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

Inflation cools further in July to 0.9%

Headline inflation sharply slowed to a near six-year low in July as utilities and food costs continued to ease, data from the Philippine Statistics Authority (PSA) showed.

The PSA on Tuesday reported that the consumer price index rose 0.9% year on year in July, slower than the 1.4% in June and 4.4% clip a year ago.

This was the lowest inflation in nearly six years or since the 0.6% print posted in October 2019. It also marked the fifth straight month that inflation settled below the central bank’s 2-4% target range.

For the first seven months of the year, inflation averaged 1.7%, a tad higher than the BSP’s 1.6% full-year forecast.

Core inflation, which excludes volatile prices of food and fuel, inched up to 2.3% in July from 2.2% a month prior. In the January-to-July period, core inflation averaged 2.3%.

The BSP in a statement said that the July inflation outturn is well within its forecast.

“Inflation is projected to average below the lower end of the target in 2025, primarily due to the continued easing of rice prices,” it added.

National Statistician Claire Dennis S. Mapa said the deceleration in July inflation was primarily due to the slower annual increase in the housing, water, electricity, gas and other fuels index.

The index eased to 2.1% in July from 3.2% in June, accounting for a 45.1% share to the overall downtrend in inflation.

This as electricity inflation decelerated to 1.3% in July from 7.4% a month ago, even as Manila Electric Co. (Meralco) hiked rates by P0.4883 per kilowatt-hour  during the month.

Liquefied petroleum gas (LPG) also posted 0.7% inflation, slower than the 1.9% clip in June. In July, LPG providers Petron and Solane implemented a price rollback of P1 per kilogram each.

Meanwhile, the heavily weighted food and nonalcoholic beverages index also fell to 0.2% from the 0.4% increase in June.

Inflation of cereal and cereal products further contracted to 11.5% in July from the 10.3% decline a month earlier.

RICE PRICES

Rice inflation continued to remain in the negative, falling to a new all-time low of 15.9% since 1995.

“For the next four months, we will perhaps still be seeing negative inflation for rice. It’s a continuous decline in prices, even in our price per kilogram,” Mr. Mapa added.

The average price of regular milled rice fell by 18.2% to P41.31 per kilogram from P50.90 a year ago. Well-milled rice likewise declined by 14.8% year on year to P47.60 from P55.85, while special rice dropped by 11.8% to P56.83 from P64.42 per kilogram.

Since last year, the government has deployed several measures to tame prices of the staple grain, such as slashing tariffs on rice imports.

However, the Agriculture department this week recommended to President Ferdinand R. Marcos, Jr. a suspension of rice imports and increased tariffs amid declining farmgate prices.

In July 2024, rice tariffs were slashed to 15% from 35% amid spiraling prices at the time. Agriculture Secretary Francisco P. Tiu Laurel, Jr. earlier proposed a phased increase in rice import duties to the original 35%.

Mr. Mapa said the potential increase in tariffs could impact rice inflation moving forward.

“It depends on the timing… when there is an increase in the tariff, there is an implication that there will be an increase in the retail price,” he said, noting that they study how high the tariffs are and the timing of when these will be implemented.

Vegetables, tubers, plantains, cooking bananas and pulses saw a decline to 4.7% from the 2.8% drop in June.

Despite agriculture damage caused by recent weather disturbances, Mr. Mapa said vegetable inflation continued to ease.

“But we saw in the National Capital Region, particularly in the second half of July, there was an adjustment in the rise of certain vegetable items, such as leafy vegetables… We expect this month of August that there may be an upward adjustment in our prices of vegetables, and that may have an impact on our inflation rate,” Mr. Mapa said.

Meanwhile, the contraction in transport inflation worsened to 2% in July from the 1.6% decline in June. This as passenger transport by sea eased sharply to 5.2% from  24.8% the previous month.

Gasoline inflation also fell to 10% from the 8.9% contraction a month ago.

In July, pump price adjustments stood at a net decrease of P1.10 a liter for gasoline and P1.10 a liter for kerosene. On the other hand, it stood at a net increase of P1.20 for diesel.

Inflation within the National Capital Region (NCR) likewise eased to 1.7% in July from 2.6% in June.

Outside NCR, inflation slowed to 0.7% in July from 1.1% in June.

Inflation for the bottom 30% of income households slipped to 0.8% from the 0.4% dip in June. Year-to-date, inflation for the bottom 30% income households averaged 0.5%.

OUTLOOK

The central bank said headline inflation will likely settle within the 2-4% target band from this year until 2027.

“For 2026 and 2027, inflation is expected to trend higher but will remain firmly within the 2-4% target range,” it said.

“Global economic activity is showing signs of deceleration, influenced by uncertainty over US trade policy and ongoing geopolitical conflict in the Middle East. These developments may contribute to slower domestic growth.”

The BSP expects inflation to average 3.4% in 2026 and 3.3% in 2027.

Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio M. Balisacan said overall inflation this year will “remain favorable and supportive of domestic demand.”

“The sustained drop in rice prices and the easing of inflation for low-income households are clear signs that our interventions are working,” he said in a statement.

“This not only helps Filipinos preserve the value of their peso but also builds confidence for businesses and consumers to plan ahead.”

DEPDev also cited data from the Philippine Atmospheric, Geophysical, and Astronomical Services Administration which showed a “relatively favorable climate outlook” from this month until January 2026.

“Nine to 17 tropical cyclones are expected, but the prevailing ENSO (El Niño-Southern Oscillation) neutral condition is likely to support stable agricultural production.”

However, Mr. Balisacan noted the need to “remain vigilant against external risks, including global policy shifts and geopolitical tensions.”

With inflation expected to be well contained, the BSP said a “more accommodative monetary policy stance remains warranted.”

“Emerging risks to inflation from rising geopolitical tensions and external policy uncertainty will require closer monitoring, alongside the continued assessment of the impact of prior monetary policy adjustments,” it said.

Analysts expect inflation to remain within target for the remainder of the year.

“Although we could see an upward trend in inflation going forward due to base effects, we still expect monthly inflation prints to remain below the BSP’s 2-4% target for the rest of the year,” Chinabank Research said in a commentary.

Rice inflation is seen to remain negative for the year due to base effects and continued decline in monthly rice prices, it added.

“However, the impact of favorable base effects may begin to fade by September and inflation could move closer to 3% by yearend,” Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said.

Chinabank said upside risks include adverse weather and the proposals to raise the rice tariff rate and limit rice imports.

“A severe storm affecting agricultural output could lead to faster inflation. Global oil prices may remain stable due to the expected increase in oil supply, but any renewed conflict in the Middle East could trigger a spike,” Mr. Neri said.

RATE CUTS

However, with inflation well below the 2-4% target band, the central bank has more than enough room to deliver more rate cuts, analysts said.

“This benign inflation outlook bodes well for domestic consumption activities, and it supports the case for further monetary easing from the BSP,” Chinabank said.

Mr. Neri said the moderating inflation and dovish signals from the BSP make a rate cut in August “highly probable.”

For its part, Chinabank expects another 25-bp reduction at the Monetary Board’s meeting later this month and another cut in the fourth quarter.

“A downside surprise in gross domestic product (GDP) on Thursday would likely cement the case for a cut,” Mr. Neri said.

The PSA is set to release second-quarter GDP on Aug. 7 (Thursday).

The Philippine economy likely grew 5.5% in the second quarter, according to a median forecast of 17 analysts. If realized, this would be slower than the 6.5% expansion in the year ago period.

“A September Fed rate cut could pave the way for the BSP to follow with another cut in October,” Mr. Neri said.

The Federal Open Market Committee’s next meeting is scheduled for Sept. 16 to 17.

“Nevertheless, uncertainties continue to cloud the outlook for US monetary policy. Tariffs may not have been fully passed on to US consumers, and a pickup in US inflation could delay Fed easing.”

“In this scenario, the room for another BSP rate cut could narrow. As such, caution is still warranted and it might be too early to fully price in a BSP rate cut in October,” Mr. Neri added.

Source: Business World

Building permit approvals inch up in May

Approved building permits picked up 1.1% year on year in May due to the modest growth in residential construction projects, the Philippine Statistics Authority said in a report.

Preliminary data showed building projects covered by the permits numbered 16,282 in May from 16,105 a year earlier.

This was slightly higher than the 0.6% growth in May 2024 and the revised 8.2% decline in April.

In May, constructions projects covered 3.22 million square meters (sq.m) of floor area, down 17.8% year on year from 3.92 million sq.m.

These building projects that received approval were valued at P42.09 billion, 22.7% lower than a year earlier when it reached P54.48 billion.

The increase in construction signifies growth in economic activity, Emmanuel J. Lopez, professorial lecturer at the University of Santo Tomas Graduate School, said in an e-mail.

“Specifically, a positive increase in investment spending ultimately leading to increase in employment buoyed by increase investment,” he said.

Permits for residential projects, which accounted for almost 70% of the total, rose 10.4% in May to 11,331.

These projects were valued at P21.25 billion, down from P25.67 billion a year earlier.

Applications for apartment buildings climbed 31.7% to 1,397 while applications for duplex or quadruplex homes nearly tripled to 250.

Single homes, which accounted for 85.3% of the residential category, grew 6.3% year on year to 9,664.

On the other hand, nonresidential projects slumped 14.9% year on year to 2,930 permits from 3,443 in May 2024. This accounted for 18% of the total.

Nonresidential projects represented by the permits were valued at P16.80 billion, declining 23.2% from a year earlier.

Meanwhile, approved commercial construction applications contracted 14.5% to 1,994. These made up 68.1% of all nonresidential projects.

Institutional building permits plunged 23.9% to 488, while industrial permits inched up 0.8% to 264.

In May, approved agricultural projects fell 20.7% to 96 while other nonresidential projects picked up 2.3% to 88.

Permits for additions, or construction that increases the height or area of an existing building, declined 17.3% to 546 approvals.

On the other hand, alteration and repair permits totaled 1,086 in May 2025, 17.6% lower from a year earlier and were valued at P2.61 billion.

Calabarzon (Cavite, Laguna, Batangas, Rizal, and Quezon) had the most approved construction projects in May 2025 accounting for 25% of the total with 4,063 permits.

This was followed by Central Luzon (20.2% share with 3,290 permits), and Ilocos Region (8.8% share with 1,425 permits).

Mr. Lopez said that the increase in employment will lead to increase in consumption spending which is a major component of the country’s economic growth.

Source: Business World