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The Bangko Sentral ng Pilipinas (BSP) is expected to cut rates this week as low inflation and the US’ tariff policy will give it more than enough room to resume its rate-cutting cycle, analysts said.

A BusinessWorld poll conducted last week showed that all 17 analysts surveyed expect the Monetary Board to reduce the target reverse repurchase rate by 25 basis points (bps) at its policy meeting on April 10.

If realized, this would bring the benchmark rate to 5.5% from the current 5.75%.

The central bank kept interest rates steady in February as it waited to see how global trade uncertainties would unfold. It slashed borrowing costs by a total of 75 bps in 2024.

“The door to continue the easing cycle has now swung even wider, with domestic conditions becoming even more appropriate for a rate cut,” HSBC economist for ASEAN Aris D. Dacanay said.

Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said there is a “90% chance” the Monetary Board will cut rates by 25 bps on Thursday.

“We think a gradual cut will be conducted given below-than-expected March inflation and need to underpin economic growth amid higher global tariffs,” Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco said.

Philippine National Bank economist Alvin Joseph A. Arogo said further easing will be justified by “low inflation, higher probabilities of Fed rate cut, and relatively better reciprocal tariff compared to other Asian countries.”

“We think that there is room for the ‘baby-step’ rate cut amid global trade uncertainties. One major reason is the continued deflation narrative, with inflation steady within the government’s inflation target of 2-4%,” Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said.

Slowing inflation

The March inflation print is one of the key indicators that will prompt the central bank to cut rates this week, analysts said.

March inflation slowed to 1.8% in March from 2.1% in February, its slowest rate in nearly five years.

Inflation averaged 2.2% in the first quarter, well within the central bank’s 2-4% target.

“I’m expecting the (Monetary) Board to resume easing (this week), with a 25-bp rate cut to the target reverse repo rate,” Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said.

He said the recent inflation prints “indicate strongly that the BSP still has ample room to further cut rates nominally while still keeping to its endgame of pursuing a ‘less-restrictive’ policy.”

Nicholas Antonio T. Mapa, chief economist at Metropolitan Bank & Trust Co., said the data so far “points to the need and scope for easing.”

“Inflation is at the lower end of target, risk-adjusted inflation forecasts point to target consistent inflation this year and next while growth is projected to miss target for a third year in a row,” he added.

Citi Economist for the Philippines Nalin Chutchotitham said the below-2% inflation “cements the case for an April policy rate cut.”

“While creeping higher from April, we see inflation staying firmly in the lower half of BSP’s target range for the rest of 2025, and cut our 2025 inflation forecast to 2.2%,” she said.

The BSP’s baseline forecasts for inflation are at 3.5% for 2025 to 2026. Accounting for risks, inflation could reach 3.7% in 2026.

“With inflation much lower than the BSP’s risk-adjusted inflation forecast, we expect the central bank to tweak its inflation forecast downwards next week,” Mr. Dacanay said.

“And with inflation down, the real policy rate has widened enough for the BSP to cut even without the Fed doing the same. All is well,” he added.

Trump tariffs

Meanwhile, analysts said the central bank will be able to now price in the tariff impact and lower interest rates accordingly.

“An interest rate cut would provide additional support for the Philippine economy amid risks from higher US tariffs,” Chinabank Research said.

“Lower borrowing costs, which is a boon for investments, could help temper the impact of potentially weaker external demand and maintain the economy’s upward growth trajectory.”

ING Regional Head of Research for Asia-Pacific Deepali Bhargava said the “global growth uncertainty” stemming from the US tariffs has strengthened the expectation of a rate cut.

Last week, the Philippines was not spared by US President Donald J. Trump announced a barrage of tariffs on all its trading partners. He imposed a 17% reciprocal tariff on all Philippine goods exported to the US, which will take effect on April 9.

While this was higher than the 10% baseline tariff imposed on most countries, the US tariff on the Philippines was the second lowest in Southeast Asia after Singapore (10%).

However, Chinabank Research noted that the Philippines is more insulated from tariffs than its regional peers due to its strong domestic demand and the relatively lower tariff.

“Moreover, a less restrictive monetary policy could help temper the adverse effects of an escalating global trade war on the Philippine economy,” it added.

The stabilizing currency will also allow the BSP to cut rates further, analysts said.

“The peso appreciated further versus the US dollar as of March, at PHP 57 levels, the strongest for the peso in more than five months, could further improve import prices and overall inflation, thereby could also support further monetary easing going forward,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

The peso closed at PHP 57.21 against the greenback at end-March, strengthening by 78.5 centavos from the PHP 57.995 at end-February.

“An inflation print that remains within their target range and a broadly stable peso will give BSP the confidence to proceed with a rate cut, even as the US Fed held interest rates steady in March,” Moody’s Analytics economist Sarah Tan said.

The US central bank last month held its benchmark overnight rate steady in the 4.25%-4.5% range amid expectations of rising prices ahead of Mr. Trump’s tariff proposal.

“We maintain our view that the 100-bp resulting interest rate differential with the Fed remains a comfortable level that is unlikely to trigger significant capital outflows and a sharp depreciation of the peso that could fan inflationary pressures,” Chinabank Research added.

Further cuts?

Analysts said the central bank is most likely to continue on its easing path for the rest of the year.

“Nevertheless, the latest print should give the Monetary Board enough comfort to restart its easing cycle next week; we expect a 25-bp cut this month, followed by 75 bp worth of additional easing by yearend,” Mr. Chanco said.

After April, Ms. Chuchotitham said she expects the BSP to deliver rate cuts in August and December in increments of 25 bps.

“Restarting the easing cycle will provide much needed support to domestic demand, more so with the reserve requirement ratio cut to 5% last week, making the BSP’s monetary transmission more efficient,” Mr. Dacanay said.

“Credit demand in the economy remains tepid, while consumption is still muted since high interest rates have brought demand for big-ticket purchases down.”

Latest data from the BSP showed bank lending growth slowed to 12.2% in February from 12.8% in January.

“Lowering the policy rate will also support the domestic economy at a time when uncertainties cloud the outlook for its external-facing sectors,” Ms. Tan said.

Oikonomia Advisory & Research, Inc. economist Reinielle Matt M. Erece said the BSP should focus on supporting growth next.

“Since inflation is already hovering within the central bank’s inflation targets, it’s time to target another area, economic growth,” he said.

“The disappointing growth last quarter shows the need for policy measures such as monetary policy easing to boost consumer demand and business activity.”

On the other hand, Chinabank Research noted that the central bank will likely remain cautious as it assesses the impact of global policies on the domestic economy.

The Philippine Economic Zone Authority (PEZA) will seek reduced US tariffs on key economic zone exports, which will likely be impacted by the 17% reciprocal tariff that will take effect on April 9.

“Guided by the Department of Trade and Industry (DTI) strategy, we hope to achieve reduced tariffs on our key exports to the US such as EMS-SMS (electronics manufacturing services and semiconductor manufacturing services), automotive parts, and select agricultural products under a bilateral FTA (free trade agreement) framework,” PEZA Director-General Tereso O. Panga told BusinessWorld.

“This is by focusing on negotiations on preferential tariff agreements that will allow the Philippines and the US to pursue mutually beneficial trade,” he added.

The Trump administration on Saturday began collecting the initial 10% baseline tariff on all imports from most countries. The higher reciprocal tariff rates of 11% to 50% on countries including the Philippines, Cambodia, Vietnam and Thailand, will take effect on April 9.

“As they account for our biggest exports to the US and are the major generators of quality jobs in the country, the government may lobby for a reduced sectoral tariff for our exports of EMS-SMS products,” Mr. Panga said.

He noted EMS-SMS products account for 44.5% of export sales to the US.

The PEZA chief said this is a proposal worth considering by the US, as a big number of EMS-SMS are American companies that provide critical support to major clients in the US.

“As a sign of goodwill, the government may also offer to reduce the current duties on critical goods and services that we import from the US, following the true spirit of reciprocal tariff,” Mr. Panga added.

PEZA also warned the IT-BPM (information technology and business process management) sector, which makes up for 28.5% of export sales, may see spillover effects from the tariffs.

“IT-BPM services are generally not directly covered by US tariffs, as tariffs typically apply to physical goods rather than services,” said Mr. Panga. “However, the IT-BPM industry in the Philippines, which is a major exporter of these services, is still affected by the possibility of US protectionism and the potential impact on its client base,” he added.

Last week, DTI said that as the new tariffs will make exports to the US more expensive, it is important for the US to improve access to rapidly growing economies, including the Philippines.

“In this regard, the Philippines aims to actively engage the US in a discussion to facilitate enhanced market access for its key export interests, such as automobiles, dairy products, frozen meat, and soybeans, within the framework of a bilateral FTA,” Trade Secretary Ma. Cristina A. Roque said.

Sought for comment, Ateneo School of Government Dean and Economics Professor Philip Arnold P. Tuaño said the government should continue to push for increased market access of Philippine exports in the US.

Even as the country pursues a bilateral FTA with the US, Mr. Tuaño said the Philippine government should also engage in trade talks with other countries.

“These are especially in terms of utilizing the provisions of trade provisions in our bilateral and regional trade agreements, and at the same time, intensifying the capacity of our exporters, especially small and medium enterprises, to be able to engage these foreign markets,” he said in an e-mail.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that pursuing an FTA is the next step for the Philippines.

“Since the US is biggest export market of the Philippines at 17% share, a Philippine FTA with the US is the next step, as the Philippines already has various FTAs with ASEAN (Association of Southeast Asian Nations), China, Japan, South Korea, India, Australia,” he said.

“So, the FTA with the US and with EU (European Union) would be the next possible steps,” he added.

Globalization a thing of the past?

However, Foreign Buyers Association of the Philippines President Robert M. Young said that an FTA may not come in the near term.

“Trump’s mindset and main agenda are to bring back all possible manufacturing activities and businesses to the US and fundraise through tariff restructuring, so it seems that an FTA will not fit in,” he said in a Viber message.

“Globalization is set to be a thing of the past for now for Trump,” he added.

Mr. Young said that it is urgent for the Philippines to start working on making the country more competitive by reducing the cost of doing business.

“There is no point to be wishful now. Urgency is needed to start reworking on how to be competitive by lowering power, labor, and logistics costs and improving efficiency and productivity, among others,” he said.

“Then, we can face any other Trumps to come,” he added.

Meanwhile, government officials said that the reciprocal tariffs could serve as an impetus for businesses in countries facing higher US tariffs to look at the Philippines as an investment destination.

Special Assistant to the President for Investment and Economic Affairs Frederick D. Go said that it would be “music to (his) ears” if businesses in Asian countries that have higher tariffs would set up manufacturing facilities in the Philippines.

“That is exactly why we put in all these incentives in the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy  Act to attract them to come to the Philippines,” he told reporters on Thursday.

“And now, they have an added reason. Apart from the fiscal incentives that we provide them, there are lower tariffs in the Philippines than in their home countries,” he added.

Among Southeast Asian countries, the US imposed the highest tariff on Cambodia at 49%, followed by Laos (48%), Vietnam (46%), Myanmar (45%), Thailand (37%), Indonesia (32%), Malaysia (24%) and Brunei (24%).

Singapore was slapped with the baseline tariff of 10%, which took effect on April 5.

“PEZA sees this as an opportunity to attract greater investment — particularly from companies based in countries imposed higher tariffs by the US — seeking to reduce export costs by relocating operations to the Philippines,” Mr. Panga said.

Amid the evolving global trade environment, he said that PEZA continues to promote the Philippines under the China +1 +1 strategy.

“This encourages businesses to maintain operations in China while diversifying their supply chains by expanding into the Philippines,” he said.

Mr. Panga also noted that even before the imposition of the 17% tariff on Philippine exports to the US, PEZA had already registered relocating companies from China, Taiwan, and Vietnam.

“These companies are mostly into electronics, electric vehicles, automotive, solar cells or panels, and agri products, with the US as their primary export market,” he said.

Apart from businesses’ diversification strategy, he also sees the country’s participation in the Regional Comprehensive Economic Partnership, intra-ASEAN trade, and the impending renewal of the European Union Generalized Scheme of Preferences to also help in attracting investments.

“It is a must that we move up the value chain with our traditional strengths in electronics, automotive, and agri products and prepare our workforce for advanced manufacturing,” Mr. Panga said.

“We can also focus on boosting production for export of high-demand goods to the US, such as consumer goods, machinery, electrical goods, and textiles — which products are manufactured mainly in Vietnam and Cambodia,” he added.

Mr. Panga said the goal is to persuade the export producers to consider the Philippines as a cost-effective alternative location as they maintain their market access to the US while taking advantage of the ASEAN FTA.

“As such, it is imperative that the government accelerate the logistics infrastructure development and digital transformation so we can position the Philippines as a global manufacturing and regional supply-chain hub and, ultimately, as the preferred investment destination in the region,” he added.

As of end-2024, PEZA hosts 310 registered business enterprises accounting for PHP 406.73 billion or 13.25% of PEZA’s total investments.

These also account for USD 8.24 billion in exports and 338,582 jobs as of the end of last year. – Justine Irish D. Tabile, Reporter

The national government’s (NG) gross borrowings plunged by 48.82% in February as domestic issuances declined, the Bureau of the Treasury (BTr) reported.

Data from the BTr showed that total gross borrowings slumped to PHP 339.55 billion in February from PHP 663.42 billion in the same month a year ago.

Month on month, gross borrowings went up by 59.31% from PHP 213.14 billion in January.

Domestic debt dropped by 78.62% to PHP 140.8 billion in February from PHP 658.68 billion in February 2024.

The domestic borrowings in February 2024 included the proceeds from the record-high PHP 584.86 billion raised from retail Treasury bonds.

Domestic debt in February this year was made up of PHP 130 billion in fixed-rate Treasury bonds and P10.8 billion in Treasury bills.

Meanwhile, external debt accounted for the bulk or 58.53% of total gross borrowings.

Gross external borrowings ballooned to PHP 198.75 billion in February from PHP 4.74 billion in the previous year, as the government issued global bonds. Last year’s external borrowings were only composed of new project loans.

This consisted of P191.97 billion in global bonds and PHP 6.79 billion in project loans.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the decline in domestic borrowings was offset by the global bond issuance which raised USD 3.3 billion or P192 billion in late January but settled in February.

The government raised USD 3.3 billion from the issuance of dollar and euro-denominated sustainability bonds. This included USD 1.25 billion from 10-year US bonds, USD 1 billion from 25-year US bonds and one billion euros from 25-year euro bonds.

In the January-to-February period, the NG’s gross debt fell by 36.22% to PHP 552.69 billion from PHP 866.57 billion in the same period last year.

Domestic debt accounted for the bulk or 53.01% of total gross borrowings in the first two months.

However, gross domestic borrowings slumped by 63.38% to PHP 293 billion from PHP 800.19 billion in the same period.

This was composed of PHP 270 billion in fixed-rate Treasury bonds and PHP 23 billion in Treasury bills.

As of end-February, gross external debt surged to PHP 259.69 billion from PHP 66.39 billion a year ago.

These consisted of PHP 191.97 billion in global bonds, PHP 56.29 billion in program loans and PHP 11.44 billion in project loans.

Oikonomia Advisory and Research, Inc. economist Reinielle Matt M. Erece said the decline in gross borrowings signaled an improvement in the government’s fiscal space, showing “that they do not need to borrow as much to finance their spending for this month.”

Mr. Erece said gross borrowings increased month on month after NG’s issuance of global bonds.

For the following months, Mr. Ricafort said lower interest rates from the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) would provide “better leeway” for the NG to “hedge its borrowing to finance the budget deficit and in refinancing maturing debt.”

The BSP will meet to review policy on April 10.

The Monetary Board on Feb. 13, unexpectedly kept benchmark rates unchanged at 5.75% amid global trade uncertainty.

“Lower interest rates and stronger peso recently (best in six months) would help reduce financing costs,” he said.

The peso on April 3, closed at a near six-month high of PHP 57.095 per dollar, up 12 centavos from March 27’s finish of PHP 57.215. – Aubrey Rose A. Inosante, Reporter

INFRASTRUCTURE SPENDING slumped by nearly 20% in December, but still exceeded the full-year program, the Department of Budget and Management (DBM) said.

Latest data from the DBM showed that spending on infrastructure and other capital outlays fell by 19.8% or PHP 36.3 billion to PHP 146.7 billion in December 2024 from PHp 183 billion in the same month in 2023.

“This was attributed to the combined impact of the base effects of high capital disbursements in 2023, as well as the ongoing processing and release of cash allocations for payments of completed and ongoing capital outlay projects of various departments/agencies during the latter part of 2024,” the DBM said.

For the full-year, expenditures on infrastructure and other capital outlays jumped by 10.1% to PHP 1.33 trillion from PHP 1.2 trillion in 2023. This also exceeded the PHP 1.24-trillion program by 6.7%.

The DBM attributed the faster infrastructure spending to the implementation of the Department of Public Works and Highways’ (DPWH) banner infrastructure projects as well as defense modernization projects of the Department of National Defense.

DBM data showed overall infrastructure disbursements rose by 8.9% to P1.545 trillion in 2024 from PHP 1.42 trillion in 2023. It exceeded the PHP 1.473-trillion program for 2024 by 4.9%.

“This was equivalent to 5.8% of GDP, well within the 5-6% target for 2024 and sustaining the 5.8% outturn in 2023,” the department said.

Infrastructure disbursements also include infrastructure components of subsidy and equity to government-owned and -controlled corporations and transfers to local government units.

“This was credited mainly to the accelerated infrastructure spending of the DPWH for its accelerated implementation of construction activities, particularly from carry-over or previous years’ projects, progress billings from completed ongoing infrastructure projects, as well as the direct payments made by development partners for foreign-assisted rail projects of the Department of Transportation,” the DBM said.

Oikonomia Advisory and Research, Inc. Economist Reinielle Matt M. Erece said the P122.2-billion increase in infrastructure and capital outlays in 2024 was partly driven by defense modernization programs of the government.

“This can be in response to the heightened geopolitical tensions felt by a lot of countries,” he said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said faster infrastructure spending last year can be partly attributed to preparations for the May elections.

“(This is) part of the preparations for the midterm elections, as basis for accomplishments that are consideration for the voters to choose some candidates based on their completed projects and programs,” he said.

Mr. Ricafort said the government likely expedited infrastructure projects in the first three months of 2025 ahead of the election ban.

The Commission on Elections’ ban on public works spending began on March 28 and will run for 45 days. The midterm elections are scheduled for May 12.

Mr. Erece said he expects slower infrastructure spending as the government “reviewed and removed some of the unprogrammed appropriations and other expenses that the administration felt were unneeded, at least in the short term.” — Aubrey Rose A. Inosante

Factory output in the Philippines unexpectedly contracted for the first time in 19 months in March, as manufacturers cut output amid uncertainty surrounding US tariff policies.

The S&P Global Philippine Manufacturing Purchasing Managers’ Index (PMI) came in at 49.4, slipping from the 51 reading in February.

March marked the first time that PMI, a closely monitored gauge of economic sentiment, fell below the neutral 50 level since August 2023. It also ended 18 straight months of growth.

A PMI reading below 50 shows a deterioration in operating conditions from the previous month, while a reading above 50 signals an improvement.

“The Filipino manufacturing sector indicated a renewed deterioration in operating conditions in March. Furthermore, the health of the sector worsened at the strongest pace since August 2021,” Maryam Baluch, economist at S&P Global Market Intelligence, said in a report.

S&P Global’s Association of Southeast Asian Nations (ASEAN) data showed the Philippines, Thailand (49.9), Myanmar (49.8) and Malaysia (48.8) all posted contractions in March.

Indonesia recorded the highest PMI reading (52.4) in March, followed by Vietnam (50.5).

The Philippines’ PMI reading also fell below the 50.8 average for ASEAN in March.

In its report, S&P Global said Philippine companies cut output in March amid a fresh decline in new orders.

“Goods producers experienced a modest decline in manufacturing output in March, marking the end of an 11-month growth sequence,” it said.

S&P Global noted factory orders dropped in March after 18 months of expansion.

“Panelists noted that growing competition and fewer clients led to a reduction in new orders, with output scaled back as a result. The growth in new export orders seen previously also dissipated, with March data signaling a marginal drop in new business from overseas,” Ms. Baluch said.

As production fell, manufacturing firms paused hiring activity in March.

“Levels of unfinished work also fell, after being accumulated at the strongest pace in nearly two years in the prior survey period. Panelists indicated that they had sufficient manpower to meet order requirements and finish any pending tasks,” S&P Global said.

Also, S&P Global said a “modest” increase in price pressures was seen in March. Higher material prices pushed companies to hike their charges, it added.

“However, both cost burdens and output charges rose at rates that were weaker than their respective historical averages,” it said.

Despite the challenges in March, Philippine manufacturers still had an upbeat outlook for production.

“Nonetheless, businesses remain optimistic in their year-ahead production forecasts, with confidence levels at a four-month high. Optimism was reflected in firms’ decisions to maintain their purchasing activity and build stocks,” Ms. Baluch said.

As firms anticipated higher output in the coming months, buying activity rose for a 16^th straight month in March.

“Moreover, firms chose to expand their inventories, with stocks of purchases recording a fresh rise, and post-production inventories growing at a modest but historically solid rate,” it said.

S&P Global Marketing Intelligence Economics Associate Director Jingyu Pan said Philippine manufacturers’ optimistic production outlook stems from expectations of election spending and lower interest rates.

“But on the long-run basis, I think, yeah, a lot of them are also very much concerned over the impact on tariffs on what that might actually mean as well for production in the next year,” she said on Money Talks with Cathy Yang on One News on Wednesday.

US President Donald J. Trump is scheduled to announce a new round of reciprocal tariffs on US trading partners on Wednesday 2000 GMT (Thursday, 4 a.m. Philippine time). These tariffs are expected to take effect immediately after Mr. Trump’s announcement. 

The Washington Post reported on Tuesday that White House aides have drafted a proposal to impose tariffs of around 20% on most imports to the US.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the contraction in factory activity may indicate manufacturers’ “cautious mode” ahead of Mr. Trump’s tariff announcement.

He noted higher US tariffs and other protectionist policies could slow global trade, investments, employment and other economic activities, as well as hurt the global economy. — Aubrey Rose A. Inosante

The national government’s (NG) budget deficit ballooned to PHP 171.4 billion in February despite double-digit revenue growth, the Bureau of the Treasury (BTr) reported on Wednesday.

Data from the BTr showed the budget deficit widened by 4.11% to PHP 171.4 billion in February from the PHP 164.7-billion gap in the same month last year.

Month on month, this was a reversal of the PHP 68.4-billion surplus in January.

In February, revenues jumped by 12.39% to PHP 251.8 billion from PHP 224 billion a year earlier, as tax revenues increased by 10.9% to PHP 234.3 billion.

Collections by the Bureau of Internal Revenue (BIR) jumped by an annual 15.7% to PHP 159.7 billion in February, while Bureau of Customs’ (BoC) revenues inched up by 1.71% to PHP 71.8 billion.

“The growth in the BIR’s February collection was primarily due to higher collections from corporate income tax (CIT), personal income tax (PIT), excise tax on tobacco and alcohol products, value-added tax (VAT), and documentary stamp tax (DST),” the BTr said.

Nontax revenues rose by 37.11% year on year to PHP 17.4 billion in February.

“The increase was partly attributed to the one-off remittance of the Department of Agrarian Reform’s share of penalties imposed on lending institutions for noncompliance with the mandatory Agri-Agra credit requirement under Republic Act 10000,” the BTr said.

During the month, Treasury income went up by 21.9% to PHP 7.9 billion due to higher interest income from NG deposits, managed funds, and NG’s share of Philippine Amusement and Gaming Corp.’s (PAGCOR) profit.

Revenues from other offices — which consisted of other nontax revenue, privatization proceeds fees, charges and grants — also rose by 53.04% to PHP 9.5 billion.

Meanwhile, NG expenditures went up by 8.88% to PHP 423.2 billion in February from PHP 388.7 billion a year ago.

This was mainly due to higher capital expenditures of the Department of Public Works and Highways, which were used for progress billings and payment of right-of-way acquisition for various infrastructure projects.

More disbursements were also made by the Department of Health and Department of Social Welfare and Development for their programs.

Primary spending — the total expenditures minus interest payments, went up by 9.95% to PHP 374.8 billion in February.

Interest payments inched up by 1.29% to PHP 48.4 billion in February amid higher coupon payments on domestic securities. However, it was offset by lower foreign payments.

 Two-month deficit

In the January-to-February period, the budget deficit swelled to PHP 103.1 billion from PHP 76.7 billion a year ago.

“The NG’s total revenue collections and expenditures maintained double-digit year-on-year (YoY) growth during the first two months of 2025, which puts it on track to hit fiscal targets for the year,” the BTr said.

Revenues went up by 11.32% to PHP 718.9 billion in the two-month period, as tax collections rose by 12.64% to PHP 671.9 billion.

BIR revenues jumped by 15.31% to PHP 514.7 billion due to higher VAT collections, CIT, PIT, final withholding tax on government securities, and DST.

“The BIR’s continued progress in revenue performance is credited to its ongoing improvements in tax payment systems and collection efficiency,” the BTr said.

Collections by BoC went up by 4.91% to PHP 151 billion, which mirrored the 4.93% increase in import goods in the January-to-February period.

“BoC’s continuous modernization, border protection, and capacity development efforts have enabled the bureau to maintain its positive performance in the first two months of the year,” the Treasury said.

On the other hand, non-tax revenues slipped by 4.67% to PHP 47 billion “partly due to lower receipts from Malampaya proceeds.”

Revenues from other offices declined by 10.48% to PHP 23.4 billion while the Treasury income inched up by 1.86% to PHP 23.7 billion due to the increased NG share in PAGCOR’s profits.

On the other hand, state spending grew by 13.76% to PHP 822 billion in the January-February period from PHP 722.5 billion a year ago.

Primary expenditures rose by 11.43% to PHP 669.1 billion as of end-February.

Interest payments also increased by 25.26% to PHP 152.9 billion.

“The growing deficit shows the faster growth of disbursements, especially for social and infrastructure programs, compared to the revenue generation capability of the government,” Oikonomia Advisory and Research, Inc. economist Reinielle Matt M. Erece told BusinessWorld in a Viber message.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the February budget deficit widened as expenditures increased by PHP 34.5 billion despite the P27.8-billion increase in revenues.

Mr. Ricafort expects another budget surplus in April “due to the seasonal increase in yearly tax collection/filing in view of the April 15 deadline set by the BIR.”

“The recent tax reform measures in terms of the 12% VAT imposed on foreign digital services providers and the 1% withholding taxes on online sellers… would help increase the country’s recurring tax revenues, narrow the budget deficit, and improve the overall fiscal performance,” he said.

Meanwhile, Mr. Erece said the budget deficit may continue to widen this year.

“We expect the deficit to continue growing this year, both as a result of an election year, as well as reflective of higher debt servicing costs in response to the higher borrowings they have incurred and will incur this year. The growing deficit calls the need for better revenue generation, especially in tax collections, to slowly close the gap of the national budget,” he said.

For this year, the NG’s deficit ceiling is capped at PHP 1.54 trillion or 5.3% of gross domestic product (GDP). – Aubrey Rose A. Inosante, Reporter