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Gross borrowings down 25% in July

Gross borrowings down 25% in July

THE NATIONAL GOVERNMENT’S (NG) gross borrowings fell by 25% in July amid a decline in domestic debt, data from the Bureau of the Treasury (BTr) showed.    

In July, gross borrowings dropped by a fourth to P131.937 billion from P174.951 billion in the same month a year ago.

Month on month, gross borrowings slid by 20.8% from P166.487 billion in June.

Domestic debt accounted for the bulk or 83.75% of total gross borrowings in July.

Gross domestic borrowings fell by 34.2% to P110.498 billion during the month from P167.81 billion a year ago.

Broken down, domestic debt was made up of P108.379 billion in fixed-rate Treasury bonds and P2.119 billion in Treasury bills.

Meanwhile, external gross borrowings, mostly composed of new project loans, more than tripled to P21.439 billion from P7.141 billion.

For the first seven months of 2023, gross borrowings jumped by 24.8% to P1.55 trillion from P1.25 trillion a year ago.

Gross domestic debt stood at P1.17 trillion in the January-to-July period, up by 28.4% from P909.073 billion a year earlier.

This accounted for 75.5% of total gross borrowings in the first seven months.

Domestic debt during the seven-month period was composed of P794.529 billion in fixed-rate Treasury bonds, P283.763 billion in retail Treasury bonds, and P88.703 billion in Treasury bills.

External debt went up by 15.3% to P387.88 billion as of end-July from P336.477 billion a year ago.

This consisted of P163.607 billion in global bonds, P145.059 billion in program loans, and P79.214 billion in new project loans.

“The decrease in gross borrowings could be attributed to relatively lower amount of maturing government bonds/debt during the month,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The narrower budget deficit in July reflected higher government revenue collections, which meant less borrowings were needed, he added.

The National Government’s fiscal deficit shrank by 44.89% to P47.8 billion in July. For the first seven months of the year, the budget gap narrowed by 21.22% to P599.5 billion.

Mr. Ricafort said risk factors like elevated inflation and high interest rates could drive up borrowings.

The National Government has set its borrowing program at P2.207 trillion this year, consisting of P1.654 trillion from domestic sources and P553.5 billion from foreign creditors. — Luisa Maria Jacinta C. Jocson

#Gross #borrowings #July

Remittances reach 7-month high in July

CASH remittances surged in July as overseas Filipino workers (OFWs) sent more money to their families amid higher inflation and borrowing costs.

This was the highest since December when remittances are usually elevated as OFWs send more money to their families before the holidays, data from the Bangko Sentral ng Pilipinas (BSP) on Friday showed. 

Remittances sent through banks increased by 2.6% to $2.99 billion in July, from $2.92 billion a year earlier.

The pace of cash remittance growth was also the fastest in two months or since 2.8% in May.

“The expansion in cash remittances in July 2023 was due to the growth in receipts from land- and sea-based workers,” the central bank said in a statement.

Remittances from land-based workers jumped by 2.7% year on year to $2.43 billion, while those from sea-based workers went up by 1.9% to $560 million.

OFWs likely sent more money back to the Philippines to help their families cope with still-elevated inflation and high-interest rates for debt payments, said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message.

Headline inflation slowed to 4.7% in July from 5.4% in June. It still marked the 16th consecutive month during which it surpassed the 2-4% target range of the BSP.

The BSP has maintained its key policy rate at a near-16-year high of 6.25% at its July meeting. The central bank has increased benchmark interest rates by 425 basis points (bps) from May 2022 to March 2023.

“The unusually higher OFW remittances in July 2023…may be largely attributed to some tuition payments and other related spending in preparation for the start of the new school year, as these education-related spending are considered compulsory in nature for many OFW families,” Mr. Ricafort said.

Most schools started the school year on Aug. 28. Student registration usually takes place a month before the next academic year starts.

However, the growth in remittances may have been offset by the stronger peso against the dollar in July, Mr. Ricafort said, adding that remittances from OFWs have a higher peso equivalent for every dollar sent.

The peso closed at P54.88 on July 31, strengthening by 0.58% or 32 centavos from its P55.2 finish on June 30.

In the first seven months, cash remittances increased by 2.9% to $18.79 billion from a year ago.

By country source, the United States remained the biggest source of cash remittances at 41.3%. It was followed by Singapore (6.9%), Saudi Arabia (5.9%), Japan (5%), and the United Kingdom (4.8%).

BSP data also showed that personal remittances increased by 2.5% to $3.32 billion in July from $3.24 billion in the same month last year. This brought the seven-month tally to $20.91 billion, up 2.9% from a year ago.

For the coming months, Mr. Ricafort said migrant Filipinos may continue to support their families in the Philippines at a similar pace as inflationary pressures remain.

Remittances could also accelerate in the fourth quarter during the holiday season, which is a consistent pattern seen for many decades, he said.

“Offsetting risk factors include higher inflation/cost of living for OFWs themselves in host countries where they are based that could lead to more expenses in foreign countries and could potentially reduce any remittances sent back home,” he added.

The BSP expects remittances to grow by 3% this year. – Keisha B. Ta-asan

#Remittances #reach #7month #high #July

Banks’ bad loan ratio steady in July

THE BANKING INDUSTRY’S nonperforming loan (NPL) ratio remained steady in July despite high borrowing costs and elevated inflation.

Based on data from the Bangko Sentral ng Pilipinas (BSP), the Philippine banking sector’s gross NPL ratio stood at 3.43% as of end-July, unchanged from end-June. It is also lower compared with the 3.57% NPL ratio in July 2022.

The July ratio was the lowest in three months or since 3.41% in April. The NPL ratio was on the rise in the first five months of the year to 3.46% as of end-May but declined to 3.43% in June.

Bad loans rose by 4.5% to P439.328 billion as of July from P420.255 billion a year earlier. It also inched up by 0.68% from P436.371 billion seen as of end-June.

Meanwhile, banks’ total loan portfolio increased by 8.8% to P12.81 trillion as of end-July from P11.77 trillion a year ago. It was also up by 0.6% from P12.73 trillion at end-June.

Loans are considered nonperforming once they remain unpaid for at least 90 days after the due date. They are deemed as risk assets given borrowers are unlikely to settle such loans.

“We’re pleased to see that despite slower economic growth in the second quarter, still elevated inflation, and sustained rapid expansion in consumer credit growth, that overall industry bad loan ratios continue to be muted,” Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said.

The Philippines’ gross domestic product (GDP) expanded by 4.3% in the second quarter, weaker than 6.4% in the first quarter and 7.5% in the second quarter a year ago. In the first half, GDP growth averaged 5.3%, still below the government’s 6-7% target for 2023.

Headline inflation averaged 6.8% in the first seven months of the year. While inflation eased to 4.7% in July, this still marked the 16th consecutive month that it surpassed the BSP’s 2-4% target range.

To tame inflation, the BSP has raised rates by 425 basis points from May 2022 to March 2023, bringing the benchmark interest rate to a near 16-year high of 6.25%.

Based on BSP data, banks’ past due loans increased by 7.5% to P528.404 billion as of end-July from P491.289 billion a year ago. This brought the past due loans’ share in total loans to 4.12% as of July, from 4.17% a year ago.

Restructured loans fell by 11.1% to P304.175 billion from P341.972 billion in the same month in 2022. These accounted for 2.37% of the banking system’s loan portfolio.

Meanwhile, banks continued to boost their loan loss reserves to P449.748 billion in July from P416.733 billion a year ago. This brought the loan loss reserves to total loan portfolio ratio to 3.51% from 3.54% a year earlier.

The industry’s NPL coverage ratio also improved to 102.37% from 99.16% the year before.

Separate BSP data showed outstanding loans of universal and commercial banks rose by 7.7% to P11 trillion in July, slower than the 7.8% growth a month prior.

Consumer credit jumped by 22.6% to P1.15 trillion in July from P934.7 billion a year ago.

“We’re hoping that sustained improvements in Philippine employment metrics combined with the public sector’s commitment to step up on the execution of their spending programs that in the second half, NPL ratios will continue to remain subdued,” Mr. Neri said.

The government has ordered departments to come up with catch-up spending plans to address underspending in the first half. — Keisha B. Ta-asan

#Banks #bad #loan #ratio #steady #July

Credit growth further slows in July

Credit growth further slows in July

By Keisha B. Ta-asan, Reporter

CREDIT GROWTH slowed for a fourth straight month in July, as high interest rates took its toll, Bangko Sentral ng Pilipinas (BSP) data showed.

Data from the BSP showed outstanding loans of universal and commercial banks, net of reverse repurchase (RRP) placements with the central bank, rose by 7.7% to P11 trillion in July, from P10.21 trillion a year earlier.

The 7.7% bank lending growth in July was slower than 7.8% in June, and the 11.9% expansion in July 2022. It was also the weakest increase since April.

China Banking Corp. Chief Economist Domini S. Velasquez said the slower credit growth reflects the cumulative impact of the aggressive monetary policy tightening of the central bank.

The BSP hiked borrowing costs by 425 basis points from May 2022 to March 2023 to curb inflation, bringing the key policy rate to a near 16-year high of 6.25%.

“This is compounded by a slowdown of economic activities, with spending moderating from the highs of revenge spending post-pandemic,” Ms. Velasquez said.

Philippine gross domestic product (GDP) expanded by a slower-than-expected 4.3% in the second quarter, as household consumption growth slowed. For the first six months, GDP growth averaged 5.3%, still below the government’s 6-7% target this year.

Security Bank Corp. Chief Economist Robert Dan J. Roces said consumers and businesses are more cautious in borrowing as inflation remains elevated and interest rates remain high.

Inflation eased to 4.7% in July but marked the 16th straight month that inflation exceeded the BSP’s 2-4% target band. For the first seven months, inflation averaged 6.8%.

“Additionally, anticipation of future monetary policy shifts by the BSP, with the stance of a hawkish hold, could influence borrowing decisions,” Mr. Roces said.

The BSP has kept policy rates unchanged for a third meeting in August. However, stubborn inflation has increased pressure on the central bank to maintain its hawkish stance.

BSP data showed outstanding loans to residents, net of RRPs, expanded by 7.8% to P10.69 trillion in July, from P9.92 trillion in the same month last year. The pace of annual expansion was a tad lower from 7.9% in June.

Borrowings for productive activities jumped by 6.2% to P9.54 trillion in July from P8.98 trillion a year ago. This was slower than the 6.3% growth in June.

Borrowings increased for sectors such as information and communication (10.8%); electricity, gas, steam and air-conditioning supply (10.5%); wholesale and retail trade, and repair of motor vehicles and motorcycles (9.4%); as well as real estate activities (5%).

However, annual declines were seen in loans for professional, scientific and technical activities (-12.5%); education (-7.6%); and arts, entertainment and recreation (-0.8%).

“On a positive note, consumer lending continues to hold up with growth still in the 20% rates, consistent with previous months. Consumer loans continue to buck the trend, remaining robust amidst a period of high interest rates,” Ms. Velasquez said.

Consumer credit jumped by 22.6% to P1.15 trillion from P934.7 billion a year ago. However, consumer loan growth was slightly slower than the 23.7% growth in June.

Double-digit increases were seen for credit card loans (29.8%) and salary-based general purpose consumption loans (24.4%), while motor vehicle loans rose by 8.7%.

Outstanding loans to nonresidents jumped by 6.2% in July, faster than 4.8% in June.

“Moving forward, if the BSP maintains its stance and inflation remains high, we might observe a continued moderation in loan growth. Elevated inflation can deter borrowing, as it erodes the real value of money and can make both consumers and businesses hesitant to take on new debt,” Mr. Roces said.

BSP Governor Eli M. Remolona, Jr. earlier said the central bank still has space for further policy tightening this year, as risks to the inflation outlook are on the upside.

Ms. Velasquez said bank lending may continue to moderate in the coming months until the BSP starts to loosen monetary policy.

“We have not yet likely felt the full effect of tightening due to the lag of monetary policy transmission (about 12 months),” she said.

Mr. Remolona earlier said a rate cut is not on the table, at least not at the Monetary Board’s Sept. 21 meeting.

#Credit #growth #slows #July

Trade deficit shrinks to $4.2 billion in July

Trade deficit shrinks to $4.2 billion in July

The Philippines’ trade deficit further shrank in July as exports and imports continued to decline, data from the Philippine Statistics Authority (PSA) showed.

The PSA on Friday reported that the country’s balance of trade in goods stood at a $4.20-billion deficit in July, 30% lower than the $6-billion gap in July 2022.

However, the July trade gap was wider than the revised $3.94-billion deficit in June.

July saw the widest trade deficit in two months or since the $4.45-billion deficit in May.

The Philippines has incurred a trade deficit for the last eight years or since the trade surplus of $64.95 million in May 2015.

Merchandise exports fell by 1.2% to $6.14 billion in July, ending two straight months of growth. This was a reversal of the revised 0.9% growth in June but still lower than 4.2% decline in July last year.

July’s export level was the lowest in three months or since the $4.90 billion seen in April.

Meanwhile, imports slumped by 15.3% to $10.35 billion in July, slightly faster than the revised 15% decline in June and a reversal of the 22.3% growth in July 2022.

July marked the six straight month of a decline in imports.

For the January to July period, the trade deficit shrank to $32.18 billion from the $35.84-billion gap a year ago.

In the first seven months of the year, exports fell by 8.2% to $41.09 billion, while imports slipped by 9.1% to $73.27 billion.

The Development Budget Coordination Committee’s exports and imports growth assumptions are set at 1% and 2%, respectively, for this year.

Manufactured goods, which accounted for 82.4% of the country’s total export receipts, rose by 1.6% year on year to $5.06 billion in July.

Electronic products, which made up nearly three-fourths of manufactured goods and more than a half of total exports in July, grew by 7.7% to $3.65 billion.

Almost half of total exports came from semiconductors, which jumped by 18.2% to $3.03 billion.

The United States was the main destination of Philippine-made goods in July. Exports to the US stood at $1.04 billion, accounting for 16.9% of the total exports. Exports to Japan reached $862 million, while exports to Hong Kong stood at $798 million.

Meanwhile, orders of raw materials and intermediate goods in July dropped by 21.9% to $3.71 billion, which made up 35.9% of the total July import bill.

In July, imports of capital goods declined by 3.9% to $3.00 billion, while the imports of consumer goods grew by 5.9% to $2.07 billion.

Mineral fuels, lubricants and related materials fell by 34.4% year on year to $1.53 billion.

China accounted 25.5% of the total imports in July, with a value of $2.64 billion. It was followed by Japan with $865 million and Indonesia with $810 million.

University of Asia and the Pacific (UA&P) Senior Economist Cid L. Terosa said in an e-mail that trade in July was dampened by several external developments.

“They include the collapse of the Ukraine grain deal when Russia opted out, trade restrictions by China, India, and other major trading countries, unstable and weakening peso and, inflationary pressures that have curtailed production, distribution, and consumption activities around the world,” he said.

Mr. Terosa said it will be challenging for the Philippines to meet the trade growth assumptions since global trade is expected to remain weak.

“Also, downgrades to world economic forecasts by major international agencies point to punishing world market conditions ahead. Geopolitical tensions in Europe and Asia as well as rising petroleum prices can temper the usual upbeat global trade mood towards the end of the year,” he added.

Philippine Exporters Confederation, Inc. President Sergio R. Ortiz-Luis, Jr. said in a telephone interview that geopolitical tensions affected the trade performance.

“Our supply chain was disrupted, there are trade constraints due to what is happening abroad. Some trading such as fuels, raw materials, and even basic consumables like rice are having problems, like a slowdown and some orders are being cancelled,” he said.

“I hope this will get better, otherwise, our projection of 6% to 7% growth at the end of the year might revised, at the most of 6%, or 5% or lower than 5%. August will be more or less the same, we are not sure if it slowdown a little or grow, but I think it will be materially difference” Mr. Ortiz-Luis said.

The Philippine economy expanded by a weaker-than-expected 4.3% in the second quarter, its slowest growth in over two years.

For the first half, gross domestic product (GDP) growth averaged 5.3%. However, GDP must expand by 6.6% in the second half to be able to achieve the government’s 6%-7% full-year target. — Lourdes O. Pilar

#Trade #deficit #shrinks #billion #July

Philippine jobless, underemployment rates jump in July

Philippine jobless, underemployment rates jump in July

By Bernadette Therese M. Gadon, Researcher

The unemployment rate in the Philippines inched up to 4.8% in July, bringing the number of jobless Filipinos to 2.27 million, the Philippine Statistics Authority (PSA) said on Friday.

The underemployment rate, on the other hand, rose to a 20-month high as slower economic activity led to more job losses.

Preliminary results of the April Labor Force Survey (LFS) showed the unemployment rate rose to 4.8% in July from 4.5% in June. Year on year, this was lower compared to 5.2% in July 2022.

At 4.8%, this was the highest unemployment rate since 5% in September 2022, and matched the unemployment rate in January and February this year.

Despite the higher rate, the absolute number of jobless Filipinos in July was lower than the 2.33 million in June and 2.6 million in the same month last year, as the labor force shrank.

Year to date, the unemployment averaged 4.6%, lower than the 5.4% average a year ago.

PSA data also showed job quality deteriorated as the underemployment rate went up to 15.9% in July from 12% in June and 13.8% in July last year.

This is equivalent to 7.10 million underemployed Filipinos in July, higher than the 5.88 million in June and the 6.54 million recorded a year ago.

The 15.9% underemployment rate is the highest in 20 months or since the 16.6% in November 2021, PSA Undersecretary and National Statistician Claire Dennis S. Mapa said during the press conference.

“Invisible underemployment rose, which means more Filipinos are working 40 hours or more already, but they want to work more hours for additional income, or they want another job with higher pay,” he added.

Meanwhile, the employment rate dropped to 95.2% in July from 95.5% in the previous month, but higher than the 94.8% in the same month a year ago.

In absolute figures, 44.63 million Filipinos had jobs in July, down from the 48.84 million in the previous month. However, this is higher than the 47.39 million employed persons in July last year.

PSA data also showed the labor force size decreased by 4.27 million to 46.90 million in July from 51.17 million in June.

This put the country’s labor force participation rate (LFPR) at 60.1%, lower than the 66.1% and 65.2% in June and July 2021, respectively.

Analysts said the uptick in the jobless rate can be attributed to slower economic activity.

In an e-mail, ING Bank N.V. Manila senior economist Nicholas Antonio T. Mapa said that it was not surprising to see employment figures slip as high interest rates continue to dampen economic activity.

“A portion of the household may have left the labor force to accompany the kids back home. Supporting this is the fact that saw a steep decrease in those who are self-employed or who are unpaid family workers, jobs that are mostly associated with the informal sector,” HSBC economist for Association of Southeast Asian Nations (ASEAN) Aris Dacanay said

Average hours worked in a week rose to 42.3 hours in July from 40 hours in June, and 40.5 hours from a year ago.

The services sector remained the largest employer with 59.4% share, followed by agriculture with 21.5% and industry with 19%.

On a monthly basis, job losses were highest in the following industries: agriculture and forestry (8.14 million in July from 10.45 million in June), wholesale and retail trade, repair of motor vehicles and motorcycles (8.68 million from 10.08 million), and public administration and defense, compulsory social security (2.63 million from 2.99 million).

“The entire government remains committed to improving the business climate in the country to attract more investments, which will lead to the creation of high-quality and high-paying jobs,” said National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan in a statement.

However, Sentro ng mga Nagkakaisa at Progresibong Manggagawa (SENTRO) Secretary-General Josua T. Mata said in a Viber message that elevated inflation may hinder job creation for the rest of the year.

“It will be more challenging to increase employment in the next months because of inflationary pressures. What the government can do is to maintain a strong stance on fiscal policy, make it more aggressive, if possible,” he said.

Mr. Mata said the government should introduce a robust public employment program that would directly generate jobs, like climate jobs.

“Climate jobs are those that would directly lower the carbon emission of the country. Examples are: developing renewable energy including manufacturing solar panels and turbines; coastal and riverine rehabilitation; serious reforestation; etc.,” he said.

HSBC’s Mr. Dacanay said that the government’s commitment to ramp up spending in the second half may improve employment numbers.

“Furthermore, the size of the labor force should increase once schooling begins as household members can return back to work to help make ends meet amid elevated inflation,” he said.

The April LFS was conducted from July 8 to 31, with a total of 170,859 sample households.

#Philippine #jobless #underemployment #rates #jump #July

Exports likely posted modest uptick in July

Exports likely posted modest uptick in July

By Justine Irish D. Tabile, Reporter

PHILIPPINE EXPORTS likely posted a modest growth in July, despite sluggish global demand, according to economists and business groups.

Danilo C. Lachica, president of the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI), said electronics exports are recovering but “may be not at the same level as last year’s July year-to-date.”

In a text message, Mr. Lachica said electronics exports are still recovering from the 15% contraction in the first quarter.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said there may have been modest gains in exports in July.

“However, global trade remains sluggish on soft demand and thus any gains may be limited,” Mr. Mapa said in a Viber message.

The Philippine Statistics Authority is scheduled to release international merchandise trade statistics for July on Friday (Sept. 8).

The trade gap reached $27.96 billion in the first six months of 2023, narrower than the $29.84-billion deficit a year ago. This as exports declined by an annual 9.3% to $34.94 billion, while imports fell by 8% to $62.9 billion.

“Both exports and imports recently corrected higher in recent months. Exports are already up from near three-year lows a few months ago and recently among seven-month highs,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

He noted the exports were earlier weighed by the risk of a recession in the United States.

The Development Budget Coordination Committee’s 2023 exports and imports growth assumptions are set at 1% and 2%, respectively.

Meanwhile, Confederation of Wearable Exporters of the Philippines Executive Director Maritess Jocson-Agoncillo said the decline in garments exports could continue for the rest of the year.

She noted all four sectors of the wearable industry — apparel, textile, travel goods, and footwear — contracted by 22% in the first semester.

“We have been seeing the trend since the start of the year where we are hitting a double-digit negative growth which is not very good. The market has slowed down and we even have major brands that have pulled out,” Ms. Jocson-Agoncillo said in a phone interview.

However, she said the industry is expected to start exporting this month the product lines for spring and summer 2024.

“But even if it picks up, (our industry’s) growth can only be a single-digit thing because we had a double-digit decline,” Ms. Jocson-Agoncillo said.

Meanwhile, Philippine Exporters Confederation, Inc. President Sergio R. Ortiz-Luis, Jr. said exports will likely be an improvement from last year’s figures.

“I think at the end of the year it will have an improvement even if it is coming at a high base and despite the many supply chain disruptions. It will surpass 2022 business level but not so much,” Mr. Ortiz-Luis said in a phone interview.

For 2022, exports rose by 5.6% to $78.84 billion from a year earlier, while imports grew by 17.3% to $137.16 billion. This brought the full-year trade balance to a record $58.32-billion deficit.

ING’s Mr. Mapa said exports may contract by yearend as demand fades.

The lower risk of a recession in the US may help support further recovery in exports, Mr. Ricafort said.

“The US dollar/peso (exchange rate) being among nine-month highs would help make Philippine exports cheaper or more price competitive from the point of view of international buyers, a factor that could help support further pickup in exports,” he said.

#Exports #posted #modest #uptick #July