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The Marcos administration has shelved a plan to overhaul the pension system for military and uniformed personnel (MUP), Finance Secretary Ralph G. Recto said.

Analysts have warned that the current pension system for MUPs is a “fiscal time bomb” that threatens the Philippines’ fiscal sustainability.

“I think we discussed that already,” he told reporters on the sidelines of a House Committee on Appropriations briefing late on Monday. “Wala na ’yung  (There will be no) MUP reform so far for the remainder of the term.”

“The reform will be costly at this point in time,” Mr. Recto said without providing details.

However, Budget Secretary Amenah F. Pangandaman said the fate of the MUP reform bill will still be discussed in the Legislative-Executive Development Advisory Council (LEDAC) meeting next month.

“We’ll have to sit down. We still have a LEDAC (meeting),” she told BusinessWorld when asked about Mr. Recto’s statement.

Ms. Pangandaman warned that government allocations for MUP pensions will consume a larger share of the national budget in the coming years and could pose a possible fiscal burden if left unchecked.

“As you know, we have a limited fiscal space — so the pension will eat up a chunk of the budget. It will keep piling up, and it’s going to grow even more,” she told BusinessWorld on the sidelines of the briefing late on Monday.

Under the 2026 National Expenditure Program, the proposed allocation for the Pension and Gratuity Fund is at PHP 197.99 billion, 36.8% higher than PHP 144.72 billion this year.

Unlike government and private sector employees whose pension contributions are regularly remitted to the Government Service Insurance System and Social Security System, MUPs do not contribute to their own pension funds.

In 2023, the Department of Finance (DoF) under then-Secretary Benjamin E. Diokno pushed to reform the MUP pension system, warning of the risk of a “fiscal collapse.”

At that time, the DoF proposed to require contributions from all active personnel and new entrants and removed the full indexation of pensions.

However, the House in 2023 approved a version that does not require mandatory contributions from active personnel. Under the approved version, new entrants would be required to contribute 9% of their salary, while the National Government counterpart was set at 12%. It also provided for the automatic indexation of MUP pensions at 100% of the increase in the base pay of active personnel.

The Senate did not pass a counterpart bill for the MUP reform.

‘Fiscal time bomb’

Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said it’s a “risky move” for the government to shelve plans to reform the MUP pension system.

“The current pension setup is a fiscal time bomb — fully funded by taxpayers, no contributions from personnel, and pensions indexed to active salaries,” he told BusinessWorld in a Viber message on Tuesday.

Mr. Ravelas said failure to reform the pension system could saddle the government with a PHP 14-trillion liability and a possible fiscal collapse in the long term.

“We need reform, but with care. Either set up a dedicated, government-backed pension fund seeded with revenues from privatization,” he said.

Mr. Ravelas suggested mandatory pension contributions from new entrants, while scrapping the current automatic indexation of benefits. He said the government should instead implement a fixed annual adjustment of pensions tied to inflation.

Filomeno S. Sta. Ana III, coordinator of Action for Economic Reforms, said delaying the MUP reform may ease political tension in the short term, but it risks long-term fiscal sustainability.

“The current pension system for military and uniformed personnel is noncontributory and ballooning. It consumes a growing portion of the national budget, crowding out funds for education, health, and infrastructure,” Mr. Sta. Ana said.

He also warned that the National Government may face bigger deficits and heavier borrowing down in the future.

“The sooner we address it, the better for long-term economic stability,” he added. — Aubrey Rose A. Inosante and Kenneth Christiane L. Basilio, Reporters

Cash remittances are projected to remain resilient for the rest of the year, potentially surpassing the Bangko Sentral ng Pilipinas’ (BSP) 2.8% full-year growth target, analysts said.

However, they also warned of possible external shocks that could dampen remittance growth.

“We’re on track. First-half growth hit 3.1%, already above BSP’s 2.8% forecast,” Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said in a Viber message.

“If global labor markets stay resilient and the peso remains competitive, we could even beat the (BSP’s) 2.8% full-year target.”

Money sent home by overseas Filipino workers (OFWs) rose by 3.1% to USD 16.75 billion in the first six months of the year, with land-based workers contributing the bulk of the increase.

The BSP is targeting a 2.8% growth in remittances this year, and 3% growth for 2026.

Remittance inflows are expected to accelerate ahead of the holiday season, analysts said.

“We expect remittances to remain a constant and reliable source of foreign currency over the next few months, with a seasonal acceleration as we enter the fourth quarter of the year,” Metropolitan Bank & Trust Co. (Metrobank) Chief Economist Nicholas Antonio T. Mapa said.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said the BSP’s full-year target of 2.8% remittance growth is “well within reach.”

“Remittance flows are expected to remain resilient, supported by seasonal inflows during the ‘ber’ months and improving global labor conditions,” he said.

Analysts warned the US government’s 1% tax on remittances, which will take effect on Jan. 1, 2026, will have a dampening effect on remittances from US-based Filipinos.

“However, the proposed 1% remittance tax in the US could pose downside risks in 2026. While the BSP’s 3% growth target remains achievable, the tax may dampen inflows from the US — currently the largest source — unless mitigated by digital remittance innovations or policy support,” Mr. Asuncion said.

The tax will be applied on cash-based remittance transfers from US-based senders, regardless of citizenship status.

BSP data showed the US remained the top source of remittances to the country in the first half, accounting for 40.1% of total remittances for the period.

“The proposed 1% US remittance tax could dampen inflows (from formal channels) slightly if implemented, but its real impact will depend on scope, implementation, and possible offsets from fintech cost reductions or regulatory responses,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in Viber message.

Mr. Ravelas said the proposed tax is a “red flag,” as it might encourage senders to use informal channels.

“That’s a red flag. The US sends over 40% of our remittances. A 1% tax could dampen flows or push senders to informal channels,” he said. “We’ll need to watch how it’s implemented and prepare support mechanisms for OFWs.”

Mr. Mapa said OFWs have been “creative” in finding ways to send money back home in the past.

“We could still expect remittance flows to remain robust in the near term,” he said.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted US protectionist policies and stricter immigration rules could weigh on remittances from the US.

“Trump’s threats of higher reciprocal tariffs and other America-first policies could also slow down global trade, investments, employment including some OFW jobs, and overall world economic growth,” he said in an e-mail. “This could also indirectly slow down the growth in OFW remittances from other countries around the world.” — Katherine K. Chan

Finance Secretary Ralph G. Recto on Monday said the government is working to ensure that economic growth would outpace debt accumulation, as outstanding debt is projected to hit PHP 24.7 trillion by 2030.

“We will make sure that the economy would continue to outgrow the country’s debt,” he said during the Development Budget Coordination Committee briefing before the House of Representatives Appropriations Committee. “This would ensure that we have the ability to pay off our obligations.”

Economic managers are targeting 5.5-6.5% economic growth this year, and 6-7% growth from 2026 to 2028.

Mr. Recto said the value of the Philippine economy is projected to reach PHP 42.6 trillion by 2030, while the debt of PHP 24.7 trillion would account for 58% of gross domestic product (GDP).

This would be the first time since 2020 that the debt-to-GDP ratio would fall below the 60% threshold considered by multilateral lenders to be manageable for developing economies.

The National Government (NG) debt jumped to a fresh high PHP 17.27 trillion as of end-June, bringing the debt-to-GDP ratio to 63.1%.

NG debt is projected to reach PHP 17.4 trillion by the end of 2025, although the debt-to-GDP ratio is seen slipping to 61.3%.

In 2026, outstanding debt is expected to rise to PHP 19.1 trillion, with the debt-to-GDP ratio inching up to 61.8%.

Debt is projected to rise to PHP 20.5 trillion in 2027, with a debt-to-GDP ratio dipping to 61.3%.

By 2028, debt is forecast to reach PHP 21.9 trillion with the debt-to-GDP ratio dropping to 60.3%.

The Department of Finance (DoF) expects debt to hit PHP 23.3 trillion but the ratio is seen to fall to 59.5% of GDP by 2029.

These projections are only possible if the government maintains disciplined and efficient spending, while “strictly” following the Marcos administration’s fiscal consolidation strategy aimed at reducing the debt stock, said Mr. Recto.

“We are determined to stick to our medium-term fiscal program by exercising the highest level of fiscal prudence,” he said.

Mr. Recto’s economic projections are only possible if the debt taken on by the government is used to fund projects that could increase productivity and generate jobs, said Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc.

“These actions will ensure that income growth remains strong, and higher income results in higher tax revenues for the government,” he said in a Viber message.

The government’s borrowing program to help fund next year’s PHP 6.793-trillion national budget was set at P2.68 trillion, up 3.15% from PHP 2.6 trillion in 2025. Domestic borrowing was set at PHP 2.05 trillion for 2026, while external loans were pegged at PHP 627.1 billion.

The government should also prioritize investments in education, infrastructure and digital transformation — sectors that could compound growth via a multiplier effect — to meet the economic forecast, Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said in a Viber message.

Mr. Ravelas said authorities should also look at broadening the tax base, but without overburdening Filipinos.

Meanwhile, Mr. Recto did not mention any new tax measures that the DoF wants Congress to approve.

“People are naturally resistant to taxes,” said Mr. Recto. “But their tax obedience can be won if they will see how the taxes they paid are spent for the right things, by the right agency, at the right time.”

In a statement after Mr. Recto’s presentation, the Finance department said the government has expanded its revenue collection by double digits in the last three years, averaging 13.8% annually.

“From 2025 to 2028, tax revenues are projected to grow 10.2% annually, pushing total revenues to hit nearly PHP 6 trillion by the end of the President’s term. By 2030, total revenues will breach the PHP 7-trillion mark,” it said. — Kenneth Christiane L. Basilio

The Philippines’ current account deficit could further widen over the medium term as global trade uncertainties affect external demand, Fitch Solutions unit BMI said.

“We now expect the Philippines’ external position to deteriorate as trade fragmentation and its knock-on effects on global demand will weigh heavily on exports,” it said in a report.

BMI expects the current account deficit to average -2.8% of gross domestic product (GDP) over the next three years. This is wider than the -0.4% average during the 2015-2019 period.

It sees the current account gap to settle at -3% of GDP this year, before narrowing to -2.8% in 2026, -2.6% in 2027, and -2.3% in 2028.

Data from the Bangko Sentral ng Pilipinas (BPS) showed the current account deficit widened to -3.7% of GDP in the first quarter, versus -1.9% in the same period in 2024. The BSP expects the current account deficit to be -3.3% this year, and -2.5% in 2026.

BMI said the outlook is “hardly surprising” as key trading partners such as the US and China are facing more challenges, which could dampen demand for Philippine exports.

The US is projected to grow by 1.7% this year, slowing from 2.8% in 2024, while China GDP is forecast to ease to 4.8% this year from 5% in 2024.

“Beyond the two economic giants, the global trade landscape is clouded by a rise in US tariffs, which we think will impact the global economy more negatively in the coming years,” BMI said.

The US started implementing higher tariffs on most of its trading partners earlier this month, with Philippine goods now subject to a 19% tariff.

In June, the US was the top destination for Philippine-made goods with USD 1.22 billion (17.3% share). It was closely followed by Hong Kong (USD 1.065 billion or 15.2% share), Japan (USD 974.8 million or 13.9% share), and China (USD 733.99 million or 10.5% share).

BMI said weak global demand could likewise hit services exports, particularly the business process outsourcing (BPO) industry.

“The Philippines is a major player in global BPO, holding 15% of global market share and contributing 7.5% to domestic GDP. This makes it highly exposed to a weak global services environment,” it said.

Remittances are also expected to slow as growth is linked to economic conditions in key source countries such as the US, Singapore, Saudi Arabia, Japan and the United Kingdom, BMI said.

Meanwhile, Moody’s Ratings said the recently implemented US tariffs could pull down economic and investment growth in Asia.

“The tariffs have left countries across Europe and APAC (Asia-Pacific) feeling bruised because the US is the largest trading partner for a majority of them, and a decline in sales to their largest customer will hurt,” the credit rater said.

Despite this, Moody’s noted that a recession remains unlikely.

“We expect global growth to slow, but we don’t appear to be staring down the barrel of a recession,” it said. — Katherine K. Chan

 

The Bureau of Internal Revenue (BIR) is looking to increase excise tax collections by 9% in 2026, mainly driven by tobacco products.

In the 2026 Budget of Expenditures and Sources of Financing (BESF), the government is set to collect PHP 359.65 billion in excise taxes in selected goods, 9.35% higher than PHP 328.9 billion for this year.

The bulk or PHP 166.57 billion in excise taxes will be collected from tobacco products, even as the government sees significant losses due to illicit trade.

The BIR expects to collect PHP 132.07 billion in excise taxes from alcohol products, and PHP 42.09 billion from sugar-sweetened beverages.

It is also targeting to collect excise taxes from mining (PHP 11.85 billion) and automobiles (PHP 6.54 billion).

Notably, the government took out the projected revenue from the proposed tax on single-use plastics, as the measure has yet to be approved by Congress.

The Philippines is bleeding USD 2 billion (PHP 114 billion) in lost revenues due to the proliferation of illicit tobacco trade in the country, a consultancy firm said at a forum last week.

BIR Commissioner Romeo D. Lumagui, Jr. earlier said the government loses billions of revenues due to illicit tobacco trade coupled with Health department’s campaign to discourage tobacco use.

Mr. Lumagui also said illicit tobacco manufacturers are using economic zones to avoid paying excise taxes even though the products are sold in the Philippines.

“If it’s meant for export and not for local consumption, there’s no excise tax. It’s being manufactured here in the ecozones. That’s what they’re trying to show — that the license they’re getting is for exporting all these products,” he told reporters during a tobacco forum on Aug. 5.

In the first half, excise taxes on tobacco went up 34.16% to PHP 58.97 billion in the January-to-June period, after several months of continued contraction. — ARAI