BSP: Youth more financially literate

Young adults in the country are more financially literate than middle-aged and senior Filipinos, a Bangko Sentral ng Pilipinas (BSP) study showed, suggesting financial education programs should adapt to changing age priorities.

Using the 2018 BSP Consumer Finance Survey (CFS) as the primary data source, the central bank found that across the three age categories, young adults registered the highest financial literacy index of 0.742, higher than the middle-aged and senior cohorts at 0.656 and 0.623, respectively.

The nationwide triennial survey examines the financial state of households, covering financial and non-financial assets such as savings, investments, debts, real property, income and expenditures.

The 2018 CFS surveyed 14,860 households. However, for this analysis, the central bank only considered households with at least P10,000 in annual income and at least P1,000 in annual expenditure, resulting in a final sample of 7,084 households.

They categorized the respondents as young adults (18 to 39 years old), middle-aged (40 to 59 years old), and seniors (60+).

The BSP said that higher income slightly increases financial literacy levels, and respondents with at least a high school education have significantly better financial knowledge and skills.

It noted that young adults are more likely to spend equal to or less than their annual income, whereas spending more than their annual income is less common for this group.

In contrast, middle-aged and senior individuals are less inclined to spend equal to or less than their income compared to young adults.

"It is possible that the older age groups have larger expenses, such as food, education of children, medicines and other consumption needs of the household," the BSP explained.

Moreover, the central bank revealed that middle-aged individuals are less likely than young adults to have a loan-to-income ratio of less than 1, with which higher income levels also increase the likelihood of having a loan-to-income ratio below 1.

During middle age, BSP said that many people take out loans for significant purchases like homes, leading to higher loan-to-income ratios compared to younger adults. Those with higher incomes can borrow larger amounts due to their perceived ability to repay.

Furthermore, the central bank found that primarily young adults and middle-aged individuals have some form of deposit account with banks or non-bank institutions.

Among those queried, only 66 percent of these respondents disclosed the amount in their deposit accounts, and 79 percent revealed the amount of emergency cash they possess.

Most of the respondents who provided details about their accounts were in the middle-aged group (774 respondents), followed by the young adult group (759 respondents) and the senior group (270 respondents).

"We observed that in terms of the average amount of savings, the senior age group has the highest average amount of savings, followed by the middle-aged and young adult groups," the BSP said.

"The savings of the senior age cohort could include the lump sum payment that they received when they retired, retirement benefits and savings made over the years," it added.

The BSP observed that people's financial behaviors vary with age and life stage, influencing whether they prioritize short-term or long-term financial strategies, noting that there's a low importance given to retirement planning and saving.

"Financial programs and interventions could help address this issue by designing and implementing modules that focus on the value of planning for retirement," the BSP said.

It emphasized that as individuals age and progress through different stages of life, their priorities, preferences, economic status and financial circumstances can change; hence, these changes can significantly influence people's financial decisions and behaviors.

"Thus, such factors should be considered in the design of financial education programs to make them more effective and responsive to the needs of their target participants and learners," it said.

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Source: Manila Times

Pursue progressive tax reforms, government urged

The national government (NG) may need to impose new taxes or raise tax rates in order to meet its revenue goals, GlobalSource Partners said.

In a report, GlobalSource country analyst Diwa C. Guinigundo said that the government is “bent on depending on intensified tax collection to fund the deficit.”

“This course may have its natural limits and sooner or later, additional or higher tax rates may be inevitable,” he said.

“With the persistent issues in governance, the old formula of intensifying tax collection and ensuring compliance with tax laws may not deliver sufficient revenues,” he added.

Finance Secretary Ralph G. Recto has reiterated there are no plans to introduce new taxes apart from the reform measures pending in Congress.

Instead, the Finance department is seeking to rely on enhanced tax administration and ramping up nontax revenues, such as privatizing state assets.

The latest data from the Bureau of the Treasury (BTr) showed that the NG’s budget deficit in the January-May period widened by 24.06% to P404.8 billion as spending outpaced revenue growth.

“Since fiscal goals are anchored to growth targets, setting high gross domestic product (GDP) targets amidst external headwinds risks revenue shortfalls,” Mr. Recto said in a forum.

“This would strain our deficit and potentially increase borrowing. But tempering these targets does not diminish our commitment to fiscal consolidation. Instead, it reflects a confident and conservative approach to fiscal policy making,” he added.

The latest data from the Finance department showed that revenue collections jumped by 14.5% to P2.13 trillion in the first half of the year.

For the full year, the government is aiming to generate P4.27 trillion in revenues, including P3.83 trillion in tax revenues.

“The legislative process could also be protracted if new tax laws are required so it is critical to already line up priority tax bills,” Mr. Guinigundo said.

He noted some of the administration’s priority tax measures, such as the Passive Income and Financial Intermediary Taxation Act, value-added tax on digital service providers, and excise tax on single-use plastics.

These measures, along with the mining fiscal regime, the motor vehicle road user’s change, and amendments to the Corporate Recovery and Tax Incentives for Enterprises law and Package 4 of Comprehensive Tax Reform Program, are expected to yield P42 billion in annual revenues, the DoF said earlier.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that introducing taxes may be a “final resort” by the government.

“Upon exhausting existing tax laws and intensified tax collections, including stricter enforcement such as running after tax cheats, then new taxes and higher taxes would be the final resort, especially if inflation stabilizes further since new taxes and higher taxes could lead to faster inflation,” he said in a Viber message.

Mr. Guinigundo also said the government may need to increase its borrowings, but also ensure effective utilization of the budget.

“Apart from judicious budget utilization, sustainable financing of the increasing fiscal deficit is key to higher economic growth,” he said.

The Department of Budget and Management (DBM) is proposing a 10% increase in next year’s budget to P6.352 trillion.

“The bigger magnitude (of the budget) is no guarantee of any significant gains in economic growth or development,” he said.

“The bottom line is the ability of the Philippine government to make wise use of the budget to establish more critical infrastructure like power, address the fundamental issues in health and education, strengthen the country’s connectivity and digitalization, make headway in promoting rule of law and reducing poverty.

Source: Business World

Government halves number of low-cost housing units it aims to build by 2028

The Department of Human Settlements and Urban Development (DHSUD) on Monday said that it is cutting by half the number of low-cost housing units it is targeting to build by 2028 because of delays, including in getting financing for housing developments.

“Dati 6 million [units], e hindi matatapos yung 3 million,” DHSUD Secretary Jose Rizalino Acuzar told state television PTV.

(It was 6 million units before, but we cannot finish some 3 million units.)

Among the challenges DHSUD is facing is the long processing times — around 9-12 months — for bank loans to housing developers.

 “Kaya, pero matagal. Siyempre pag pumunta ka sa bangko, hahanapan ka ng documentation,” he said.

(It can be done, but it takes a long time. Of course, if you go to the bank, they will ask you for documentation.)

He said that the delays in funding have meant that only 140,000 units of the 1 million a year that the Marcos Jr. administration originally promised have been built.

The administration is looking at a new scheme where the government would borrow the loans and serve as the developer, Acuzar, a real estate developer before joining government, said.

“Instead na private, si gobyerno na kasi si gobyerno puwede mangutang… government-to-government so medyo madali,” he said.

(Instead of private contractors borrowing from banks, the government will be the one to take out the loans… It will be easier because we can do transactions between government offices.)

In 2022, the DHSUD committed to building 1 million housing units annually to address the Philippines’ 6.5-million backlog in residential spaces.

 In 2023, President Ferdinand Marcos Jr. reiterated that promise, noting that his administration is working to construct 1.2 million housing units by the end of that year.

Source: ABC