PHL likely to grow by 6% this year

Philippine gross domestic product (GDP) growth is expected to average 6% this year, at the low end of the government’s 6-7% target, according to analysts. 

Fitch Solutions’ unit BMI lowered its Philippine GDP growth forecast to 6% this year from 6.2% previously, after weaker-than-expected second-quarter data.

“The latest growth outturn clearly showed that we have overestimated the health of the Philippine economy,” it said.

The Philippine Statistics Authority (PSA) last week reported that GDP expanded by 6.3% in the second quarter, quickening from the revised 5.8% in the first quarter and beating the 6% median estimate in a BusinessWorld poll.

BMI had earlier projected 6.5% GDP growth for the second quarter.

For the first half of the year, GDP growth averaged 6%. In order to meet the low end of the government’s 6-7% target, the economy would need to expand by at least 6% in the second semester.

“To reach our previous 6.2% growth projection for 2024, the economy must expand by around 6.4% in the second half, which we think is unlikely,” BMI said.

BMI said that the Philippines’ second-quarter growth print “paints a misleading picture of the economy’s health.”

“Reinforcing our view, the 0.5% quarter-on-quarter expansion recorded was the softest pace since the second quarter of 2023. Much of this weakness stemmed from a poor performance in the external sector, as we had expected,” it said.

On a seasonally adjusted quarter-on-quarter basis, GDP grew by just 0.5%, slower than the 1.1% in the first quarter.

“Indeed, exports contributed just 1.2 percentage points (ppts) to headline growth, halving the strong 2.4-ppt contribution in the prior quarter. Along with a strong pickup in imports, net exports detracted 0.8 ppt from the headline figure,” it added.

PSA data showed that exports of goods and services grew by 4.2% in the second quarter, much slower than the 8.4% growth a quarter ago.

“Against the backdrop of a slowing global economy in the second half, external demand will prove even less supportive over the coming quarters,” it added.

Despite this, BMI noted that domestic demand continues to hold up “pretty well.”

Growth in household consumption slowed to 4.6% from 5.5% a year ago. Private consumption accounts for about three-fourths of the economy.

“Despite a dip in private consumption contribution from 3.4 ppts in the first quarter to 3.2 ppts in the second quarter, the rebound in investment activity more than made up for it,” it said.

Gross capital formation or the investment component of the economy grew by 11.5% in the second quarter, faster than the 0.5% growth in the previous quarter and 0.7% a year ago.

“Contribution from gross fixed capital formation jumped from 0.5 ppt to 2.5 ppts, the highest level in almost two years. We expect imminent rate cuts by the Bangko Sentral ng Pilipinas (BSP) to provide a further lift to domestic activity,” it said.

CITI OUTLOOK

On the other hand, Citigroup, Inc. raised its GDP growth projection to 6% this year from 5.9% previously due to expectations of improving economic conditions.

“While household consumption is likely to only gradually recover, there are supporting factors such as strong employment, as well as the expected lower inflation and interest rates in the coming months,” Citi economist for the Philippines Nalin Chutchotitham said in a report.

Inflation is also seen to continue to ease after the spike in July. “We also agree with the BSP that inflation is projected to decline from August onwards,” it said.

Headline inflation rose to 4.4% in July from 3.7% in June, its fastest pace in nine months.

In the first seven months of the year, headline inflation averaged 3.7%. The BSP expects inflation to average 3.3% this year.

For 2025, Citi sees growth steady at 6%. This would be below the 6.5-7.5% government target.

“We maintain our expectation of 2025 growth at 6%, noting increasing external headwinds from the slowdown in several advanced economies (especially the US), which are the Philippines’ key trading partners and sources of overseas workers’ remittances,” Ms. Chutchotitham said.

EASING TO START

Meanwhile, Citi said that it expects the BSP to commence its easing cycle at its meeting on Thursday.

“We continue to expect a 25-bp rate cut starting at the Aug. 15 policy meeting despite a temporarily high inflation print in July,” Ms. Chutchotitham said.

Citi also expects the Monetary Board to cut rates by 25 bps at its October and December meetings, for a total of 75 bps for the full-year 2024.

“The BSP may, with some small probability, err on the cautious side and stand pat in August, given July’s inflation print at 4.4% year on year amid volatile food and energy prices,” Ms. Chutchotitham said.

A BusinessWorld poll conducted last week showed that nine out of 16 analysts surveyed expect the Monetary Board to deliver a 25-bp rate cut at Thursday’s review. This would bring the target reverse repurchase rate to 6.25% and would be the first reduction in benchmark borrowing costs since November 2020, or during the coronavirus pandemic.

BSP Governor Eli M. Remolona, Jr. last week said they may be “a little bit less likely” to cut rates at its upcoming meeting amid the uptick in July inflation.

At the same time, ING Bank N.V. Research Head and Chief Economist for Asia and the Pacific Robert Carnell said he now expects the BSP to keep rates on hold on Thursday due to recent market volatility.

“Were it me… I probably would leave it this month and wait until the market’s a little calmer,” he said at a briefing on Monday. “The thing that I think makes it more of a coin toss is the volatility of the market backdrop. We have been through a really, pretty hectic and volatile couple of weeks.”

Stronger-than-expected GDP data in the second quarter and July inflation also don’t support the August rate cut, Mr. Carnell said.

“The GDP numbers could have supported that had they been weaker… Having said that, the inflation numbers made it slightly less likely that they’d be easing in August,” he said.

Mr. Carnell also noted that the BSP should wait for other central banks to cut rates first to see how the market reacts.

He expects the Fed to cut by 100 bps this year — a 50-bp cut in September, a 25-bp cut in November and another 25-bp cut in December.

“I just think the optics will look a little bit better in a month’s time, and there’ll also be that sort of safety in numbers at that stage, because we will have the Fed easing by then,” he said.

Aside from its scheduled policy meetings, Mr. Carnell also said that the BSP could still implement an off-cycle rate cut, but this move carries the risk of unnecessarily alarming the market.

Mr. Remolona earlier said that they are “always open” to off-cycle rate cuts.

Source: Business World

May building permit approvals decline

Approved building permits fell 15.4% in May, a turnaround from the year-earlier 8% growth, the Philippine Statistics Authority (PSA) said in a report.

Citing preliminary data, building projects covered by the permits numbered 12,888 in May, down from 15,234 a year earlier.

In May, building projects covered 3.15 million square meters of floor area, down 13.5% year on year.

Construction projects that received approval were valued at P39.32 billion, down 6.5% from a year earlier.

Permits for residential projects, accounting for 63.4% of the total, fell 20.1% to 8,165.

These projects were valued at P20.14 billion, compared with P18.77 billion a year earlier.

Single homes accounted for 87.1% of the residential category, with approved permits declining 23.3% to 7,112.

Permits for apartment buildings totaled 958, up 14.9% from May 2023, while permits for duplex or quadruplex homes tallied 79, down 19.4%.

Nonresidential projects fell 7.7% year on year to 3,017 permits, accounting for 23.4% of the total.

Nonresidential permits were valued at P15.04 billion, declining 28.3% from a year earlier.

Approved commercial construction applications made up 67.8% of all nonresidential projects, and were down 10.2% at 2,045. 

Institutional building permits rose 8.3% to 547, while industrial permits fell 7.7% to 240.

Approved agricultural projects in May 2024 fell 18.2% to 108 while other nonresidential projects fell 18.1% to 77.

Alteration and repair permits totaled 1,063, down 8% from a year earlier. They were valued at P3.61 billion.

On the other hand, permits for additions, or construction that increases the height or area of an existing building, grew 7.9% to 643 approvals.

Calabarzon (Cavite, Laguna, Batangas, Rizal, and Quezon) had the most approved construction projects, accounting for 25.9% of the total with 3,341 permits, followed by Central Luzon (1,846 permits), and Central Visayas (1,445 permits).

The PSA said construction statistics are compiled from the copies of original application forms of approved building permits as well as from demolition and fencing permits collected monthly by the agency’s field personnel from the offices of local building officials nationwide.

Source: Business World

Can a foreigner inherit private land in the Philippines?

Please be informed that Sections 3, 7 and 8 of Article XII of the 1987 Philippine Constitution provide:

"Section 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands and national parks. Agricultural lands of the public domain may be further classified by law according to the uses to which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof, by purchase, homestead, or grant.

Taking into account the requirements of conservation, ecology, and development, and subject to the requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public domain which may be acquired, developed, held, or leased and the conditions therefor.

"Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.

"Section 8. Notwithstanding the provisions of Section 7 of this Article, a natural-born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of private lands, subject to limitations provided by law. (Emphasis supplied)

In the case of Testate Estate of Jose Eugenio Ramirez et al. v. Marcelle D. Vda. De Ramirez et al., GR L-27952, Feb. 15, 1982, through Associate Justice Vicente Abad Santos, the Supreme Court ruled:

"We are of the opinion that the Constitutional provision which enables aliens to acquire private lands does not extend to testamentary succession for otherwise the prohibition will be for naught and meaningless.  Any alien would be able to circumvent the prohibition by paying money to a Philippine landowner in exchange for a devise of a piece of land." (Emphasis supplied)

While the afore-quoted decision was promulgated prior to the effectivity of the 1987 Constitution, it must be noted that the provision in the 1987 Constitution limiting an alien's right to own private land in the Philippines through hereditary succession was likewise found in Article XIII, Section 5 of the 1935 Constitution, to wit:

"SEC. 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines."

Pursuant to the aforementioned provisions of the 1987 Philippine Constitution, a foreign national is prohibited from owning private land in the Philippines, except in cases of hereditary succession. This mode of ownership, as clarified by the Supreme Court, is limited to intestate succession.

So if you are not a legal heir of a Filipino but were only constituted as an heir in their will, and the disposition involves private land, it cannot be legally enforced because it is a violation of the Philippine Constitution.

Source: Manila Times