A Rescue, Not a Stimulus: BSP’s June Cut and the Banking System’s Liquidity Crunch

 

The ultimate cause, therefore, of the phenomenon of wave after wave of economic ups and downs is ideological in character. The cycles will not disappear so long as people believe that the rate of interest may be reduced, not through the accumulation of capital, but by banking policy—Ludwig von Mises 

In this issue

A Rescue, Not a Stimulus: BSP’s June Cut and the Banking System’s Liquidity Crunch

I. Policy Easing in Question: Credit Concentration and Economic Disparity

II. Elite Concentration: The Moody's Warning and Its Missing Pieces

III. Why the Elite Bias? Financial Regulation, Market Concentration and Underlying Incentives

IV. Market Rebellion: When Reality Defies Policy

V. The Banking System Under Stress: Evidence of a Rescue Operation

A. Liquidity Deterioration Despite RRR Cuts

B. Cash Crunch Intensifies

C. Deposit Growth Slowdown

D. Loan Portfolio Dynamics: Warning Signs Emerge

E. Investment Portfolio Under Pressure

F. The Liquidity Drain: Government's Role

G. Monetary Aggregates: Emerging Disconnection

H. Banking Sector Adjustments: Borrowings and Repos

I.  The NPL Question: Are We Seeing the Full Picture?

J. The Crowding Out Effect

VI. Conclusion: The Inevitable Reckoning 

A Rescue, Not a Stimulus: BSP’s June Cut and the Banking System’s Liquidity Crunch 

Despite easing measures, liquidity has tightened, markets have diverged, and systemic risks have deepened across the Philippine banking system. 

I. Policy Easing in Question: Credit Concentration and Economic Disparity 

The BSP implemented the next phase of its ‘easing cycle’—now comprising four policy rate cuts and two reductions in the reserve requirement ratio (RRR)—complemented by the doubling of deposit insurance coverage. 

The question is: to whose benefit? 

Is it the general economy? 

Bank loans to MSMEs, which are supposedly a target of inclusive growth, require a lending mandate and still accounted for only 4.9% of the banking system’s total loan portfolio as of Q4 2024. This is despite the fact that, according to the Department of Trade and Industry (DTI), MSMEs represented 99.6% of total enterprises and employed 66.97% of the workforce in 2023. 

In contrast, loans to PSEi 30 non-financial corporations reached Php 5.87 trillion in Q1 2025—equivalent to 17% of the country’s total financial resources. 

Public borrowing has also surged to an all-time high of Php 16.752 trillion as of April. 

Taken together, total systemic leverage—defined as the sum of bank loans and government debt—reached a record Php 30.825 trillion, or approximately 116% of nominal 2024 GDP. 

While bank operations have expanded, fueled by consumer debt, only a minority of Filipinos—those classified as “banked” in the BSP’s financial inclusion survey—reap the benefits. The majority remain excluded from the financial system, limiting the broader economic impact of the BSP’s policies. 

The reliance on consumer debt to drive bank growth further concentrates financial resources among a privileged few. 

II. Elite Concentration: The Moody's Warning and Its Missing Pieces 

On June 21, 2025, Inquirer.net cited Moody’s Ratings: 

"In a commentary, Moody’s Ratings said that while conglomerate shareholders have helped boost the balance sheet and loan portfolio of banks by providing capital and corporate lending opportunities, such a tight relationship also increases related-party risks. The global debt watcher also noted how Philippine companies remain highly dependent on banks for funding in the absence of a deep capital market. This, Moody’s said, could become a problem for lenders if corporate borrowers were to struggle to pay their debts during moments of economic downturn." (bold added) 

Moody’s commentary touches on contagion risks in a downturn but fails to elaborate on an equally pressing issue: the structural instability caused by deepening credit dependency and growing concentration risks. These may not only emerge during a downturn—they may be the very triggers of one. 

The creditor-borrower interdependence between banks and elite-owned corporations reflects a tightly coupled system where benefits, risks, and vulnerabilities are shared. It’s a fallacy to assume one side enjoys the gains while the other bears the risks. 

As J. Paul Getty aptly put it: 

"If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem." 

In practice, this means banks are more likely to continue lending to credit-stressed conglomerates than force defaults, further entrenching financial fragility. 

What’s missing in most mainstream commentary is the causal question: Why have lending ties deepened so disproportionately between banks and elite-owned firms, rather than being broadly distributed across the economy?

The answer lies in institutional incentives rooted in the political regime. 

As discussed in 2019, the BSP’s trickle-down easy money regime played a key role in enabling Jollibee’s “Pacman strategy”—a debt-financed spree of horizontal expansion through competitor acquisitions. 

III. Why the Elite Bias? Financial Regulation, Market Concentration and Underlying Incentives 

Moreover, regulatory actions appear to favor elite interests. 

On June 17, 2025, ABS-CBN reported: 

"In a statement, the SEC said the licenses [of over 400 lending companies] were revoked for failing to file their audited financial statements, general information sheet, director or trustee compensation report, and director or trustee appraisal or performance report and the standards or criteria for the assessment." 

Could this reflect regulatory overreach aimed at eliminating competition favoring elite-controlled financial institutions? Is the SEC becoming a tacit ‘hatchet man’ serving oligopolistic interests via arbitrary technicalities? 

Philippine banks—particularly Universal Commercial banks—now control a staggering 82.64% of the financial system’s total resources and 77.08% of all financial assets (as of April 2025). 

Aside from BSP liquidity and bureaucratic advantages, political factors such as ‘regulatory capture’ and the ‘revolving door’ politics further entrench elite power. 

Many senior officials at the BSP and across the government are former bank executives, billionaires and their appointees, or close associates. Thus, instead of striving for the Benthamite utilitarian principle of “greatest good for the greatest number,” agencies may instead pursue policies aligned with powerful vested interests. 

This brings us back to the rate cuts: while framed as pro-growth, they largely serve to ease the cost of servicing a mountain of debt owed by government, conglomerates, and elite-controlled banks. 

Figure 1 

However, its impact on average Filipinos remains negligible, with official statistics increasingly revealing the diminishing returns of these policies. 

The BSP’s rate and RRR cuts, coming amid a surge in UC bank lending, risk undermining GDP momentum (Figure 1) 

IV. Market Rebellion: When Reality Defies Policy 

Even markets appear to be revolting against the BSP's policies!

Figure 2

Despite plunging Consumer Price Index (CPI) figures, Treasury bill rates, which should reflect the BSP's actions, have barely followed the easing cycle. (Figure 2, topmost window) 

Yields of Philippine bonds (10, 20, and 25 years) have been rising since October 2024 reinforcing the 2020 uptrend! (Figure 2, middle image) 

Inflation risks continue to be manifested by the bearish steepening slope of the Philippine Treasury yield curve. (Figure 2, lower graph)

Figure 3

Additionally, the USD/PHP exchange rate sharply rebounded even before the BSP announcement. (Figure 3, topmost diagram) 

Treasury yields and the USD/PHP have fundamentally ignored the government's CPI data and the BSP's easing policies. 

Importantly, elevated T-bill rates likely reflect liquidity pressures, while rising bond yields signal mounting fiscal concerns combined with rising inflation risks. 

Strikingly, because Treasury bond yields remain elevated despite declining CPI, the average monthly bank lending rates remain close to recent highs despite the BSP's easing measures! (Figure 3, middle chart) 

While this developing divergence has been ignored or glossed over by the consensus, it highlights a worrisome imbalance that authorities seem to be masking through various forms of interventions or "benchmark-ism" channeled through market manipulation, price controls, and statistical inflation. 

V. The Banking System Under Stress: Evidence of a Rescue Operation 

We have been constantly monitoring the banking system and can only conclude that the BSP easing cycle appears to be a dramatic effort to rescue the banking system. 

A. Liquidity Deterioration Despite RRR Cuts 

Astonishingly, within a month after the RRR cuts, bank liquidity conditions deteriorated further: 

·         Cash and Due Banks-to-Deposit Ratio dropped from 10.37% in March to 9.68% in April—a milestone low

·         Liquid Assets-to-Deposit Ratio plunged from 49.5% in March to 48.3% in April—its lowest level since March 2020 

Liquid assets consist of the sum of cash and due banks plus Net Financial assets (net of equity investments). Fundamentally, both indicators show the extinguishment of the BSP's historic pandemic recession stimulus. (Figure 3, lowest window) 

B. Cash Crunch Intensifies

Figure 4

Year-over-year change of Cash and Due Banks crashed by 24.75% to Php 1.914 trillion—its lowest level since at least 2014. Despite the Php 429.4 billion of bank funds released to the banking system from the October 2024 and March 2025 RRR cuts, bank liquidity has been draining rapidly. (Figure 4, topmost visual) 

C. Deposit Growth Slowdown 

The liquidity crunch in the banking system appears to be spreading. 

The sharp slowdown has been manifested through deposit liabilities, where year-over-year growth decelerated from 5.42% in March to 4.04% in April due to materially slowing peso and foreign exchange deposits, which grew by 5.9% and 3.23% in March to 4.6% and 1.6% in April respectively. (Figure 4, middle image) 

D. Loan Portfolio Dynamics: Warning Signs Emerge 

Led by Universal-Commercial banks, growth of the banking system's total loan portfolio slowed from 12.6% in March to 12.2% in April. UC banks posted a deceleration from 12.36% year-over-year growth in March to 11.85% in April. 

However, the banking system's balance sheet revealed a unmistakable divergence: the rapid deceleration  of loan growth. Growth of the Total Loan Portfolio (TLP), inclusive of interbank lending (IBL) and Reverse Repurchase (RRP) agreements, plunged from 14.5% in March to 10.21% in April, reaching Php 14.845 trillion. (Figure 4, lowest graph) 

This dramatic drop in TLP growth contributed significantly to the steep decline in deposit growth. 

E. Investment Portfolio Under Pressure

Figure 5

Banks' total investments have likewise materially slowed, easing from 11.95% in March to 8.84% in April. While Held-to-Maturity (HTM) securities growth slowed 0.58% month-over-month, they were up 0.98% year-over-year. 

Held-for-Trading (HFT) assets posted the largest growth drop, from 79% in March to 25% in April. 

Meanwhile, accumulated market losses eased from Php 21 billion in March to Php 19.6 billion in May. (Figure 5, topmost graph) 

Rising bond yields should continue to pressure bank trading assets, with emphasis on HTMs, which accounted for 52.7% of Gross Financial Assets in May. 

A widening fiscal deficit will likely prompt banks to increase support for government treasury issuances—creating a feedback loop that should contribute to rising bond yields. 

F. The Liquidity Drain: Government's Role 

Part of the liquidity pressures stem from the BSP's reduction in its net claims on the central government (NCoCG) as it wound down pandemic-era financing. 

Simultaneously, the recent buildup in government deposits at the BSP—reflecting the Treasury's record borrowing—has further absorbed liquidity from the banking system. (Figure 5, middle image) 

G. Monetary Aggregates: Emerging Disconnection 

Despite the BSP's easing measures, emerging pressures on bank lending and investment assets, manifested through a cash drain and slowing deposits, have resulted in a sharp decrease in the net asset growth of the Philippine banking system. Year-over-year growth of net assets slackened from 7.8% in April to 5.5% in May. (Figure 5, lowest chart) 

Figure 6

Interestingly, despite the cash-in-circulation boost related to May's midterm election spending—which hit a growth rate of 15.4% in April (an all-time high in peso terms), just slightly off the 15.5% recorded during the 2022 Presidential elections—M3 growth sharply slowed from 6.2% in March to 5.8% in April and has diverged from cash growth since December 2024. (Figure 6, topmost window) 

The sharp decline in M2 growth—from 6.6% in April to 6.0% in May—reflecting the drastic slowdown in savings and time deposits from 5.5% and 7.6% in April to 4.5% and 5.8% in May respectively, demonstrates the spillover effects of the liquidity crunch experienced by the Philippine banking system. 

H. Banking Sector Adjustments: Borrowings and Repos 

Nonetheless, probably because of the RRR cuts, aggregate year-over-year growth of bank borrowings decreased steeply from 40.3% to 16.93% over the same period. (Figure 6, middle graph) 

Likely drawing from cash reserves and the infusion from RRR cuts, bills payable fell from Php 1.328 trillion to Php 941.6 billion, while bonds rose from Php 578.8 billion to Php 616.744 billion. (Figure 6, lowest diagram) 

Banks' reverse repo transactions with the BSP plunged by 51.22% while increasing 30.8% with other banks. 

As we recently tweeted, banks appear to have resumed their flurry of borrowing activity in the capital markets this June. 

I.  The NPL Question: Are We Seeing the Full Picture? 

While credit delinquencies expressed via Non-Performing Loans (NPLs) have recently been marginally higher in May, the ongoing liquidity crunch cannot be directly attributed to them—unless the BSP and banks have been massively understating these figures, which we suspect they are. 

J. The Crowding Out Effect 

Bank borrowings from capital markets amplify the "crowding-out effect" amid growing competition between government debt and elite conglomerates' credit needs. 

The government’s significant role in the financial system further complicates this dynamic, as it absorbs liquidity through record borrowing. 

Or, it would be incomplete to examine banks' relationships with elite-owned corporations without acknowledging the government's significant role in the financial system. 

VI. Conclusion: The Inevitable Reckoning 

The deepening divergent performance between markets and government policies highlights not only the tension between markets and statistics but, more importantly, the progressing friction between economic and financial policies and the underlying economy. 

Is the consensus bereft of understanding, or are they attempting to bury the logical precept that greater concentration of credit activities leads to higher counterparty and contagion risks? Will this Overton Window prevent the inevitable reckoning? 

The evidence suggests that the BSP's easing cycle, rather than supporting broad-based economic growth, primarily serves to maintain the stability of an increasingly fragile financial system that disproportionately benefits elite interests. 

With authorities reporting May’s fiscal conditions last week (to be discussed in the next issue), we may soon witness how this divergence could trigger significant volatility or even systemic instability 

The question is not whether this system is sustainable—the data clearly indicates it is not—but rather how long political and regulatory interventions can delay the inevitable correction, and at what cost to the broader Philippine economy.

 

Liquidity Under Pressure: Philippine Banks Struggle in Q1 2025 Amid a Looming Fiscal Storm

 

Truth always originates in a minority of one, and every custom begins as a broken precedent—Nancy Astor 

In this issue: 

Liquidity Under Pressure: Philippine Banks Struggle in Q1 2025 Amid a Looming Fiscal Storm

I. Introduction: A Financial-Political Economic System Under Increasing Strain

II. Liquidity Infusion via RRR Cuts: A Paradox: Declining Cash Amid Lending Boom

III. Mounting Liquidity Mismatches: Slowing Deposits Amid Lending Surge, Liquidity Ratios Flashing Red

IV. Government Banks and Broader Financial Systemic Stress

V. Mounting Liquidity Mismatches: Record Surge in Bank Borrowings and Repo Market Heats Up

VI. RRR Cuts as a Lifeline, Not Stimulus, Why the Strain? Not NPLs, Not Profitability

VII. Bank-Financial Index Bubble and Benchmark-ism: Disconnect Between Profit and Market Valuation

VIII. Financial Assets Rise, But So Do Risks; Spotlight on Held-to-Maturity Assets (HTM); Systemic Risks Amplified by Sovereign Exposure

IX. Brace for the Coming Fiscal Storm

X. Non-Tax Revenues: A High Base Hangover; Rising Risk of a Consecutive Deficit Blowout

XI. April 2025 Data as a Critical Clue of Fiscal Health

XII. Aside from Deficit Spending, Escalating Risk Pressures from Trade Disruptions and Domestic Economic Slack

XIII. Final Thought: Deepening Fiscal-Bank Interdependence Expands Contagion Risk Channels 

Liquidity Under Pressure: Philippine Banks Struggle in Q1 2025 Amid a Looming Fiscal Storm 

Behind the balance sheets: why Philippine banks are bleeding cash even as lending accelerates—and what the looming fiscal blowout means for systemic risk. 

I. Introduction: A Financial-Political Economic System Under Increasing Strain

We begin our analysis of the Philippine banking system in Q1 2025 with our April assessment:

"However, the data suggests a different story: increasing leverage in the public sector, elite firms, and the banking system appears to be the real driver behind the BSP’s easing cycle, which also includes RRR reductions and the PDIC’s doubling of deposit insurance. 

"The evidence points to a banking system under strain—record-low cash reserves, a lending boom that fails to translate into deposits, and economic paradoxes like stalling GDP growth despite near-record employment." (Prudent Investor, April 2025) [bold italics original] 

The Bangko Sentral ng Pilipinas (BSP) released pivotal data in its April 2025 Central Bank Survey (MAS) and an updated balance sheet and income statement for the Philippine banking system. 

The findings reveal a sector grappling with severe liquidity constraints despite aggressive monetary easing. 

This article dissects these challenges, exploring their causes, implications, and risks to financial stability, while situating them within the broader economic and fiscal landscape. 

II. Liquidity Infusion via RRR Cuts: A Paradox: Declining Cash Amid Lending Boom 

Figure 1

The second leg of the BSP’s Reserve Requirement Ratio (RRR) reduction in March 2025 resulted in a Php 50.9 billion decrease in liabilities to Other Depository Corporations (ODCs) by April. 

When combined with the first RRR cut last October, the cumulative reduction from October to April amounted to a staggering Php 429.4 billion—effectively unleashing nearly half a trillion pesos of liquidity into the banking system via freed-up cash reserves. (Figure 1, topmost window) 

Even more striking was the BSP’s March report on the balance sheets of Philippine banks. The industry's "cash and due from banks" dived 28.95% year-on-year, from Php 2.492 trillion in 2024 to Php 2.09 trillion in 2025—its lowest level since at least 2014! (Figure 1, middle graph) 

This sharp drop calls into question the effectiveness of RRR cuts while also exposing deeper structural issues within the banking system. 

Ironically, this cash drain occurred alongside a robust expansion in bank lending. Yet, deposit growth stalled, which further strained liquidity and weighed on money supply growth. 

The limited impact of RRR reductions may reflect banks using freed-up reserves to cover existing liquidity shortfalls rather than fueling new lending or deposit growth. 

Meanwhile, the BSP’s move to double deposit insurance through the Philippine Deposit Insurance Corporation (PDIC) last March—nearly coinciding with the second phase of the RRR cut—signals growing concerns over depositor confidence, potentially foreshadowing broader financial stability risks 

III. Mounting Liquidity Mismatches: Slowing Deposits Amid Lending Surge, Liquidity Ratios Flashing Red 

The decline in cash reserves coincided with decelerating deposit growth, even as bank lending surged. 

Deposit liabilities growth fell to just 5.42% in March—its lowest since August 2019. The deceleration was mainly driven by a slowdown in peso deposits growth, from 6.28% in February to 5.9% in March. Foreign currency (FX) deposits also remained a drag, despite a modest improvement from 2.84% to 3.23%. (Figure 1, lowest diagram) 

In stark contrast, the banking sector’s total net lending portfolio (inclusive of RRPs and IBLs) surged to 14.5% in March from 12.31% in February.

Figure 2 

As a result, the ratio of "cash and due from banks" to total deposits has collapsed to 10.37% in March 2025, levels below those seen in 2013—underscoring an escalating liquidity mismatch! (Figure 2, upper pane) 

This divergence highlights a critical tension: despite BSP’s aggressive monetary easing, lending is not translating into deposit growth. Instead, it has created a liquidity conundrum—intensifying balance sheet strain. 

Beyond cash, the liquid assets-to-deposits ratio has fallen back to levels last seen in April 2020, effectively reversing the gains achieved during the BSP’s pandemic-era historic liquidity rescue. 

This indicates a depletion of liquid assets—comprising cash and net financial assets excluding equities—which are crucial for meeting withdrawal demands and regulatory requirements, making this decline a critical vulnerability. 

Curiously, cash positions reported by publicly listed banks on the PSE showed a 4.43% YoY increase, with only five of the 16 banks reporting a cash decline. This apparent contradiction prompted deeper scrutiny. (Figure 2, lower table) 

The divergence between lending and deposit growth indicates a breakdown in the money multiplier effect, where loans typically generate deposits as borrowers spend. 

Two critical factors likely driving the erosion of savings. 

First, steep competition arising from the financing crowding-out effect of government borrowing (via record deficit spending), which competes with banks and the non-financial sector for access to public savings, has been a key force in suppressing savings. 

Second, extensive debt accumulation from malinvestments in 'build-and-they-will-come' sectors further consumes savings and capital, exacerbating the decline. 

IV. Government Banks and Broader Financial Systemic Stress 

Our initial suspicion pointed to government banks (DBP and LBP) as potential sources of the cash shortfall.

Figure 3

However, BSP data revealed that liquidity pressures were widespread—not only affecting universal and commercial banks but also impacting thrift and rural-cooperative banks.  (Figure 3) 

Interestingly, these smaller banking institutions (rural-cooperative banks) displayed relatively better liquidity positions than their larger peers. 

This discrepancy could reflect differing reporting standards between disclosures to the public and to the BSP. 

Diverging indicators could also signal "benchmark-ism"—where worsening problems are obscured through embellished reporting. 

V. Mounting Liquidity Mismatches: Record Surge in Bank Borrowings and Repo Market Heats Up 

Another red flag is the record-high bank borrowing.

Figure 4

Total bank borrowings soared by 40.3% in March to an all-time high of Php 1.91 trillion. This pushed the borrowing-to-liabilities share to 7.89%—its highest level since the pandemic’s onset in March 2020. (Figure 4, topmost chart) 

The sharp rise was driven by bills payable, which skyrocketed by 65.4% in March. 

In contrast, bonds payable grew by just 4.12%. As a result, bills payable now make up 5.5% of total liabilities—almost double the 2.9% share of longer-term bonds. (Figure 4, middle image)

This asymmetry is mirrored in listed banks’ financials. Excluding BPI (which lumps bills under "other borrowed funds"), bills payable surged by 69.4% in Q1 2025 to Php 1.345 trillion. 

MBT alone reported a 214% increase to Php 608 billion—representing 45.21% of the aggregate from PSE-listed banks. 

Repo transactions also surged in March. (Figure 4, lowest diagram) 

Interbank repos hit an all-time high, while repo trades with the BSP reached the third highest level on record. This reflects increasing reliance on short-term funding mechanisms, a hallmark of tightening liquidity conditions. 

This reliance on short-term borrowing for bridge financing, while cost-effective in the near term, exposes banks to refinancing risks, particularly if interbank rates rise or market confidence falters. 

All this underscores that liquidity stress is not confined to a single quarter—it is deeply embedded in bank balance sheets. 

VI. RRR Cuts as a Lifeline, Not Stimulus, Why the Strain? Not NPLs, Not Profitability 

In hindsight, both legs or phases of the RRR cut were not preemptive monetary tools but reactive measures aimed at alleviating a growing liquidity crisis. 

Similarly, rate cuts—intended to reduce borrowing costs—only served to expose the structural weaknesses in the banking system.

Figure 5

According to the BSP, credit delinquency improved in March, with Gross and Net Non-Performing Loans (NPLs) as well as Distressed Assets showing a slight decline. (Figure 5, topmost pane) 

Indeed, the banking system posted a 10.6% YoY increase in Q1 2025 profits—better than last year’s 2.95%, but still significantly weaker than 2022–2023. It was also a deceleration from Q4’s 20.7%. 

While the profit rebound is positive, it may be artificially inflated by 'accounting acrobatics.' The slowdown relative to 2022–2023 suggests diminishing returns from lending—driven by weaker borrower demand, rising unpublished NPLs, or both.’

VII. Bank-Financial Index Bubble and Benchmark-ism: Disconnect Between Profit and Market Valuation 

Despite slowing profit growth, the PSE’s Bank dominated Financial Index continued to hit record highs in Q1 and into May 2025. This signals a disconnect between bank valuations and their actual financial or ‘fundamental’ performance. (Figure 5, middle graph) 

This growing divergence may reflect "benchmark-ism"—where inflated share prices are used to mask the sector’s internal fragilities, as previously discussed. 

Despite a sharp slowdown in revenue growth (10.37% vs. 24% in 2024), listed banks still posted a 7.5% increase in ‘accounting profits.”  (Figure 5, lowest diagram) 

In theory, profits should enhance liquidity, not diminish it—unless those profits are largely cosmetic—"benchmark-ism." 

For investors, the divergence between stock performance and fundamentals signals caution, as inflated valuations could unravel if liquidity pressures escalate. 

VIII. Financial Assets Rise, But So Do Risks; Spotlight on Held-to-Maturity Assets (HTM); Systemic Risks Amplified by Sovereign Exposure 

The rapid contraction in cash reserves cannot be fully attributed to lending, NPLs, or financial asset growth.

Figure 6

Bank financial assets (net) rose 11.8% to an all-time high of Php 7.89 trillion in March. Accumulated unrealized losses narrowed from Php 26.4 billion to Php 21.04 billion. (Figure 6, topmost chart) 

Instead, held-to-maturity (HTM) assets, primarily government securities, offer insight. 

After a period of stagnation, HTMs grew 1.7% in March—breaking the Php 4 trillion ceiling (since 2023) to reach a new high of Php 4.06 trillion. (Figure 6, middle image) 

Despite lower interest rates, banks have not pared back HTM holdings. That’s because most HTMs are composed of government securities, particularly "net claims on the central government" (NCoCG), which surged to a record Php 5.58 trillion in March. (Figure 6, lowest diagram) 

This spike aligns with the record Q1 fiscal deficit—and likely presages a similarly wide Q2 deficit.

IX. Brace for the Coming Fiscal Storm 

As we’ve consistently argued, rising sovereign risk will amplify the banking system’s fragility. 

A blowout fiscal deficit won’t just expose skeletons—such as questionable accounting practices used to inflate profits, understate NPLs, or distort share prices—it will likely push the BSP toward a more aggressive role in stabilizing the financial system. 

This intervention could have sweeping implications for financial markets and the broader economy.

Figure 7

The public and the market's complacency over the government's deteriorating fiscal position has been astonishing. 

In Q1 2025, a steep revenue decline triggered a record fiscal deficit blowout—comparable to historical first-quarter data. As a result, the deficit-to-GDP ratio surged to 7.3%, far above the government’s full-year target of 5.3% (DBCC). (Figure 7, topmost window) 

Markets have largely dismissed these data, buoyed by two ‘available bias’ heuristics: the midterm election cycle and a steady stream of official reassurances. 

Yet it is worth underscoring: the 7.3% deficit-to-GDP ratio masks the extent of dependence on deficit spending. That same deficit spending was a key driver behind Q1 2025’s 5.4% GDP growth—just as it has been in many previous quarters/years. 

Also, it is crucial to distinguish the nature of government spending and revenue: while expenditures are programmed or mandated by Congress, actual disbursements are increasingly prone to executive discretion, with breaches of the enacted budget observed over the past six straight years—symptoms of centralization of power. 

In contrast, revenues depend on both economic activity and administrative collection efforts. 

Despite a 13.6% year-on-year increase in tax revenues in Q1, this gain failed to offset the collapse in non-tax revenues, which plunged by 41.2%. This drop severely weakened the overall revenue base. 

X. Non-Tax Revenues: A High Base Hangover; Rising Risk of a Consecutive Deficit Blowout

Non-tax revenues surged by 57% in 2024, lifting their share of total collections to 13.99%—the highest since 2007’s 17.9%.  (Figure 7, second to the highest chart) 

With a long-term average of 11.7% since 2000, current levels are markedly elevated. Moreover, 2024 figures significantly exceeded the exponential trend, indicating the potential for a substantial retracement. 

While the official breakdown or targets for collection categories remain undisclosed, it is plausible that non-tax revenue targets for 2025 were benchmarked against last year’s elevated base—potentially complicating fiscal planning and exacerbating volatility in public revenue performance 

Authorities expect total revenues to reach 16.5% of GDP in 2025. Yet, in Q1, the revenue-to-GDP ratio slipped to 15.15%, reflecting the substantial shortfall in non-tax collections. 

This implies that the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC)—which posted 16.7% and 5.7% year-on-year growth respectively in Q1—would need to significantly accelerate collections to bridge the gap. 

But the Q1 data suggests that current tax growth trends are unlikely to be sufficient. 

If tax revenue growth merely holds steady—or worse, underperform—then Q1’s historic deficit may not be a one-off.  

Instead, it risks being carried into Q2, leading to a second consecutive quarter of elevated deficits.  

This would reinforce perceptions of fiscal slippage or ‘entropy’, with direct implications for financial markets, interest rates, and banking sector dynamics.  

XI. April 2025 Data as a Critical Clue of Fiscal Health  

The Bureau of the Treasury is expected to release the April 2025 National Government Cash Operations Report (COR) in the final week of May.  

Due to the shift in VAT filing from monthly to quarterly, April’s figures will be the first major test of whether tax receipts can rebound sharply enough to counterbalance the Q1 shortfall.  

April is typically one of the stronger months for collections. For instance, in January 2024, the government recorded a Php 87.95 billion surplus—the highest since 2023—following changes in the VAT reporting regime. (Figure 7, second to the lowest graph) 

To keep the 2025 full-year deficit ceiling of Php 1.54 trillion within reach, the government would need to secure multiple monthly surpluses—or at least significantly smaller deficits. 

A hypothetical Php 200 billion surplus in April would be required to partially offset Q1’s Php 478 billion fiscal gap and keep the official trajectory on track.  

XII. Aside from Deficit Spending, Escalating Risk Pressures from Trade Disruptions and Domestic Economic Slack  

However, this fiscal balancing act is made more difficult by worsening external and domestic conditions.  

The global trade slowdown—exacerbated by ongoing trade tensions and supply chain fragmentation—will likely weigh on the Philippines’ external trade. 

Meanwhile, intensifying signs of slack in the domestic economy further threaten revenue generation, especially for the BIR and BOC. 

These pressures highlight the structural reliance on debt-financed deficit spending. 

Rising fiscal shortfalls increase sovereign risk, which can ultimately be transmitted into the broader economy through multiple channels—elevated inflation or stagflation risks, weakening credit quality or credit risks, liquidity pressures in the banking system and more. 

Contagion risks may also emerge in financial markets, manifesting through a surge in the USD/Php exchange rate (currency risk), rising bond yields (currently diverging from declining ASEAN counterparts) or interest rate risk, and amplified volatility in the stock market (including related markets—market risk). (Figure 7, lowest image) 

All these factors align with—and reinforce—the deteriorating liquidity and funding conditions apparent in bank balance sheets.

The nexus between fiscal fragility and banking stress is no longer theoretical; their growing interdependence is symptomatic in slowing deposit growth, increased reliance on repo markets, and rising bank borrowing. 

XIII. Final Thought: Deepening Fiscal-Bank Interdependence Expands Contagion Risk Channels 

As fiscal risks mount, so too does the potential for cross-sectoral contagion and cascading effects. The banking system—already struggling with liquidity depletion—faces heightened exposure due to its expanding claims on sovereign securities (implicit quantitative easing). 

Again, though partially obscured, stagflationary pressures, deteriorating credit quality, and rising funding costs may converge, amplifying broader macro-financial instability. 

In short, the fiscal storm is no longer a distant threat—it is approaching fast, and its first casualties may already be visible in the cracks forming across the financial system. 

______   

Reference 

Prudent Investor, BSP’s Fourth Rate Cut: Who Benefits, and at What Cost?, April 13,2025, Substack

BSP’s Fourth Rate Cut: Who Benefits, and at What Cost?

 

A country does not choose its banking system: rather it gets a banking system consistent with the institutions that govern its distribution of political power—Charles Calomiris and Stephen Haber

In this issue

BSP’s Fourth Rate Cut: Who Benefits, and at What Cost?

I. Introduction: BSP’s Easing Cycle, Fourth Interest Rate Cut

II. The Primary Beneficiaries of BSP’s Policies

III. The Impact of the BSP Monetary Policy Rates on MSMEs

IV. The Inflation Story—Suppressed CPI as a Justification? Yield Curve Analysis

V. Logical Contradictions in the Philippine Banking Data

VI. Slowing Bank Asset Growth

VII. Booming Bank Lending—Magnified by the Easing Cycle

VIII. Economic Paradoxes from the BSP’s Easing Cycle

IX. Plateauing Investments and Rising Losses

X. Mounting Liquidity Challenges in the Banking System

XI. Conclusion: Unmasking the BSP’s Easing Cycle: A Rescue Mission with Hidden Costs 

BSP’s Fourth Rate Cut: Who Benefits, and at What Cost? 

As part of its ongoing easing cycle, the BSP cut rates for the fourth time in April 2025. The key question: who benefits? Clues point to trickle-down policies at work. 

I. Introduction: BSP’s Easing Cycle, Fourth Interest Rate Cut 

The Bangko Sentral ng Pilipinas (BSP) initiated its easing cycle in the second half of 2024, implementing three rate cuts and reducing the banking system’s Reserve Requirement Ratio (RRR) in October 2024. 

This was followed by a second RRR reduction in March 2025, complemented by the doubling of deposit insurance by the Philippine Deposit Insurance Corporation (PDIC), a BSP-affiliated agency, in the same month. 

The latter was likely intended to boost depositor confidence in the banking system, given the rapid decline in banks’ reserves amid heightened lending and liquidity pressures. (previously discussed) 

Last week, the BSP announced its fourth rate cut—the first for 2025—bringing the policy rate to 5.5%. 

The BSP justified this latest cut by citing the easing of inflation risks and a "more challenging external environment, which could dampen global GDP growth and pose downside risks to domestic economic activity." 

But who truly benefits from these policies? 

Or, we ask: Cui bono? 

The answer naturally points to the largest borrowers: the Philippine government, elite-owned conglomerates, and the banking system. 

Let’s examine the beneficiaries and question whether the broader economy is truly being served. 

II. The Primary Beneficiaries of BSP’s Policies 

The BSP’s easing measures disproportionately favor the following:

Figure 1

A. The Philippine Government: Public debt surged by Php 319.26 billion to a record PHP 16.632 trillion in February 2025.  Debt-to-GDP ratio increased to 60.72% in 2024, up from 60.1% in 2023. (Figure 1, topmost image) 

While debt servicing data for the first two months of 2025 appears subdued, it accounted for 7.64% of nominal GDP in 2024—a steady increase from its 2017 low of 4.11%. Between 2022 and 2024, the debt servicing-to-GDP ratio accelerated from 5.87% to 7.64%, reflecting the growing burden of rising debt.

Lower interest rates directly reduce the government’s borrowing costs, providing fiscal relief at a time of record-high debt, but they also encourage more debt-financed spending, a key factor contributing to this all-time high.

B. Elite-Owned Conglomerates: Major corporations controlled by the country’s elites have also seen their debt levels soar. 

For instance, San Miguel Corporation’s 2024 debt increased by Php 154.535 billion to a record Php 1.56 trillion, while Ayala Corporation’s debt rose by PHP 76.92 billion to PHP 666.76 billion. 

Other member firms of the PSEi 30 have yet to release their annual reports, but Q3 2024 data shows that the non-financial debt of the PSEi 30 companies grew by Php 208 billion, or 3.92%, to PHP 5.52 trillion—equivalent to 16.6% of Total Financial Resources (Q3).

These conglomerates benefit from lower borrowing costs, enabling them to refinance existing debt or fund expansion at cheaper rates, but similar to the government, their mounting loan exposure diverts financial resources away from the rest of the economy, exacerbating credit constraints for smaller firms. 

C. The Philippine Banking System: The banking sector itself is a significant beneficiary. 

In February 2025, aggregate bonds and bills payable surged by Php 560.2 billion—the fourth-highest increase on record—pushing outstanding bank borrowings to PHP 1.776 trillion, the second-highest level ever, just below January 2025’s all-time high of PHP 1.78 trillion. (Figure 1, middle pane)

Ideally, lower rates and RRR cuts provide banks with cheaper funding and more lendable funds, boosting their profitability while easing liquidity pressures. But have they? 

These figures reveal the primary beneficiaries of the BSP’s policies: the government, elite conglomerates, and the banking system.

III. The Impact of the BSP Monetary Policy Rates on MSMEs

But what about the broader economy, particularly the micro, small, and medium enterprises (MSMEs) that form its backbone?

Republic Act 9501, the Magna Carta for MSMEs, mandates that banks allocate at least 8% of their total loan portfolio to micro and small enterprises (MSEs) and 2% to medium enterprises (MEs), based on their balance sheets from the previous quarter.

However, a recent report by Foxmont Capital Partners and Boston Consulting Group (BCG), cited by BusinessWorld, highlights a stark mismatch: despite MSMEs comprising 99.6% of all businesses in the Philippines, generating 67% of total employment, and contributing up to 40% of GDP, they accounted for only 4.1% of total bank lending in 2023—a sharp decline from 8% in 2010.

As of Q3 2024, the BSP reported a total compliance rate with the Magna Carta for MSMEs stood at just 4.6%. (Figure 1, lower graph)

Despite a boom in bank lending, many banks opt to pay penalties for non-compliance rather than extend credit to MSMEs.

This underscores a harsh reality: bank lending remains concentrated among a select few—large corporations and the government—while MSMEs continue to be underserved.

All told, the BSP's policies have minimal impact on MSMEs, highlighting their distortive distributional effects

The report further echoes a "trickle-down" monetary policy critique we’ve long emphasized: the Philippine banking system is increasingly concentrated. Over 90% of banking assets are held by just 20 large banks, while more than 1,800 smaller institutions, primarily serving rural areas, collectively control only 9% of total assets!

Figure 2

This concentration is evident in the universal and commercial banks’ share of total financial resources, which stood at 77.7% in January 2025, slightly down from a historic high of 77.9% in December 2024. (Figure 2, topmost diagram)

If the BSP’s policies primarily benefit the government, banks, and elite conglomerates rather than the broader economy, why is the central bank pushing so hard to continue its easing cycle? And what have been the effects of its previous measures?

IV. The Inflation Story—Suppressed CPI as a Justification? Yield Curve Analysis

One of the BSP’s stated reasons for the April 2025 rate cut was a decline in the Consumer Price Index (CPI), with March headline CPI at 1.8%.

However, authorities have done little to explain to the public the critical role that Maximum Suggested Retail Prices (MSRPs)—essentially price controls—played in shaping this decline.

First, the government imposed MSRPs on imported rice on January 20, 2025, despite rice prices already contracting by 2.3% that month. (Figure 2 middle chart)

The second phase of rice MSRPs was implemented on March 31, despite rice prices deflating.

Second, pork MSRPs were introduced on March 10, 2025.

Pork inflation, which peaked at 8.5% in February, slipped to 8.2% in March, despite a reported compliance rate of only 25% in the National Capital Region (NCR).

Notably, pork sold in supermarkets and hypermarkets was exempt from these controls, revealing an inherent bias of policymakers against MSMEs. Were authorities acting as tacit sales agents for the former?

Third, since the introduction of these quasi-price controls, headline CPI has declined faster than core CPI (which excludes volatile food and energy prices), which printed 2.2% in March. (Figure 2, lowest window)

Food CPI, with a 34.78% weighting in the CPI basket, has likely been a significant driver of this decline, more so than core CPI.

This divergence suggests that price controls artificially suppressed headline inflation, masking underlying price pressures.

Meanwhile, the falling core CPI points to weak consumer demand, a concerning trend given the Philippines’ near-record employment rates.

Figure 3

Finally, the Philippine treasury market appears to challenge the BSP’s narrative of controlled inflation at 1.8% in March 2025.

Yield data shows a subtle flattening in the mid-to-long section of the curve: yields for 2- to 5-year maturities dipped slightly (e.g., the 5-year yield fell by 2.8 basis points from February 28 to March 31), while the 10-year yield rose by 6.75 basis points, and long-term yields, such as the 25-year, declined by 3.15 basis points. (Figure 3, topmost image)

This flattening—driven by a narrowing spread between medium- and long-term yields—may reflect market concerns about economic growth and banking system liquidity.

Despite this, the overall yield curve remains steep last March, signaling that the market anticipates inflation risks in the future.

This suggests that Treasury investors doubt the sustainability of the BSP’s inflation management.

We suspect that authorities leveraged price controls to justify the rate cut, using the suppressed CPI as a convenient metric rather than a true reflection of economic conditions.

This raises questions about the BSP’s transparency and the real motivations behind its easing cycle.

V. Logical Contradictions in the Philippine Banking Data

When you make a successful lending transaction, you get back not only your capital but the interest with it. Less costs, this income represents your profits and adds to your liquidity (savings or capital).

When you make a successful investment transaction, you get back not only your capital but the dividend or capital gains with it. Less costs, this income also represents your profits and adds to your liquidity (savings or capital).

Applied to the banking system, under these ideal circumstances, declared profits should align with liquidity conditions, but why does this depart from this premise?

Let us dig into the details. 

VI. Slowing Bank Asset Growth 

Bank total assets grew by 8% year-over-year (YoY) in February 2025 to PHP 26.95 trillion, slightly below December 2024’s historic high of PHP 27.4 trillion.  (Figure 3, middle pane)

Despite the BSP’s easing cycle, the growth in bank assets has been slowing, a downtrend that has persisted since 2013. This decline in the growth of bank assets has mirrored the falling share of cash reserves.

The changes in the share distribution of assets illustrate the structural evolution of the Philippine banking system.

As of February 2025, lending, investments, and cash represented the largest share, totaling 92.6%, broken down into 54.5%, 28.8%, and 8.8%, respectively. (Figure 3, lowest visual)

Since 2013, the share of cash reserves has been declining, bank loans broke out of their consolidation phase in July 2024 (pre-easing cycle), while the investment share appears to be peaking.

VII. Booming Bank Lending—Magnified by the Easing Cycle

The Total Loan Portfolio (inclusive of Interbank Loans (IBL) and Reverse Repurchase Agreements (RRP)) grew by 12.3% in February 2025, slightly down from 13.7% in January.

Since the BSP’s historic rescue during the pandemic recession, bank lending growth has been surging, regardless of interest rate and Reserve Requirement Ratio (RRR) levels. The recent interest rate and RRR cuts have only amplified these developments.

Figure 4

Notably, bank lending growth has become structurally focused on consumer lending, with the Universal-Commercial share of consumer loans rising to an all-time high as of February 2025. (Figure 4, topmost graph)

This shift is partly due to credit card subsidies introduced during the pandemic recession. This evolution in the banks’ business model also points to an inherent proclivity toward structural inflation: producers are receiving less financing (leading to reduced production and more imports), while consumers have been supplementing their purchasing power, likely to keep up with cumulative inflation.

In short, this strategic shift toward consumption lending underlines the axiom of "too much money chasing too few goods."

The rising loan-to-deposit ratio further shows that bank lending has not only outperformed asset growth, but ironically, these loans have not translated into deposits. (Figure 4, middle chart)

Total deposit liabilities growth slowed from 6.83% in January to 5.6% in February, driven by a slowdown in peso deposits (from 6.97% to 6.3%) and a sharp plunge in foreign exchange (FX) deposit growth (from 6.14% to 2.84%). (Figure 4, lowest window)

Peso deposits accounted for 82.7% of total deposit liabilities. Ironically, despite the USD-PHP exchange rate drifting near the BSP’s ‘upper band limit’ or its ‘Maginot Line’, FX deposit growth has materially slowed.

VIII. Economic Paradoxes from the BSP’s Easing Cycle 

Paradoxically, despite near-record employment levels (96.2% as of February 2025) and stratospheric loan growth propelled by consumers, the GDP has been stalling, with Q3 and Q4 2024 underperforming at 5.2% and 5.3%, respectively.

Real estate vacancies have been soaring—even the most optimistic analysts acknowledge this—and Core CPI has been plunging (2.2% in March 2025, as mentioned above).

Figure 5

Meanwhile, social indicators paint a grim picture: SWS hunger rates in March have hit near-pandemic milestones, and self-rated poverty, affecting 52% of families, has rebounded in March after dropping in January 2025 to 50% from a 21-year high of 63% recorded in December 2024. (Figure 5, topmost image) 

In a nutshell, where has all the fiat money created via loans flowed? What is the black hole consuming these supposedly profitable undertakings? 

IX. Plateauing Investments and Rising Losses 

The plateauing of investments is highlighted by their slowing growth rates. 

Total Investments (Net) decelerated from 5.85% in January to 4.86% in February 2025. This slowdown comes in the face of elevated market losses, which remained at PHP 26.4 billion in February, down from PHP 38.1 billion a month ago. (Figure 5, middle diagram) 

Held-to-Maturity (HTM) securities accounted for the largest share of Total Investments at 52.22%, followed by Available-for-Sale (AFS) securities at 38.5%, and Financial Assets Held for Trading (HFT) at 5.6%. 

Despite the CPI’s sharp decline, backed by the BSP’s easing, elevated Treasury rates—such as the 25-year yield at 6.3%—combined with losses in trading positions at the PSE (despite coordinated buying by the "national team" which likely includes some banks—to prop up the PSEi 30 index) have led to losses in banks’ trading accounts. 

Clearly, this is one reason behind the BSP’s easing cycle.

Yet, HTM securities remain the largest source of bank investments.

In early March 2025, we warned that the spike in banks’ funding of the government via Net Claims on Central Government (NCoCG) would filter into HTM assets: 

"Valued at amortized cost, HTM securities mask unrealized losses, potentially straining liquidity. Overexposure to long-duration HTMs amplifies these risks, while rising government debt holdings heighten banks’ sensitivity to sovereign risk. 

With NCoCG at a record high, this tells us that banks' HTMs are about to carve out another fresh milestone in the near future. 

In short, losses from market placements and ballooning HTMs have offset the liquidity surge from a lending boom, undermining the BSP’s easing efforts." (Prudent Investor, March 2025)

Indeed, the NCoCG spike to a record PHP 5.54 trillion in December 2024 pushed banks’ HTM holdings above their previous high of PHP 4.017 trillion in October 2023, breaking the implicit two-year ceiling of PHP 4 trillion to set a fresh record of PHP 4.051 trillion in February 2025. (Figure 5, lowest pane) 

This increase raised the HTM share of assets from 14.7% in January to 15.03% in February. 

X. Mounting Liquidity Challenges in the Banking System

Figure 6

This new all-time high in HTM securities led to a fresh all-time low in the cash-to-deposit ratio, meaning that despite the RRR cuts, cash reserves dropped more than the slowdown in deposit growth would suggest. (Figure 6, topmost chart)

The banking system’s cash and due from banks fell 2.94% in February to PHP 2.37 trillion, its lowest level since June 2019, effectively erasing all of the BSP’s unprecedented PHP 2.3 trillion cash injection in 2020-21. (Figure 6, middle graph)

Moreover, the liquid assets-to-deposits ratio, another bank liquidity indicator, dropped to June 2020 levels. (Figure 6, lowest visual)

The BSP cut the RRR in October 2024, yet liquidity challenges continue to mount. What, then, will the March 2025 RRR cut achieve? While the BSP notes that bank credit delinquency measures—such as gross non-performing loans (NPLs), net NPLs, and distressed assets—have remained stable, it’s doubtful that HTM securities are the sole contributor to the liquidity challenges faced by the banking system.

Improving mark-to-market losses are part of the story, but with record credit expansion (in pesos) and an all-time high in financial leverage amid a slowing GDP, it’s likely that the banks’ unpublished NPLs are another factor involved.

Figure 7

Additionally, banks have increasingly relied on borrowing, with bills payable accounting for 67% of their outstanding debt. (Figure 7, upper graph)

Though banks have reduced their repo exposure with the BSP, interbank repos set a record high in February 2025, providing further signs of liquidity strains. (Figure 7, lower chart)

Banks have been aggressively lending, particularly to high-risk sectors such as consumers, real estate, and trade, to raise liquidity to fund the government.

However, this has led to a build-up of HTM securities and sustained mark-to-market losses for HFT and AFS assets.

Additionally, lending to high-risk sectors like consumers and real estate increases the risk of defaults, particularly in a slowing economy, which can strain liquidity if these loans become non-performing.

Moreover, this lending exacerbates maturity mismatches—for instance, when short-term deposits are used to fund longer-term real estate loans—amplifying the liquidity challenges as banks face immediate funding demands with potentially impaired assets.

While the BSP’s “relief measures” may understate the true risk exposures of the industry, the mounting liquidity challenges and the increasing scale and frequency of their combined easing policies have provided clues about the extent of these risks.

Borrowing from our conclusion in March 2025:

"The BSP’s easing cycle has fueled a lending boom, masked NPL risks, and propped up government debt holdings, yet liquidity remains elusive. Cash reserves are shrinking, deposit growth is faltering, and banks are borrowing heavily to stay afloat.

...

As contradictions mount, a critical question persists: can this stealth loose financial environment sustain itself, or is it a prelude to a deeper crisis?" (Prudent Investor March 2025)

Under these conditions, the true beneficiaries of the BSP’s easing cycle become clear: it is primarily a rescue of the elite owned-banking system. 

XI. Conclusion: Unmasking the BSP’s Easing Cycle: A Rescue Mission with Hidden Costs 

The BSP has used inflation and external challenges to justify its fourth rate cut in April 2025, part of an easing cycle that began in the second half of 2024. 

The sharp decline in the March CPI rate to 1.8%—potentially understated due to price controls through Maximum Suggested Retail Prices (MSRPs)—may have provided a convenient rationale. 

However, the data suggests a different story: increasing leverage in the public sector, elite firms, and the banking system appears to be the real driver behind the BSP’s easing cycle, which also includes RRR reductions and the PDIC’s doubling of deposit insurance. 

The evidence points to a banking system under strain—record-low cash reserves, a lending boom that fails to translate into deposits, and economic paradoxes like stalling GDP growth despite near-record employment. 

When the BSP cites a "more challenging external environment, which would dampen global GDP growth and pose a downside risk to domestic economic activity," it is really more concerned about the impact on the government’s fiscal conditions, the health of the elite-owned banking system, and elite-owned, too-big-to-fail corporations. 

This focus comes at the expense of the broader economy, as MSMEs remain underserved and systemic risks, such as unpublished NPLs and overexposure to government debt, continue to mount. 

As the BSP prioritizes a rescue mission for its favored few, one must ask: at what cost to the Philippine economy, and can this trajectory avoid a deeper crisis?