Overseas Filipinos’ access to retirement funds expanded

The Bangko Sentral ng Pilipinas (BSP) has amended its regulations to expand investment opportunities for overseas Filipinos by allowing their retirement funds to freely invest in central bank securities.

Personal Equity and Retirement Account-Unit Investment Trust Funds (PERA-UITFs) will no longer be subject to a 10-percent foreign ownership cap. The policy change recognizes that PERA-UITFs may include overseas Filipinos who are considered non-residents under existing regulations.

“The move reflects the BSP’s continued effort to promote financial health. It helps Filipinos, both at home or abroad, build secure and sustainable retirement savings,” the central bank said. “It also helps develop the country’s private pension system and strengthens domestic capital markets.”

PERA contributions climbed to P491.4 million in 2024, up 24 percent from P396.3 million a year earlier, as more Filipinos joined the voluntary savings program. The number of contributors also increased by 6.4 percent to 5,912 from 5,555.

Employed workers accounted for the largest share, contributing P341.7 million from about 4,211 participants. Overseas Filipinos followed with P82.25 million from 789 contributors, while 912 self-employed individuals invested a combined P67.39 million.

The central bank noted that nine out of 13 PERA-UITFs currently exceeded the 10-percent non-resident ownership limit, preventing them from investing in BSP securities. The updated policy will now allow these funds to diversify their portfolios and enhance potential returns for investors.

Under the revised Section 601-Q of the Manual of Regulations for Banks and the Manual of Regulations for Non-Bank Financial Institutions, trust entities are still required to report the participation of non-residents in their UITFs and maintain proper internal controls, monitoring systems, and assurance mechanisms.

Trust entities must continue submitting timely, accurate, and comprehensive reports on non-resident funds to the BSP. They must also make available all relevant documents and information for verification of compliance with the terms and conditions governing access to the BSP Securities Facility.

UITFs are investment vehicles managed by banks and trust companies under BSP supervision. They pool funds from various investors, including those with small contributions, to form a diversified portfolio.

These are comparable to mutual funds, which are regulated by the Securities and Exchange Commission and managed by investment companies.

Source: Manila Times

PH at risk from structural weaknesses, political row

Structural weaknesses and political volatility could pressure the Philippines' economic and fiscal performance, Fitch Ratings said on Wednesday.

The country's credit rating — an investment-grade "BBB" with a stable outlook — is being constrained by low GDP per capita, it also said in a report.

"Governance standards are weaker than at peers," the debt watcher noted, but added that World Bank indicators "somewhat overstate this."

Gross domestic product growth has slowed from a post-Covid pandemic rebound, it said, and will likely expand by 5.7 percent this year — up from 2023's 5.5 percent but below the government's 6.0- to 6.5-percent target.

Domestic demand will drive 2024 growth, Fitch said, and this will likely improve to 6.2 percent next year due to interest rate cuts, spending on infrastructure, and trade and investment reforms.

This outlook falls within the government's 6.0- to 8.0-percent goal for 2025 to 2028.

Fitch said the Philippines' rating reflected "strong medium-term growth" that would support the size of the economy — said to be large in relation to its "BBB" peers — and a gradual reduction in the debt-to-GDP ratio.

The latter is expected to fall from next year due to strong growth and lower fiscal deficits. The central government deficit was forecast to hit 5.7 percent of GDP this year and hit 4.9 percent in 2026 after averaging 5.1 percent as of end-September.

While higher than the government's target, these still are an improvement from 6.2 percent in 2023 and the 8.6-percent peak hit in 2021.

"Our narrower general government deficit forecast of 4.4 percent of GDP for 2024 reflects social security and local government surpluses," Fitch added.

It warned, however, that escalating political conflicts ahead of next year's midterm elections "could, if sustained, weigh on macroeconomic and fiscal performance."

Fitch noted that the support of Vice President Sara Duterte and her father, former president Rodrigo Duterte, was instrumental in President Ferdinand Marcos Jr.'s landslide win in 2022.

Both campaigned on a unity platform that clearly cracked this year with Sara — under investigation for misuse of public funds — threatening to have Marcos killed.

Externally, policies to be implemented by incoming US President Donald Trump pose risks for the Philippines along with other economies.

A further strengthening of the dollar from US trade protectionism could put further pressure on the peso, which has fallen nearly 5 percent as of October, and inflation.

"The Philippines would [also] be vulnerable to a change in US immigration policy, given the importance of remittances for domestic consumption," Fitch said.

Monetary policy, however, is a bright spot, and Fitch said that the Bangko Sentral ng Pilipinas had made strides in managing inflation, which at 3.2 percent as of end-November was down from 6.0 percent a year ago and within the 2.0 to 4.0 percent target.

"We forecast inflation to stay around these levels in 2025-2026, leading to a further 100 bps (basis points) of rate cuts in 2025," it said.

"A credible inflation-targeting framework and flexible exchange rate regime contribute to a sound economic policy framework and support the country's rating," Fitch said.

Source: Manila Times

15 PPP projects up for approval this year

Around 15 public-private partnership (PPP) projects are expected to be submitted to the National Economic and Development Authority (NEDA) Board for approval this year, according to the PPP Center.

Speaking at the SGV Knowledge Institute’s Philippine Economic Outlook forum, PPP Center executive director Cynthia Hernandez said there are 117 PPP projects in the pipeline worth P2.5 trillion as of February.

“Out of the 117 projects, there are 15 that are expected to be approved this year,” she said.

Hernandez told reporters the 15 projects would be submitted to the NEDA Board chaired by President Marcos for approval.

Those in the advanced stages are the Metro Manila Subway operations and maintenance (O&M), North-South Commuter Rail O&M, construction and O&M of the San Ramon Newport at the Zamboanga City Special Economic Zone, University of the Philippines Philippine General Hospital Diliman, Cagayan Valley Medical Center – Hemodialysis Center and the National Capital Region EDSA Busway O&M.

Also part of the PPP pipeline to be submitted for approval this year are solicited projects, including the Cebu Bus Rapid Transit, Davao City Bypass project, Metro Rail Transit Line 3, as well as Light Rail Transit Line 2.

Meanwhile, unsolicited projects expected to be submitted for government approval this year are the Puerto Princesa International Airport rehabilitation and O&M, New Bohol International Airport upgrade and O&M, Iloilo International Airport rehab and O&M, long term water source development for Metro Manila, and Philippine Identification System O&M.

According to Hernandez, the government wants to start the procurement process for the O&M projects relatively early for proper turnover and operations.

“This will reduce interface risk. The government really doesn’t have the capacity to operate the projects when they finish,” she said.

For 2025, Hernandez said 13 projects in the early stages of development would also be submitted for approval.

“The preliminary studies are expected to be completed. Once completed, these can be submitted by the implementing agencies for approval by 2025,” she said.

With the enactment of the new PPP Code, which aims to provide a more competitive and enabling environment for the implementation of projects undertaken with the private sector, Hernandez said the government expects to receive more unsolicited proposals.

As PPPs are being pushed for the implementation of infrastructure projects, she said the PPP Center is encouraging Japanese firms to be more involved in PPPs through direct investments.

Source: Philstar