‘Lending to stay tepid while rates are high’ By Cai U. Ordinario @caiordinario
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ANK lending to both households and corporate borrowers could remain tepid as long as the Bangko Sentral ng Pilipinas (BSP) keeps key policy rates high, according to US-based Global Source Partners. In a brief, Global Source Partners country analyst Diwa Guinigundo said that due to the high rates, there has been “an accumulation of credit tightening,” which discouraged Filipinos and companies from borrowing. Unfortunately, this made businesses and consumers less optimistic this quarter and the next 12 months. Guinigundo said this was based on the fourth quarter Consumer Expectations Survey of the BSP. “If the BSP is not inclined to quickly
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reduce its policy rate, household and corporate borrowers should be prepared to see the same reticence among the banks to increase their exposure, their stake in fact, in the Philippine economic growth,” Guinigundo said. Citing data from the fourth quarter 2023 Senior Bank Loan Officers’ Survey, Guinigundo said banks kept or tightened their credit standards even if inflation had already started its downtrend. While domestic liquidity (M3) slowed, given these tight lending conditions, M3 did not decline. Guinigundo said deposits were steady, and loans net of lending to the BSP were resilient. “Based on the banks’ rising loansto-deposit ratio, loans were more bullish than deposits. Banks were able to convert more of their deposits to
loans,” Guinigundo said. Guinigundo said between 2022 and the end of 2023, the BSP jacked up its policy rate by a total of 450 basis points to 6.5 percent from 2 percent. He said businesses “thought it’s the end of the world” when rates increased by more than three times between 2022 and 2023. Guinigundo said this gave businesses the impression that the BSP was “bent on closing business in the Philippines to defeat inflation at all costs.” But, he added, “They were wrong. High inflation could in fact undermine the growth process through lower private consumption and government expenditure.” According to Guinigundo, “High inflation also discourages business precisely because high inflation turns
off consumers. Thus, fighting inflation promotes growth,” he added. The BSP data earlier showed outstanding loans of universal and commercial banks (U/KBs) grew 7.8 percent year-on-year in January 2024 from 7.1 percent in December 2023. Consumer loans to residents rose by 25.2 percent in January from 23.9 percent in December 2022. This was mainly due to a sustained increase in credit card and motor vehicle loans and salary-based general-purpose consumption loans. Outstanding loans to residents, net of RRPs, went up 7.8 percent in January from 7.4 percent in December 2023. The data also showed outstanding loans to non-residents grew by 9.8 percent in January after declining by 2.9 percent in December.
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N.G. ’23 DEBT PAYMENTS UP 23.97% TO P1.6T—BTR n
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Monday, March 11, 2024 Vol. 19 No. 148
P25.00 nationwide | 2 sections 20 pages |
By Reine Juvierre S.Alberto
HE national government reported a total of P1.603 trillion in debt payments in 2023, up by nearly 24 percent from the previous year, with amortization outpacing interest payments, according to the Bureau of the Treasury (BTr).
P975.278 billion while interest payments accounted for P628.333 billion, Treasury data showed. Payments posted under amortization grew by 23 percent compared to the P790.323 billion reported in 2022. The bulk of the payments went to domestic amortization which totaled P854.165 billion in 2023. The amount is 29.45 percent higher than the P659.834 billion the national government paid domestic amortization recorded in 2022. External amortization payments made by the state went down 7.81 percent to P121.113 billion from P130.489 billion in 2022.
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HE Congressional Policy and Budget Research Department (CPBRD) has expressed reservations about the proposals to increase the minimum wage in the Philippines. While such measures may aim to improve living conditions, they could have severe detrimental effects on the nation’s economy and could jeopardize the jobs of 11.9 million low-skilled workers, it said. In a policy brief, titled “Raising the minimum wage: How good intentions can lead to poor outcomes,” the CPBRD said that while proponents argue that such measures will uplift the living standards of ordinary Filipinos, ensure fair profit distribution, and enhance economic security among the
M/T St.Nikolas seized by Iran in January 2024 arrive via Emirates EK332 on Sunday, March 10, 2024 at Naia Terminal 3 and were received by the Department of Migrant Workers, which coordinated with the Department of Foreign Affairs. The OFWs said they were traumatized initially, but their captors later treated them well. Story on A12, “9 Filipino seafarers held in Iran fly home; 2 more due.” NONIE G. REYES
See “N.G.,” A2
HOUSE THINK TANK: WAGE BILL MAY HURT, MORE THAN HELP By Jovee Marie N. dela Cruz
BACK FROM IRAN-HELD SHIP Nine Filipino seafarers who were among the crew of oil tanker
working class, critics argue that the intended benefits are far removed from the expected impacts on the economy. The policy brief was written by David Joseph Emmanuel Barua Yap Jr., Jhoanne E. Aquino, Rutcher M. Lacaza, and Edrei Udaundo. The House think tank said traditional economic theories and empirical evidence suggest that arbitrary governmentmandated wage hikes have the potential to increase unemployment, worsen living conditions for marginalized households, and impede skills development among low-skilled workers. “A careful analysis of scientific literature suggests that enactment of HB 7871 or SB 2534 will imperil long-standing efforts to reduce poverty, tame inflation, bolster job generation, and See “House,” A2
BSP: Reviving Interest Rate Swaps to deepen markets
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HE Bangko Sentral ng Pilipinas (BSP) plans to revive the Interest Rate Swaps (IRS) market to help deepen the capital markets. BSP Governor Eli M. Remolona Jr. told reporters he aims to revive the IRS market within his term. He said this could lead to the creation of a swaps curve. A swaps curve, he said, can be a good benchmark to use to price corporate bonds and mortgages. “We used to do swaps quite a bit, but somehow they disappeared. So I would like to revive the swaps market, the IRS markets, and insist on market making at least the fiveyear maturity, which is the sweet spot for foreclosures,” Remolona said in a recent forum. Remolona said this revival of the swaps curve is part of his three wishes for the country’s capital markets. The other two are: to open the corporate bank bond market to
single A or even triple B issuances; and for the country to join the global shift to equity index in the emerging market bond Exchange-Traded Funds (ETFs). Unionbank Chief Economist Ruben Carlo O. Asuncion told BusinessMirror said hedging activity opportunities will benefit traders and investors in terms of having options. Asuncion said efforts by the BSP to deepen the capital markets means the country’s financial markets are maturing. This could also deepen the investment appetite and capacity in the country. “If there are opportunities [initiatives] to expand and grow our financial markets, then why not push for it and see how the market can take advantage,” Asuncion said. Last year, Remolona cited a need to deepen the capital market to create a “spare tire” for the country. See “BSP,” A2
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Data from the Treasury showed the country’s debt service in 2023 rose by 23.97 percent to P1.603 trillion compared to the P1.293 trillion total recorded in the previous year. The double-digit growth rates in the state’s payments on both interest and amortization drove an increase in the overall debt payments for the whole year. The state’s debt service payments last year was at its highest in February at P375.714 billion, followed by P238.999 billion in September 2023. Meanwhile, the lowest debt service was recorded in January at P47.831 billion. Broken down, the bulk of the payments went to amortization which reached
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IS THE US OVERESTIMATING CHINA’S POWER?
PESO EXCHANGE RATES n US 55.8200 n JAPAN 0.3771 n UK 71.5054 n HK 7.1375 n CHINA 7.7602 n SINGAPORE 41.8723 n AUSTRALIA 36.9305 n EU 61.1229 n KOREA 0.0422 n SAUDI ARABIA 14.8833 Source: BSP (March 8, 2024)