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The Bangko Sentral ng Pilipinas (BSP) is seeking to amend its regulatory relief policy for banks in order to provide them with more support during calamities and disasters.

“Consistent with the aim of strengthening banks’ operational resilience through business continuity or disaster recovery measures, the BSP is amending the regulatory relief policy for banks by providing additional regulatory measures,” it said in a draft circular.

“The BSP recognizes the vulnerability of the Philippines to both natural and human-induced hazards which can lead to certain areas being declared under a state of calamity.”

These amendments seek to make regulatory relief measures more uniform and systemic, as well as boost banks’ capacity to bounce back from natural calamities.

The draft circular proposes to formally adopt several relief measures that were already given to banks affected by Tropical Storm Kristine and Super Typhoons Leon, Ofel and Pepito, which were introduced in January.

Under the draft rules, banks may avail themselves of relief measures within one year from the onset of a calamity. This could be earlier than the date of the official declaration of a state of calamity, it added.

Banks may also be granted a temporary grace period for loan payments and a temporary exclusion from past due and nonperforming loan (NPL) computations.

“Banks may grant borrowers in affected areas a grace period of up to six months for loan repayments, which may start from the inception date of the calamity,” it said.

“Loans extended to affected borrowers may be temporarily excluded from past due and NPL computations from one year from the inception date of the calamity.”

The BSP also included in the draft circular some interventions that were first implemented during the coronavirus disease 2019 (COVID-19) pandemic.

These include easing the identification requirements for households or micro-businesses in affected areas; relaxation of notification requirements related to changes in banking days and hours as well as temporary closure of bank branches and branch-lite units.

For example, branches that must temporarily close due to hazards are exempt from notification requirements.

Banks may also defer the opening of approved branches or branch-lite units in affected areas for up to three years.

Meanwhile, the draft circular also proposes a staggered booking of impairment losses.

“Impairment losses from banks’ own physical assets, including bank premises and equipment, due to hazards may be recognized over a three-year period, subject to BSP evaluation and approval,” it said.

“Similarly, the three-year period is also proposed to apply to the staggered booking of credit loss allowances.”

Agricultural loans

The central bank is also introducing relief policies specifically for the agriculture sector.

“Meanwhile, since the agricultural sector is usually affected by climate-related hazards, the BSP is proposing a standardized forbearance measure covering agricultural loans,” it said.

“Loan payments for agricultural borrowers may be deferred, with repayment terms adjusted based on crop cycles and other relevant factors,” it added.

For example, the deferment period for loans related to the production of palay and corn is set at six months; while those for other short-term crops is at seven months, sugarcane at 12 months and cassava at 14 months.

The proposed rules also detail guidelines on the grace period for rediscounting obligations.

“Rediscounting banks may apply for a 60-day grace period to settle the outstanding rediscounting obligations with the BSP as of the inception date of the calamity.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that improvements in the relief measures are a welcome development.

“The Philippines is one of the hardest-hit countries by natural calamities in a given year,” he said.

“So, a framework on regulatory relief measures as a stop-gap measure (will help) better respond to the adverse effects on some borrowers, though transitory in nature until they are back on their feet once supply chains and business transactions normalize.” — L.M.J.C. Jocson

The national government’s (NG) outstanding debt rose to a record PHP 16.75 trillion in the first four months amid a modest uptick from March that was tempered by a strong peso, according to the Bureau of the Treasury (BTr).

Treasury data showed that outstanding debt inched up 0.41% or PHP 68.69 billion from end-March. Year on year, the debt rose 11.56%.

“The uptick was minimized by the significant appreciation of the peso, which reduced the effect of additional borrowings in line with the fiscal program,” the BTr said in a statement on Tuesday.

It used a foreign exchange rate of PHP 55.93 a dollar in April, appreciating from PHP 57.28 in March and PHP 57.58 in April 2024.

The bulk or 69.2% of the debt stock came from domestic sources, while external obligations took the rest.

The improved share of external debt at 30.8% is in line with the government’s thrust to cut exposure to external shocks.

As of end-April, outstanding domestic debt inched up 1.85% to PHP 11.59 trillion, mostly made up of government securities.

The BTr attributed the increase to the strong demand for government securities, including PHP 300 billion in benchmark bonds.

In April, the government raised P300 billion worth of new 10-year fixed-rate Treasury notes amid strong demand for longer-dated tenors on expectations of rate cuts by the Bangko Sentral ng Pilipinas.

“With economic fundamentals remaining sound, the country continues to enjoy strong market access at reasonable rates,” it said.

The peso appreciation shrank the peso value of dollar-denominated domestic securities by PHP 3.85 billion. Year on year, domestic debt increased 12.44%.

On the other hand, external debt slipped 2.68% to PHP 5.16 trillion at end-April from March.

“The reduction was primarily due to the PHP 124.74-billion decrease in the peso value of external debt owing to the peso appreciation, combined with net repayments of PHP 58.28 billion,” the Treasury said.

Foreign debt went up 9.63% year on year.

NG-guaranteed obligations dipped 0.68% to PHP 377.54 billion at end-April from March due to PHP 1.75 billion in net repayment of domestic guarantees and PHP 2.14-billion lower valuation arising from the peso appreciation, the BTr said.

Year on year, guaranteed obligations declined 5.2%.

‘Firmly on track’

“Finally, the debt portfolio remains resilient, with 91.7% of obligations carrying fixed interest rates and 82% classified as long term,” the Treasury said. “This structure helps insulate public finances from abrupt changes in interest rates and the market environment.”

It said the Philippine economy is “firmly on track” to cut the debt-to-gross domestic product ratio to below 60% by the end of President Ferdinand R. Marcos, Jr.’s term in 2028.

The debt-to-GDP had risen to 62% by the end-March — the highest in 20 years.

“The fiscal deficit has also been steadily narrowing and is on track to drop to about 3.8% by 2028,” it added.

Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., attributed the rise in government debt to increased demand for government securities.

“In the following months, I expect the country’s debt to rise as spending programs may continue to put a burden on the country’s fiscal space,” he told BusinessWorld in a Viber Message.

The debt would remain “manageable” as long as debt service is consistent and revenue growth is strong, he pointed out.

But the relative strength of the peso, which tempered the rise in domestic debt, is expected to be short-lived, Mr. Erece said.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the additional debt in April reflected the P300 billion in Treasury notes issued during the month and the previous month’s budget deficit.

The NG posted a PHP 67.3-billion surplus in April, a turnaround from the PHP 375.73-billion deficit in March.

“For the coming months, the outstanding National Government debt could hit record highs amid new borrowings in the early part of the year, as well as the need to hedge both local and foreign borrowings of the National Government in view of the Trump factor,” Mr. Ricafort said in a Viber Message.

US President Donald J. Trump’s protectionist policies, including higher tariffs, have caused volatility in global financial markets since October, he pointed out.

The NG’s outstanding debt is projected to hit PHP 17.35 trillion by yearend.

In a related development, Finance Secretary Ralph G. Recto said the Bureau of Internal Revenue (BIR) is on track to hit its P3.232-trillion collection goal this year.

“So far, they are on track to meet their target,” he told BusinessWorld in a text message on Monday.

The BIR, which seeks to increase revenue by 13.36% or PHP 380.87 billion this year from 2024, on Friday said it exceeded its goal for the first four months by 14.5%, collecting PHP 1.11 trillion.

“Cumulative collection as of April 2025 represents more than 35% collection of the Bureau’s calendar year 2025 collection target of PHP 3.232 trillion,” it said in a statement.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies said the this is a “promising sign.”

“The rollout of new tax measures such as digital taxation and improvements in tax administration can further support collections, especially if enforcement is sustained,” he said in a Viber message.

But an economic slowdown brought by global uncertainties or domestic spending constraints pose risks to the BIR target, he said.

“Volatile inflation and weaker business profits could also dampen collection growth,” he said. “Sustained efficiency reforms, broadening the tax base and minimizing leakages will be key to meeting the target.”

Mr. Ricafort said he expects digital taxes to help the BIR meet its goal this year. He also cited the Philippines’ “good track record of growth in recent years.”

Hitting the BIR target rests not just on new taxes but also on enforcement, said Eleanor L. Roque, tax principal at P&A Grant Thornton.

“The bulk of the tax take will still come from voluntary compliance with regular taxes like income tax and value-added tax,” she said in a Viber message. “To be able to achieve this year’s high target, the BIR needs to exert extra effort widening their tax net.”

“The BIR needs to make the cost of evading taxes higher than the cost of compliance,” she added. – Aubrey Rose A. Inosante, Reporter

The Philippine Economic Zone Authority (PEZA) approved PHP 66.34 billion worth of investment pledges in the first five months — 80% higher than a year earlier —  that could generate more than 29,000 more jobs and USD 1.092 billion in exports.

In a statement on Tuesday, the agency said the commitments are covered by 102 approved projects in January to May, compared with 95 projects a year ago.

The P66 billion in new and expansion projects spans advanced manufacturing, semiconductors, information technology and business process management, logistics and renewable energy — key industries driving the transformation of global trade networks, PEZA said.

“This consistent growth in job creation affirms investor confidence in the Philippine ecozone program, especially in strategic and emerging locations,” PEZA Director-General Tereso O. Panga said in a statement.

“Our focus remains on inclusive growth by developing economic zones (ecozones) beyond urban centers,” he added.

This year, PEZA is targeting the approval and proclamation of at least 30 ecozones, particularly in Central Luzon, Cebu and Mindanao.

Meanwhile, Mr. Panga said US reciprocal tariffs, the subject of negotiations between Philippine authorities and the US Trade Representative, are creating uncertainty among investors.

“However, at PEZA, we are promoting the China+1+1 methodology to facilitate the growing interest of China-based companies in having a presence in the Philippines,” Mr. Panga said, referring to the supply-chain strategy of some companies to diversify by setting up manufacturing and sourcing locations in two other countries aside from China.

“PEZA has received numerous inquiries lately, and we are confident that we can do a quick turnover and welcome these companies as new locators,” he added.

South Korea was the top investment source in the first five months, accounting for 16% of PEZA’s approved investments.

“This surge is largely attributed to the recently implemented South Korea-Philippine free trade agreement, which has boosted investor confidence and strengthened bilateral economic ties,” the ecozone regulator said.

The other top sources of investments were the US (4.08%), China (3.3%), Japan (2.92%) and The Netherlands (2.16%).

Mr. Panga said his team is in talks with Malaysian and Indonesian companies that have signified their intent to set up shop in the country.

“We welcome these interests as we continue to grow and strengthen inter-trade ties among our neighbors, making the ASEAN (Association of Southeast Asian Nations) region a more cohesive economic and trade area,” he said.

“With the rising interest in the Philippines and together with this massive ecozone development in Palawan, we are well on the way to meeting the set targets for 2025,” he added.

PEZA is targeting approved investments to reach at least PHP 235 billion this year, and for exports and jobs to rise by 5%.

The ecozone development in Palawan province in western Philippines was among the big-ticket projects approved by PEZA in its board meeting last month.

Considered the first and largest of its kind, the Palawan Mega Ecozone (PMEZ) is a joint initiative between PEZA and the Bureau of Corrections. Under the plan, 28,000 hectares of the Iwahig Prison Colony will be transformed into an eco-friendly industrial estate.

“An initial 4,000 hectares has been transferred to PEZA as phase 1 for conversion into the approved PMEZ,” PEZA said.

The grant of pre-qualification for the declaration of a 4,000-hectare property in the villages of Montible and Sta. Lucia in Puerto Princesa City, Palawan had been approved for development, it said.

Apart from strengthening Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA) trade, the PMEZ is also in line with President Ferdinand R. Marcos, Jr.’s call to promote stronger trade ties among ASEAN member states.

“The PMEZ is envisioned to attract environmentally responsible industries such as agro-industrial processing, renewable energy, ecotourism and marine biotechnology,” Mr. Panga said.

“This will not only preserve Palawan’s rich biodiversity but will also uplift the livelihood of local communities through jobs and infrastructure development,” he added.

PEZA seeks to complete the regulatory requirements for the PMEZ within the month before submitting it to the President for proclamation.

The ecozone is expected to create more than 480,000 jobs that could benefit the local communities and Filipino prisoners. – Justine Irish D. Tabile, Reporter

Growth in Philippine manufacturing activity slowed in May due to declining output and weaker demand from foreign markets amid global trade tensions.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI), which measures the country’s monthly factory performance, settled at 50.1, slipping from 53 in April.

This was the lowest index since the 49.4 contraction in March.

A PMI reading above 50 denotes better operating conditions month on month, while a reading below 50 shows the opposite.

“The promising growth observed at the beginning of the second quarter signaled a notable cooling in May,” Maryam Baluch, an economist at S&P Global Market Intelligence, said in a report on Monday. “While new orders continued to increase, they did so at a slower pace, overshadowed by contractions in other areas.”

S&P Global data on the Association of Southeast Asian Nations (ASEAN) showed that only the Philippines expanded in May, while Vietnam (49.8), Myanmar (47.6) and Indonesia (47.4) all declined.

In its report, S&P Global said output declined in May, the second contraction in the past three months.

“Overall, the downturn was marginal, but companies noted softer demand conditions weighed on production,” it said.

Despite continuing to signal a rise in new sales, the rate of expansion in new orders was slight and weaker than in April, it added. This was reflected in the softer rate of increase in input buying activity.

“The situation was further exacerbated by a deteriorating demand from foreign markets, with May witnessing a sharper drop in new export orders,” Ms. Baluch said. “As global trade tensions escalate, the outlook for overseas demand appears increasingly precarious,” US President Donald J. Trump paused his reciprocal tariffs in April for 90 days but continues to apply a 10% baseline tariff rate for most trading partners.

Ms. Baluch said the drop in production requirements was accompanied by a fresh decline in employment and the inventories of both purchases and finished goods.

S&P said employment numbers declined for the first time in four months.

The pace of job shedding was marginal, but the strongest in 11 months, which factories attributed to voluntary resignations and the nonreplacement of those roles.

S&P also cited the limited manpower for a renewed buildup of backlogs across Filipino producers.

“On a brighter note, inflationary pressures remain modest and historically subdued, which could play an important role in supporting demand moving forward,” she said.

However, cost burdens and output charges rose to the highest since January.

“The stability of price pressures may also provide a necessary buffer against the challenges posed by a cooldown in new orders and external market uncertainties,” she added.

S&P Global said manufacturers expect new orders to continue to rise, supported by confidence in the year-ahead outlook for production, but the degree of optimism was the third weakest in the series’ history.

Analysts also said trade tensions and softer demand weighing down the country’s manufacturing activity in May.

The anticipation for higher tariffs likely caused subdued exports, said Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc.

“The persistent trade tensions continue to weigh on global trade, causing exports to drop as higher tariffs may be imposed,” he said in a Viber message.

Philippine exports in the first four months rose 9.5% to USD 26.87 billion, according to the local statistics agency.

Mr. Erece said domestic demand slowed as the election-spending season ended. Stronger manufacturing activity is expected later this year, as local authorities continue trade talks with the US Trade Representative, he added.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said companies might have been more cautious due to “election-related transition risks and global supply-chain realignments, which could lead to hesitation in new orders and production planning.”

In the coming months, easing inflation, lower interest rates and public and private sector spending post-election season might help improve factory activity in the Philippines.

Further rate cuts by the Bangko Sentral ng Pilipinas and US Federal Reserve could help cut the financing costs of some manufacturers, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

The Monetary Board cut the key policy rate by 25 basis points (bps) to 5.5% in April. It has cut the rate by 100 bps since it started its easing cycle in August last year.

BSP Governor Eli M. Remolona, Jr. has signaled two more rate cuts this year. The Monetary Board’s next policy meeting is on June 19. – Aubrey Rose A. Inosante, Reporter

Headline inflation likely slowed further in May to another over five-year low amid the continued decline in food prices and a stronger peso.

A BusinessWorld poll of 17 analysts conducted last week yielded a median estimate of 1.3% for the May consumer price index (CPI), slower than the 1.4% in April and 3.9% in the same month a year ago. This is within the Bangko Sentral ng Pilipinas’ (BSP) 0.9%-1.7% forecast for the month.   

If realized, this would be the lowest clip in more than five years or since the 1.2% in November 2019.

The Philippine Statistics Authority is scheduled to release May inflation data on Thursday (June 5).

“We expect May inflation to have eased slightly to 1.3% year on year from 1.4% in April, implying a month-on-month decline of 0.1%,” Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said.

“The sustained drop in rice prices, coupled with lower energy and fuel costs, remained the primary drivers of disinflation,” he said.

Emmanuel J. Lopez, professorial lecturer at the University of Santo Tomas Graduate School, said inflation likely eased to 1.3% “owing to lower prices of food and agricultural products and lower transport costs.”

“This is added to the continued appreciation of the peso against the US dollar resulting in the cheaper price of imported products,” he added.

Sun Life Investment Management and Trust Corp. economist Patrick M. Ella said slower inflation in May is likely due to “favorable food prices decelerating and stable nonfood prices similar to the past two months.”

“The sustained fall in rice prices and decline in cost of oil likely kept inflation below the BSP’s 2-4% target,” Philippine National Bank economist Alvin Joseph A. Arogo added.

In April, rice inflation further contracted to 10.9% from the 7.7% decline in March.

Latest data showed the average price of a kilo of regular milled rice nationwide declined by 13.3% year on year to PHP 44.45 in April, while well-milled rice dropped by 10.4% to PHP 50.54. Special rice went down by 6.2% to PHP 60.69 per kilo.

“Food supply is expected to have improved compared to a year earlier due to better weather conditions, supporting better harvests. This should feed into stable retail price growth,” Moody’s Analytics economist Sarah Tan said.

“As for utilities, power rates were lowered in May, which will provide relief to households and businesses,” Ms. Tan added.

After three months of straight hikes, Manila Electric Co. lowered the overall rate for May by PHP 0.7499 per kilowatt-hour (kWh) to PHP 12.2628 per kWh from PHP 13.0127 per kWh in April.

The strong peso and lower global oil prices have lowered energy costs, said Aris D. Dacanay, economist for ASEAN at HSBC Global Research.

The peso closed at PHP 55.745 per dollar at end-May, strengthening by 9.5 centavos from the PHP 55.84 finish at end-April.

On the other hand, Chinabank Research flagged price pressures from key food items such as meat, vegetables, fruits, and eggs, though said these could have been offset by the monthly decreases in prices of rice, fish, sugar, electricity and liquefied petroleum gas.

Nicholas Antonio T. Mapa, chief economist at Metropolitan Bank & Trust Co., said upward pressure from meat prices and utility costs may have nudged the headline inflation rate higher last month.

“Prices of some livestock and vegetable items increased during the period, but these were offset by low oil prices in the global markets and lower electricity generation prices,” Oikonomia Advisory & Research, Inc. economist Reinielle Matt M. Erece added.

Mr. Neri also noted the “rebound in vegetable and fruit prices amid the ongoing dry season, which significantly reduced agricultural output.”

“Additionally, the lifting of the maximum suggested retail price (MSRP) for pork contributed to an uptick in meat prices during the month,” he added.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said headline inflation may have bottomed out in May and could pick up to 1.9% in August during the typhoon season and breach 2% for the rest of the year, adding that they expect the CPI to settle at 2.6% by yearend.

The central bank expects inflation to average 2.3% this year and 3.3% in 2026, both well within the 2-4% target range.

“Headline inflation is projected to remain subdued in the coming months, largely supported by sustained softness in key commodity prices and a high base from last year,” Mr. Neri said.

“However, favorable base effects — particularly for rice — are expected to diminish starting in September. This could gradually push the headline print close to, if not at, the 3% level by yearend,” he added.

Rate cut likely this month

The current inflation trajectory shows that another rate cut from the BSP this month “appears increasingly plausible,” Mr. Neri said.

“With inflation running below the lower end of the BSP’s 2-4% target, we think the central bank has room to cut its policy rate at its June meeting,” Chinabank Research said.

“With inflation easing and the peso strengthening, it seems to be an opportune time for the BSP to implement another rate cut,” Ms. Tan added.

The Monetary Board in April reduced the target reverse repurchase (RRP) rate by 25 basis points (bps) to 5.5%, bringing total cuts thus far to 100 bps since it began its easing cycle in August last year.

Its next meeting is scheduled for June 19. BSP Governor Eli M. Remolona, Jr. has said they could deliver two more rate cuts this year, still in “baby steps” or increments of 25 bps.

Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco also expects a 25-bp rate cut at the Monetary Board’s meeting this month amid the benign inflation environment.

Mr. Arogo said the continued low inflation and modest gross domestic product growth in the first quarter is a “strong justification for the BSP to reduce the RRP rate further by 25 bps on June 19.”

“This move would also offer additional support for the domestic economy, which grew slower than expected in the first quarter and is facing downside risks from global policy uncertainties and higher US tariffs,” Chinabank Research said.

“[We] believe BSP has a copious amount of space to cut rates and support growth momentum during these challenging times. We expect up to three more rate cuts this year,” Mr. Mapa said.

The Philippine economy grew by a weaker-than-expected 5.4% in the first quarter.

Meanwhile, Mr. Neri said the BSP’s recent comments of shifting to a point-targeting regime from the current range also shows “a subtle but meaningful shift from an increasingly dovish tone last month to a more cautious stance.”

“This evolving guidance suggests that while the BSP remains poised to cut rates in the near term, further easing is likely to be more measured and data-dependent, particularly as upside risks to inflation may re-emerge later in the year just as base effects become unfavorable again in 2026.”

Mr. Remolona earlier said they are studying how to shift to a point target for inflation, from the current 2-4% target range. He said they are eyeing for the target to be a bit lower than the 3% midpoint of the current band.

“The central bank’s subsequent moves after a potential June cut are likely to be more measured, as external headwinds linked to uncertain global trade environment cloud the policy landscape,” Mr. Neri added. – Luisa Maria Jacinta C. Jocson, Senior Reporter