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The Philippines is among the least exposed to US tariff policies in Southeast Asia and stands to benefit from shifting trade directions, the Philippine Institute for Development Studies (PIDS) said in a discussion paper.

“For smaller economies like the Philippines, the new tariff regime presents both a strategic opportunity and a formidable challenge,” according to the paper authored by PIDS Emeritus Research Fellow Rafaelita M. Aldaba.

“The relatively lower tariff rate creates openings for niche export expansion, particularly in sectors with tight price margins and high tariff sensitivity such as garments and footwear.”

US President Donald J. Trump slapped the Philippines with a 17% tariff, the lowest among Association of Southeast Asian Nations-5 (ASEAN-5) countries. Vietnam faced the highest tariff rate at 46%, followed by Thailand (36%), Indonesia (32%) and Malaysia (24%).

However, Ms. Aldaba, a former undersecretary at the Department of Trade and Industry, said that capitalizing on the window of opportunity is “far from automatic.”

“The Philippines’ ability to convert this relative advantage into tangible economic gains will hinge on how swiftly it can mobilize responses in logistics, investment facilitation, and targeted export promotion.”

PIDS used a tariff exposure composite index (TECI) to measure the “relative vulnerability of the country’s exports to the new tariff regime.”

Under the TECI index, the Philippines and Indonesia logged the same score of 2.2, which indicates a moderate risk.

Vietnam registered the highest exposure (3.4), followed by Thailand (3.0). Malaysia scored a 2.8, which indicates a moderate exposure.

Data from PIDS also showed that based on the relative exposure of ASEAN-5 economies to the US market, the Philippines has the smallest export footprint. Its share of exports is just 5% of the region’s total.

However, it also noted that the Philippines’ exports to the United States accounts for about 20% of its total exports.

The country’s top exports are electronics, particularly related to semiconductors, as well as coconut oil and printing machines.

“Its limited product diversification and small volume make it more vulnerable to sector-specific shocks but also signals potential for targeted upgrading,” Ms. Aldaba said.

Ms. Aldaba said the Philippines benefits from the lowest reciprocal tariff among ASEAN-5 due to the structure of its exports.

“Electronics — including semiconductors — account for over 50% of the country’s total exports, and many of these products are included in the US exemption list. This strongly cushions the Philippines from broader tariff disruptions, helping to temper its actual trade vulnerability,” she added.

However, she said the country is still not completely unaffected by these tariffs and faces some form of exposure.

“Non-exempted exports — such as coconut oil, insulated wires, containers, and select low-tech manufacturing goods — are more vulnerable to cost increases and competition, especially from trade diversion out of China or higher-tariff ASEAN partners.”

“Despite this, the Philippines is strategically positioned to benefit. Its unique combination of low tariff rate, strong exemption for high-value exports, and moderate strategic exposure creates an advantageous platform for trade redirection, particularly for thin-margin, cost-sensitive goods.”

To maximize these benefits, PIDS said the country must “bolster its industrial base, improve logistics and Customs efficiency, and actively promote itself as a stable and efficient export hub amid shifting global supply chains.”

The Philippines is also “well-positioned to capture relocation and supply-chain shifts,” particularly in electronics goods.

“However, to realize this opportunity, the Philippines — and similar ASEAN peers — must address structural gaps,” Ms. Aldaba said.

These include ramping up infrastructure development to address gaps and alignment of the labor market to upskill workers to meet the needs of complex manufacturing.

“To overcome these barriers and unlock its full export potential, the Philippines must urgently implement a coordinated set of strategic trade and industrial interventions to safeguard critical sectors while acceler-ating industrial upgrading,” she added.

Ms. Aldaba also called for the need for industrial upgrading and resilience building, and trade defense and monitoring mechanisms.

“Without swift and proactive policy implementation, the Philippines risks being merely a passive beneficiary rather than a strategic player in ongoing global trade realignments,” she said.

“Conversely, by adopting targeted policy and institutional measures — grounded in digital readiness, sectoral upgrading, and strategic positioning — the Philippines can establish itself as a credible alternative hub for digital-ly-enhanced, service-integrated, and geopolitically trusted exports.” — Luisa Maria Jacinta C. Jocson

The International Monetary Fund (IMF) slashed its gross domestic product (GDP) growth projections for the Philippines from this year to the next, reflecting heightened global uncertainty arising from US tariff policy.

In its latest World Economic Outlook (WEO), the IMF downgraded its GDP growth forecast for the Philippines to 5.5% this year from the 6.1% projection in its January update.

It also lowered its 2026 forecast to 5.8% from 6.3% previously.

These would fall below the government’s 6-8% growth targets for this year to 2026.

The IMF said its forecasts consider the weaker-than-anticipated Philippine growth in the fourth quarter, as well as external headwinds stemming from heightened trade tensions and policy uncertainty.

“Downward revisions to growth for 2025 and 2026 are observed throughout the region and globally, reflecting the recent external developments,” an IMF spokesperson said in an e-mail.

These include the “direct impact of higher tariffs on the Philippines’ goods exports to the US, downward revisions to trading partners’ growth, and impact of higher uncertainty and financial tightening,” it said.

US President Donald J. Trump on April 2 announced a barrage of reciprocal tariffs on nearly all of its trading partners, with a baseline rate of 10%.

While most of the higher reciprocal tariffs have been suspended until July, the baseline 10% tariff is still in effect.

The Philippines was slapped with a 17% tariff rate on its exports to the US, the second lowest in Southeast Asia.

The IMF said its WEO forecasts are based on information available as of April 4 and are subject to “significant uncertainty.”

However, the IMF said the Philippine economy is seen to remain somewhat resilient.

“Despite a more difficult environment, growth in the Philippines is expected to remain relatively robust in 2025,” it said.

The IMF’s forecast for the Philippines places it as the second-fastest growing economy in emerging and developing Asia this year, just behind India (6.2%).

The region is projected to grow by 4.5% this year and 4.6% in 2026, as Southeast Asian countries are among the most affected by the US tariffs.

In Southeast Asia, the Philippines has the fastest-projected GDP growth forecast this year. It is ahead of Vietnam (5.2%), Indonesia (4.7%), Malaysia (4.1%) and Thailand (1.8%).

“On the upside, recent legislative reforms could facilitate an accelerated implementation of domestic infrastructure projects, including through public-private partnerships, and lead to higher foreign direct investment (FDI) and investment,” the IMF said.

“In terms of growth drivers, domestic consumption remains the key driver for growth and is expected to be supported by lower inflation and low unemployment,” it added.

Meanwhile, the multilateral institution said it expects headline inflation in the Philippines to average 2.6% this year and 2.9% in 2026, well within the central bank’s 2-4% target band.

“Relative to January WEO, the headline inflation projection for 2025 has been revised down by 0.2 percentage point (ppt) to 2.6%.”

This reflects the “lower-than-expected inflation outturn in the first quarter, and downward revisions to global fuel and food price projections.”

The latest data from the local statistics agency showed inflation slowed to 1.8% in March, its slowest rate in nearly five years. This brought average inflation to 2.2% in the first quarter.

Accounting for risks, the central bank sees inflation averaging 2.3% in 2025 and 3.3% in 2026.

The IMF said risks to the inflation outlook are “broadly balanced.”

“On the upside, potential disruptions in global supply chains and trade restrictions can raise imported inflationary pressures, while risk-off shocks could contribute to currency depreciation.”

“The Philippines’ exposure to extreme climate events also poses additional inflationary risks. On the downside, risk of weaker global demand prospects could pose deflationary risks, including through lower commodity prices.”

Meanwhile, the IMF said the Bangko Sentral ng Pilipinas (BSP) has room to further lower interest rates and “firmly move to a neutral stance.”

“With inflation projected to remain around the BSP’s target of 3%, inflation expectations well-anchored, and amid an expected widening of the output gap, there is space for a more accommodative stance.”

The Monetary Board earlier this month resumed its rate-cutting cycle with a 25-basis-point (bp) rate cut, bringing the benchmark to 5.5%.

BSP Governor Eli M. Remolona, Jr. has said they will likely continue cutting rates further this year in “baby steps” or increments of 25 bps.

There are four more Monetary Board policy meetings this year, with the next slated for June 19.

“Amidst prevailing uncertainty and with both upside and downside risks to inflation, a data-dependent approach, and clear and effective communication around policy settings will be important to manage expectations and provide clarity on the BSP’s reaction function,” the IMF added.

‘Negative shock to growth’

Meanwhile, the IMF expects global growth to slow to 2.8% this year and to recover to 3% in 2026, reflecting “the direct effects of new trade measures and their indirect effects through trade linkage spillovers, heightened uncertainty, and deteriorating sentiment.”

The new forecasts are lower than the 3.3% projection for both years in the January WEO update.

Trade uncertainties have “surged to unprecedented levels,” the IMF said in the latest report.

“The swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity,” it added.

The US is expected to grow by 1.8% this year, 0.9 percentage point lower than the previous projection “on account of greater policy uncertainty, trade tensions and softer demand momentum.”

“Tariffs are also expected to weigh on (US) growth in 2026, which is projected at 1.7% amid moderate private consumption,” the IMF said.

The IMF also lowered projections for Canada, Japan and the United Kingdom.

For China, it downgraded its growth outlook to 4% this year from 4.6% previously due to the impact of the US tariffs. It also lowered its 2026 China forecast to 4% from 4.5% previously.

The tariffs and consequent countermeasures alone are a “major negative shock to growth,” it added.

“The unpredictability with which these measures have been unfolding also has a negative impact on economic activity and the outlook and, at the same time, makes it more difficult than usual to make assumptions that would constitute a basis for an internally consistent and timely set of projections.”

Global inflation is also seen to ease at a slower pace than initially expected, the IMF said.

It also flagged “intensifying downside risks” on global output.

“Ratcheting up a trade war, along with even more elevated trade policy uncertainty, could further reduce near- and long-term growth, while eroded policy buffers weaken resilience to future shocks.”

“Divergent and rapidly shifting policy stances or deteriorating sentiment could trigger additional repricing of assets beyond what took place after the announcement of sweeping US tariffs on April 2 and sharp adjustments in foreign exchange rates and capital flows, especially for economies already facing debt distress.”

Moving forward, the IMF said there is a need for “clarity and coordination.”

“Countries should work constructively to promote a stable and predictable trade environment, facilitate debt restructuring, and address shared challenges.”

“At the same time, they should address domestic policy and structural imbalances, thereby ensuring their internal economic stability. This will help rebalance growth-inflation trade-offs, rebuild buffers, and reinvigorate medium-term growth prospects, as well as reduce global imbalances,” it added. – Luisa Maria Jacinta C. Jocson, Senior Reporter

The PHilippines has room to negotiate with the US to lower its reciprocal tariffs, Fitch Solutions’ unit BMI said, but added that trade tensions are still likely to weigh on economic growth.

“For now, though, Washington has lowered the tariff rate to 10% for 90 days. We think that the Philippines will be successful in keeping them at this level at the very least,” BMI Asia Country Risk Analyst Shi Cheng Low said in a webinar on Tuesday.

US President Donald J. Trump slapped a 17% tariff on the Philippines earlier this month, but suspended this for 90 days, keeping the blanket 10% duty in effect.

The Philippines’ 17% tariff rate is much lower than its Southeast Asian peers, some of which are facing some of the highest reciprocal tariffs. Six Southeast Asian countries were slapped with much larger-than-expected tariffs of between 32% and 49%.

BMI said the Philippines can negotiate with the US on further lowering trade barriers.

To address the US’ demand to increase import volumes, BMI said the Philippines can possibly increase energy and weapon imports, as well as lower levies on US goods.

“(The Philippines) remains an important security partner for the US, especially as Washington is working to counter Beijing’s expanding reach in the South China Sea,” Mr. Low said.

“Therefore, we think that this will give them at least a bit of leverage. If we are right, the final impact will be less severe, and we expect them to shave off about 0.6 percentage point (ppt) of headline growth.”

If the 17% reciprocal tariff is implemented, BMI’s baseline estimates show that this could subtract about 1.1 ppt from the Philippines’ real GDP growth.

“We revised our real GDP growth projections from 6.3% to 5.4%,” Mr. Low said.

BMI’s forecast would fall short of the government’s 6-8% target this year.

“Now, this is more aggressive than the 0.6 ppt we have previously mentioned but because it’s a reflection of a very tepid domestic activity we’ve seen recently. So, more stimulus will be needed to cushion the impact.”

“The Philippines’ exposure to both China and the US economy is pretty balanced. With both economies likely to slow over the next few quarters, the Philippines will definitely follow suit,” he added.

Meanwhile, BMI expects the Bangko Sentral ng Pilipinas to cut rates by an additional 75 basis points (bps).

The Monetary Board earlier this month resumed its easing cycle, cutting rates by 25 bps to bring the benchmark to 5.5%.

The next rate-setting meeting is on June 19. There are four more Monetary Board meetings slated this year, including June. — Luisa Maria Jacinta C. Jocson

The country’s balance of payments (BoP) position swung to a USD 2-billion deficit in March, the Bangko Sentral ng Pilipinas (BSP) said on Monday.

Central bank data showed the BoP posted a deficit of USD 1.97 billion in March, a reversal from the USD 3.09-billion surplus in February and the USD 1.17-billion surfeit in the same month a year ago.

The BoP measures the country’s transactions with the rest of the world. A deficit indicates more funds exited the Philippines while a surplus means more money entered the country than left.

“The BoP deficit reflected the National Government’s (NG) drawdowns on its foreign currency deposits with the BSP to meet its external debt obligations, as well as the BSP’s net foreign exchange operations,” the central bank said.

Latest data from the BSP showed the Philippines’ outstanding external debt rose by 9.8% to USD 137.63 billion as of end-December 2024 from a year prior.

This brought the external debt-to-gross domestic product (GDP) ratio to 29.8% at the end of 2024 from 28.7% at end-2023.

In the first quarter, the country’s BoP position registered a USD 2.96-billion deficit, also a reversal from the USD 238-million surplus in the same period a year ago.

“Based on preliminary data, the year-to-date deficit reflected mainly the widening trade in goods deficit,” the BSP said.

Latest data from the local statistics authority showed the trade-in-goods deficit widened by 4.6% to USD 8.28 billion in the January-February period from the USD 7.91-billion gap last year.

“This decline was partly muted, however, by the continued net inflows from personal remittances, foreign direct investments, and foreign borrowings by the NG,” it added.

At its end-March position, the BoP reflected a final gross international reserve (GIR) level of USD 106.7 billion, lower than USD 107.4 billion as of end-February.

Despite this, the BSP said the latest GIR provides a “robust external liquidity buffer.”

“Specifically, the latest GIR level ensures availability of foreign exchange to meet balance of payments financing needs, such as for payment of imports and debt service, in extreme conditions when there are no export earnings or foreign loans,” it added.

The dollar reserves were enough to cover 3.6 times the country’s short-term external debt based on residual maturity.

It was also equivalent to 7.4 months’ worth of imports of goods and payments of services and primary income.

An ample level of foreign exchange buffers safeguards an economy from market volatility and is an assurance of the country’s capability to pay debt in the event of an economic downturn.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the shift to a deficit position is due to several factors, such as the wider trade deficit amid higher imports.

He also cited the “larger debt service payments, or forex (foreign exchange) operations by the BSP to manage (peso) volatility.”

“It’s also possible that earlier inflows such as borrowings, remittances, or investment-related receipts moderated in March,” Mr. Rivera said.

“This underscores the sensitivity of the Philippines’ external position to global market movements and domestic financing needs. Moving forward, careful management of external debt and trade competitiveness will be crucial to maintaining external stability.”

This year, the BSP expects the country’s BoP position to end at a USD 4-billion deficit, equivalent to -0.8% of gross domestic product.

In 2024, the BoP position stood at a surplus of USD 609 million, plunging by 83.4% from the USD 3.672-billion surplus as of end-2023.  – Luisa Maria Jacinta C. Jocson, Senior Reporter

Air passengers will have to pay higher terminal fees starting April 21 as the Civil Aviation Authority of the Philippines (CAAP) approved the collection of new passenger service charge (PSC) and other fees at its airports.

In Memorandum Circular 019-2025, CAAP Director General Raul L. Del Rosario said the PSC, also known as terminal fees, will be raised to PHP 900 (USD 17) for international flights from PHP 550 currently. This will be applied to air passengers departing from international airports as well as principal class 1 and 2 airports.

For domestic flights, the PSC is set at PHP 350 if the passenger is departing from an international airport. It is set at PHP 300 if departing from a principal class 1 airport; PHP 200 for those departing from a principal class 2 airport; and PHP 100 for those leaving via community airports.

The PSC for all domestic flight passengers is currently at PHP 200.

“Any passenger refusing or failing to pay the required passenger service charge shall be prevented from boarding the aircraft,” the circular stated.

However, children under two years old at the time of departure, transit passengers, and passengers who were denied entry do not have to pay the PSC.

Overseas Filipino workers departing via international flights are also exempted from the PSC.

In a statement, the CAAP said the increase in the decade-old PSC was primarily adjusted based on inflation from 2015 to present.

“The adjustment supports CAAP’s efforts to enhance passenger experience and improve airport facilities and operations,” it said.

The new fees will be implemented in CAAP-operated airports starting April 21.

Privately-operated airports such as Ninoy Aquino International Airport (NAIA), Mactan-Cebu International Airport, Clark International Airport, and Caticlan Airport will not be covered by the higher fees laid out in the circular.

New NAIA Infra Corp., which took over the operations of the country’s main gateway last year, will raise the PSC to PHP 950 for foreign departures and PHP 390 for domestic passengers in September this year.

Sought for comment, Nigel Paul C. Villarete, senior adviser on public-private partnerships at the technical advisory group Libra Konsult, Inc, said the increase in airport fees is appropriate and timely, noting that CAAP should have a more commercial approach towards aviation services.

“Airport services should not be subsidized, when airplane fares are not,” Mr. Villarete said in a Viber message on Monday.

“Airports should be empowered to be self-sufficient not only for operations but for future expansion as well,” he added.

Aside from terminal fees, CAAP set new landing and take-off fees that are based on the maximum take-off weight (MTOW) of the aircraft.

“Aircraft that operate at CAAP-operated airports shall be levied with appropriate fees and charges for the use of various facilities such as runways, taxiways, apron areas and lighting facilities,” the circular stated.

For international flights, the minimum fee is USD 260 for an aircraft weighing up to 50,000 kilograms.

For domestic flights, a minimum rate is PHP 54 per 500 kilograms for an aircraft weighing up to 50,000 kilograms.

Meanwhile, the CAAP circular also set “lighting charges,” which means an aircraft that lands and takes off between 6 p.m. and 6 a.m. will be imposed an additional 15% of the applicable landing and take-off charges.

An aircraft that parks between 6 p.m. and 6 a.m. will be imposed an additional 15% of applicable parking charges.

The CAAP also set aircraft parking fees, based on the maximum take-off weight and the number of hours parked.

For international flights, the first two hours are free, after which USD 30 is charged for the first 30 minutes. The subsequent rates ranging from USD 4.60 to USD 8.70 per half hour will depend on the aircraft’s MTOW.

Aircraft for domestic flights, on the other hand, will have one-hour free parking, after which the first half hour will be at PHP 364. Rates for the additional half-hour range from PHP 36 to PHP 97 depending on the MTOW.

The CAAP also imposed a “tacking” fee for aircraft using loading bridges. For international flights, the fee is USD 30 per tube per hour, while the rate is P1,300 per tube per hour for domestic flights.

The memorandum circular was signed on April 4 and submitted to the University of the Philippines Law Center on April 7. It will take effect 15 days after the publication in two newspapers. — A.E.O.Jose

cooling inflation drove domestic consumption. 

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort, said in an e-mail that first-quarter GDP likely expanded by 6.3%. 

He said he expected household spending to have grown by 5% in the first three months of 2025 versus 4.7% last year, supported by “benign” inflation.  

In the first quarter, inflation averaged 2.2%, well within the central bank’s 2-4% target range. 

Mr. Ricafort said consumption may have been driven by “among the strongest employment data in nearly 20 years, continued growth in overseas Filipino workers’ remittances, business process outsourcing revenues, [and] tourism receipts.” 

However, some analysts expect growth in the January-to-March period to settle below 6%. 

Moody’s Analytics economist Sarah Tan said the economy may have expanded by 5.5% in the first quarter. 

“Private consumption should lift 5.2% year on year, supported by lower borrowing costs as the effect of monetary policy easing filters through the economy. That will ease the pressure on household budgets,” Ms. Tan said in an e-mailed statement on April 11. 

The Bangko Sentral ng Pilipinas paused its easing cycle in February but cut rates by 25 basis points at the April 10 meeting. This brought the target reverse repurchase rate to 5.5% from 5.75% previously. 

Ser Percival K. Peña-Reyes, director of the Ateneo Center for Economic Research and Development, said in a Viber message that “construction, transport and storage, and accommodation and food service activities” likely drove GDP expansion to 5.4% in the first quarter. 

He said household consumption may have grown by 4.6% in the January-to-March period. 

Asked for the reason of a relatively slower GDP projection, Mr. Peña-Reyes said that elections no longer provide a significant boost to Philippine growth. 

Mr. Balisacan earlier said that election spending would likely be “muted” compared with previous elections as more candidates are allocating more of their campaign funds on social media ads.  

Tariff threat 

Meanwhile, the outlook for the second quarter may be clouded by the turmoil caused by US President Donald J. Trump’s tariff policies. 

Mr. Trump on April 9 paused the new reciprocal tariffs for 90 days, although the baseline 10% tariff on almost all US imports remained in effect. The Philippines faced a 17% reciprocal tariff, which was the second lowest among Southeast Asian countries. 

“The immediate risk to the outlook for the rest of 2025 will be slowing export growth due to the hike in US tariffs. These make the Philippines’ goods to the US more costly and less competitive, which is concerning because the US is the Philippines’ largest export destination,” Ms. Tan said. 

She also noted that escalating tensions between the US and its trading partners could dampen external demand for the country’s goods, potentially slowing production. 

“We expect the Philippines to expand 5.8% this year, but this could be revised lower should the heightened US-China trade war cause significant disruptions to the global economy,” Ms. Tan said. 

The Philippines exported USD12.14 billion worth of goods to the US in 2024. 

Mr. Ricafort said the easing inflation trend would justify further rate cuts “that would fundamentally lead to faster GDP than otherwise.” 

“However, offsetting risk factors include US President Trump’s higher US import tariffs, reciprocal tariffs, and other protectionist policies that could slightly reduce GDP growth starting the second quarter 2025,” Mr. Ricafort said.  

Despite the tariff threats, he said second-quarter growth could still reach 6%, driven by election spending. 

Ms. Tan anticipates an increase in government spending ahead of the midterm elections on May 12. 

Mr. Peña-Reyes said he sees the economy expanding by 5.9% in the second quarter, as well as the full year. 

Mr. Balisacan has said it may be too early to revise the full-year growth targets in the Development Budget Coordination Committee’s meeting in May. 

However, he said the upper end of the 6-8% target may be unrealistic to hit amid global uncertainty over the US tariff policy.  – Aubrey Rose A. Inosante, Reporter