MANILA — The Philippines’ agriculture ministry said on Friday it has ordered the suspension of onion imports until May to protect domestic farmers.
The ban can be extended up to July depending on domestic harvest of the high value crop, the ministry said in a statement.
A supply glut in the Philippines has significantly pushed down prices of onions over the past year, according to government data. — Reuters
Celebrate Sinulog, the country’s grandest festival, at your favorite SM City Cebu. Immerse yourself in the excitement of festive events at the core of the Sinulog Festival this month of January.
The Sinulog Festival in Cebu is a vibrant and deeply-rooted religious celebration that traces its origins to the Feast of the Sto. Nino.
SM City Cebu offers a vibrant and culturally rich experience for both locals and tourists this Sinulog 2024.
RELIGIOUS EXHIBITION
To start off the celebration, SM City Cebu and Ramon Aboitiz Foundation, Inc. present the Treasures of Devotion, a virtual exhibition of religious objects or objects of devotion. Through photo and video documentation, the religious objects found in diocesan and parish museums and private collections in Cebu were catalogued, unearthing layers of memories and experiences accrued by generations of believers and discovering stories of faith and devotion as shown, shaped, and sustained by these religious artifacts. The exhibition is located at the first level of the North Wing, and is ongoing until Jan. 31.
FUN & ENTERTAINMENT FOR FAMILIES & FRIENDS
Celebrate Sinulog in bold and vibrant hues! Islands Souvenirs’ Cut & Style at SM City Cebu invite you to explore their Sinulog Merch pop-up store for the best fusion of tradition and contemporary style this year. Check-out the Cut & Style booth at the lower ground level of SM City Cebu.
COLORFUL INSTALLATIONS
Take a picture at SM City Cebu’s AweSM Sinulog Square installation located at the North Wing Atrium, and experience a haven of festivity, where tradition meets modern splash of colors and rhythms.
MOUTHWATERING LOCAL DISHES
Food lovers check this out! Visit the StrEATs of Cebu booths where one can enjoy a gastronomic feast of Cebu’s lechon and other Cebu delicacies located at the lower ground level of the main mall.
HUGE DISCOUNTS & PROMOS
Shoppers will also enjoy huge discounts and exciting promos in the Sinulog Sale from Jan. 19 to 21. Get into the festive spirit with a great selection of sale items of up to 50% off mall wide.
And to complete the Sinulog experience, witness the AweSM Cebu Dance Parade around the mall from Jan. 19-21 beginning at 10A.M.
Dive into the festive feels this Sinulog 2024 and experience an ultimate #AweSMFestival.
For more updates, checkout SM City Cebu (Official) on Facebook or Instagram.
Spotlight is BusinessWorld’s sponsored section that allows advertisers to amplify their brand and connect with BusinessWorld’s audience by enabling them to publish their stories directly on the BusinessWorld website. For more information, send an email to online@bworldonline.com.
Join us on Viber at https://bit.ly/3hv6bLA to get more updates and subscribe to BusinessWorld’s titles and get exclusive content through www.bworld-x.com.
SYDNEY – Australian consumers are tending to spend only when there are bargains to be had, as punishing home loan payments and cost of living pressures weigh on overall outlays, data from Westpac showed on Friday.
The Westpac Card Tracker Index stood at 137.2 for the week ending Jan. 13, up 3 index points from mid-December, but on a quarterly basis, spending fell as shoppers forked out less on services such as travel and dining out.
The base of 100 reflects average activity in 2019.
“The Christmas-New Year period has been a sporadic one for consumer-related card activity with bursts around key sales weeks followed by sharp pull-backs,” said Matthew Hassan, a senior economist at Westpac.
“The picture is broadly consistent with consumers more actively seeking out discounts to deal with cost of living pressures.”
Separate data from ANZ on Friday showed a solid seasonal uplift in non-food retail spending in the last quarter of the year thanks to the increasing popularity of Black Friday sales, but the level of spending remained low.
The official retail sales figures, due on Jan. 30, are likely to show consumer spending turned soft again after a jump in November, which would reinforce wagers that the Reserve Bank of Australia will not have to raise rates further in February.
All of Australia’s major banks have called a peak in interest rates. Both Commonwealth Bank of Australia and Westpac expect the first rate cut in September, while NAB and ANZ predict it will come in November.
“As we move into the second half of the year, we think that the combination of fiscal easing, slower inflation and a rate cut in November will support spending,” ANZ analysts said in a note. – Reuters
TOKYO – Japan Airlines named its first female president on Wednesday, a former cabin attendant who rose through the ranks to senior management, taking a deeply symbolic step in a country struggling to close a vast gender gap at work.
Mitsuko Tottori, a senior managing executive officer who joined JAL in 1985, the year it suffered one of the worst crashes in airline history, will become president from April 1, it said in a statement.
The appointment comes as Japanese companies face increasing pressure to boost gender diversity and tackle a gender pay gap that is the worst among the Group of Seven nations and almost double the average of the OECD grouping of advanced economies.
“There are female employees out there who are struggling with their career steps or going through big life events,” Ms. Tottori told a news conference.
“I hope my appointment as a president can encourage them, or give them the courage to take the next step.”
The change comes as the airline seeks to recover from the pandemic-era downturn and tourists flock back to Japan.
Airline safety is under a fresh spotlight after a collision between a JAL plane and a Japanese Coast Guard aircraft at Tokyo’s Haneda airport this month. All 379 people aboard the airliner escaped as it burst into flames.
JAL has said Tottori acquired a “high level of insight and field experience” in safety operations and service.
The current president, Yuji Akasaka, will become chairperson while continuing to hold a representative director title, the airline said in its statement.
Yoshiharu Ueki, the current chairman, will retire from his post in April and leave the director position upon shareholder approval in June.
JAL has set itself a target for women to make up 30% of managers across the group by the end of the fiscal year to March 2026.
By the end of March 2023, the corresponding figure was 22.8%. – Reuters
MANILA — The pass-through effect of the Philippine central bank’s series of rate hikes since 2022 has been “quite significant”, a senior central bank official said on Friday.
“In all the rates that we were monitoring, pass throughs are quite significant so transmission is intact,” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco G. Dakila Jr. told reporters.
Since May 2022, the BSP has hiked its benchmark rate by a total of 450 basis points to rein in inflation. In December, it kept its policy rate steady at 6.5% for a second straight meeting.
Headline inflation last month returned to target to 3.9%, but average inflation for 2023 stood at 6.0%, well above the central bank’s 2%-4% target.
The rate-setting monetary board will meet on February 15 to review interest rates. — Reuters
SEOUL — North Korea has conducted a test of its underwater nuclear weapons system in a protest against this week’s joint military drills by South Korea, the United States and Japan, state media KCNA said on Friday.
The test of the “Haeil-5-23” system, a name North Korea has given to its nuclear-capable underwater attack drones, was carried out by the defence ministry’s think tank in the waters off its east coast, the report said, without specifying a date.
The ministry’s unnamed spokesman accused the United States, South Korea, and Japan of “getting frantic” with military exercises, warning of “catastrophic consequences.”
The three countries’ navies held their three-day regular drills until Wednesday, alongside the US aircraft carrier Carl Vinson, as part of efforts to improve their responses to Pyongyang’s evolving nuclear and missile threats.
“Our army’s underwater nuke-based countering posture is being further rounded off and its various maritime and underwater responsive actions will continue to deter the hostile military maneuvers of the navies of the US and its allies,” the North Korean ministry spokesman said in a statement, according to KCNA.
North Korean state television has aired previous atmospheric explosion tests, which have been monitored by US and South Korean authorities, but the reported underwater weapon has not been independently verified.
Dubbed “Haeil,” which means tsunami, the new drone system was first reportedly tested in March 2023, and state media said it was intended to make sneak attacks in enemy waters and destroy naval strike groups and major operational ports by creating a large radioactive wave through an underwater explosion.
The latest reported underwater test came days after North Korea fired a new intermediate-range, solid-fuel hypersonic missile, which Washington, Seoul, and Tokyo condemned as a serious violation of UN Security Council resolutions.
The three allies’ nuclear envoys gathered in Seoul on Thursday, also condemning Pyongyang’s arms trade with Russia and increasingly hostile rhetoric, just as North Korea’s foreign minister visited Moscow and met with President Vladimir Putin. — Reuters
Skyworth Philippines announced the official launch of Gabbi Garcia as its first and newest brand endorser and recognized its awardees for the Sky Hero Awards in their event at Alta Guia in Taguig last Jan. 12.
Guests were encouraged to come wearing modern barong and Filipiniana, establishing the ambiance of celebration not just of technology and entertainment but also the rich cultural tapestry of the Philippines.
Beyond the role of an actress and global endorser, Ms. Garcia is also a visionary and empowered woman. Along with this, she advocated for positive change, evident in her life advocacies on body positivity, women empowerment, mental health awareness, gender inclusivity, and many more which was fitting for the role of an “EyeCon.”
Ms. Garcia’s role as the “EyeCon of EyeCare TV” extends beyond endorsing technology. It symbolizes a visionary trendsetter empowering women and inspiring a generation to see the world differently.
The program covered her introduction as Skyworth’s brand endorser, an interactive Q&A session with members of the press, an official contract signing, and the brand’s messaging to the public.
Furthermore, Skyworth announced the awardees for the Sky Hero Awards, a recognition program in partnership with Junior Chamber International (JCI) to honor unsung heroes contributing to community rebuilding after the COVID-19 pandemic.
This awarding sought to further highlight the goal of Skyworth Philippines as a brand deeply rooted in Filipino culture and committed to creating an authentic and meaningful connection for the Filipino community.
The Sky Hero Award was aligned with the JCI RISE initiative, which stands for Rebuild-Invest-Sustain-Evolve. Its main purpose was to lift up individuals and communities who suffered during the pandemic era.
The Sky Hero Award was categorized into three categories: Business Recovery, Workforce Empowerment, and Mental and Physical Health Awareness.
The awardees represented a diverse range of community heroes who, despite the challenges, have made significant impact. These inspiring individuals include:
These awardees were honored not only for their individual achievements but also for their collective impact on community development, reflecting Skyworth’s commitment to positive social change.
The awarding was presided over by James Sun, general manager of Skyworth Philippines, and was graced by the presence of Ms. Garcia, alongside representatives from JCI.
The awardees received Skyworth products, cash prizes for seed funding, starting capital or training scholarships, and trophies.
Moreover, the appreciation given to the awardees transcended material rewards by virtue of the inspiration they inculcated in each of their communities through their stories of hard work, perseverance, and hope.
Spotlight is BusinessWorld’s sponsored section that allows advertisers to amplify their brand and connect with BusinessWorld’s audience by enabling them to publish their stories directly on the BusinessWorld website. For more information, send an email to online@bworldonline.com.
Join us on Viber at https://bit.ly/3hv6bLA to get more updates and subscribe to BusinessWorld’s titles and get exclusive content through www.bworld-x.com.
WASHINGTON — The Iran-backed Houthi militia launched two anti-ship ballistic missiles at a US-owned tanker ship late on Thursday that hit the water near the vessel but caused no injuries or damage, the U.S. military said.
The incident, the latest amid growing tensions in the Red Sea that have disrupted global trade and raised fears of supply bottlenecks, took place around 9 p.m. Yemen time (1800 GMT), according to a US Central Command post on X, formerly Twitter.
The Houthis, who control most of Yemen, earlier on Thursday claimed responsibility for the attack, saying they targeted the ship Chem Ranger with naval missiles that caused “direct hits.”
Monitoring service TankerTrackers.com said on social media that the “fairly small chemical tanker left the Red Sea port of Jeddah, Saudi Arabia for Kuwait, but her AIS (automatic identification system) went offline on (Tuesday) before proceeding south past Yemen.”
The Houthis say their attacks are in solidarity with Palestinians under attack from Israel in Gaza.
Since last week, the United States has launched strikes on Houthi targets in Yemen, and this week returned the militia to a list of “terrorist” groups. President Joe Biden told reporters on Thursday that air strikes would continue even if they may not be halting the Houthi attacks. — Reuters
By Beatriz Marie D. Cruz, Reporter
A HOUSE of Representatives committee on Thursday endorsed to members a bill that seeks to lower the income tax on both local and foreign companies to 20% under a so-called enhanced deduction regime, while streamlining the tax refund system for corporations.
Substitute House Bill No. 9794 or the CREATE MORE (CREATE to Maximize Opportunities for Reinvigorating the Economy) bill will amend Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
The committee report will be taken up at the House Ways and Means panel next week before it is debated at the plenary.
The measure seeks to enhance fiscal and nonfiscal provisions of the Tax Code and “reconcile disparities between the CREATE Act and its implementing rules,” Albay Rep. Jose Ma. Clemente S. Salceda, who heads the Ways and Means Committee, said in a fact sheet that accompanied the committee report.
The CREATE law had imposed a 25% income tax on companies and limited the 20% rate to local enterprises with income not exceeding P5 million ($89,513) and assets worth P100 million and below. It also restricted the zero-rating on value-added tax (VAT) on local purchases to the sale of goods and services directly used in a project of a registered exporter.
Under the proposed CREATE MORE, domestic and export companies, including those inside ecozones and freeports, will be entitled duty exemptions, VAT exemption on importation, and the VAT zero-rating of local purchases.
Companies outside ecozones and freeports will also enjoy VAT zero-rating on local purchases as well as duty exemption on the importation of capital equipment, raw materials, spare parts, or accessories, according to a copy of the committee report.
The proposed law also seeks to establish a 20% corporate income tax rate on local and foreign corporations under the enhanced deduction income tax regime.
Registered business enterprises (RBEs) will also enjoy a 200% additional deduction for power cost, to be accumulated during the Income Tax Holiday (ITH) period. They may also enjoy 100% additional deductions in expenses for trade fairs, missions or exhibitions.
The bill also seeks to include the tourism industry under the coverage of the reinvestment allowance, and to apply the net operating loss carryover within five years after the ITH entitlement period.
The proposed law also seeks to impose a 1 1/2% RBEs local tax in lieu of any and all taxes to be collected by IPA.
VAT incentives for RBEs that enjoy incentives prior to the enactment of CREATE will be extended from 10 to 12 years, if there is no tax refund or credit granted. RBEs may also enjoy duty incentives for the remainder of the 10-year transitory period.
Under the measure, the power to grant and approve tax incentives would be returned to investment promotion agencies (IPAs), which is currently handled by the Fiscal Incentives and Review Board (FIRB).
“The President may, in the interest of national economic development, or upon the recommendation of the FIRB, modify the mix, period or manner of availment of incentives provided under this Code or craft the appropriate financial support package for a highly desirable project or a specific industrial activity,” according to a copy of the committee report.
The bill essentially limits the FIRB’s power to grant and approve fiscal incentives, upon the recommendation of President Ferdinand R. Marcos, Jr.
The measure also allows the information technology and business process outsourcing sector to “conduct business under alternative work arrangements.”
Under the CREATE MORE bill, the Bangsamoro Board of Investments and the Bangsamoro Economic Zone Authority will also be included under the list of IPAs.
If enacted into law, foreign nationals with executive positions and nonresident aliens in supervisory, technical and advisory positions will receive a working visa, while a special skills visa may be granted to foreign nationals with “highly specialized skills.”
Domestic market enterprises in creative industries listed under RA 11904 or the Philippine Creative Industries Development Act will also be entitled to the ITH period.
Eleanor L. Roque, tax principal of P&A Grant Thornton, said lawmakers must ensure that the bill’s tax provisions take into account the Philippines’ membership in the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS).
The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) seeks to address tax avoidance schemes among its 140 member countries.
“An improvement of the set of incentives granted to qualified investors is expected to improve our attractiveness as an investment destination. The 20% income tax rate with the enhanced deduction is a generous incentive to investors. Depending on their cost structures, it can lead to a really low tax payable,” Ms. Roque said in a Viber chat.
“However, since the Philippines has joined the international efforts against tax avoidance by joining the OECD/G20 Inclusive Framework on BEPS and Pillar 2 initiatives, the bill should also consider how the incentives will impact on companies covered by BEPS-Pillar 2,” she said.
“We must ensure that taxes for transactions and activities in the Philippines are paid in the Philippines and not in other jurisdictions who have adopted local rules to implement Pillar 2.”
Jose Enrique A. Africa, executive director of think tank IBON Foundation, said lowering taxes under the CREATE MORE would reduce government revenues.
“One of the big selling points of the CREATE law, [is to] make our corporate income taxes quote unquote competitive with others in the region,” Mr. Africa said at a news briefing. “That attitude is eroding our fiscal space.”
“The resources for development won’t come if the government is choosing to lower income taxes, [on] those [who] should contribute more to the revenues of the government,” he added.
By Luisa Maria Jacinta C. Jocson, Reporter
THE PHILIPPINES is projected to be the fastest-growing economy in the region this year amid resilient domestic demand, the ASEAN+3 Macroeconomic Research Office (AMRO) said on Thursday.
“The Philippine economy has held up very well despite high inflation and interest rates, and it’s much less dependent on exports than other countries in the region,” AMRO Chief Economist Hoe Ee Khor said in a virtual briefing on Thursday.
In its latest Regional Economic Outlook quarterly update, AMRO kept its Philippine gross domestic product (GDP) growth projection at 6.3% for this year, unchanged from its annual consultation report in November.
The Philippines’ growth is the fastest among Association of Southeast Asian Nations (ASEAN) members, ahead of Cambodia (6.2%), Vietnam (6%), Indonesia (5.2%), Malaysia (5%), Laos (4.7%), Thailand (3.3%), Myanmar (3.2%), Singapore (2.6%), and Brunei Darussalam (2.4%).
In the ASEAN+3 region, the Philippines is also ahead of China (5.3%), Hong Kong (3.5%), South Korea (2.3%), and Japan (1.1%).
If the 6.3% GDP growth is realized, however, this would be below the Philippine government’s 6.5-7.5% target for 2024.
However, Mr. Khor cited several risks that could dampen growth this year, such as a spike in global commodity prices; weaker economic growth in China, financial spillovers from tighter US monetary policy, a potential recession in the US and Europe, and US-China geopolitical tensions.
He also flagged the possible impact of the El Niño, which may stoke rice prices.
The latest data from the state weather bureau showed that a strong El Niño is expected to continue through January and is seen to persist until May.
AMRO said the Philippines likely grew by 5.6% in 2023, the same projection it gave in November. This also makes it the economy with the fastest growth in the region but falls short of the government’s 6-7% target.
“As it turns out, I think we were too optimistic on the growth momentum. Momentum is weaker than expected,” Mr. Khor said.
Latest data from the Philippine Statistics Authority (PSA) showed that the economy grew by 5.5% in the nine-month period. Fourth-quarter and full-year 2023 GDP data will be released on Jan. 31.
For ASEAN+3, AMRO expects stronger growth this year at 4.5%, slightly higher than its projection of 4.4% for 2023.
“The region did relatively well last year, better than what we expected, based on better exports and moderating inflation. We expect growth to pick up this year on strong exports and resilient domestic demand,” Mr. Khor added.
AMRO also noted that the recovery of China’s property sector and the rebound in tourism will help support growth in the region this year.
TIGHTER FOR LONGER
Meanwhile, AMRO kept its inflation forecast for the Philippines at 3.6% this year, slightly slower than the Bangko Sentral ng Pilipinas’ (BSP) forecast of 3.7%
“In 2024, headline inflation is likely to remain on a moderating trend in line with the continued normalization of global commodity prices,” AMRO said.
Headline inflation averaged 6% in 2023, the second straight year that inflation breached the BSP’s 2-4% target band.
AMRO also said that the BSP must continue to keep rates tighter for longer until inflation remains within target.
“We agree with the BSP view that the rates should remain tight until inflation is down to within target,” Mr. Khor said.
The Philippine central bank has raised rates by a cumulative 450 bps from May 2022 to October 2023, bringing the benchmark rate to a 16-year high of 6.5%.
BSP Governor Eli M. Remolona, Jr. also earlier signaled that policy easing will only be considered if inflation settles firmly within the 2-4% target.
“As long as the economy is doing strongly, we don’t see the urgency for the BSP to cut rates,” Mr. Khor added.
By Sheldeen Joy Talavera, Reporter
HIGHER ELECTRICITY BILLS loom as the Energy Regulatory Commission (ERC) lifted the suspension of the collection of feed-in tariff allowance (FIT-All) starting February.
In a statement, the ERC said that it has decided to lift the 13-month collection suspension due to the projected deficit in the FIT-All fund.
“As the Commission reevaluated the balance of the FIT-All fund as of Jan. 5, 2024, inclusive of the Cost Recovery Revenue (CRR) collections in November 2023, the ERC found that the projected FIT-All fund would be in deficit in the February 2024 customer monthly billing. In view of this, the Commission resolved to approve and adopt the lifting of the suspension and to resume the collection of the FIT-All charges,” it said.
The FIT-All is a P0.0364 per kilowatt-hour (kWh) charge reflected in the bills of electricity consumers that is collected from on-grid electricity customers to support the development and promotion of renewable energy.
Payments are remitted to the FIT-All fund established and administered by the National Transmission Corp., which keeps the funds with a government financial institution.
The fund goes towards paying renewable energy (RE) developers who have obtained fixed rates for electricity generated by their projects.
According to ERC Chairperson Monalisa C. Dimalanta, the FIT-All fund needs to pay around P2.2 billion a month to RE suppliers.
“The fund has about P2.98 billion remaining as of Jan. 5, 2024, so it needs to start building up amounts again to make sure the RE developers that supply in the next months can be paid for their supply,” she said in a Viber message.
The ERC had first suspended FIT-All collection for three months covering the billing period of December 2022 to February 2023 to ease the financial burden on consumers amid the rising costs of electricity in 2022.
The suspension of the FIT-All collection was extended twice last year.
Sought for comment, Bienvenido S. Oplas, Jr., president of Minimal Government Thinkers, said that the resumption of FIT-All collection may lead to a slight increase in the cost of electricity, which may result in higher monthly power bills.
“This will raise the cost of electricity by 3.64 centavos/kWh, round off to four centavos/kWh starting February billing,” he said in a Viber message.
Meanwhile, Terry L. Ridon, a public investment analyst and convenor of think tank InfraWatch PH, said that the ERC should consider reviewing the tariff with the decreasing costs of renewables.
“The ERC should undertake a continuing review of the tariff to reflect the performance of RE providers and the current state of RE technology today, with its decreasing costs,” he said in a Viber message.
Manila Electric Co. has temporarily halted the collection of FIT-All to its consumers in the previous monthly electricity bills as directed by the ERC.
Households consuming 200 kWh may pay about P7.28 more, Mr. Oplas said, including value-added tax.
By Keisha B. Ta-asan, Reporter
PHILIPPINE BANKS may see an improvement in loan growth this year, as monetary policy easing in the second half may encourage borrowers to take out more credit, BMI Country Risk & Industry Research said.
BMI, a unit of Fitch Solutions, said they expect stronger loan growth in 2024 as better macroeconomic conditions and lower interest rates in the second half may boost credit demand.
“We expect loan growth to accelerate from an estimated 5.7% year on year in 2023 to 10% by the end of 2024,” BMI said in a report dated Jan. 17.
“We also see limited risks to financial stability as the Philippine banking system is underpinned by a strong balance sheet and robust capital buffers.”
Based on the latest data from the central bank, outstanding loans issued by big banks increased by 7% year on year to P11.4 trillion in November 2023 from P10.65 trillion in the same period in 2022.
At 7%, the loan growth rate was a tad slower than the 7.1% expansion recorded in October 2023.
According to BMI, easing inflation will prompt the Bangko Sentral ng Pilipinas (BSP) to start cutting borrowing costs by the second half of the year.
To tame inflation, the BSP tightened policy rates by 450 basis points from May 2022 to October 2023. This brought the benchmark interest rate to a 16-year high of 6.5%.
The overall year-on-year increase in prices of widely used goods and services eased to 3.9% in December from 4.1% in November and 8.1% a year ago, settling within the central bank’s 2-4% target range for the first time in nearly two years.
However, full-year inflation stood at 6% in 2023, the highest in 14 years and above 5.8% in 2022. This marked the second straight year that average inflation breached the BSP’s 2-4% target band.
“This set the stage for policy loosening in the second half, which will encourage lending as borrowing costs decline,” BMI said. “What surprised us was the resilience of household loans in 2023.
Despite the aggressive pace of domestic tightening, loans for household consumption still grew.”
BSP data showed that outstanding loans for retail borrowers grew by 23.6% to P1.25 trillion in November from P1.01 trillion a year ago. Loan growth grew from the 22.8% expansion in October.
“Considering the possibility for cuts to materialize in the latter half of the year, we think these figures will remain robust in 2024 as well,” BMI said.
Better domestic conditions may also boost credit demand this year as the Philippine economy has proven to be resilient so far, the research firm noted.
Philippine gross domestic product (GDP) expanded by 5.9% in the third quarter of 2023, faster than the 4.3% growth in the previous quarter due to increased private and public spending. This brought the year-to-date GDP growth to 5.5%.
“We believe 2024 will also be a stellar year and expect real GDP growth to inch up from 5.7% in 2023 to 6.2% in 2024. This will be driven by private consumption which we expect to hold up pretty well on the back of easing inflationary pressures,” BMI said.
However, lackluster external demand in loans from the manufacturing sector, which makes up around 11% of banks’ total loan portfolio, may continue to drag lending growth this year, it said.
“Loans to the industry contracted by 0.1% year on year in November 2023, as a result of lackluster external demand. And a turnaround seems unlikely. Our global team is forecasting the global economy to expand by just 2.1% in 2024, a considerable slowdown from the 2.6% we estimate in 2023,” it said.
Loans for the manufacturing sector dipped by 0.1% to P1.23 trillion in November 2023 from a year ago. Credit growth, however, improved from the 3.6% contraction recorded in October.
Bank asset quality may also see some challenges this year, but its drop is not expected to be as severe as the decline during the coronavirus pandemic, BMI said.
“Tight monetary policy will put pressure on borrowers’ ability to repay loans,” it said. “We expect loan delinquencies to increase over the next few quarters against the backdrop of high interest rates.
Data from the BSP showed banks’ nonperforming loan ratio stood at 3.41% in November, easing from the five-month high of 3.44% in October but still above 3.35% a year prior.
The November bad loan ratio marked the lowest in two months or since 3.4% logged in September.
However, bad loans inched up by 1.1% to P454.281 billion in November from P449.454 billion in the prior month. Year on year, it rose by 11.3% from P408.097 billion in November 2022.
“Nevertheless, risks to financial stability are minimal. The Philippine banking system is supported by robust capital buffers, with the capital adequacy ratio standing at a healthy 16% in the third quarter of 2023, well above the 10% regulatory minimum,” BMI said.
Better bank profitability this year would also build up buffers, it noted.
“Elevated interest rates are expected to enhance net interest margins, as historical data show a positive relationship between the two. The tightening cycle has already led to significant improvements in profitability ratios,” BMI added.
The banking industry’s return on assets and return on equity stood at 1.6% and 12.8%, respectively, as of August 2023, based on the latest BSP data.
The cumulative net income of banks also rose by 10.4% to P270.352 billion in the January-to-September period from P244.876 billion last year.
As of end-September, banks’ net interest income jumped by 20.4% to P663.240 billion from P550.666 billion last year.
