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Fast-fashion retailer Forever 21 files for bankruptcy

Fast-fashion retailer Forever 21’s U.S. operating company on Sunday filed for Chapter 11 bankruptcy for the second time in six years, hamstrung by dwindling mall traffic and mounting competition from online retailers.

The company said it will conduct liquidation sales at its stores while simultaneously conducting a court supervised sale and marketing process for some or all of its assets.

In the event of a successful sale, Forever 21 said it may pivot away from a full wind down of operations to facilitate a going-concern transaction.

The company said its stores and website in the United States will remain open and continue serving customers, and that its international stores remain unaffected.

Forever 21 listed its estimated assets in the range of $100 million to $500 million, according to a filing with bankruptcy court in the District of Delaware, with liabilities being in the range of $1 billion to $5 billion. The filing also showed creditors in the range of 10,001 to 25,000. – Reuters

South Korea calls to avoid impact on US cooperation after ‘sensitive’ country designation

STOCK PHOTO | Image by HeungSoon from Pixabay

SEOUL – South Korea’s acting President Choi Sang-mok called on Monday to avoid any negative impact on science, technology and energy cooperation with the United States, after the U.S. Department of Energy (DOE) designated South Korea as a ‘sensitive’ country.

The U.S. department has not explained why South Korea was added to the list, which can cause curbs on cooperation, though a DOE spokesperson said Seoul faced no new limits on bilateral cooperation in science and technology from the designation.

In a statement relayed by the finance ministry after a ministerial meeting, Choi called on South Korean agencies to actively foster understanding with Washington, and for the industry minister to meet with the U.S. Secretary of Energy this week.

Despite the DOE assurances over bilateral cooperation not being impacted, politicians in Seoul have traded blame over the sensitive country designation.

The main opposition Democratic Party leader Lee Jae-myung on Monday criticised the current South Korean government, calling the U.S. move a “perfect diplomatic failure” which is feared could limit cooperation between the countries in the high-tech field.

Ruling party lawmaker Kwon Young-se, however, criticized the Democratic Party which controls parliament, for pushing anti-U.S. sentiment and excessively impeaching government officials including President Yoon Suk Yeol, a move that Kwon said was the biggest cause of the sensitive country designation.

According to the DOE’s website, countries may appear on the sensitive country list for reasons such as national security, nuclear nonproliferation, regional instability, threats to national economic security, or terrorism support. – Reuters

China’s Jan-Feb industrial output slows, retail sales growth picks up speed

RAWPIXEL.COM

BEIJING – China’s industrial output slowed in January-February, while retail sales growth accelerated slightly in a mixed start for the economy this year as policymakers navigate mounting pressure from U.S. trade tariffs.

The data followed weaker-than-expected exports and inflation indicators earlier this month, as a burst of U.S. trade tariffs against key trading partners including China threatens to upend the global trade order and highlights the need for more policy support to foster a sustainable economic recovery.

China’s top leaders have maintained an economic growth target of “around 5%” for 2025, but analysts say that may be a tall order given pressure on exports, tepid household demand and a protracted property crisis.

“The data release suggests a decent momentum in the opening months, even if the economy remains in deflation,” said Tianchen Xu, senior economist at the Economist Intelligence Unit.

“Retail sales growth was decent, too, reflecting the vital role of subsidies in supporting home appliance and mobile phone sales.”

U.S. President Donald Trump has piled an additional 20% of tariffs on all Chinese goods and is threatening more action. Exports were one of the lone bright spots for China’s economy last year.

China’s industrial output grew 5.9% year-on-year in the first two months, slowing from the 6.2% expansion in December, according to the data from the National Bureau of Statistics (NBS). However, it was ahead of expectations for a 5.3% rise in a Reuters poll of 26 analysts.

Retail sales, a gauge of consumption, rose 4.0% in the January-February period, better than a 3.7% rise in December and marking the quickest rate since November 2024. Analysts had expected retail sales to grow 4.0%.

Household consumption in the first two months were buoyed by holiday spending during the 8-day Lunar New Year holidays, when China’s box office raked in record takings with animated hit “Nezha 2”.

China publishes data for the two months in a combined release to smooth out the impact of the Lunar New Year holidays, which fall in either of the two months.

In the annual parliament meeting earlier this month, China’s leaders pledged stronger fiscal and monetary support for the economy.

Policymakers have put expanding domestic demand as the top priority this year. Among other measures, they have lined up 300 billion yuan ($41.5 billion) for a recently-expanded consumer goods trade-in scheme for electric vehicles, appliances and other goods.

On Sunday, China’s State Council unveiled a “special action plan” to boost domestic consumption, featuring measures including increasing residents’ income and establishing a childcare subsidy scheme.

Officials from the country’s top economic ministries will brief media on consumption-boosting measures later on Monday.

The urban survey-based jobless rate in February climbed to 5.4%, the highest in two years.

Fixed asset investment, which includes property and infrastructure investment, expanded 4.1% in the Jan-Feb period from the same period a year earlier, versus expectations for a 3.6% rise. It grew 3.2% in 2024. – Reuters

Russia demands ‘ironclad’ guarantees in peace treaty with Ukraine

Army soldier figurines are displayed in front of the Ukrainian and Russian flag colors background in this illustration taken, Feb. 13, 2022. — REUTERS/DADO RUVIC/ILLUSTRATION

Russia will seek “ironclad” guarantees in any peace deal on Ukraine that NATO nations will exclude Kyiv from membership and that Ukraine will remain neutral, a Russian deputy foreign minister said in remarks published on Monday.

U.S. President Donald Trumpis trying to win President Vladimir Putin’s support for a 30-day ceasefire proposal that Ukraine accepted last week and which Putin says needs to meet crucial conditions to be acceptable.

Mr. Trump is expected to speak with Mr. Putin this week on ways to end the three-year war in Ukraine, U.S. envoy Steve Witkoff told CNN on Sunday after returning from what he described as a “positive” meeting with Mr. Putin in Moscow.

In a broad-ranging interview with the Russian media outlet Izvestia that made no reference to the ceasefire proposal, Deputy Foreign Minister Alexander Grushko said that any long-lasting peace treaty on Ukraine must meet Moscow’s demands.

“We will demand that ironclad security guarantees become part of this agreement,” Izvestia cited Mr. Grushko as saying.

“Part of these guarantees should be the neutral status of Ukraine, the refusal of NATO countries to accept it into the alliance.”

Moscow is categorically against the deployment of NATO observers to Ukraine, Mr. Grushko also reiterated the Kremlin’s position.

Britain and France both have said that they were willing to send a peacekeeping force to monitor any ceasefire in Ukraine. Australian Prime Minister Anthony Albanese said his country was also open to requests.

“It does not matter under what label NATO contingents were to be deployed on Ukrainian territory: be it the European Union, NATO, or in a national capacity,” Mr. Grushko said.

“If they appear there, it means that they are deployed in the conflict zone with all the consequences for these contingents as parties to the conflict.”

Mr. Grushko said that a deployment of unarmed post-conflict observers can be discussed only once a peace agreement is worked out.

“We can talk about unarmed observers, a civilian mission that would monitor the implementation of individual aspects of this agreement, or guarantee mechanisms,” Mr. Grushko said. “In the meantime, it’s just hot air.”

French President Emmanuel Macron said in remarks published on Sunday that the stationing of peacekeeping troops in Ukraine is a question for Kyiv to decide and not Moscow.

Mr. Grushko said that European allies of Kyiv should understand that only the exclusion of Ukraine’s membership in NATO and the elimination of the possibility of deploying foreign military contingents on its territory will work for the region.

“Then the security of Ukraine and the entire region in a broader sense will be ensured, since one of the root causes of the conflict will be eliminated,” Mr. Grushko said. – Reuters

Japan PM Ishiba’s cabinet approval hits record low, Asahi reports

JAPANESE PRIME MINISTER SHIGERU ISHIBA — REUTERS FILE PHOTO

TOKYO – Public support for Japanese Prime Minister Shigeru Ishiba’s government dropped to a record low after he handed out gift vouchers to some ruling party lawmakers, a poll conducted by the Asahi newspaper showed on Monday.

The approval rating slid 14 percentage points to 26% from the previous survey done in February, the worst since Mr. Ishiba took the office last October, according to the March 15-16 poll by the Asahi.

Other polls done by the Yomiuri newspaper and the Mainichi newspaper over the weekend also showed public approval for the Mr. Ishiba’s cabinet fell to a record low.

Mr. Ishiba found himself in a hot water as he handed out gift vouchers worth 100,000 yen ($673) each to 15 first-term lower house lawmakers of his ruling Liberal Democratic Party (LDP) earlier this month, drawing criticism as it could violate a political law.

Speaking in parliament, Mr. Ishiba said he used “pocket money” to hand out gift certificates to the lawmakers before having dinner with them on March 3 as a “show of appreciation” for their hard work getting elected.

The premier said the gift handout didn’t violate a political fund law but apologized for his action caused “distrust and anger among many people.”

All of the 15 lawmakers returned the gift vouchers to the Mr. Ishiba’s office, according to Japanese media.

The slide in opinion polls could be a blow to Mr. Ishiba’s leadership ahead of an upper house election slated for July, and comes at a time when Japan’s economy faces headwinds from the escalating trade war waged by U.S. President Donald Trump. – Reuters

US death toll from extreme weather over the weekend rises to 36

STOCK PHOTO | pixabay.com

Portions of Pennsylvania, New York and Mid-Atlantic and Southeast states were still under a National Weather Service watch for damaging wind and tornadoes, as the death toll from weekend storms rose to 36 people across six states.

In a White House statement, President Donald Trump said he was monitoring the tornadoes and storms, adding “36 innocent lives have been lost, and many more devastated.”

Mr. Trump announced the National Guard had been deployed to Arkansas and pledged help to state and local officials.

The storms that hit the South and the Midwest headed east on Sunday. More than 340,000 consumers had no power in the affected areas as of late afternoon on Sunday, according to the website PowerOutage.

Missouri reported the largest number of deaths, 12 fatalities spanning five counties, the state’s highway patrol posted on X. Missouri Governor Mike Kehoe said there was still one person missing in the state, which saw widespread destruction across 27 counties.

Robbie Myers, the director of emergency management in Missouri’s Butler County, told reporters that more than 500 homes, a church and a grocery store in the county were destroyed. A mobile home park had been “totally destroyed,” he said.

“Everything around it here is really bad,” Missouri resident Rick Brittingham told Reuters from Butler County. “The trailer park up the street had fatalities. So, I mean, we don’t have nothing compared to anything like that. I still have a home. They don’t.”

Mississippi Governor Tate Reeves posted on X that six deaths had been reported in the state – one in Covington County, two in Jefferson Davis County and three in Walthall County.

According to preliminary assessments, 29 people were injured statewide and 21 counties sustained storm damage, Reeves said.

In Arkansas, three deaths occurred, the state’s Department of Emergency Management said, adding that there were 32 injuries.

Eight deaths were confirmed in a crash involving more than 50 cars in Sherman County in Kansas, caused by a severe dust storm, the Kansas Highway Patrol said in a statement. Many injured travelers were taken to local hospitals.

At least two people died in Alabama due to the severe weather, Governor Kay Ivey said in a post on X. “We have reports of damage in 52 of our 67 counties,” the governor said.

Crashes caused by dust storms near Amarillo, Texas, resulted in three deaths, according to the state’s Department of Public Safety.

Thirty-nine tornadoes were reported from Friday to midday on Sunday, but the number was not yet confirmed, according to the National Weather Service’s Weather Prediction Center. – Reuters

Cuba reconnects electrical grid, restores power to much of Havana

UNSPLASH

HAVANA – Cuba reconnected its national electrical grid and restored power to the majority of the capital Havana by late on Sunday, energy officials said, nearly two days after an island-wide outage knocked out power to 10 million people.

Havana´s electric company said late on Sunday that approximately two-thirds of its clients in the city had seen power restored and said that number would increase overnight.

Cheers could be heard in neighborhoods across the city as the lights flickered on after two days without electricity.

Cuba’s grid collapsed on Friday evening after a transmission line at a substation in Havana shorted, beginning a chain reaction that completely shut down power generation across the island.

Most of Havana – densely populated and a major tourism center – had gone without power since then, paralyzing commerce, shutting down most restaurants and blacking out street and stoplights across the city of two million people.

The grid operator said the country’s two largest oil-fired power plants, Felton and Antonio Guiteras, were back online and generating electricity by late Sunday, a major benchmark for restoring power across the island.

Electricity had also arrived in the country’s westernmost Pinar del Rio province, the last to see power restored, just before dark on Sunday, officials said.

Friday’s grid collapse marked the Caribbean island’s fourth nationwide blackout since October.

Cuba’s oil-fired power plants, already obsolete and struggling to keep the lights on, reached a full crisis last year as oil imports from Venezuela, Russia and Mexico dwindled.

Even before Friday´s grid collapse, many across the island had already been experiencing daily blackouts that reached 20 hours or more.

Though Cuba had made progress restoring electricity on Sunday, officials said they were generating just one-third of typical daily demand, leaving many residents still in the dark.

Schools in Pinar del Río, Artemisa and Mayabeque provinces in western Cuba would remain closed until Tuesday to assure adequate conditions for students, the education ministry said.

Cuba blames the country’s mounting energy crisis on a Cold War-era U.S. trade embargo and fresh restrictions from U.S. President Donald Trump, who recently tightened sanctions on the communist-run government and vowed to restore a “tough” policy toward the long-time U.S. foe.

The government is pushing to develop large solar farms with help from China in a bid to reduce dependence on antiquated oil-fired generation. – Reuters

External debt up 10% as of end-2024

REUTERS

By Luisa Maria Jacinta C. Jocson, Reporter

THE PHILIPPINES’ outstanding external debt rose by nearly 10% year on year as of end-2024, the Bangko Sentral ng Pilipinas (BSP) said.

Preliminary data showed the country’s external debt increased by 9.8% to $137.63 billion as of end-December 2024 from $125.39 billion in the same period in 2023.

However, the debt stock edged lower by 1.4% quarter on quarter from the record-high $139.64 billion as of end-September.

External debt refers to all types of borrowings by residents from nonresidents.

“The increase was driven primarily by net availments of $9.61 billion to address liquidity requirements of the public and private sector,” the central bank said.

BSP data showed public sector net availments amounted to $5.59 billion last year, while the private sector’s net availments reached $4.03 billion.

“The net acquisition of Philippine debt securities by nonresidents of $3.37 billion resulting from investor preference towards emerging market debt securities for most of 2024 as well as prior years’ adjustments of $634.76 million further contributed to the increase in debt stock.”

“Meanwhile, the negative FX (foreign exchange) revaluation of borrowings denominated in other currencies of $1.39 billion tempered the increase in debt,” it added.

This brought the external debt as a percentage of gross domestic product (GDP) to 29.8% from 30.6% in the third quarter. However, this was higher than the 28.7% posted in 2023.

The central bank said the external debt-to-GDP ratio remains at a “prudent” level.

“This improvement in the ratio was driven by the decline in external debt levels in conjunction with the Philippine economy’s 5.2% real GDP growth for the fourth quarter and 5.6% growth for the full year,” it added.

Meanwhile, the BSP attributed the 1.4% quarter-on-quarter decline in the debt stock due to the negative FX revaluation of borrowings denominated in other currencies.

It also cited the “net acquisition by residents of Philippine debt securities from nonresidents aggregating $835.33 million; and recorded net repayments amounting to $133.51 million.”

“During the reference quarter, the appreciation of the US dollar decreased the value of the country’s debt stock by $1.29 billion,” it said.

At the end of 2024, the peso closed at P57.845 versus the dollar, declining by P2.475 or 4.28% from its end-2023 finish of P55.37 against the greenback.

“The US dollar strengthened due to improved US economic performance, market perception towards Federal Reserve’s future policy path as well as expectations on the shift in US trade and investment policies under the then incoming administration.”

“The same underlying factors may have also triggered nonresidents to offload Philippine debt securities, further lowering outstanding external debt by $835.33 million,” it added.

Broken down, the private sector’s external debt slipped by 0.9% to $52.29 billion at the end of the fourth quarter from $52.76 billion at the end of the third quarter.

“The modest decline in private sector borrowings were driven by the net acquisition by residents of debt securities issued offshore aggregating $870.03 million,” the BSP said.

It also cited the negative FX revaluation of borrowings denominated in other currencies of $154.11 million and net repayments of $70 million, which offset prior periods’ adjustments of $313.98 million.

Public sector debt dropped by 1.8% to $85.34 billion as of end-fourth quarter from $86.88 billion as of end-third quarter.

This was due to the $1.44-billion negative FX revaluation of borrowings denominated in other currencies.

“Prior periods’ adjustments of $71.23 million as well as net repayments of $63.51 million further reduced the outstanding levels.”

The bulk or 92.9% of public sector obligations were from the National Government, while the rest came from borrowings of government-owned and -controlled corporations, government financial institutions, and the BSP.

The Philippines’ top creditor countries were Japan ($15.18 billion), Singapore ($5.06 billion) and the Netherlands ($4.55 billion).

The borrowing mix was composed mainly of US dollar-denominated debt (74%) followed by debt in Philippine peso (9.2%) and debt in Japanese yen (7.5%).

The central bank said other key external debt indicators were also still at “sustainable levels.”

The country’s gross international reserves (GIR) stood at $106.26 billion as of end-2024. This represented 3.81 times cover for short-term (ST) debt based on the remaining maturity concept.

“The debt service ratio (DSR) rose to 11.5% from 10.3% for the same period last year due to the higher recorded debt service payments.”

The DSR and the GIR cover for short-term debt is a gauge of the adequacy of foreign exchange earnings to meet maturing debt obligations.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the persistent NG budget deficit contributed to the rise in external debt.

“The budget deficit fundamentally led to more local and foreign borrowings and outstanding debt, despite increasing the share of local borrowings in the total borrowing mix to better manage foreign exchange risks entailed in external debt,” he said.

The NG’s budget deficit narrowed by 0.38% to P1.506 trillion in 2024 from P1.512 trillion in 2023. However, it exceeded the P1.48-trillion deficit ceiling set by the Development Budget Coordination Committee.

Moving forward, the share of external debt to the overall borrowing mix is expected to be reduced, Mr. Ricafort said.

“Some of the foreign borrowings in recent years were meant to diversify borrowing sources for the NG and to provide liquidity of global bonds in the international market,” he said.

In January, the NG raised $3.3 billion from the sale of 10-year and 25-year fixed-rate global bonds and seven-year euro sustainability bonds. It was NG’s first global bond offering for the year.

The government plans to borrow P2.55 trillion this year, of which P507.41 billion will come from external sources.

NG debt service bill surges to P2.02-T in 2024

A Philippines peso note is seen in this picture illustration on June 2, 2017. — REUTERS

THE NATIONAL GOVERNMENT (NG) debt service payments surged to P2.02 trillion in 2024 as both interest and amortization payments increased, the Bureau of the Treasury (BTr) said.

Data from the Treasury showed that the NG’s debt repayments rose by 26% to P2.02 trillion last year from the P1.604 trillion recorded in 2023.

However, it fell short of the P2.027-trillion program for debt payments by 0.3% last year.

Debt service refers to payments made by the NG on its domestic and foreign debt.

The bulk or 62.22% of total debt payments came from amortization payments.

Principal payments jumped by 28.92% to P1.26 trillion in 2024 from P975.28 billion in the previous year. This was 0.47% lower than the BTr’s P1.263-trillion program for the year.

Amortization on domestic debt went up by 19.18% annually to P1.018 trillion, while principal payments on foreign debt surged by 97.58% to P239.293 billion last year.

On the other hand, interest payments went up by 21.48% to P763.31 billion in 2024 from P628.33 billion in 2023. It was 0.02% below the P763.437-billion program for the full year.

Interest paid on domestic debt went up by 23.89% to P539.83 billion in 2024 from P435.74 billion in 2023.

Broken down, P340.5 billion was for interest payments for fixed-rate Treasury bonds, P153.92 billion for retail Treasury bonds, and P32.69 billion for Treasury bills.

For external debt, interest payments went up by 16.04% to P223.48 billion from P192.59 billion in the previous year.

DECEMBER DEBT SERVICE
In December alone, debt repayments slipped by 3.73% to P66.3 billion from P68.87 billion in the same month in 2023.

Month on month, interest payments fell by 29.25% from P93.7 billion in November.

Amortization payments rose by 1.61% to P8.32 billion in December last year from P8.19 billion in December 2023.  It was entirely composed of principal payments on external debt, since there were no payments made on domestic debt in December.

Meanwhile, interest paid on domestic debt fell by 4.45% to P57.98 billion in December from P60.68 billion in the same month in 2023.

Broken down, interest payments on retail Treasury bonds at P19.18 billion, fixed-rate Treasury bonds stood at P14.51 billion, and Treasury bills at P2.27 billion.

Interest payments on external debt jumped by 19.93% year on year to P20.54 billion in December from P17.13 billion in 2023.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the higher debt servicing reflects the rising repayments on the significant amount of debt incurred by the government during the coronavirus disease 2019 (COVID-19) pandemic.

As of end-2024, NG’s total outstanding debt reached P16.05 trillion, 9.8% higher than the end-2023 level.

“(The) still relatively higher interest rates and weaker peso exchange rate since the Russia-Ukraine war started in February 2022 also increased debt servicing, particularly interest payments. Also (the) higher peso equivalent for foreign/external debts amid weaker peso since then (from P51 levels in early 2022, or at least 12% weaker since then),” he said.

Mr. Ricafort said the expected rate cuts by the US Federal Reserve would “somewhat help reduce external debt servicing costs, going forward.”

“But would be offset by [Donald] Trump’s higher US import tariffs and other protectionist policies that could reduce Fed rate cuts,” Mr. Ricafort said.

Reinielle Matt M. Erece, economist at Oikonomia Advisory and Research, Inc., said he expects higher debt service bill this year mainly due to external debt repayments.

“However, in 2025, I expect foreign loan repayments to be the major driver rather than domestic borrowing repayments as the Philippine peso is expected to depreciate relative to the dollar, causing higher repayments needed to meet the country’s obligations,” he said. — A.R.A. Inosante

PDIC eyes new assessment system for banks to deter risky lending behavior

THE PHILIPPINE Deposit Insurance Corp. (PDIC) wants to introduce a risk-based assessment system to prevent banks from taking on too much leverage following the increase in the maximum deposit insurance coverage (MDIC).

“Presently, we only have one premium assessment, the flat rate assessment system, that applies to all banks, which is one-fifth of 1% of the total deposit liabilities of each bank. With the introduction of the risk-based assessment system, we’ll have to take into account the levels of risk that the banks are undertaking in determining what should be the appropriate assessment rate that will be levied on the banks,” PDIC President and Chief Executive Officer Roberto B. Tan said at a briefing on Friday.

“Basically, the idea is to discourage the banks from engaging into excessive risk-taking practices.”

The PDIC is conducting a study on the feasibility of a risk-based assessment system along with the Bangko Sentral ng Pilipinas and the World Bank, which will be presented to Congress, he said.

The study began in 2022 and is due in 2027, but he said it could be finished within this year.

“The intention is to incentivize prudent practices. So, the riskier banks based on the assessment and based on certain criteria, that may translate to higher fees for the banks if ever they engage in those. It provides discipline for banks to improve their standing, their operation, their management, their capital, and their governance,” Mr. Tan said.

The maximum deposit insurance coverage has been increased to P1 million per depositor per bank effective March 15 from P500,000 previously.

Under the PDIC Charter, the regular assessment rate for banks is at one-fifth of 1% per annum of their total deposit liabilities. Assessments should amount to at least P5,000.

The assessments are collected from member-banks semi-annually and form part of the Deposit Insurance Fund.

The assessment rate is reviewed periodically for potential adjustments, Mr. Tan said.

“But there is no adjustment that we are going to make [right now], even with the increase of MDIC, because of the adequacy of the Deposit Insurance Fund,” he said.

The Deposit Insurance Fund stood at P236.95 billion as of end-2024. Mr. Tan said this is expected to grow by 5% this year, driven mainly by banks’ assessments and the PDIC’s investments in government securities.

The agency will also auction off 350 properties this year to generate revenues, the official said.

Analysts said that the MDIC increase, while positive for depositors, could result in riskier lending behavior among banks.

“The increase means that a larger portion of depositors’ funds is now insured, reducing the risk of financial losses in the event of bank failures. This move reassures depositors, potentially encouraging higher savings and financial inclusion. It could also reduce the risk of bank runs, as depositors feel more secure about the safety of their funds,” Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said in a Viber message.

“While increasing deposit insurance enhances financial security, it also raises PDIC’s liability in case of bank failures. This means that PDIC must ensure its fund reserves remain adequate to cover potential claims. There’s also the moral hazard risk wherein banks and depositors may take riskier financial positions under the assumption that their funds are insured,” Mr. Rivera said.

IBON Foundation Executive Director Jose Enrique “Sonny” A. Africa said the increased deposit insurance could increase confidence in the Philippine financial system and encourage Filipinos to save.

“There’s a possibility that this might incentivize banks to engage in riskier behavior because of more deposits being fully insured, but this moral hazard is unlikely because the country’s financial system remains quite underdeveloped and banks quite conservative,” Mr. Africa said.

“Even with the increase, the country still has among the lowest coverage in Southeast Asia. This is less of a problem than it might seem though, because less than seven million households have the capacity to save and over 20 million have nothing to save — and the latest increase means some 99% of this seven million are already covered.”

Still, Bankers Association of the Philippines President and Bank of the Philippine Islands Chief Executive Officer Jose Teodoro K. Limcaoco said the P1-million coverage is “appropriate for now” and will benefit retail investors.

“Only a small percentage of accounts have balances higher than this (P1 million),” Mr. Limcaoco said.

The PDIC expects to fully insure 98.6% of deposit accounts this year or 147.012 million accounts, Mr. Tan said on Friday. This would translate to deposits worth P5.296 trillion or 24.1% of the total.

This is higher than the 139.98 million accounts covered last year or 97.6% of the total, which was equivalent to P3.73 trillion or 18.4% of total deposits. — A.M.C. Sy

PHL services trade slumps in 2024 — BSP

DCSTUDIO-FREEPIK

THE PHILIPPINES’ services trade slumped in 2024 as exports grew at a much slower pace than imports, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Preliminary central bank data showed the country’s trade in services fell by 19.8% to $14.58 billion in 2024 from $18.18 billion in 2023.

This as service exports rose by just 7.5% year on year to $51.98 billion from $48.33 billion compared with imports, which jumped by 24% to $37.4 billion from $30.15 billion.

Broken down, other business services accounted for the bulk of overall services, posting a $15.57-billion balance.

These include services related to research and development; professional and management consulting; and technical, trade-related and other business services.

This was followed by telecommunications, computer and information services ($5.93 billion), and manufacturing services on physical inputs owned by others ($4.91 billion)

On the other hand, shortfalls were recorded in transport services (-$3.87 billion), travel (-$3.04 billion), financial services (-$2 billion), and insurance and pension (-$1.91 billion). 

The services industry is a key growth driver of the Philippine economy.

“This may reflect the higher base in services exports, especially BPO (business process outsourcing) revenues, given the sharp increase over the past 2 years or so, so mathematically growth already nearing GDP (gross domestic product) growth as a result,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Latest data from the Philippine Statistics Authority (PSA) showed that the services sector grew by 6.7% in the fourth quarter, slowing from 7.4% in the same period in 2023. It accounted for 62% of total GDP.

The IT and Business Process Association of the Philippines (IBPAP) said it booked $38 billion in revenue last year, 7% higher than $35.5 billion in 2023.

“The Philippines’ free trade agreements over the past 15 years and the more globalized services due to increased digitization including more online businesses as well as increased outsourcing may have increased services imports,” Mr. Ricafort said.

“This also may reflect increased competition for services, similar to merchandise, especially in terms of getting the lowest price possible in other countries.”

Service imports also saw an increase amid the “specialization of other developed countries where there is strict observance of intellectual property rights especially on technology solutions and other higher end of the supply chain for services.”

IBPAP also earlier said the Philippines should raise the value-added content of its offerings to minimize the impact of US protectionism.

“There is a need for the Philippines to develop higher end of the services supply chains such as having high-tech ecozones that would be similar to Silicon Valley to encourage local development of new startups that have the potential to become local industry giants,” Mr. Ricafort said. 

The government must also find ways to “attract and retain local talent rather than being lost to overseas competition where there are opportunities for high-end service professionals especially for the tech sector.”

He also cited the need to harness and integrate artificial intelligence (AI) and machine learning in the sector.

Under the Philippine Development Plan, the government expects to book $48.15 billion in services exports this year.

CURRENT ACCOUNT
Meanwhile, latest data from the BSP showed the current account deficit (CAD) widened by 41.4% to $17.5 billion last year from the $12.39 billion in 2023.

This breached the $10.4-billion forecast set by the BSP for the year.

It also marked the second-largest current account deficit on record, after the $18.3-billion gap recorded in 2022.

This brought the CAD as a share of gross domestic product (GDP) to 3.8% in 2024, larger than the 2.8% ratio posted a year prior.

“The higher current account deficit emanated from lower net receipts in trade in services and a higher deficit in trade in goods,” the BSP said.

“However, this was offset partly by higher net receipts in the primary and secondary income accounts.”

In the fourth quarter alone, the current account deficit skyrocketed to $4.6 billion from $1.04 billion in the same quarter in 2023.

“The sharp widening of the CAD can be explained by the surge of imports of capital goods and energy, partly due to elevated oil prices and infrastructure-driven demand, while export growth remained weak, particularly in electronics,” Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said.

“Sluggish global trade conditions and weak demand from key markets like China and the European Union also played a role,” he added.

Mr. Ricafort said the wider current account deficit reflects the trade deficit in 2024.

The country’s full-year trade balance grew by 3.1% year on year to a $54.21-billion deficit in 2024 from $52.59 billion a year ago, its widest trade gap in over two years.

“While BPO revenues and tourism receipts improved, the growth was not enough to offset the trade imbalance,” Mr. Rivera said.

“Transport and logistics costs remained elevated, impacting net services. Multinational firms repatriating profits and increased interest payments on external debt contributed to the larger deficit.”

For the coming months, the current account could be impacted by tariff policies by the United States, Mr. Ricafort said, which could “slow down global trade, investments, employment and overall global GDP growth.”

Markets are pricing in US President Donald J. Trump’s shifting tariff policies on its biggest trading partners, namely, China, Mexico and Canada. Proposals of a reciprocal tariff on all countries that tax US imports continue to loom over the markets.

“Exports could see moderate recovery, especially if global electronics demand picks up, but downside risks remain,” Mr. Rivera said.

“Remittances and BPO revenues are expected to continue supporting external accounts, but a strong peso could temper growth. The pace of import growth will be key if infrastructure spending remains aggressive and oil prices stay high, the deficit could remain elevated.”

This year, the central bank expects the current account deficit to reach $12.1 billion or 2.4% of economic output. — Luisa Maria Jacinta C. Jocson

Production value

Toyota Motor Philippines expects to sell around 20,000 Tamaraw units (which are assembled in Sta. Rosa, Laguna) in 2025. — PHOTO BY KAP MACEDA AGUILA

With car sales expected to top 500K units this year, local auto manufacturing should be pursued with vigor

THE PHILIPPINE government is intent on expanding the contribution of the industry to economic development. In fact, this is an expressed goal of the National Economic and Development Authority (NEDA) in its national development plans. The government agency noted, “The Philippine economy over the past years has been characterized by a reduced share of the manufacturing sector in the country’s gross domestic product (GDP).”

The Philippines, with its dynamic economy and youthful workforce, has made significant strides in recent years. Despite these gains though, the nation still has lots of opportunities to improve in the areas of employment, income distribution, and economic well-being. One of the most effective ways to address these issues is through job creation, and I am hugely encouraged that this is among the government’s central concerns.

In this regard, I believe in the primacy of the manufacturing sector as a robust engine for economic growth and employment generation, particularly in countries with abundant labor resources like the Philippines. A report by Asia Fund Managers cited the manufacturing sector as contributing only 28% to the country’s GDP in 2024. This compares with the service sector that accounts for over 62% and the agriculture sector with 9%. Clearly, there is a case to be made for a rebalancing of the economy.

The automotive industry is a significant contributor to the manufacturing sector. In a speech to members of the media earlier this year, Toyota Motor Philippines (TMP) Chairman Alfred V. Ty mentioned that “the auto industry is truly transforming into a major pillar of economic development.” According to reports of the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI), the Truck Manufacturers Association (TMA), Association of Vehicle Importers and Distributors (AVID), and some members of the Electric Vehicle Association of the Philippines (EVAP), total vehicle sales in 2024 reached 475,000 units, representing approximately 40 different brands and more than 400 models on the road. This is a new record for the auto market, exceeding the previous high of 473,000 units in 2017 when sales soared in anticipation of changes in the excise taxes on automobiles.

Mr. Ty stated that, by his estimate, sales in 2024 should have generated up to P70 billion in taxes and duties and 138,000 direct and indirect jobs supplying parts or business services to the auto sector. He explained that the rapid and significant influx of automakers and brands was a very welcome indicator. “I have always said that the one thing that attracts automakers the most to any market is increasing sales volumes. And as motorization progresses, this opens new opportunities for local manufacturing,” Mr. Ty stressed.

In 2025, industry prospects are quite encouraging. The macro outlook is reasonably optimistic with GDP expected to exceed 6%. Personal consumption is seen to grow with the relaxation of interest rates. In addition, the upcoming elections is expected to trigger incremental economic demand. As a result, the auto industry is projected to sell 512,000 units by the time 2025 is done and dusted, representing a sustained rate of expansion of 8%, comparable to the growth in 2024. This will be another record-high for the industry and a very important milestone — breaking through the half-million mark.

In addition to the macro growth drivers, other factors that are expected to enable a rise in car sales is the continuing strength of and growing access to credit. A report by the Banko Sentral ng Pilipinas (BSP) showed that consumer loans increased by 25% to P1.59 trillion at the end of December 2024. The growth was largely due to a rise in credit card loans by 29.4% to P934.55 billion from P722.46 billion. However, motor vehicles were also a significant contributor, with loans for car purchases reportedly soaring by 19.5% from P380.14 billion to P454.37 billion by yearend.

The growth in demand for electrified vehicles (xEVs) will also be another growth driver. In 2024, CAMPI reported sales of xEVs to have grown by around 60% to 18,690 units, accounting for about 4% of total sales. If sales of non-CAMPI members are included, xEV sales last year are estimated at almost 25,000 units, representing 5% of total vehicle sales, compared to 2.6% in 2023. These include sales of hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs), and battery electric vehicles (BEVs).

This year, more automakers will be introducing EV models, likely to spur further demand. In January 2025 alone, CAMPI reported that 1,600 xEVs were sold, making up 5.36% of total car sales. If we apply this percent of sales against the annual sales projection of up to 512,000 units this year, total xEV sales should hit 27,500 units, excluding sales of non-CAMPI members.

Other new model introductions — excluding xEV — will also stimulate market expansion. The most significant contributor is expected to be the Toyota Tamaraw, whose sales began in January this year. Toyota projects sales to top 20,000 units in 2025, serving a growing and previously untapped demand for mobility from the micro, small, and medium enterprise (MSME) sector. Meantime, increased demand from specific mobility sectors such as the logistics industry and the transport network vehicle service (TNVS) will also stimulate growth.

Indeed, the drive to motorization continues to gain momentum. With the rise in economic activity, a growing demand for a broader range of mobility solutions will emerge in tandem. This is a very compelling opportunity for the government to put in place programs that will allow us to capture local manufacturing investments and generate more jobs across various regions of the country.

Indeed, it was very encouraging to hear that the government is set to allocate P9 billion as fiscal support for participating car makers under the proposed Revitalizing the Automotive Industry for Competitiveness Enhancement (RACE) program. RACE targets to cover three specific models of four-wheeled internal combustion engine (ICE) vehicles. Each participant will pledge to locally manufacture 100,000 units. In fact, Board of Investments (BoI) Executive Director Ma. Corazon Halili-Dichosa shared, “Both Toyota and Mitsubishi signified their intention to enroll under RACE.”

The Philippines offers a fertile ground for investments in auto manufacturing. Not only will this create thousands of jobs, but it can also upskill a generation of workers, promote economic and social well-being, and enhance the quality of life of Filipinos. I hope that more auto manufacturers will consider to invest in local production or decide to make the Philippines a vital part of their global supply chain for automotive parts and components. With the support of the government, this is an opportunity we should take full advantage of.

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