It is unlikely that the Philippines will be affected by US President Donald J. Trump’s tariff plans, S&P Global Ratings said, but warned that this could change if the service export is also the target.
“Fortunately for the Philippines, the export component of the economy is not great. The economy of the Philippines is usually domestic and is also powered by consumption. So, largely, every impact will not be large, “said S&P Global Ratings Director and chief analyst Ivan Tan in a webinar on Thursday.
Markets are braced for the potential impact of Mr Trump’s trade policy, such as mutual rates for all countries that tax the import of the US.
“A reservation is that the export services of the Philippines are quite large,” said Mr. Tan.
Previous data from the Central Bank showed that the Philippines booked $ 37.4 billion in the export of services in the first nine months, an increase of 6.25% compared to a year earlier.
In 2024, the export of services increased by 8.3%, according to data from the Local Statistics Authority. It was also good for 13% of the gross domestic product (GDP).
According to the Filipino development plan, this year is expected to take $ 48.15 billion.
“Now the Trump rate policy is usually on goods. He has not focused any services yet, “said Mr. Tan.
“So that is not our basic case, but if he has to focus his attention on the service industry, then we have to look at ourselves again and think about the potential impact on the economy and, of course, the flow of the impact on the banks. “
Mr. Tan noticed the robust transfers of the country of foreign Filipino employees and the export of services.
“Due to a good education system and English literacy in the Philippines, there are many service employees who work in the US, including doctors and nurses. And transfers are a meaningful contribution to GDP. “
In 2024 the US was the best source of cash transfers. It was good for almost half or 40.6% of the total transfer flows.
Risks for banks
In the meantime, S&P Global said that the Filipino banking system has maintained good capital buffers, although it has marked the risks for the sector, referring to the shift to consumer loans.
“In general, the capitalization and profit have been pretty good, like most Southeast Asia banks in the space of investment quality,” said Mr. Tan.
“The only incremental risk that we see is that banks turn away from company loans, which are little but very safe, to consumer loans with a higher risk and higher return.”
The last information showed that bank loans have risen by 12.2% year after year to P13.1 trillion in the end of December. This was the fastest growth in two years.
“Business loans are approximately 3% of non -performance loans (NPL). Consumer loans, although the margins are very high, the non -performance loans are twice as high. The average consumer loans are around 6% NPL or more. “
“There is a bit of risk at the moment, so we’re taking a good look at that. But for the sake of clarity, the majority of the bankbooks are still in the safe, low return on corporate loans, “said Mr. Tan.
“It will take some time for consumer loans to become a larger, more meaningful part of their balance.”
The gross NPL ratio of the Filipino banking sector fell to 3.54% to 3.27% in November in December. This was also the lowest NPL ratio since the 3.24% posted in December 2023. – – Luisa Maria Jacinta C. Jocson