MANILA -  The International Monetary Fund said the two state-owned banks that contributed to the Maharlika Investment Fund should be recapitalized to strengthen the Philippines' financial system.

In its 2024 Country Report on the Philippines, the IMF said it was important to implement capital restoration plans for the Land Bank of the Philippines and the Development Bank of the Philippines after these were tapped by the government for the Maharlika Investment Corporation (MIC).

Landbank was made to contribute P50 billion to the MIC, while DBP gave P25 billion. The national government meanwhile was eyed to contribute another P50 billion into the MIC, which was envisioned to be a sovereign investment fund that would help finance flagship infrastructure projects.

"While the establishment of the MIC can help address the country’s investment needs; it should not come at the cost of a resilient financial system, sound regulatory framework, and level playing field," the IMF said.

Gov't urged to return Maharlika money from Landbank, DBP

The IMF also noted that segments of the commercial real estate sector have seen persistently high vacancies and falling rents. It said that non-performing loans from the residential real estate sector stand at 6.8 percent, above pre-pandemic levels.

"Hence real estate loans, at 20 percent of banks’ loan books system-wide, require close monitoring as of end-June 2024," the IMF said.

Meanwhile, the IMF said it expects the Philippine economy to grow 5.8 percent in 2024 and pick up to 6.1 percent in 2025. it also expects inflation to decline to 3.2 percent on average in 2024 from 6.0 percent in 2023, supported by the reduction in rice tariffs and other non-monetary measures to reduce food prices.