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The travel and tourism sector is expected to contribute PHP 5.9 trillion to the Philippine economy this year, according to the World Travel & Tourism Council (WTTC).

“This new record would represent more than one-fifth (21%) of national gross domestic product (GDP), cementing travel and tourism’s place as a backbone of the Philippine economy,” the WTTC said in a statement, citing its 2025 Economic Impact Research report.

Economic managers are targeting 6-8% GDP growth this year until 2028.

The WTTC also projected the travel and tourism sector to employ 11.7 million by yearend, accounting for 23.8% of all jobs in the Philippines.

Last year, the travel and tourism sector contributed PHP 5.3 trillion to the country’s GDP and accounted for 11.2 million jobs.

If the projections are realized, it will represent an 11.3% and 4.5% increase in GDP contribution and employment, respectively, from last year.

The WTTC said that the travel and tourism sector’s contribution for this year would be 13.5% higher than the 2019 level or before the pandemic.

“International visitor spending is also on the rise, projected to reach PHP 709.2 billion — up 2.1% on the previous high in 2019, while domestic visitor spending is anticipated to reach PHP 4.1 trillion — a 9.3% increase over its previous peak,” the WTTC said.

Last year, spending by domestic visitors stood at PHP 3.6 trillion, while spending of international visitors hit PHP 644.8 billion.

If the WTTC’s spending projections are realized, these will represent an almost 10% increase in international spending and a 13.9% increase in domestic spending.

“The Philippines is a standout example of how travel and tourism, when supported by a clear, long-term vision, can deliver real economic impact and long-term opportunity,” said WTTC President and Chief Executive Officer Julia Simpson.

“This success speaks to the country’s extraordinary appeal, its policy focus on tourism as a growth engine, and the energy of its people and private sector,” she added.

By 2035, the WTTC expects the travel and tourism sector to contribute PHP 9.2 trillion to the Philippine economy, representing 19.8% of GDP.

It also expects the creation of 2.5 million jobs, which will bring total sector employment to 14.1 million.

“As the country continues to strengthen air connectivity, invest in infrastructure, and prioritize destination resilience, travel and tourism are positioned not just to grow but to transform the national economy,” said the global tourism body.

“WTTC calls on policymakers to continue fostering this trajectory with clear regulation, long-term investment in workforce development, and sustained global promotion of the Philippines as a world-class destination,” it added.

Sought for comment, Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said that tourism is a “low-hanging fruit” for the Philippines.

“The Philippines is yet to fully catch up with other Asian or Association of Southeast Asian Nations countries that have three to five times more foreign tourism, so this could be a major source of economic growth,” said Mr. Ricafort in a Viber message.

He said that the tourism sector has the potential to create more jobs, generate more investments, and spur business activity.

“This could be made possible with further development of the country’s infrastructure, especially airports, seaports, mass transport systems, and accommodation facilities,” he added.

Colliers Research Director Joey Roi H. Bondoc said it would be a challenge to reach the tourism targets this year.

“The 2024 figures are down compared to the target of the government, and that was even before the South Korean economic crisis. But now that you no longer have the Chinese tourists, and then the Korean figures are down, so it will be extra challenging,” he said in a phone interview.

Data from the Department of Tourism  showed that the Philippines booked 5.95 million visitor arrivals last year, missing the agency’s target of 7.7 million.

However, Mr. Bondoc said that the DoT’s initiatives are in the right direction but need to be complemented with initiatives that will address infrastructure, peace and order, and affordability, among others.

“I think they’re doing the right thing; attracting Indians and implementing visa-upon-arrival or visa-free access to the Philippines are steps in the right direction, but it needs to be complemented,” he said. – Justine Irish D. Tabile, Reporter

The Philippine banking system’s nonperforming loan (NPL) ratio hit a five-month high in April, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Banks’ bad loan ratio rose to 3.39% in April from 3.3% in March. However, it eased from 3.45% a year ago.

This was the highest bad loan ratio in five months or since the 3.54% logged in November 2024.

Data from the BSP showed that soured loans inched up by 0.6% to PHP 519.23 billion as of April from PHP 516.12 billion a month prior.

Year on year, bad loans jumped by 8% from PHP 480.65 billion in the same month in 2024.

Loans are considered nonperforming once they remain unpaid for at least 90 days after the due date. These are deemed risk assets since borrowers are unlikely to pay.

BSP data also showed the total loan portfolio of the banking system stood at PHP 15.34 trillion as of end-April, down by 1.9% from PHP 15.63 trillion as of end-March. On the other hand, it rose by 10% from PHP 13.94 trillion a year ago.

Past due loans went up by 1.1% to PHP 653.26 billion in April from PHP 646.37 billion in March. It likewise increased by 5.7% from PHP 618.04 billion a year earlier.

This brought the past due loan ratio to 4.26%, higher than 4.14% in March but lower than 4.43% in the same period in 2024.

Restructured loans edged higher by 0.1% to P311.66 billion in April from PHP 311.48 billion month on month. Year on year, it rose by 7.3% from P290.37 billion.

Restructured loans accounted for 2.03% of the industry’s total loan portfolio in April, higher than 1.99% in the month prior but lower than 2.08% in April 2024.

Banks’ loan loss reserves stood at PHP 493.79 billion, up by 0.7% from PHP 490.56 billion a month ago and higher by 4.8% from PHP 471.35 billion a year earlier.

This brought the loan loss reserve ratio to 3.22% in April, higher than 3.14% last month but lower than 3.38% a year ago.

Lenders’ NPL coverage ratio, which gauges the allowance for potential losses due to bad loans, stood at 95.1% in April from 95.05% in March and 98.07% a year prior.

“The uptick in NPL ratio likely reflects a lagged response to tighter financial conditions, elevated interest rates, and persistent cost of living pressures on both households and businesses,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said.

“While still relatively low and manageable, the rise signals early signs of stress, especially among more vulnerable borrowers, such as MSMEs (micro, small and medium enterprises) and lower-income consumers. In my opinion, it is not yet a cause for alarm, but it is a signal for banks to remain vigilant in their credit risk management.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the slight uptick in NPLs is seen amid slowing growth in bank loans.

Bank lending rose by 11.8% year on year to PHP 13.19 trillion in March, its slowest pace in four months, as loan growth for production activities and consumers eased.

Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said the rise in unemployment could also be a factor behind the rise in NPLs.

“On the consumers’ side, higher unemployment these past few months may indicate slower earnings growth, making it harder to pay their loans. In addition, slow demand and business growth may also impact business cash flows during the period,” he said.

The jobless rate rose to 4.1% in April from 3.9% in March and 4% a year ago, the latest data from the local statistics authority showed.

This was equivalent to 2.06 million unemployed Filipinos in April, higher than 1.93 million a month ago and 2.04 million the year prior.

“If the trend continues over the next few months, it could indicate that some sectors of the economy are experiencing difficulty servicing debt, possibly due to slower-than-expected income recovery or tightening liquidity,” Mr. Rivera said.

“Monetary authorities and banks will likely monitor this closely. If credit quality deteriorates further, it could prompt more cautious lending behavior and affect the overall pace of credit growth, which in turn could have broader implications for economic recovery and domestic consumption.” – Luisa Maria Jacinta C. Jocson, Senior Reporter

 

 

The Bangko Sentral ng Pilipinas (BSP) will be able to further reduce interest rates amid below-target inflation and weak economic growth, analysts said.

“With inflation holding near multi-year lows and the peso showing relative strength, a rate cut from the BSP in June has become more certain,” Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said.

This after inflation cooled to an over five-year low of 1.3% in May, bringing the five-month average to 1.9%. This is below the BSP’s 2-4% target band.

Inflation is also seen to remain well contained for the remainder of the year, analysts said.

Nomura Global Markets Research analysts Euben Paracuelles and Nabila Amani said headline inflation could average 1.8% this 2025.

“Our forecast pencils in CPI (consumer price index) inflation becoming more benign at 1.3% in the third quarter, down from 2% year-to-date, before edging back up to 2% by yearend,” they said in a report. 

The central bank expects inflation to average 2.3% this year.

“This benign inflation outlook is underpinned by various factors, such as a negative output gap, low crude oil prices and the government maintaining supply-side measures (to keep rice prices low, in particular),” Nomura added.

Weaker-than-expected first-quarter gross domestic product (GDP) growth would also justify further easing, Mr. Neri said.

Consumption growth has not yet returned to pre-pandemic levels, which has kept overall GDP below 6%.

“However, with inflation stabilizing at lower levels, there is room for further recovery in the coming months,” he added.

The Philippine economy grew by a weaker-than-anticipated 5.4% in the January-to-March period, sharply slowing from the 5.9% expansion a year ago.

“Coupled with the weaker-than-expected GDP print in the first quarter, we think the latest inflation report supports the case for another 25-bp (basis point) cut at the BSP’s June 19 meeting,” Chinabank Research said.

The Monetary Board’s next policy meeting is scheduled for June 19.

In April, the BSP resumed its rate-cutting cycle with a 25-bp rate cut, bringing the benchmark rate to 5.5%.

Nomura expects the BSP to deliver another 75 bps worth of cuts for the remainder of the year.

“We continue to believe BSP has scope to steadily shift towards a more accommodative stance, as inflation expectations remain well-anchored and domestic demand is still subdued,” it said.

“We reiterate our call for BSP to deliver an additional 75 bps of rate cuts this year, taking the policy rate to a below neutral 4.75%.”

BSP Governor Eli M. Remolona, Jr. has signaled the possibility of two more rate cuts this year, in increments of 25 bps. He also said another 25-bp cut this month is still “on the table.”

The central bank has reduced borrowing costs by a total of 100 bps so far since it began easing rates in August last year.

Risks ahead 

Despite macroeconomic indicators pointing to a cut, Mr. Neri said the BSP must still remain cautious. 

“However, while the environment favors a cut, caution is still warranted. A shift in US monetary policy remains a key risk, particularly if inflation there rises further due to tariffs.”

“An overly aggressive easing cycle could leave the Philippine economy exposed to a sharp reversal in the Federal Reserve’s stance, potentially forcing the BSP into abrupt and sizable rate hikes in response,” he added.

US Federal Reserve policymakers have already signaled they are in no rush to cut interest rates, and a government report on Friday showing the labor market is far from crumbling amid big trade policy changes only cements that stance, Reuters reported.

Financial markets have been betting the Fed will wait until September to cut rates and will deliver a second reduction in borrowing costs by December.

Meanwhile, Chinabank Research said the central bank will also consider the recent wage hike proposal and its impact on prices.

“The BSP will likely remain cognizant of persisting upside risks to the inflation outlook, including upticks in food prices and the proposed legislated wage hike.”

The House of Representatives last week approved on third and final reading a bill seeking to raise the minimum daily wage by P200 across the board. If passed into law, this would mark the first legislated national wage hike since the late 1980s.

“Looking ahead, we expect inflation to remain low in the next months, though a hefty increase in the minimum wage could add to inflationary pressures,” Chinabank added.

Business groups have warned that the proposed wage hike could lead to closure of small businesses, joblessness and higher cost of goods and services. — Luisa Maria Jacinta C. Jocson

The National Government’s (NG) debt service bill sharply increased year on year in April as amortization payments more than doubled, the Bureau of the Treasury (BTr) reported.

Data from BTr showed that the debt service bill went up by 73.72% to PHP 280.9 billion in April from P161.7 billion in the same month last year.

Month on month, the debt service bill also rose by 53.2% from P183.36 billion in March.

Debt service refers to the payments made by the government on domestic and foreign borrowings.

In April, amortization payments stood at PHP 234.45 billion, up 148.89% from PHP P94.2 billion in the same month in 2024.

The bulk of debt payments in April were made up of amortization payments, BTr data showed.

Principal payments on domestic debt surged by 208.23% to PHP 169.83 billion in April from PHP 55.1 billion a year ago.

Amortization paid on foreign debt increased by 65.27% to PHP 64.63 billion in April from PHP 39.1 billion in April 2024.

Meanwhile, interest payments slid by 31.19% to PHP 46.45 billion from PHP 67.5 billion a year earlier.

Domestic interest payments went down by 34.37% to PHP 30.47 billion in April from PHP 46.43 billion in the same month last year.

This was composed of PHP 21.3 billion in fixed-rate Treasury bonds, PHP 3.84 billion in Treasury bills (T-bills), and PHP P3.58 billion in retail Treasury bonds and others (P1.76 billion).

Interest payments for foreign borrowings dropped by 24.17% to PHP 15.98 billion in April from PHP 21.07 billion a year prior.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the increase in debt servicing was primarily due to the PHP 140-billion Treasury bond payments in early April.

“However, there would be relatively large NG debt/Treasury bond maturities from August-September 2025 that could be principal payments that need to be paid by then,” Mr. Ricafort said in a Viber Message.

Mr. Ricafort also said the rate cuts from the Bangko Sentral ng Pilipinas and the US Federal Reserve from the latter part of 2024 may have also partly helped in reducing NG interest payments.

YEAR TO DATE
Meanwhile, for the first four months of the year, the NG debt service bill stood at PHP 622.92 billion, a 45.73% decline from PHP 1.15 trillion in the same period last year.

Amortization payments slumped by 62.19% to PHP 335.47 billion in the January-to-April period from PHP 887.24 billion. This accounted for 53.85% of the four-month tally.

Amortization payments on domestic debt fell by 77.42% to PHP 170.4 billion, while external payments increased by 24.61% to PHP 165.07 billion.

Meanwhile, interest payments rose by 10.35% to PHP 287.45 billion in the January-to-April period from PHP 260.49 billion in the same period a year ago.

Interest payments on domestic debt stood at PHP 209.03 billion, 12.8% higher annually from PHP 185.31 billion in 2024.

This was composed of PHP 146.13 billion in fixed-rate Treasury bonds, PHP 43.21 billion in retail Treasury bonds, PHP 16.08 billion in Treasury bills (T-bills), and others (PHP 3.63 billion).

On the other hand, external debt inched up by 4.3% to PHP 78.42 billion in the first four months from PHP 75.18 billion a year ago.

“The maturity of government securities caused the uptick in debt payments for the government, specifically government bonds,” Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said in a Viber message.

Mr. Erece said he expects debt payments to rise in the coming months.

“The government debt service bill may continue to increase in the next few months as government securities saw high demand mature. In addition, the long-term fiscal consolidation plan of the government can also explain elevated debt payments to try and reduce the country’s debt burden,” he said.

In 2025, the debt service program is set at PHP 2.051 trillion, consisting of PHP 1.203 trillion in principal payments and PHP P848.031 billion in interest payments.

The NG debt stock registered a fresh high of PHP 16.75 trillion as of the end-April. It is projected to hit PHP 17.35 trillion by yearend.

The debt-to-gross domestic product (GDP) ratio rose to 62% as of end-March — the highest in 20 years.

“The country remains firmly on track to reduce the NG debt-to-GDP ratio to below 60% by the end of the President’s term,” the Department of Finance said last week. — A.R.A. Inosante

The Japan Credit Rating Agency (JCR) has again maintained the Philippines’ “A-” rating with a “stable” outlook, citing the country’s resilient economic growth and continued fiscal consolidation.

In a news release on Thursday, JCR affirmed the country’s foreign currency and local currency long-term issuer rating at “A-” and kept its “stable” outlook.

“The ratings mainly reflect Philippines’ high and sustained economic growth supported by solid domestic demand, low-level external debt and resilience to external shocks supported by accumulated foreign exchange reserves,” it said.

An “A-” rating indicates a high level of certainty to honor financial obligations, while a “stable” outlook means the rating is unlikely to change in the foreseeable future.

“However, reducing income disparity through rural development and infrastructure development remain important tasks to be addressed,” JCR said.

The Japan credit rater noted the country’s “steady progress” on its fiscal consolidation, infrastructure development, and poverty alleviation.

“JCR expects that economic growth and fiscal improvement through the government’s efforts will enhance the country’s creditworthiness.”

“It will continue to monitor developments closely. Based on the above, it has retained the ratings with a stable outlook,” it added.

The agency projects the Philippines’ gross domestic product (GDP) growth to remain in the “upper 5% range.” This will be supported by “robust domestic demand, despite uncertainties in external environ-ment.”

The government is targeting 6-8% GDP growth this year. The Philippine economy grew by 5.4% in the first quarter, driven by faster public spending and private consumption.

Meanwhile, JCR said the country’s fiscal consolidation remains on track.

“The government debt-to-GDP ratio stood at approximately 60% at end-2024, which is one of the lowest among sovereigns rated in A-range by JCR,” it added.

The Marcos administration is looking to cut its debt-to-GDP ratio to below 60% by 2028. In the first quarter, debt as a share of GDP stood at 62%.

The government’s fiscal deficit ceiling is capped at 5.7% of GDP this year. It is targeted to be brought down to 3.7% by 2028.

“Despite increased uncertainty due to changes in US tariff policies, Philippines’ foreign exchange liquidity position remains solid, and JCR expects the economy to retain high resilience to external shocks going forward.”

It noted strong investment inflows, well-contained external debt, and high international reserves.

The Bangko Sentral ng Pilipinas (BSP) welcomed the country’s continued A-rating from JCR.

“JCR’s affirmation will support and strengthen investment from Japan, one of the Philippines’ most important partners,” BSP Governor Eli M. Remolona, Jr. said in a statement.

“The BSP will continue to safeguard price and financial stability to boost the country’s resilience amid global headwinds.”

Finance Secretary Ralph G. Recto said the affirmation “keeps the Philippines well-positioned to maintain high investment-grade ratings from all major global and regional credit agencies.”

He also said the government will continue working on its goal to secure more “A” ratings.

“An ‘A-’ rating is a strong investment-grade score that reflects robust creditworthiness and macroeconomic stability. It signals confidence to investors and creditors, resulting in lower interest rates on borrowings of the National Government and the private sector,” he said.

Apart from JCR, the Philippines also holds an “A-” rating with Japan-based Rating and Investment Information, Inc. However, it has yet to secure an “A” rating from the big three debt watchers. It currently has a “BBB+” rating with S&P Global Ratings, “BBB” with Fitch Ratings, and “Baa2” with Moody’s Ratings. — Luisa Maria Jacinta C. Jocson

 

The House of Representatives on Tuesday approved on third and final reading a measure seeking a PHP 200 across-the-board minimum wage hike for workers in the private sector, despite concerns over its potential inflationary effects and adverse impact on small businesses.

Lawmakers voted 171-1-0 to approve House Bill No. 11376, paving the way for the possibility of a first legislated wage hike since the late 1980s, when a law created regional wage boards to dictate pay rates.

Congressmen in February passed the bill on second reading, while the Senate greenlit a counterpart bill seeking a P100 wage increase last year.

However, the House’s approval of the wage hike comes just a few days before Congress adjourns for a final time on June 13.

In a statement after the approval, the Trade Union Congress of the Philippines (TUCP) urged the House and Senate leadership to immediately convene a bicameral conference committee to reconcile disagreeing provisions of their bills.

“I appeal to all my fellow bicameral committee conferees — my counterparts in the Senate and my colleagues in the House — let us get this done, and get it done now,” Deputy Speaker and TUCP Party-list Rep. Raymond Democrito C. Mendoza said in the statement. “We are way past the stage of whether we will pass a legislated wage hike, but how much that wage hike will be.”

“Regardless of whether it ends up closer to PHP 100 or PHP 200, this will be the most significant wage increase in nearly four decades,” he added.

The Philippines sets minimum wages regionally through wage boards, but lawmakers argue the system delivers slow and meager increases that fail to keep up with rising costs.

Around 55% of Filipino families see themselves as poor, according to an April Social Weather Stations survey. Data from the Philippine Statistics Authority in 2023 showed that a family of five needs at least PHP 13,797 a month or PHP 460 daily to make ends meet.

Giving a nod to a legislated wage hike would provide a “real boost” to achieving a livable wage, Federation of Free Workers President Jose Sonny G. Matula said before the bill’s approval, adding that it’s “pro-worker, pro-poor and pro-local economy.”

“A legislated wage hike breaks the cycle of barya-barya (loose change) adjustments from regional wage boards,” he said in a Viber message. “For minimum wage workers nationwide, this means a real boost to daily survival — a step toward a living wage.”

However, only five million workers would benefit from the wage hike, Sergio R. Ortiz-Luis, Jr., president of the Employers Confederation of the Philippines, said before the bill’s approval.

“Only 10% of employees would be affected by the legislated wage increase,” he said in a phone call, noting that most workers are in the informal sector. “Most are, for example, farmers, fisherfolk, tricycle and jeepney drivers and market vendors.”

Close to 50 million Filipinos were employed in March 2025, according to government data.

Companies would likely struggle to keep up with a legislated wage hike, prompting them to raise the prices of goods and services they provide, which could be inflationary, John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said before the bill’s approval.

“Businesses could pass on the higher labor costs to consumers through increased prices,” he said in a Viber message. “However, the inflationary impact would depend on the scale of the wage hike and whether it is staggered or accompanied by productivity gains.”

An immediate wage hike could force companies to downsize their workforce, leading to job shedding and reduced hiring, he said. “Micro, small and medium enterprises (MSME) may struggle to absorb higher wage bills.”

MSMEs account for more than 99% of all businesses in the Philippines and generate 67% of the country’s total employment, according to the United Nations Development Program.

The Labor department may provide incentives to small businesses to help them comply with the legislated wage increase, according to the proposed law. Companies with fewer than 10 employees may be exempted from the measure too.

It could cost the government PHP 1.5 billion monthly if it chooses to subsidize small businesses just so they could comply with the proposed wage hike, said Mr. Ortiz.

“It could cost up to PHP 50 million a day,” he said. “Where will that come from?”

Lawmakers should instead let regional wage boards handle salary increases, Mr. Ortiz said. “There are regional wage boards that are raising wages every year.”

Congress should also look at implementing a legislative wage hike by phase or through a region-based approach to help balance the interests of businesses and workers, said Mr. Rivera. – Kenneth Christiane L. Basilio, Reporter

The Philippines’ growth momentum remains “broadly stable,” even as global trade tensions would make it hard to hit the 6-8% growth target in the next two years, an Organisation for Economic Co-operation and Development (OECD) economist said.

“The Philippines continues to show very solid growth momentum, supported by domestic demand and somewhat by public investment,” OECD economist Cyrille Schwellnus said at a briefing on Wednesday.

In its latest Economic Outlook, the OECD projected below-target growth for the Philippines for 2025 and 2026. It sees the Philippine economy growing by 5.6% this year, and picking up to 6% in 2026.

Mr. Schwellnus cited robust labor market and election-tied expenditure as main drivers of growth.

“But investment is going through a soft patch, growing well below its average over the past three years. Exports, again, are growing at a healthy pace. But we expect that to weaken on the back of escalating global trade tensions,” he said.

In April, the US slapped higher reciprocal tariffs on most of its trading partners’ goods exports, though this has been suspended until July, except for the baseline 10% which still remains in effect. The US slapped the Philippines with a 17% reciprocal tariff, the second lowest among its neighbors.

Mr. Schwellnus said the government’s 6-8% growth target is “perfectly attainable” in the medium term.

“But in the very short term, in 2025, 2026, we see [the target] as difficult to reach,” Mr. Schwellnus said.

In the first quarter, gross domestic product (GDP) grew by a weaker-than-expected 5.4% amid heightened uncertainty arising from the Trump administration’s tariff policies.

“Now in 2025, we have additional headwinds, especially from the external side, so a slowdown of global trade, but also on the domestic side, where we see some fiscal consolidation going on over the next couple of years,” Mr. Schwellnus said.

The OECD cut its global growth outlook to 2.9% in both 2025 and 2026, noting that “substantial barriers to trade, tighter financial conditions, diminishing confidence and heightened policy uncertainty are projected to have adverse impacts on growth.”

The OECD noted the possible impact of the global economic slowdown on remittances from overseas Filipino workers.

“If there were to be a larger-than-expected slowdown in major economies, such as the US or China, that would, of course, have an effect on exports of the Philippines, and it might also impact remittance flows, which would then impact domestic consumption and investment,” Mr. Schwellnus said.

However, the OECD said the impact on remittance flows was not accounted for in its growth projection for the Philippines.

Mr. Schwellnus said the Philippines can immediately implement reforms, especially to reduce barriers to foreign direct investment.

In the same report, the OECD projected that inflation would settle at 2% this year and 3.1% in 2026 “amid balanced domestic demand and currency stability.”

“Looking ahead, we expect inflation to gradually return to 3% as food prices stabilize and monetary policy continues to ease,” he said.

BSP Governor Eli M. Remolona, Jr. earlier said cooling inflation has given them “plenty of room” to cut rates this year. Mr. Remolona said they could deliver two more rate cuts this year, in “baby steps” of 25 basis points.

Services unaffected

Meanwhile, the Philippines’ services sector is unlikely to be impacted by the US tariff policies, S&P Global Ratings said, though the industry could eventually face strains in the coming years.

“In the Philippines, the story is more nuanced. The Philippines is active in the export of certain things. One is services, especially business process outsourcing. It is a big factor for the Philippine economy,” S&P Global Ratings Senior Economist Vishrut Rana said in a webinar.

The service sector will likely be sheltered from the initial impact of the trade tensions, he said.

“One element of shelter is that for services. Trade seems to be unaffected by the tariff measures for the time being. It could come under pressure over the next few years,” he added.

United States President Donald J. Trump’s reciprocal tariffs have only covered goods, not services.

Meanwhile, the credit rater also noted that the Philippines’ electronics exports are also spared for the time being.

“The Philippines is also a significant player in the electronic supply chain in Asia and the Pacific (APAC). However, for the time being, it doesn’t seem to be a focus area,” Mr. Rana said.

The US’ reciprocal tariffs will not apply to certain goods, such as semiconductors, copper, pharmaceuticals, gold, and minerals that are not available in the US, according to the White House’s April 2 tariff announcement.

Electronic products were the top commodity export of the Philippines last year, accounting for more than half or 53.4% of its total exports.

“On broader trade, there could be some pressure on the electronic space. We are watching that at the moment,” Mr. Rana said. “For now, the APAC electronic sector is performing relatively well, which is supporting the sector in the Philippines also.” — ARAI and LMJCJ