Philippines needs 9-9.5% growth to return to pre-pandemic track

The economy needs to grow by at least 9% to 9.5% a year until 2028 to return to its pre-pandemic growth track, a former Bangko Sentral ng Pilipinas (BSP) official said.

During the MAP Economic Briefing and General Membership Meeting, GlobalSource Partners analyst Diwa C. Guinigundo said that the current government’s target of “between 6% to 8% annually, by 2036 (the Philippines) should be reaching only P60 trillion.”

“To overcome this setback, growth will have to be between 9% to 9.5% through 2028 to be able to return to the original growth path,” he said.

Last year, Mr. Guinigundo pushed for targets of 9.4% growth.

The Development Budget Coordination Committee (DBCC) on December trimmed the economic growth estimate for this year to 6-6.5% but widened the target band to 6-8% until 2028, due to “evolving domestic and global uncertainties.”

Finance Secretary Ralph G. Recto described as “doable” growth of between 6% and 6.5%.

In 2024, the economy expanded by 5.6%, following a 5.5% reading in 2023. It fell short of the government’s revised 6-6.5% target.

“We grew by only 5.5% in 2023 and 5.6% last year. Of course, we take pride in saying Philippine growth performance surpassed the global average in 2022 and 2023 of 3.5% and 3.3% respectively,” he said. 

“But we had the economy stall in 2020 and the years following that, so we have a lot of catching up to do.”

Mr. Guinigundo said risks to the economy include fiscal and debt sustainability, with revenue effort remaining low, food security issues, and political disunity.

“Since the Trump policy of tariff increases and tax cuts are potentially inflationary, we don’t expect the Fed to be very aggressive in reducing the target interest rate,” he added in his presentation.

“With the BSP having the space to further ease monetary policy, we see a potential capital outflow, peso depreciation, and therefore, the resurgence of inflation.”

Mr. Guinigundo noted that the budget deficit, which narrowed to P1.506 trillion in 2024, remains  in the “trillion mark.”

He said improved tax administration can only yield much, as can “squeezing” state-run firms for more dividends.

“This is after Congress forced the split banks and other GOCCs to continue to the Maharlika Investment Fund. No wonder, from the pre-pandemic (debt) of $7.7 trillion, we saw the crisis ending at $16 trillion. In January 2025, $300 billion was added to National Government debt,” he said.

Source: Business World

Banks’ real estate loans climb to 19.8% in 2024

The exposure of Philippine banks and trust entities to the volatile property segment inched up to 19.8 percent of total loans in end-December 2024 amid the sustained expansion of property-related lending despite economic uncertainties.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that banks’ real estate exposure went up from 19.6 percent in end-September last year. It marked the highest level in two months or since the 19.9 percent as of end-June 2024.

Investments and loans extended by the banking industry to the property sector stood at P3.31 trillion in end-2024, 5.1 percent higher than the P3.15 trillion seen a year ago.

Lending rose by 7.7 percent to P2.95 trillion in 2024 from P2.74 trillion in 2023. Commercial real estate loans rose by 6.9 percent to P1.85 trillion, while residential real estate loans grew by 10 percent to P1.1 trillion.

Past due real estate loans inched up by four percent to P140.65 billion. This came after past due commercial real estate loans edged higher by 2.3 percent to P40.92 billion, while past due residential real estate loans increased by 4.7 percent to P99.73 billion.

The gross non-performing loans (NPLs) of banks from the real estate sector stood at P108.81 billion as of end-December last year, 0.4 percent higher than the P108.39 billion in the comparable year-ago period.

Despite the increase in NPLs, the gross non-performing loan real estate ratio went down to 3.68 percent in end-2024 from 3.96 percent a year ago.

Meanwhile, real estate investments in debt and equity securities fell by 13.8 percent to P353.81 billion from P410.65 billion the previous year.

To ensure that banks’ exposure to the property sector remains manageable, the BSP continues to maintain prudential measures, including the real estate limit.

These measures also include the heightened surveillance of banks’ real estate and project finance exposures, and the real estate stress test thresholds for universal and commercial banks as well as thrift banks.

At the height of the global health crisis, the BSP raised the real estate loan limit of big banks to 25 percent from 20 percent in August 2020 to free up P1.2 trillion in additional liquidity for lending amid the uncertainties brought about by the pandemic.

BSP data showed that the Residential Real Estate Price Index slipped by 2.3 percent to 163.9 in the third quarter from 167.7 in the same quarter last year. This was the first time the index contracted since the 9.4 percent decline in the second quarter of 2021.

Source: Philstar

OFW remittances hit all-time high of $38.3B

Money sent home by overseas Filipino workers (OFWs) hit a record $3.73 billion in December, the Bangko Sentral ng Pilipinas (BSP) reported on Monday, bringing the full-year total to an all-time high of $38.3 billion.

December's count was 3.0 percent higher than the year-earlier $3.62 billion and $3.12 billion recorded in November 2024. The BSP, in a statement, said that it was driven by "remittances from both land-based and sea-based workers."

The 2024 tally, meanwhile, was also 3.0 percent higher than $37.21 billion recorded in 2023. It also exceeded the central bank's $34.5-billion target for the year.

Full-year remittances were equivalent to 8.3 percent and 7.4 percent of gross domestic product and gross national income, respectively.

In December alone, cash remittances rose by 3.0 percent to $3.38 billion from $3.28 billion recorded in the same month in 2023. For the full-year, these hit $34.49 billion, also 3.0 percent higher than the $33.49 billion registered in 2023.

The cumulative growth in cash remittances was attributed to flows from the United States, Saudi Arabia, Singapore, and the United Arab Emirates.

The US accounted for the biggest share (40.6 percent) of overall remittances for the year, followed by Singapore (7.2 percent), Saudi Arabia (6.4 percent) and Japan (4.9 percent).

Other countries that contributed to overall remittances were the United Kingdom (4.7 percent), the UAE (4.4 percent), Canada (3.6 percent), Qatar (2.8 percent), Taiwan (2.7 percent) and South Korea (2.5 percent).

The US accounted for the bulk as remittance centers in many cities abroad course funds to correspondent banks that are mostly in that country.

Sought for comment, Philippine Institute for Development Studies senior research fellow John Paolo Rivera said that the growth in remittances highlighted the continued role that OFWs play in supporting the economy.

"Sustained economic recovery in the US, Middle East, and APAC (Asia-Pacific) led to higher wages and employment opportunities for OFWs, boosting remittances," Rivera added.

"Also, the weak PHP (peso) against the USD (dollar) in certain months increased the monetary value of remittances, prompting some OFWs to send more money home."

Rivera also said that the adoption of digital remittance platforms had made transfers faster and cheaper, encouraging higher remittance flows.

Remittances are likely to remain a stable growth driver, he continued, amid more favorable exchange rates that could encourage higher remittance volumes.

"However, this can be disrupted by geopolitical tensions or economic downturns in host countries could affect job security," Rivera said.

"Overall, remittances are expected to maintain modest growth in 2025, barring major economic disruptions. The steady inflows will continue to support household spending, helping drive consumption-led growth."

Source: Manila Times