GDP growth may miss top-end goal

Philippine economic growth is unlikely to reach the upper end of the government’s 5.5-6.5% target this year amid higher US tariffs and slowing remittances, analysts said.

Foundation for Economic Freedom President Calixto V. Chikiamco said hitting the 6.5% mark is “possible, but improbable.”

“More so with [US President Donald J.] Trump tariffs on our key exports and a global economic slowdown,” Mr. Chikiamco said.

The economy grew by an annual 5.5% in the April-to-June period, supported by a rebound in agriculture production and faster household consumption.

For the first half, gross domestic product (GDP) growth averaged 5.4%, slower than the 6.2% a year ago.

Economic Secretary Arsenio M. Balisacan said the economy must grow by 5.6% in the second half to achieve the low end of the full-year target, and by 7.5% to hit the upper end of the goal.

“However, if the administration keeps its same steady as you go approach, the likelihood is that not only will the government fail to reach its minimum 6% growth target, but actually achieve less than 5.5% growth,” Mr. Chikiamco said.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the required 7.5% average growth in the July-to-December period is a “stretch goal but not impossible.”

“It will require strong export performance despite global headwinds, faster infrastructure rollout after the election spending ban, and sustained household and investment spending,” he said in a Viber message over the weekend.

Mr. Trump imposed a 19% export levy on goods from the Philippines, as well as Cambodia, Malaysia, Thailand, and Indonesia. This took effect on Aug. 7.

“With the tariff rate on the Philippines’ goods being in line with other ASEAN (Association of Southeast Asian Nations) emerging markets, the Philippines risks losing the opportunity of increasing its market share in the US,” HSBC economist for ASEAN Aris D. Dacanay said.

Mr. Dacanay said the strong growth in exports is unlikely to be sustained in the next semester.

“But unlike private consumption, we do not think this strong performance will be sustained. The robust performance was a result of frontloading of import demand across the globe in anticipation of higher US tariffs,” he said.

However, BMI said Philippines is well-insulated from the US tariffs “exports-wise,” but there is a possibility of Mr. Trump raising the tariffs if the Philippines fails to spend at least 5% of its GDP on military spending.

“If Trump threatens a higher tariff because of the nonfulfillment, we anticipate a further slowdown in export growth for the Philippines,” BMI said.

Mr. Rivera said he expects softer export growth, especially for sectors like electronics, garments, and agriculture.

“However, the full effect will likely be gradual, as existing orders and contracts still work through the pipeline,” he said.

“The extent of the slowdown will depend on how fast exporters can adjust either by negotiating better terms, shifting to other markets, or moving up the value chain.”

REMITTANCE SLOWDOWN

Analysts said slowing remittances from overseas Filipino workers (OFWs) may hurt consumer spending in the second half.

“A slowdown in remittances will weigh on private consumption while heightened global uncertainty will continue to chill,” Fitch Solutions’ unit BMI said.

Household final consumption, which accounts for over 70% of the economy, jumped by 5.5% in the second quarter. It was the fastest since the 8.1% growth in the first quarter of 2023.

BMI sees private consumption to grow by 5% in 2025.

“About 40% of remittances come from the US and President Donald Trump has clamped down on immigration and imposed a 1% tax on remittances. Remittances, therefore, are likely to continue dragging on consumption growth in the coming months, diminishing the positive effects of easier monetary policy,” BMI said.

The Bangko Sentral ng Pilipinas (BSP) expects cash remittances from OFWs to grow by 2.8% this year and by 3% in 2026.

The US will start imposing a 1% excise tax on cash-based remittances from the US to recipients abroad on Jan. 1, 2026.

BMI said it kept its GDP forecast at 5.4% for this year, but lowered its 2026 projection to 5.2% from 6.2% for 2026 due to slower remittances and tariff uncertainty.

“The upshot is that we maintain our relatively downbeat forecast for fixed investment to expand by 4.5% in 2025, well below the 12.4% over 2015-2019,” it said.

Nomura Global Markets Research said GDP growth will likely slow to 5.2% in the second half but kept its full-year forecast at 5.3%.

“We believe private investment spending will be more subdued, as businesses turn more cautious owing to surging global trade policy uncertainty and an increasingly challenging operating environment,” Nomura said.

“In the same vein, we expect goods export growth to slow due to the impact of US tariffs but acknowledge rising downside risks particularly from sectoral tariffs on semiconductors in the coming quarters.”

Last week, Mr. Trump announced plans to impose tariffs on semiconductors shipped to the US but offered to exempt companies manufacturing in the US or those that commit to do so, Reuters reported.

Meanwhile, Chinabank Research said it expects growth “to remain modest” as external prospects may remain subdued, given persisting uncertainties and rapidly changing global policies.

“Moving forward, downside risk to growth will be centered on external trade as elevated policy uncertainty and higher tariffs weigh on global economic activity,” it said in a policy note on Thursday.

On the demand side, Chinabank anticipates that government spending will likely continue to quicken for the rest of the year.

“We could see a rebound in the coming quarters as the government ramps up delayed projects and as the effects of interest rate cuts further materialize.”

Nomura said it expects the BSP to cut its policy rate by 25 bps at its Aug. 28 meeting and by another 25 bps in October.

“This would take the policy rate to 4.75% this year, which we think puts BSP’s monetary stance below its estimate of neutral, though we see some risk that BSP might deliver more in 2026 if inflation remains well within its 2-4% target,” Nomura said.

“We continue to believe BSP remains on a path of a steady shift to a more accommodative stance, given the benign inflation outlook.”

Meanwhile, Mr. Dacanay said with government infrastructure spending and services exports underperforming, further monetary easing could be needed to help sustain growth.

“Quickening and deepening the ongoing easing cycle will help support both sectors. Lower interest rates can help incentivize further investments, while it can also help improve or at least maintain the competitiveness of the services exports sector via the FX (foreign exchange) channel,” he said.

Source: Business World

Inflation may pick up again in coming months

Headline inflation could pick up again in the remaining months after hitting a near six-year low in July but still remain within target, which would still give way to further policy easing by the Bangko Sentral ng Pilipinas (BSP).

“Looking ahead, we think July inflation is the floor of the Philippines’ inflation outlook,” HSBC Global Research economist for ASEAN Aris D. Dacanay said in a report.

“Headline inflation is likely to accelerate in the months ahead as the base effects of the rice tariff rate cut in 2024 fade,” he added.

Nomura Global Markets Research analysts Euben Paracuelles and Nabila Amani said that inflation could rise close to 2% in the coming months.

“We maintain our forecast for CPI (consumer price index) inflation to average 1.8% in 2025, penciling in a gradual climb towards 2% by yearend, in part due to low base effects and the impact of weather disruptions that are still likely to materialize in the near term,” they said in a report.

Headline inflation sharply eased to a near six-year low of 0.9% in July from 1.4% in June and 4.4% a year ago, the Philippine Statistics Authority (PSA) reported on Tuesday.

It also marked the fifth straight month that inflation settled below the central bank’s 2-4% target range.

“Still, our full-year forecast remains below BSP’s 2-4% target, reflecting a combination of factors, including a still-negative output gap and an economy facing downside risks,” Nomura said.

For the first seven months of the year, inflation averaged 1.7%. This was a tad higher than the central bank’s 1.6% forecast for 2025.

“This implies pass-through effects from easing supply-side drivers are likely to accentuate the impact; we still see low crude oil prices and the government maintaining supply-side measures to keep food prices, particularly rice prices, low,” Nomura said.

Meanwhile, Mr. Dacanay flagged risks to watch out for, including proposed changes to rice policies. 

President Ferdinand R. Marcos, Jr. announced on Wednesday a 60-day suspension of rice imports, effective Sept. 1, to protect local farmers amid declining farmgate prices. The government is also still discussing the possibility of raising tariffs on rice imports.

“We have written previously that curbing the supply of rice risks stoking inflation by 1.2 to 1.4 percentage points (ppts),” Mr. Dacanay said.

Despite the likelihood of inflation picking up in the months to come, the BSP can still continue its rate-cutting cycle.

“Will this derail the BSP’s easing cycle? We do not think so since we expect inflation to peak at around 2.9% year on year in the second quarter of 2026. This implies that inflation will still be well within the BSP’s 2-4% target range,” Mr. Dacanay said.

BSP Governor Eli M. Remolona, Jr. told Bloomberg on Tuesday that they can deliver two more 25-basis-point (bp) cuts this year and potentially continue its easing cycle until next year.

The central bank has lowered borrowing costs by a total of 125 bps since it began easing in August last year, bringing the policy rate to 5.25% when it last reduced rates in June.

“Nonetheless, the soft inflation numbers will likely give the central bank more confidence that it can proceed with its easing cycle with or without the Fed,” Mr. Dacanay said.

“Our baseline scenario is for the BSP to pause its easing cycle during the August rate-setting meeting, but the soft inflation outlook increases the risk of a rate cut,” he said.

Second-quarter gross domestic product (GDP) data, scheduled to be released today (Aug. 7), will also support further rate cuts.

“Any soft GDP figure will likely strengthen the conviction of the BSP of loosening the monetary reins without the Fed or deepening its monetary easing cycle throughout the year,” Mr. Dacanay added.

For its part, HSBC expects the benchmark to end at 5% by yearend.

“But since the US tariff rate on the Philippines was less favorable than expected, the risk of a deeper easing cycle by the BSP is increasing,” Mr. Dacanay said.

Meanwhile, Nomura projects the Monetary Board to deliver a 25-bp cut at the Aug. 28 meeting, followed by another 25 bps in October.

“This would take the policy rate to 4.75%, which we think puts BSP’s monetary stance slightly below its estimate of neutral. BSP continues to emphasize its assessment of the inflation outlook as the main driver of policy decisions,” it added

Source: Business World

IMF raises to 5.9% its 2026 Philippine economic growth forecast

The International Monetary Fund (IMF) has revised upward its 2026 Philippine economic growth forecast.

In its recent World Economic Outlook (WEO) report, the IMF said it expects the Philippine economy to grow by 5.9 percent next year, slightly higher than its previous projection of 5.8 percent.

For this year, the IMF forecasts the country’s gross domestic product to grow by 5.5 percent, which settles within the government’s 5.5 percent to 6.5 percent target.

Earlier this year, the IMF said the Philippine economy remains resilient despite external challenges and heightened policy uncertainty.

“The Philippine economy holds significant potential with a sizable demographic dividend and abundant natural resources. The government has been undertaking reforms to reduce infrastructure, health and education gaps, promote foreign direct investment, and diversify the country’s export markets,” IMF Mission Chief Elif Saxegaard earlier said.

“These reforms should be complemented by strengthening social protection programs, promoting digitalization, and increasing resilience to climate shocks and natural disasters.”

Source: Inquirer