The International Monetary Fund (IMF) urged the Bangko Sentral ng Pilipinas (BSP) to closely monitor banks' exposures to the manufacturing and public sectors amid uncertainty over global trade policies.
In a report following its Article IV consultation with the Philippines, the IMF said manufacturing sector earnings remain low and the global trade crisis poses risks to manufacturing and wholesale or retail credit.
“Earnings in the manufacturing sector have been weak and the soundness of manufacturing and wholesale or retail credit, which accounts for about 19% of household credit at the end of August 2025, may be impacted by adverse global trade developments,” it said.
Starting August 7, the US is imposing a 19% tariff on most Philippine goods, with the same rate imposed on goods from Cambodia, Malaysia, Indonesia and Thailand.
The US is usually the top destination for Philippine exports.
The latest central bank data showed that banks lent P1.179 trillion to the manufacturing sector at the end of October, equivalent to 8.5% of total bank lending of P13.793 trillion during the period.
Banks lent P1.58 trillion to wholesale and retail trade over the 10-month period, accounting for 11.5% of total lending.
The S&P Global Philippines Manufacturing Purchasing Managers' Index (PMI) fell sharply to 47.4 in November, a reversal from 50.1 in October. It was the biggest decline in four years due to a decline in production and new orders in November.
Also, the IMF said the central bank should keep an eye on household debt as low savings rates among households exacerbate financial system vulnerabilities.
“There is a need for close monitoring given the strong growth in household credit, real estate loans, rapid growth in bank credit cards and salary loans, and low household savings rates due to increase in credit access through NBFIs (non-bank financial institutions) and digital finance,” it said. “Similarly, banks have exposure to the public sector, which has increased since the pandemic.”
The latest BSP data showed that consumer credit rose 21.26% year on year to P3.537 trillion as of September.
corporate relations
Meanwhile, the IMF said the financial system may be more sensitive to risks arising from banks' close ties with the corporate sector.
“The interconnectedness of banks with the corporate sector, including through complex group structures, may also put the financial system at risk,” it said. “NBFIs, some of which are not supervised by the BSP, are relatively small, but they have expanded activities into real estate, consumer credit and lending to micro, small and medium-sized enterprises (MSMEs).”
The Financial Stability Coordination Council previously said it had recently observed tightening links between the financial system and non-financial corporations.
However, the FSCC noted that related risks remain from housing market trends and leverage in the corporate and household sectors, although these are mitigated by banks' strong capital, healthy liquidity and adequate loan loss provisions.
Meanwhile, the IMF said the Philippines should improve its macro-prudential policy framework to reduce potential risks and vulnerabilities.
“Replacing the limits on commercial real estate exposures with regional systemic risk buffers will help capture broader risks in the real estate sector and provide value-based incentives for banks to align their loan portfolios and capital buffers with systemic risk; however, its implementation will need to ensure that there are no unintended changes in the macroprudential stance.”
At the end of September, the banking system's real estate exposure ratio stood at 19.54%, up from 19.61% at the end of June and 19.55% last year. BSP has set a limit of 25% of banks' real estate loans of their total loan portfolio.
Central bank data also showed that past outstanding real estate loans rose 7.06% year-on-year to P158.619 billion at the end of September, from P148.157 billion the year before.
This, past due residential real estate loans increased by 5.16% to P110.379 billion, while past due commercial real estate loans increased by 11.7% to P48.24 billion. , Katherine K. chan