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

PHL economy expands 5.5% in Q2

The Philippine economy expanded at a slightly faster pace in the second quarter, driven by strong agriculture production and an uptick in consumption, the statistics agency said.

Preliminary data released by the Philippine Statistics Authority (PSA) showed Philippine gross domestic product (GDP) grew by an annual 5.5% in the April-to-June period, up from the 5.4% in the first quarter.

However, this was slower than the 6.5% growth in the second quarter of 2024.

On a seasonally adjusted quarter-on-quarter basis, the country’s GDP expanded by 1.5%, improving from 1.3% a year ago.

“The Philippine economy continues to show resilience and stability, even as global challenges persist and fuel uncertainty across many fronts,” Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio M. Balisacan said at a briefing on Thursday.

“With this performance, we maintain our place among the fastest-growing economies in emerging Asia,” he said, adding the Philippines was only behind Vietnam (8%) and ahead of China (5.2%) and Indonesia (5.1%).

While the Philippines may fall behind India’s projected 6.5% growth, Mr. Balisacan said it is still likely to outpace Malaysia’s projected 4.3% GDP growth and Thailand’s 2.4%.

For the first half, GDP growth averaged 5.4%, slower than the 6.2% a year ago.

Mr. Balisacan said GDP must grow by 5.6% for the rest of the year to achieve the low end of the full-year target.

“I think we can do better in the second half. (I am) confident that inflation has gone down substantially and the past reduction in the policy rates is now beginning to be felt,” he said.

Inflation slowed to a near six-year low in July at 0.9% as utilities and food costs continued to ease. For the first seven months of the year, inflation averaged 1.7%, a tad higher than the central bank’s 1.6% forecast for 2025.

The Bangko Sentral ng Pilipinas (BSP) has lowered benchmark interest rates by a cumulative 125 basis points since it started its easing cycle in August last year.

To reach the upper end of the target, the DEPDev chief said the economy must grow by 7.5% in the July-to-December period.

“Of course, 7.5% is high, but it’s not impossible. I think that if we see continuing improvement in the confidence of our consumers and our domestic investors, (we can see) higher growth in consumption and investment and services,” he said.

PSA data showed household final consumption, which accounts for over 70% of the economy, jumped by 5.5% in the April-to-June period. This was faster than the 4.8% in the second quarter of 2024 but slower than 5.3% in the first quarter. It was the fastest since the 8.1% growth in the first quarter of 2023.

“Our strategic, sustained, and coordinated efforts to manage inflation and safeguard purchasing power are making an impact. Notably, rice prices, a major concern for households, have been declining steadily in recent months,” Mr. Balisacan said.

The election-related ban on public works dampened government final consumption expenditure, which grew by 8.7% in the second quarter from 18.7% in the first quarter and 11.9% a year ago.

National Statistician Claire Dennis S. Mapa attributed this slowdown to public construction, which contracted by 8% in the second quarter.

The 45-day election ban on public works started on March 28 and ended with the May 12 elections.

“We expect to maintain that momentum in the spending side. The second half of the year, you should see improvements in the construction, public construction spending because it’s there where we had a bit of a slowdown, but that was expected because of the election ban,” Mr. Balisacan said.

TARIFF UNCERTAINTY

Uncertainty over the US tariffs has started to weigh on the Philippine economy, as growth in exports, industry and investment slowed in the second quarter.

Total exports growth grew by 4.4% in the April-to-June period, picking up from 3.9% a year ago but slowing from the 7.1% growth in the first quarter.

Merchandise exports also rose by 13.6% in the second quarter, driven by semiconductors, as US firms began front-loading before the higher tariffs took effect.

The US set a 19% tariff on Philippine goods, which took effect on Aug. 7.

“I expect the local economy to stabilize a bit with all this tariffs uncertainty, although they’re still there, but I think that supposedly this is the end of that series of announcements. We hope that there will be no further destabilization in the expectations about trade uncertainty,” Mr. Balisacan said.

Meanwhile, exports of services contracted by 4.2% in the second quarter, a reversal of the 6.3% growth in the previous quarter and 7.6% a year ago.

“It’s possibly following the overall state of the global economy. In recent months, we saw deceleration and uncertainty in the trade sector, including trade and services,” Mr. Balisacan said.

On the other hand, imports of goods and services slowed to 2.9% in the second quarter, slower than the 5.3% in the same period last year and 10.3% in the first quarter.

Gross capital formation, the investment component of the economy, grew by 0.6% in the second quarter, slower than the 11.5% growth a year ago and the 4.8% growth in the first quarter.

“I think we will see a rebound of investment in the second quarter. The election ban is over so we should continue and that should be a positive factor. The domestic investment climate is improving as seen in the continuing decline in interest rates,” Mr. Balisacan said.

AGRICULTURE

On the supply side, agriculture output grew by 7% in the second quarter, the fastest in nearly 14 years or since 8.3% recorded in the second quarter of 2011.

Mr. Balisacan attributed the strong rebound in farm output to palay and corn, which grew by 14.2% and 29.8% respectively.

The services sector, which made the biggest contribution among major industries, expanded by 6.92% in the second quarter, faster than 6.87% a year ago.

The industry sector grew by 2.1% in the second quarter, slowing from 7.9% a year ago and 4.6% in the first quarter.

“Industry growth slowed to 2.1%, affected by declines in output for coke and refined petroleum products (-12.2%), chemical products (-6.6%), and computer and electronics (-2.5%),” Mr. Balisacan said.

Food manufacturing grew by 9.3%, slightly below the 10.8% in the previous quarter.

The PSA said among the main contributors to the second-quarter growth were wholesale and retail trade, repair of motor vehicles and motorcycles (5.8%), compulsory social security (12.8%) and financial and insurance activities (5.6%).

Gross national income posted an annual 8.2% growth in the second quarter, slightly lower than the 8.1% expansion a year ago.

Net primary income went up by 38.8% in the second quarter, higher than the 25.8% in the same period in 2024.

GROWTH OUTLOOK

Capital Economics Senior Asia Economist Gareth Leather said in a commentary that they expect “steady” growth for the rest of the year as domestic consumption will be supported by easing inflation and lower interest rates. They see Philippine GDP growth averaging 5.5% for the full year, meeting the low end of the government’s goal.

However, the “fragile” external environment poses risks to the outlook, Mr. Leather said.

“Trump tariffs and weaker global demand mean export growth is likely to slow further over the coming months.”

ANZ Research added that external headwinds would also affect private investment.

“Private investment remains constrained by low productivity growth and slowing global growth… Given the subdued outlook for external demand, private investment is unlikely to rebound in the near-term. However, the strong rise in capital goods imports in June indicates an increase in government capital expenditure, which can help partly offset the weakness in private gross fixed capital formation,” it said in a report.

While inflation has eased, private consumption will continue to be weighed down by low wages, ANZ Research added. “Overall, we forecast growth to ease to 5.1% in 2025.”

“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. 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,” Nomura Global Markets Research said in a separate note.

It expects the economy to grow by 5.3% for the full year. “Our forecast pencils in GDP growth slowing to 5.2% year on year in the second half from 5.4% in the first half, even as we expect a rebound in public investment spending.”

Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., said that global trade uncertainty and supply chain risks are a “red flag” for long-term growth.

“We’re on track, but not cruising,” Mr. Ravelas said. “Stakeholders should double down on consumer confidence, unlock private investments, and leverage [the agriculture sector’s] momentum.”

“The second half is crucial — it’s time to push, not pause.”

Source: Business World

Q2 PH growth likely higher at 5.7% – UA&P

Philippine economic growth likely picked up in the second quarter, the University of Asia and the Pacific (UA&P) said, falling within the government’s recently reduced target for 2025.

In the July edition of its Market Call report, the UA&P forecast April-June gross domestic product (GDP) growth of 5.7 percent, up from 5.4 percent in the first three months of the year.

The first-quarter result fell below the 6.0- to 8.0-percent full-year target at that time and economic managers last month revised the 2025 goal to 5.5-6.5 percent given global headwinds.

Preliminary second quarter GDP data is scheduled to be released on Aug. 7 by the Philippine Statistics Authority.

The UA&P said that second-quarter growth was likely to have been buoyed by good weather and an improvement in employment amid a weakness in government spending in the first two months of the perid and the slightly lower consumer optimism.

It noted the threat from higher US tariffs, which were also said to be constraining faster monetary policy easing and subsequently holding back spending.

Deeper interest rate cuts and more competitive exchange rates will help give local producers some room to boost production and employment, the UA&P said, leading to faster growth.

Earlier this week, Finance Secretary Ralph Recto said that second-quarter growth likely improved on the back of household and government spending.

The full-year result, however, could fall below 6.0 percent due to tariff uncertainties but still remain within target at around 5.7-5.8 percent.

US President Donald Trump has slapped a 20-percent tariff on Philippine-made goods, up from the 17 percent announced in April.

The government has said that it would be negotiating for a lower rate in a bid to avert the imposition of the 20-percent duty beginning Aug. 1.

Source: Manila Times