. 21 and 26.

The BSP earlier attributed this to the stronger dollar amid rising geopolitical tensions.

On the other hand, the risks to the inflation outlook are seen to be offset by lower prices of rice, the central bank added.

National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan said on Friday that inflation is expected to “stay comfortably” within the 2-4% target range.

“We don’t think that the (November) number will breach our target of 2-4%,” he said, though noted that if there is a pickup in prices, this would be “marginal.”

Mr. Balisacan also noted the BSP’s easing cycle will support the economy.

“We expect the BSP’s decision to cut policy rates by a cumulative 50 basis points and reduce reserve requirements to boost liquidity to spur growth in private spending,” he said.

“Particularly on big-ticket consumer items and investments in capital-intensive infrastructure in the coming quarters, which we see as another significant economic growth driver.”

The BSP said it “will continue to take a measured approach in ensuring price stability conducive to balanced and sustainable growth of the economy and employment.”

Since August, the central bank has reduced borrowing costs by 50 basis points, bringing the key rate to 6%. – Luisa Maria Jacinta C. Jocson, Reporter

The Philippines can still achieve its 6-7% gross domestic product (GDP) growth target this year, National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan said on Friday.

“We remain optimistic about the fourth quarter economic performance. Holiday spending, more stable commodity prices, robust remittance inflow, and labor market give us confidence that our 6 to 7% growth target is still achievable,” he said during a press conference on Friday.

Mr. Balisacan said fourth quarter GDP growth will likely be faster than the third quarter, amid easing inflation and lower interest rates.

“I think all these, we believe that the fourth quarter could be better than the third quarter,” he said.

Mr. Balisacan said these “positive forces” could outweigh the expected contraction in agricultural output due to weather disturbances.

In the third quarter, GDP expanded by 5.2%, as bad weather hurt agricultural output and slowed government spending. This was slower than the revised 6.4% in the second quarter and and 6% a year ago.

It was also the weakest growth in five quarters or since the 4.3% expansion in the second quarter of 2023.

For the first nine months, GDP growth averaged 5.8%. The economy has to grow by 6.5% in the fourth quarter in order to reach the lower end of the government’s 6-7% target for 2024.

Mr. Balisacan said that even if Philippine GDP expands by an average of 5.9% to 6.1% for the full year, this would still be a “very respectable growth” compared to most emerging economies.

For 2025, Mr. Balisacan said the economy will likely benefit from rate cuts by the Bangko Sentral ng Pilipinas’ (BSP).

Since starting its easing cycle in August, the BSP has cut borrowing costs by 50 basis points, bringing the benchmark rate to 6%.

Trump impact

Meanwhile, Mr. Balisacan said the Philippines is “ready to work with any economy” as Donald J. Trump is set to assume the presidency in the United States in January.

He said the Philippines will adjust its policies accordingly as it continuously built “solid” relationships with the US and other countries.

Mr. Trump has proposed to impose 60% tariffs on US imports of Chinese goods, as well as a universal tariff of up to 20%.

“The best hope we could make is that what was stated during the campaign would be different from what will actually happen. So that we won’t get into these high tariffs, increasing tariffs,” he said.

It would be “bad” for the global economy as a whole as it could reduce trade, inflows, and more, Mr. Balisacan said.

“We expect that we hope that we won’t go there, but still our priority, even before this development and as reflected in our PDP [Philippine Development Plan], is to diversify the economy so that we have all these growth pillars kicking in,” he said. — Aubrey Rose A. Inosante

The National Economic and Development Authority (NEDA) on Thursday said rising political tensions in the Philippines will have minimal, if any, impact on the economy.

The Philippine government is focused on upgrading infrastructure, boosting the country’s resiliency in the face of climate change, and diversifying its economy amid geopolitical risks, NEDA added.

It’s “business as usual,” NEDA Secretary Arsenio M. Balisacan said at a Palace briefing after attending a Cabinet meeting that largely focused on the prospects for the 2025 national budget.

He said the business community is more concerned with the sustainability of the country’s economic agenda.

“As also seen in recent economic history, for so long the government stays in course within its development economic priorities and programs, this will continue to maintain their confidence in the economy,” he added.

“So, I think the impact of [political] noises such as what we have now, if there’s anything, will be quite minimal and the last 12 or so years bear on that.”

Due largely to the impacts of weather disturbances and slower government spending, the Philippine economy grew by 5.2% in the third quarter — the weakest in five quarters.

President Ferdinand R. Marcos, Jr. on Monday vowed to fight back and never to allow the country to be dragged into gutter-level politics. This after his erstwhile ally and Vice-President Sara Z. Duterte-Carpio claimed she hired an assassin to kill the President, his wife and  House Speaker Ferdinand Martin G. Romualdez.

Ms. Duterte on Wednesday said her broken ties with the President’s camp had reached a “point of no return.”

The country’s second-highest official has been grumbling amid congressional probes into confidential funds at the Office of the Vice-President and the Department of Education.

Mr. Balisacan claimed that since the late 1990s, the Philippine economy “continued to progress despite the political noises.”

“In this administration, we are so focused on ensuring that the goals and targets and strategies that we have outlined in the Philippine Development Plan will be achieved,” he said.

Mr. Balisacan said it is important for the public to know that economic momentum is sustained.

“We can do ‘business as usual’ amid conflicts between former political allies. Indeed, it may not translate to macroeconomic disturbances, but it would affect our image among global partners which could be potential sources of investment,” said Emy Ruth Gianan, who teaches economics at the Polytechnic University of the Philippines.

“More importantly, it adversely affects the morale of ordinary Filipinos. They would eventually choose to leave the country given petty political fights,” she said in a Facebook Messenger chat.

Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila University, said amid all the dramas, the major issue remains the same — “that the root cause was the misuse of public funds, otherwise known as confidential funds.”

“Sure, the government is focused on the economy. But the key issue is trust,” he said via Messenger chat.

“The loss of P125 million of confidential money in 11 days should be already a cause of concern for the economic managers, and its consequences cannot be offset by future committed work especially if no one is being held accountable for it.”

Terry L. Ridon, a public investment analyst and convenor of InfraWatchPH, said rising political tensions can create an “atmosphere of instability” from the point of view of the international community.

“This may compel foreign investors to reconsider the Philippines as its next investment destination and rechannel their funds towards economies with a more stable political status quo,” he added.

“Nonetheless, Congress and the President should resolve this political instability in the soonest time, whether through impeachment proceedings or through legal proceedings being initiated by various government agencies.”

‘More stable’

Mr. Balisacan said the economic meeting with Mr. Marcos earlier in the day largely focused on the 2025 national budget and “the need to prioritize the funding of the high-priority projects.”

Mr. Romualdez and Senate President Francis Joseph “Chiz” G. Escudero were present at the meeting.

Mr. Balisacan said the Congress vowed to cooperate with the Executive branch in ensuring funding for its flagship projects for next year.

Asked whether this would mean new taxes, the NEDA chief said: “It’s the same. We haven’t changed the priorities with respect to new measures.”

He said the Legislative-Executive Development Advisory Council will convene in two weeks.

Mr. Balisacan said the President has instructed the economic team to “tighten our practices” in releasing rules and guidelines for infrastructure projects to ensure that they can withstand the floods and typhoons.

Aside from infrastructure, the economic team is also focused on the need to “diversify the economy and to strengthen its fundamentals,” the NEDA chief said, citing “threats of high tariffs and the possible responses of other countries to such tariffs.”

US President-elect Donald J. Trump seeks 60% or higher tariffs on all Chinese goods and a 10% universal tariff.

“I think that over the years, and I’m quite confident, that our economy now is more stable than any other time in the past, that it’s more diversified than actually in the past but we need to continue and improve working and developing other pillars of growth,” Mr. Balisacan said.

Also on Thursday, Mr. Balisacan said NEDA was set to submit its periodic review of the reduced tariff rate for rice on Friday.

“It basically presents the picture of the rice market at this time, providing an analysis of where we are, particularly with respect to production, to supply, to demand, to prices and what to expect in the coming four months and beyond,” he said. – Kyle Aristophere T. Atienza, Reporter

The national government’s fiscal position swung to a surplus in October, driven by a 23% jump in revenues, the Bureau of the Treasury (BTr) said on Wednesday.   

The NG posted a PHP 6.3-billion budget surplus in October, a turnaround from the PHP 34.4-billion deficit in the same month a year ago.

This was the first budget surplus since the PHP 42.7-billion surplus posted in April.

Month on month, the budget balance swung to a surplus from the PHP 273.2-billion deficit in September.

Data from the BTr showed government revenues increased by 22.63% to PHP 473.1 billion in October from PHP 385.8 billion a year ago, as tax revenues jumped by 16.94% to PHP 414.9 billion.

The bulk of tax revenues came from the Bureau of Internal Revenue (BIR), which collected PHP 325.5 billion in October, up 18.62% year on year.

“The double-digit growth in October can be attributed to higher collections on value-added tax (VAT), personal income tax (PIT), documentary stamp tax (DST), corporate income tax (CIT), excise tax on tobacco products, and percentage taxes,” BTr said.

Collections by the Bureau of Customs jumped by an annual 11.5% to PHP 86.9 billion in October, while collections by other offices were flat at PHP 2.4 billion.

On the other hand, non-tax revenues also went up by 87.65% year on year to PHP 58.3 billion in October. Treasury revenues declined by 13.5% to PHP 14.5 billion, due to “the base effect of early remittances of dividends from government-owned and -controlled corporations last year.”

Collections by other offices surged by 206.72% to PHP 43.7 billion.

Meanwhile, expenditures rose by 11.08% to PHP 466.8 billion in October from PHP 420.2 billion a year ago.

“This was mainly attributed to higher personnel services expenses due to the first tranche of the salary adjustments of qualified civilian government employees and the release of FY 2022 Performance-Based Bonus of the Department of Education,” it said.

Spending also got a boost from the implementation of infrastructure projects of the Department of Public Works and Highways and foreign-assisted rail projects of the Department of Transportation, as well as social protection and health programs.

Interest payments slipped by 6% to PHP 55.4 billion, while other expenditures jumped by 13.89% to PHP 411.4 billion.

“Budget surplus (in October) may stem from low budget utilization rate of several agencies due to various factors such as procurement and disbursement issue,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in a Viber message.

10-month deficit

In the first 10 months, the budget deficit narrowed to PHP 963.9 billion from PHP 1.02 trillion in 2023.

As of end-October, the shortfall represents only 64.94% of the PHP 1.48-trillion deficit ceiling for the year.

Revenue collections jumped by 16.83% to PHP 3.77 trillion in the January-to-October period. This accounted for 88.2% of the revised PHP 4.27-trillion revenue program for this year.

Taxes, which made up 86% of the total revenues, increased by 11.4% to PHP 3.23 trillion.

Revenues generated by the BIR rose by 13.49% to PHP 2.42 trillion as of end-October, making up 84.95% of the PHP 2.85-trillion revised full-year program.

“The 10-month year-on-year growth is due to higher VAT, a total of 12 months’ worth of VAT was already collected with the change of filing schedule from monthly to quarterly. The other sources of higher BIR collection are PIT, CIT, combined taxes on bank deposits and government securities, DST, and percentage taxes,” the Treasury said.

Customs collections went up by 5.32% to PHP 777.6 billion, representing 82.75% of the revised PHP 939.7-billion program.

Nontax revenues, which accounted for 14.32% of the total revenues, jumped by 64.93% to PHP 539.4 billion.

On the other hand, expenditures increased by 11.52% to PHP 4.73 trillion in the first 10 months from PHP 4.24 trillion in the comparable period last year.

Interest payments rose by 23.03% to PHP 638.7 billion from PHP 519.1 billion a year ago.

“The better budget balance data for the month of October 2024 and for the first 10 months of the year may be attributed to faster growth in recurring tax revenues especially from the BIR as the economy reopened further,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

He said many businesses reported improved sales, which resulted in higher tax revenue collections.

“Going forward, the CREATE MORE (Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy) would lead to some foregone tax revenue collections,” he said.

But this could be offset “by increased foreign direct investments, more jobs, and increased business/economic activities in the country that would result in more recurring tax revenue collections,” Mr. Ricafort said.

The Treasury said revenue effort for the first three quarters improved to 17.5% of gross domestic product (GDP), slightly higher than 16.4% a year ago and exceeded the 16.1% target for 2024.

Tax effort also went up to 14.91% in the first three quarters versus 14.72% in 2023, and above the 14.42% full-year target.

Expenditure effort rose to 22.6%, up from 22.13% a year ago and surpassed the full-year target of 21.72%.

“The fiscal deficit-to-GDP ratio stands at a manageable 5.14% of GDP for the first three quarters of 2024. This is lower than the 5.7% level during the same period last year and well below the 5.6% target for 2024,” the Treasury said. – Aubrey Rose A. Inosante, Reporter