Peso falls to PHP 59 vs US dollar

The Philippine peso on Thursday hit a record-low PHP 59-a-dollar level for the first time in more than two years as the dollar continued its rally.

The peso closed at PHP 59 against the greenback at the end of trading, weaker by nine centavos from its PHP 58.91 finish on Wednesday.

This marked the first time the peso returned to the PHP 59-a-dollar level since Oct. 17, 2022.

The peso opened Thursday’s trading session at PHP 58.93 versus the dollar. Its intraday best was PHP 58.92, while its weakest showing was its close of PHP 59.

Dollars traded dropped to USD 842.68 million from USD 1.09 billion on Wednesday.

“The USD/PHP weakness reflects the recent rise in (10-year US Treasury yields), reflecting Trump 2.0 policies and causing the dollar to rise,” Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said.

Economists have been warning that US President-elect Donald J. Trump’s proposed tariffs and tax cuts could stoke inflation and potentially hamper the US Federal Reserve’s easing cycle.

Reuters reported that markets are pricing in a 52% chance of a 25-basis-point (bp) cut at the Fed’s December meeting, down from 82.5% a week ago, according to CME’s FedWatch Tool.

A Reuters poll showed most economists expect the Fed to cut rates at its December meeting, with shallower cuts in 2025 than expected a month ago due to the risk of higher inflation from Mr. Trump’s policies.

The first trader said the peso slump was also due to the “function of a stronger dollar and uncertainty of the Fed direction under Trump, plus mixed signals from the Bangko Sentral ng Pilipinas (BSP).”

“This also reflects expectations of rate cuts by BSP. This could persist in 2025. The near-term risk is PHP 60,” Mr. Ravelas added.

BSP Governor Eli M. Remolona, Jr. this week gave mixed signals, saying the Monetary Board can either keep or cut rates at its Dec. 19 policy meeting.

He said inflationary pressures would warrant a pause, while weaker-than-expected growth would pave the way for another rate cut.

Since August, the BSP has delivered a total of 50 bps worth of rate cuts, bringing the benchmark to 6%.

“The peso continued to depreciate, closing at the 59 level, with the ongoing uncertainty on the composition of Trump’s economic team,” the second trader said.

Mr. Trump’s pool for a Treasury secretary pick widened to include Apollo Global Management Chief Executive Marc Rowan and former Federal Reserve Governor Kevin Warsh, Reuters reported.

Mr. Trump said he would nominate Howard Lutnick, chief executive of Wall Street brokerage firm Cantor Fitzgerald, as head of the Commerce Department.

The second trader also noted “escalating tensions between Russia and Ukraine exert increased safe-haven demand for the greenback.”

Russia launched an intercontinental ballistic missile from its southern Astrakhan region during a morning attack on Ukraine on Thursday, Reuters reported, citing Kyiv’s air force. It was the first time Russia has used such a powerful, long-range missile during the war.

The air force reported the launch after Ukraine fired US and British missiles at targets inside Russia this week, despite warnings by Moscow that it would see such action as a major escalation in the 33-month-old war. — Luisa Maria Jacinta C. Jocson with Reuters

BSP monitoring lenders behaving like digital banks

Some lenders behaving like online banks might be required to obtain digital banking licenses to curb arbitrage and improve oversight, the Bangko Sentral ng Pilipinas (BSP) said.

“We’re busy right now determining which among the digi-centric institutions that we have right now can already be considered as operating like a digital bank,” BSP Director for Technology Risk and Innovation Supervision Department Melchor T. Plabasan told reporters on the sidelines of an event in Mactan, Cebu on Wednesday.

He said lenders operating like online banks might be obliged to also undergo the process of securing digital bank licenses.

“If the BSP has a basis for us to convert their license, then we will require them. That means all the requirements for digital banks will have to be complied with by these institutions,” he said.

In August, the Monetary Board lifted the moratorium on new digital banking licenses starting Jan. 1, 2025.

The BSP will now allow four more digital banks to operate in the country, which would bring the total to 10. These can either be new applicants or banks that will convert their existing license to a digital one.

Mr. Plabasan said the BSP could also convert the license of a rural or thrift bank into one for a digital bank.

“Because if you’re already behaving like a digital bank, you should be regulated like a digital bank, not a rural bank. That’s why the intention really is to minimize the arbitrage,” he added.

Once applicants secure approval from the central bank, they can begin operations as soon as their technology and infrastructure are ready, Mr. Plabasan said.

“Normally, the chartering is completed within three to four months, assuming that they have already submitted all the requirements,” he added.

BSP Governor Eli M. Remolona, Jr. earlier said these applicants must “bring something new to the table.”

Applicants will also undergo a “rigorous” licensing process that will evaluate their value proposition, business models and resource capabilities.

They must also comply with the standard licensing criteria, which cover capital adequacy and corporate governance and risk management, among others.

The BSP also said applicants must have the potential to reach untapped or underserved markets and push credit inclusion.

“We will not complete the four (licenses), just to say we granted all four licensees. If no one meets the additional requirements, then we will stay with the existing number,” Mr. Plabasan added.

So far, he said there has been equal interest from both new entrants and existing players seeking to convert their licenses.

“There are also foreign players that have signified interest to enter the Philippine market. We have already received some queries about certain legal requirements, regulatory requirements… By Jan. 1, probably we also will have done some assessment of the existing players there,” he said.

In 2021, the BSP capped the number of digital banking licenses at six to boost regulatory capacity and supervision of the sector.

The six digital lenders in the country are Tonik Digital Bank, Inc.; GoTyme Bank of the Gokongwei group and Singapore-based Tyme; Maya Bank of Voyager Innovations, Inc.; Overseas Filipino Bank, a subsidiary of Land Bank of the Philippines; UNObank of DigibankASIA Pte. Ltd.; and UnionDigital Bank of Union Bank of the Philippines, Inc.

The BSP defines a digital bank as a lender that offers financial products and services that are processed end-to-end through a digital platform or electronic channels with no physical branch. — Luisa Maria Jacinta C. Jocson

PHL breaks ground on world’s largest solar and battery storage facility

The Philippines on Thursday signaled the start of construction of a PHP 200-billion solar and battery storage project that is expected to supply power to over two million households by 2027.

President Ferdinand R. Marcos, Jr. led the groundbreaking of Meralco Terra (MTerra) Solar project, which consists of a 3,500-megawatt-peak (MWp) solar power plant and a 4,500-megawatt-hour (MWh) battery energy storage system in Nueva Ecija and Bulacan.

Once fully operational by 2027, the project would deliver 3,500 megawatts of solar power to the Luzon grid, Mr. Marcos said in a speech, adding that it would become the “largest integrated solar and battery storage facility in the world.”

“A 13-kilometer, 500-kilovolt transmission line will connect this project to the power grid, ensuring that clean energy reaches Filipino homes and businesses with efficiency,” he added.

Once completed, the MTerra Solar is expected to supply clean energy to about 2.4 million households through a 20-year, 850-MW mid-merit power supply deal with Manila Electric Co. (Meralco).

The project is being developed by Terra Solar Philippines, Inc., a unit of SP New Energy Corp. (SPNEC).

The initial block with 600 MW of capacity is scheduled for delivery by February 2026, while the remaining 250 MW will follow in 2027.

“Numbers alone fail to articulate the full significance of this project, we are making a statement today that the Philippines is not only keeping pace with the global energy transition but more so express our intention — the Philippines’ intention — to lead the migration from thermal to renewables,” Meralco Chairman and Chief Executive Officer Manuel V. Pangilinan said.

In his speech, Mr. Marcos said the project would also “reduce carbon emissions by more than 4.3 million metric tons annually.”

“To put that into perspective, it is equivalent to removing three million gasoline-powered cars from our roads — a decisive action towards helping address global warming and climate change,” he added.

Energy Secretary Raphael P.M. Lotilla said major investments in energy such as the MTerra project will help the Philippines reach its renewable energy goal faster.

“The major investment in solar and energy storage technology is a crucial step toward achieving our goal of increasing the share of renewables in the energy mix, reducing our carbon footprint and addressing electricity demand in Luzon,” he said.

The project aligns with the Philippines’ goal of increasing the share of renewable energy in its power generation mix to 35% by 2030 and 50% by 2040.

The MTerra Solar was certified by the Energy department as an “energy project of national significance” and secured “green lane certification” from the Board of Investments, enabling it to benefit from streamlined and expedited permit processing.

Opportunities

“The country should be quick to capitalize on opportunities towards green transition, such as the Nueva Ecija MTerra Solar project, particularly as there is a real demand for cheaper electricity and the current prices proposed by these renewable energy (RE) facilities can actually compete with traditional base load plants,” said public investment analyst Terry L. Ridon, who started InfraWatchPH.

“We should however be allowed to transition at our own pace, based on the actual conditions of the economy,” he said in a Facebook Messenger chat.

Mr. Ridon said public support for the green transition would get stronger as the prices of electric vehicles are expected to be cheaper than internal combustion engines due to lower production costs and advanced manufacturing methods.

Mr. Marcos said the MTerra Solar project, which features five million solar panels, is expected to create as many as 10,000 jobs.

“It will stimulate local economies and open countless opportunities for growth and development in those communities,” he said.

“Over the next decade, it is poised to generate nearly PHP 23 billion in financial benefits — resources that will pave the way for even greater progress.”

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — Kyle Aristophere T. Atienza and Sheldeen Joy Talavera

Balance of payments swings to deficit in Oct.

The country posted posted a balance of payments (BoP) deficit of USD 724 million in October as the government repaid external debt, the Bangko Sentral ng Pilipinas (BSP) said.

This was a reversal of the USD 1.51-billion surplus a year ago and USD 3.526-billion surfeit in September.

“The BoP deficit in October 2024 reflected the National Government’s (NG) net foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures,” the BSP said in a statement.

The BoP summarizes the country’s transactions with the rest of the world. A deficit means more funds left the country, while a surplus shows that more money came in.

Latest data from the Bureau of the Treasury (BTr) showed that the NG’s outstanding debt rose to a record-high PHP 15.89 trillion as of end-September.

The bulk (68.81%) of the debt stock came from domestic sources while the remainder was from foreign creditors.

External debt rose by 9.3% to PHP 4.96 trillion at end-September from a year ago.

Central bank data showed the BoP reflected a final gross international reserve (GIR) level of USD 111.1 billion as of end-October, down from USD 112.7 billion a month earlier.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said that despite the decline, the reserve level has been above the USD 100-billion mark for over a year or 13 straight months.

“Still a relatively high GIR, the second highest on record, partly due to net income from the BSP’s foreign investments amid gains in most global financial markets recently on market expectations on the series of Fed rate cuts from 2024-2026,” he added.

The US Federal Reserve began its rate-cutting cycle in September with a half-percentage-point reduction and delivered another quarter of a percentage-point cut earlier this month.

Markets are anticipating another quarter-point rate cut at its last meeting for the year in December.

Data from the central bank showed the dollar buffer was enough to cover 4.4 times the country’s short-term external debt based on residual maturity.

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

An ample level of foreign exchange buffers safeguards an economy from market volatility and is an assurance of the country’s capability to pay debts in the event of an economic downturn.

Mr. Ricafort said the deficit position in October was due to the country’s continued trade deficit.

The Philippines’ trade-in-goods balance stood at a USD 5.09-billion deficit in September, the widest in 20 months.

The country’s balance of trade in goods has been in the red for over nine years since the USD 64.95-million surplus recorded in May 2015.

Mr. Ricafort also noted volatility due to geopolitical risks and markets pricing in the incoming Trump administration’s restrictive trade policies.

10-month surplus

Meanwhile, the country’s BoP position registered a USD 4.393-billion surplus in the 10-month period, widening from the USD 3.246-billion surplus a year ago.

“The surplus reflected in part the continued net inflows from personal remittances, trade in services, and net foreign borrowings by the NG,” the central bank said.

“Furthermore, net foreign direct and portfolio investments contributed to the BoP surplus,” it added.

Latest data from the BSP showed foreign direct investment (FDI) net inflows rose by 3.9% year on year to USD 6.07 billion in the first eight months.

Meanwhile, foreign portfolio investments yielded a net inflow of USD 3.02 billion in the January-September period, significantly higher than the USD 387.24-million inflow last year.

“For the coming months, the BoP data could improve, thereby could also lead to better GIR, partly due to the proceeds of the National Government’s foreign currency-denominated borrowings from both commercial sources that would also be added to the country’s BoP and GIR,” Mr. Ricafort said.

He also noted continued growth in overseas Filipino worker remittances, business process outsourcing revenues, exports and foreign tourism receipts.

“Going forward, any improvement in BoP data and in GIR data for the coming months could still help provide a greater cushion for the peso exchange rate (against) the US dollar especially versus any speculative attacks, as well as help strengthen the country’s external position,” he added.

The BSP expects a USD 2.3-billion BoP surplus by yearend, equivalent to 0.5% of economic output. – Luisa Maria Jacinta C. Jocson, Reporter

Inflationary pressure may prompt pause in December – BSP Chief

Inflationary pressure could prompt the Philippine central bank to pause its easing cycle, but a slowdown in growth may leave room for another rate cut, its governor said on Wednesday.

“Inflation pressures may cause us maybe to pause a bit, but weak growth may cause us to cut,” Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. told reporters on the sidelines of an event on Wednesday.

Depending on the data, he said the Monetary Board may cut or pause at its Dec. 19 meeting.

This year, the BSP has delivered a total of 50 basis points (bps) worth of rate cuts in increments of 25-bp reductions at its August and October meetings.

“Based on our readings, there are still pressures on inflation, and the economy is also a bit weak as seen in the third quarter number,” he said in mixed English and Filipino.

Philippine gross domestic product (GDP) slowed to 5.2% in the July-to-September period from 6.4% in the second quarter and 6% a year ago.

This was also the weakest growth since the 4.3% expansion in the second quarter of last year.

In the first nine months, GDP grew by 5.8%. The economy would need to grow by at least 6.5% in the fourth quarter to meet the lower end of the government’s 6-7% target.

Mr. Remolona said November inflation is likely to remain within the 2-4% target band based on the BSP’s latest projections.

Headline inflation picked up to 2.3% in October, bringing the 10-month average to 3.3%.

The BSP’s baseline forecasts see inflation settling at 3.1% this year, 3.2% in 2025 and 3.4% in 2026.

The central bank also earlier said the balance of risks to the inflation outlook for 2025 and 2026 shifted to the upside but will likely continue to remain within target.

BSP Assistant Governor Zeno R. Abenoja said that November inflation may reflect the typhoon damage in October, but the impact from the multiple storms that hit the country in November will likely be reflected in December inflation data.

“Based on the Department of Agriculture (DA), they estimated that about 70% of the harvest was done when the typhoons started coming in, the last four typhoons,” he said.

“Hopefully, the impact will be limited, but it’s the next cycle that may be affected,” he added.

Latest data from the DA showed that the combined agriculture damage due to tropical cyclones Kristine and Leon, which made landfall in the country in late October, reached P9.81 billion.

Meanwhile, the BSP chief said that the peso’s performance is not a factor that the central bank considers in its monetary policy decisions.

“Usually, they’re different, the exchange rate and the policy rate. We don’t use the policy rate to control the exchange rate. That’s a different matter,” Mr. Remolona said.

The peso has been recently trading at the P58-per-dollar range, teetering closer to the P59 level.

Mr. Remolona earlier said he is not worried about the peso’s weakness, though the central bank has been intervening in “small amounts” following the peso depreciation amid the announcement of Donald J. Trump’s election as US President. – Luisa Maria Jacinta C. Jocson, Reporter

Peso slides to over two-year low

The peso sank to an over two-year low on Wednesday amid escalation in the Russia-Ukraine war as well as further signals on US President-elect Donald J. Trump’s economic policies.

The local unit closed at PHP 58.91 per dollar on Wednesday, weakening by 10 centavos from its PHP 58.81 finish on Tuesday, Bankers Association of the Philippines data showed.

This was the peso’s weakest close in 25 months or since its PHP 58.94 close on Oct. 20, 2022.

The peso opened the session at PHP 58.80 against the dollar with its intraday best at PHP 58.77. Meanwhile, it dropped to as low as PHP 58.925 versus the greenback.

Dollars exchanged went down to USD 1.096 billion on Wednesday from USD 1.473 billion on Tuesday.

The first trader said in a phone call that the peso slipped amid an escalation in the Russia-Ukraine war.

“The US dollar-peso exchange rate is also higher amid some geopolitical risks related to the Russia-Ukraine war lately,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Reuters reported that Russian President Vladimir Putin on Tuesday lowered the threshold for a nuclear strike in response to a broader range of conventional attacks, days after reports said Washington had allowed Ukraine to use US-made weapons to strike deep into Russia.

Ukraine used United States-made Army Tactical Missile System (ATACMS) missiles to strike Russian territory on Tuesday. However, Moscow said the use of ATACMS, the longest-range missiles Washington has supplied to Ukraine so far, was a clear signal the West wanted to escalate the conflict.

The second trader in an e-mail said that the peso depreciated after reports that Mr. Trump has narrowed his choice for Treasury secretary.

Bloomberg News reported Mr. Trump was set to interview former Federal Reserve Governor Kevin Warsh and Apollo Global Management Chief Executive Officer Marc Rowan for the post of Treasury secretary.

“However, (Mr. Warsh’s) previous experience in the Fed might give him an edge over other candidates for the position… his pick is widely viewed as supportive of his alternative approach to the US central bank, falling in line with the US economic plans by Trump,” the trader said.

Mr. Ricafort also noted the latest balance of payments (BoP) data, which posted a deficit position.

The country posted a BoP deficit of $724 million in October, a reversal of the USD 1.51-billion surplus a year ago and USD 3.526-billion surfeit in September, latest central bank data showed.

The second trader said the peso may stay close to the PHP 59-per-dollar level in the near term.

“The peso is likely to remain elevated near the PHP 59 level as growing geopolitical concerns and uncertainties on Trump policies continue to drive demand for the greenback,” the second trader said.

In October 2022, the peso hit a record low of PHP 59 against the dollar, which led to inflationary pressures and prompted the central bank to intervene.

BSP Governor Eli M. Remolona, Jr. has said that the peso’s recent weakness is not a cause for concern as it was expected that the dollar strengthened after Mr. Trump was elected US President.

However, he said that the central bank has had to intervene in “small amounts.”

For Thursday, the first trader expects the peso to move between PHP 58.60 and PHP 58.95 while the second trader sees the peso trading from PHP 58.75 to PHP 59.

Meanwhile, Mr. Ricafort expects it to range from PHP 58.75 to PHP 58.95. — L.M.J.C.Jocson

Easing cycle still underway — BSP

CEBU — The Philippine central bank’s easing cycle is still underway though it may opt to keep rates steady at its December meeting, its top official said.

“We’re still in the easing cycle. Either we cut in December, or we cut in the next meeting, but gradually,” Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. told reporters on the sidelines of the BSP-International Monetary Fund (IMF) Systemic Risk Dialogue in Mactan, Cebu on Tuesday.

Asked if the central bank could keep interest rates steady at its December meeting, Mr. Remolona said in mixed English and Filipino: “Yes, of course. It depends on the data. We are still not sure about December.”

Mr. Remolona reiterated that the central bank will continue to make rate cuts in 25-basis-point (bp) increments.

He earlier said the BSP may not necessarily reduce rates at every quarter or every meeting.

Since it began its easing cycle in August, the BSP has reduced borrowing costs by a total of 50 bps so far.

The Monetary Board has delivered a 25-bp cut at its meetings in August and October, bringing the benchmark to 6%.

Mr. Remolona had earlier signaled the possibility of a 25-bp cut on Dec. 19, the Monetary Board’s final policy meeting this year.

Meanwhile, he said the weak gross domestic product (GDP) growth in the third quarter was likely an “aberration” and that growth would likely recover in the fourth quarter.

The Philippine economy grew by a weaker-than-expected 5.2% in the third quarter, its slowest growth in five quarters.

This brought GDP growth in the nine-month period to 5.8%. The economy needs to grow by at least 6.5% in the fourth quarter to ensure it can hit the low end of the government’s 6-7% full-year target.

Instead, the central bank is monitoring closely the latest inflation data, Mr. Remolona said.

“The next number to expect is the November inflation number, we’ll see what that is. Our expectation is that it will still be within the target band.”

Headline inflation picked up to 2.3% in October, bringing the 10-month average to 3.3%. This was still within the BSP’s 2-4% target range.

For 2025, the BSP chief said that the Monetary Board could likely deliver rate cuts at the 100-bp range.

“That’s not exact. It could be more, could be less, but that’s in the ballpark,” he added.

Peso performance

Meanwhile, the BSP governor said he is not worried about the peso’s recent performance.

“It’s below PHP 59. We don’t worry so much about whether the peso depreciates, appreciates. We worry about the pass-through effect. Right now, it’s still okay,” Mr. Remolona said.

The peso closed at PHP 58.81 per dollar on Tuesday, depreciating by 13 centavos from its PHP 58.68 finish on Monday, Bankers Association of the Philippines data showed.

Markets are keeping an eye out for whether the peso will sink to the P59-per-dollar level. The peso fell to the record low of PHP 59 per dollar in October 2022.

However, he said the central bank has been intervening in “small amounts.” “A little bit just so it won’t (depreciate sharply against the dollar),” he said.

“We leave it to the guys in the financial markets area, but if it depreciates very sharply, then we talk. If it’s not too sharp, it doesn’t become inflationary. It’s inflationary if it’s sharp and persistent.”

He said the recent peso weakness was expected after Donald J. Trump was elected US president. The US dollar has been on the rise amid market expectations Mr. Trump would implement higher tariffs that could fuel inflation and slow the Federal Reserve’s planned rate cuts.

“We monitor the swings that take place over a few months, not day by day. It is usually expected that the night before, this kind of news will put pressure on the peso.” – Luisa Maria Jacinta C. Jocson, Reporter

Gaming, energy firms seen to lead IPOs in ’25

Professional services company Deloitte is cautiously optimistic about the initial public offerings (IPOs) at the Philippine Stock Exchange (PSE) for 2025, which could be led by the gaming and energy firms.

“The buzzword is cautious optimism,” Deloitte Singapore Transactions Accounting Support Partner Darren Ng said in a virtual briefing on Tuesday.

“I think from that perspective, if you look at what’s in the pipeline for the Philippines as well, there should be more IPOs happening in 2025 and in a mix of different industries.”

There could be IPOs from companies in the gaming, energy and resources sectors in 2025.

“There are two gaming companies, Okada Manila and Hann Resorts, and with a continued interest in energy and resources, we do think that there should be more IPOs coming for the Philippines,” Mr. Ng said.

The PSE previously said it expects to have six IPOs for 2025.

Several big names such as SM Prime Holdings, Inc.’s real estate investment trust, Razon-led Prime Infrastructure Capital, Inc., Maynilad Water Services, Inc. and electronic wallet GCash, are said to be planning IPOs but with no definite timeline.

This year, there were only three IPOs, falling short of the PSE’s target of six. These were mining company OceanaGold Philippines, Inc. and renewable energy companies Citicore Renewable Energy Corp. and NexGen Energy Corp.

“In the first three quarters of 2024, the PSE saw three IPOs in energy and resources industry that raised USD 203 million, achieving market capitalization of USD 972 million,” Mr. Ng said.

A fourth IPO was initially scheduled this year, but Cebu-based fuel retailer Top Line Business Development Corp. (Topline) decided to postpone it.

Topline announced on Monday that it is moving the offer period of its maiden issuance to the first quarter of 2025 as the company accommodates institutional investors.

Based on Deloitte data, the Philippines is fourth among Southeast Asian countries in terms of IPO amount raised this year. Malaysia topped the region with USD 1.54 billion, followed by Thailand (USD 756 million), and Indonesia (USD 368 million).

The country is ahead of Vietnam (USD 37 million) and Singapore (USD 34 million).

“Southeast Asia’s strong consumer base, growing middle class, and strategic importance in sectors like real estate, healthcare, and renewable energy remain attractive to investors,” Deloitte said.

“On the same breadth, momentum for real estate investment trusts and artificial intelligence infrastructure are expected to pick up as large tech companies are investing into the region, which offers lower costs, reliable power source, and geopolitical neutrality,” it added.

Local analysts had blamed the lackluster market conditions for the lack of IPOs this year. The Philippine Stock Exchange index (PSEi) has been on a slump since closing at a near five-year high of 7,554.68 on Oct. 7. On Tuesday, the PSEi closed at 6,803.19, up 0.61% from Monday’s close.

Luna Securities, Inc. President and Co-Founder Francis Patrick T. Diaz said they have adopted a “wait-and-see” stance when it comes to IPOs next year.

“Given our recent slide, we are more wait-and-see. Aside from waiting on specifics on United States policy such as interest rates, note that next year is also an election year,” he said in a Viber message.

“Ultimately, it will be the economy and consequent market conditions that will set the pace for IPO activity. You can see how easy it is for prospective companies to postpone their IPO plans if market conditions are not as bullish as they expect,” he added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message rising volatility in markets since Donald J. Trump’s victory may prompt investors to stay on the sidelines.

“The increased volatility in the global and local financial markets since Mr. Trump won the US presidential elections could realistically lead to some wait-and-see attitude for some stock market fundraising deals as issuers would like to sell shares at the highest prices and valuations as much as possible as a matter of financial prudence,” he said.

Mr. Ricafort noted Mr. Trump’s protectionist policies and tougher immigration rules could stoke inflation in the US.

“There are also possible pro-US business and economic policies such as tax cuts which would lead to higher US inflation and could reduce the need for future Fed rate cuts that in turn could temper the gains in the financial markets, including the local stock market,” he added. –Revin Mikhael D. Ochave, Reporter

IMF says ‘tit-for-tat’ tariffs can hurt Asia’s growth

CEBU — “Tit-for-tat” retaliatory tariffs could hurt the growth outlook for the Asia-Pacific region, the International Monetary Fund (IMF) said.

“In a region like Asia, which has benefited a lot from globalization, from greater integration with the rest of the world, any kind of tariff or trade restrictions will have an impact,” Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, said at the Bangko Sentral ng Pilipinas (BSP)-IMF Systemic Risk Dialogue here on Tuesday.

“Our analysis shows that over the long run, everybody hurts because the size of the pie becomes that much smaller. So, every country, including the Philippines, will hurt in the long run.”

Mr. Srinivasan said that “tit-for-tat retaliatory tariffs” could threaten growth prospects across the region as it could disrupt supply chains.

“When you have fragmentation, which is across trade and investment and so on, all the work we have done shows that in the long run, every country hurts.”

Global trade could be upended if US President-elect Donald J. Trump pushes through with his campaign promise to impose a 60% tariff on Chinese-made goods and at least a 10% tariff on all other imports.

Such a move could stoke inflation and derail the Federal Reserve’s easing cycle, as well as negatively impact growth in exporting countries like the Philippines.

National Economic and Development Authority Secretary Arsenio M. Balisacan earlier said Mr. Trump’s tariff plan is a cause for worry due to its potential impact on the global economy.

The Philippines heavily relies on the United States for business and economic activity, as it is the top destination of Philippine-made goods and is the biggest source of overseas Filipino worker remittances.

“If China slows down because of fragmentation, it’s going to affect you. If the US slows down, it’s going to affect you,” Mr. Srinivasan said.

“One way or the other, over the long run, all countries will hurt from fragmentation and the risks we have seen have only increased over the past few years,” he added.

Escalating trade tensions could impact financial markets, increase trade costs and affect domestic demand, Mr. Srinivasan said.

In its World Economic Outlook, the IMF expects economic growth in Asia to average 4.4% in 2025, faster than the 3.2% growth for the global economy.

IMF data show that Asia is forecasted to contribute about 60% to global growth this year.

“Growth outlook in Asia remains robust and inflation pressures have eased, thanks to the region’s central banks’ ability to anchor inflation and inflation expectations effectively,” Mr. Srinivasan said.

The IMF sees Philippine gross domestic product (GDP) expanding by 6.1% in 2025.

On the other hand, BSP Governor Eli M. Remolona, Jr. said that the exact spillover effects from Mr. Trump’s policies on the Philippines remain to be seen.

“We don’t know exactly what the tariffs will be because of the size of the tariffs that are being contemplated. We don’t really know what the effects will be. So we have to wait and see, and then we’ll figure it out,” he said.

The BSP chief said that the country’s balance of payments (BoP) is less likely to be impacted by tariff measures.

“In the case of the Philippines, our BoP shows that our service exports are just as large as our goods exports. Our services exports, you have business process outsourcing (BPO) revenues and then we have remittances from abroad,” he said.

“These are less easily subject to tariffs, because these things, BPO business goes over the internet. Whereas remittances, the workers are abroad, or they’re on ships. So maybe we’re a little bit insulated from the tariffs.”

Mr. Remolona also noted the impact of the tariff restriction on Chinese-made goods.

“At the same time, China remains our number one source of imports to the Philippines. If those imports cannot enter the United States easily, then they might send us more of those imports, probably less expensive imports than before. Those are kind of second-round effects that we have to figure out.”

Other risks

Meanwhile, Mr. Srinivasan also flagged the risks that less regulated, nonbank financial institutions (NBFI) pose to the overall financial system.

“These developments could amplify negative shocks, especially given the worsening risk landscape and increased uncertainties with significant implications for financial stability.”

“For instance, the nonbank financial institutions being more agile and subject to fewer constraints can leverage AI in many ways that pose challenges for financial regulators.”

Mr. Remolona also noted the rapid growth of NBFIs.

“The nonbank financial sector has noticeably grown since the Global Financial Crisis. On one hand, this is welcome news because it addresses some of the concentration risks that arise from relying too much on the banking industry,” he said.

Latest data from the BSP showed that NBFIs’ total resources rose by 5.3% to PHP 5.525 trillion as of end-June from PHP 5.248 trillion a year ago.

“On the other hand, financial markets are never an ‘either- or.’ There is much diversity within nonbank financial institutions, just as there are inter linkages with nonbanks and banks,” Mr. Remolona said.

“In exchanging interlinkages, its opportunities and risks should be of great interest to regulators and practitioners.” — Luisa Maria Jacinta C. Jocson

TMP says auto parts exports may rise 5% next year

Toyota Motor Philippines Corp. (TMP) is projecting a potential 5% growth in auto parts exports next year as demand recovers in other countries, a company official said.

“If next year it will increase, more or less… it will be 5%,” TMP First Vice-President for Purchasing Richard B. Valdez told reporters on Tuesday.

Exports are so far flat this year, he noted. “Every year, at least we would like to increase, but that will still depend on the sales of other countries.”

In 2023, the Toyota group accounted for 30% or USD 1.26 billion of the total Philippine auto parts exports. These represented USD 665 million in export revenues.

However, the car manufacturer’s share in the auto parts exports that year was lower than 33% a year prior.

“It’s a little bit down because since we are exporting, these (represent) the sales of other countries like Thailand and other ASEAN (Association of Southeast Asian Nations) markets,” Mr. Valdez said.

There are lower sales in other markets due to issues with financing as interest rates remain elevated, he noted.

Data from the ASEAN Automotive Federation (AAF) showed that motor vehicle sales in Thailand declined 9% to 775,780 units last year.

Meanwhile, Thailand’s motor vehicle sales from January to September dropped 23.5% to 438,303 units.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said it is possible for the country’s total auto parts exports to increase next year.

“This is consistent with the fact that the Philippines is one of the fastest growing in vehicle sales and production in ASEAN in recent years,” he said.

AAF statistics showed that Philippine motor vehicle production grew 18.3% in the January-to-September period to 97,139 units. It was the second-fastest in the region.

Meanwhile, a joint report by the Chamber of Automotive Manufacturers of the Philippines, Inc. and Truck Manufacturers Association showed that auto sales grew 8.9% to 384,310 units as of October.

Mr. Ricafort added that since Toyota is one of the world’s biggest automakers, it is possible for the company to further diversify its global supply chains.

“It will be prudent for them to diversify the auto parts exported from the Philippines to the rest of [its] production facilities worldwide,” he said.

In 2016, TMP established Toyota Motor Philippines Logistics, Inc. (TLI) to strengthen its indirect exports of OEM (original equipment manufacturer) and aftermarket parts and accessories to Toyota’s global network.

As of the end of 2023, TLI has 13 indirect export suppliers, which generate around $200 million annually.

According to Mr. Valdez, the top destinations for Philippine-made parts last year were Thailand, South Africa, Brazil, Taiwan, and India. — Justine Irish D. Tabile

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