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The Philippine government is seeking an exemption from US tariffs on select exports, particularly semiconductors, a move aimed at safeguarding one of the country’s most important industries.

“We are working on getting several of our exports exempted,” Special Assistant to the President for Investment and Economic Affairs  Frederick D. Go told reporters on the sidelines of the Economic Journalists Association of the Philippines Economic Forum on Monday.

He said an exemption can be sought for products that an exporting country produces in abundance and cannot be produced in the US.

In particular, he said that the government hopes that the US will exempt Philippine-made semiconductor chips from steep tariffs.

“We are hoping that they view the work we do here in the Philippines, which is ATP (assembly, testing, and packaging), to be part of the process that the US may not really want to do. So, we are hoping… and we have expressed this, that ATP is a process that the semiconductor companies would probably want to outsource,” he said.

The Philippines is a key player in the ATP segment of semiconductor production. Electronics and semiconductors are the country’s single largest export category.

Last week, US President Donald J. Trump announced a 100% tariff on imports of semiconductors in a bid to bring back manufacturing to the country. However, he offered exemptions to companies currently manufacturing in the US and planning to do so.

Mr. Go said Mr. Trump’s proposed tariff on semiconductors remains uncertain, but some countries are already claiming exemptions for their semiconductor exports.

“So, we are still seeking clarification from the US Trade Representative side, and of course we are lobbying that our semiconductor exports likewise be exempted if there is such,” he said.

The US had paused tariffs on imports of semiconductors and semiconductor manufacturing equipment, which have been the subject of a US national security investigation. The results are expected to be out within the month.

Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI) President Danilo C. Lachica welcomed the government’s move to seek an exemption for Philippine-made chips.

“We appreciate the government’s effort to secure an exemption for our semiconductor exports,” said Mr. Lachica in a Viber message.

Mr. Lachica warned last week of the devastating effect of the proposed 100% tariff on semiconductors entering the US market on Philippine exporters.

In a separate message, Mr. Lachica said the Philippines’ semiconductor and electronics industries should expand to other markets.

“The impact really would be very complex, and it affects the whole supply chain,” he said, noting it can also drive up logistics costs for semiconductor firms.

He also said the industries should work to move up the value chain into research and development and integrated circuit design and other high-value activities.

Associate Professor of the University of Asia and the Pacific George N. Manzano said some US-owned semiconductor firms may move back to the US if Mr. Trump pushes through with his threatened semiconductor tariff.

“The danger to the Philippines is that 100% tariffs on semiconductors by the Trump administration, might motivate some of these US-owned semiconductor companies to move back operations to the US. I hope it does not lead to that,” Mr. Manzano said.

Diwa C. Guinigundo, country analyst at GlobalSource Partners and a former central bank governor, said a 100% US tariff on semiconductors could hurt the Philippine exporters.

“We are now hit by double whammy: higher reciprocal tariff of 19% and then this 100% on specific product as semiconductors and electronics,” Mr. Guinigundo said in a Viber message.

The US began imposing higher tariffs on most of its trading partners starting Aug. 7. A 19% tariff was slapped on goods from the Philippines, Indonesia, Cambodia, Malaysia and Thailand.

“US imports from the Philippines will be more expensive and domestic demand could possibly decline. We don’t exactly have the lowest cost of doing business to make us more competitive than the rest.”

Transhipment

Meanwhile, Mr. Go said that the Philippines’ deal with the US does not include tariffs on transshipment of goods from third countries.

“The transshipment category applies to countries that the US believes engage in transshipments from a third country… We do not have that clause because we do not, and we are not identified as one of those who engage in transshipments,” he added.

The US imposed a 20% tariff on goods from Vietnam, while transshipments from third countries through Vietnam will face a 40% levy. — Justine Irish D. Tabile and Aubrey Rose A. Inosante

Net inflows of foreign direct investments (FDI) into the Philippines rose by 21.3% year on year in May but declined by 26.9% in the first five months of the year, preliminary data from the central bank showed.

The Bangko Sentral ng Pilipinas (BSP) said the net inflows of FDI jumped by 21.3% to USD 586 million in May from USD 483 million in the same month in 2024, with “inflows from the United States and into manufacturing taking the lead.”

Month on month, net inflows of FDIs slipped by 3.9% from USD 610 million in April.

“The (year-on-year) increase resulted from the significant expansion in nonresidents’ net investments in debt instruments, which rose by 88.3% year-on-year, from USD 227 million to USD 427 million,” the BSP said.

Investments in equity and investment fund shares dropped by 38% to USD 159 million in May from USD 256 million in the same month in 2024.

This was due to the 61.4% decline in nonresidents’ net investments in equity capital (excluding reinvestment of earnings) to USD 62 million in May from USD 161 million a year ago.

Reinvestment of earnings also inched up by 1.4% year on year to USD 97 million in May.

Nearly half (49%) of gross placements of equity capital went into manufacturing, followed by real estate activities (14%); and electricity, gas, steam and air-conditioning supply (13%).

In May, the bulk of FDI inflows came from the US (36%) and Japan (33%), followed by Singapore (12%) and South Korea (12%).

“The uptick in May’s FDI reflects improved investor sentiment due to the country’s solid macroeconomic fundamentals, relatively stable (decelerating) inflation, and infrastructure momentum,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in a Viber message. “Externally, moderating global interest rates and a recovery in regional trade also helped.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the year-on-year improvement in May FDI inflow can be partly attributed to the release of the rules for the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act.

However, this was “counteracted” by the uncertainty over the US tariffs and other protectionist policies, as well as China-Philippines tensions, Mr. Ricafort said.

For the first five months of the year, net inflows of FDI declined by 26.9% to USD 2.96 billion, from the USD 4.04 billion recorded in the same period a year ago.

Net investment in debt instruments plunged by 14.1% in the January-May period to USD 2.149 billion from USD 2.501 billion in the same period in 2024.

Reinvestment of earnings rose by 6% to USD 445 million in the January-to-May period, from USD 420 million a year ago.

Investments in equity capital other than the reinvestment of earnings also went down by 67.6% to USD 364 million in the five-month period from USD 1.123 billion a year ago.

Equity placements plunged by 55% year on year to USD 616 million while withdrawals rose by 1.8% to USD 253 million.

Equity investments during the period were mainly from Japan (39%), the US (21%), Singapore (14%), and South Korea (8%).

At least 48% of equity placements flowed to manufacturing, while 20% went to real estate activities and 12% to the electricity, gas, steam, and air-conditioning supply industries.

Mr. Ricafort said FDI inflows in recent months may have been affected by proposed legislated wage increases that threaten to increase labor costs in the country.

“Local political noises since the latter part of 2024 (Dutertes vs. the Marcoses) could have also partly weighed on the FDI data in recent months,” he said.

Foreign investors could have also been waiting for further rate cuts by the US and Philippine central banks before making investment decisions, he said.

“For the coming months, the release of the CREATE MORE IRR (implementing rules and regulations) could make some foreign investors/FDIs to become more decisive in locating in the country amid enhanced incentives for foreign investors,” Mr. Ricafort said.

Meanwhile, Mr. Rivera noted that the year-to-date decline shows that FDI inflows are still sensitive to policy clarity, geopolitical risks, and tariff developments.

“If growth holds near the 5.4% average in the first half, we can sustain modest FDI recovery in the latter part of the year. To gain stronger traction, the Philippines needs to accelerate reforms in EODB (ease of doing business), investment facilitation, and trade diversification to counter headwinds from global uncertainty,” Mr. Rivera said.

The BSP expects FDI to end the year at a net inflow of USD 7.5 billion. — Katherine K.Chan

The Philippine government is unlikely to extend the 60-day suspension of rice imports after end of October, and has no plans to raise tariffs on rice, Finance Secretary Ralph G. Recto said on Monday.

“The only reason for the suspension essentially is because it’s harvest season,” he said on the sidelines of the Economic Journalists Association of the Philippines Economic Forum on Monday.

Last week, President Ferdinand R. Marcos, Jr. ordered a halt on rice imports for 60 days starting Sept. 1 to provide relief for farmers, upon the recommendation of the Department of Agriculture (DA).

Asked if the government would extend the suspension beyond October, Mr. Recto replied: “unlikely.”

The DA also recommended gradually raising the rice import tariff to its original 35% rate from the current 15%.

Asked if there are plans to hike tariffs, Mr. Recto said: “Wala pa. There are no plans.”

Executive Order (EO) No. 62, which took effect in July 2024, lowered import tariffs on rice to 15% until 2028 to tame inflation. The order is valid until 2028 and is subject to review every four months.

Department of Economy, Planning, and Development Secretary Arsenio M. Balisacan said the government is still studying the impact of a hike in rice tariffs.

“We’ll be meeting our technical group in consultation. We’re preparing the study and then we’ll set an informed basis for the decision or our recommendation,” he told reporters.

Mr. Balisacan said there is a need to balance the interests of farmers, consumers, and the broader economy as it will affect inflation and wages.

“We have to use additional tools to address the concerns of various parties,” he said. “It has to be a win-win for all.”

Mr. Balisacan earlier said there are no inflation risks from the pause on rice imports, citing ample supply.

He cited estimates that supply will remain sufficient even if the government pauses imports for more than 40 days.

“The 60-day rice import pause was a quick fix to protect farmers during harvest — but it’s not a long-term solution. Instead of suspension, we need smart safeguards: fair tariffs, better buffer stocking, and stronger support for local production,” Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said in a Viber message.

However, farmer groups said the 60-day suspension is not sufficient to allow farmers to recover their losses and are calling for the tariff rate to revert to the original 35%.

“The 60-day suspension of rice importation is not truly sufficient for farmers to recover from years of losses caused by the consistently low farmgate prices of palay — a concrete consequence of the Rice Liberalization Law,” Amihan National Federation of Peasant Women and Bantay Bigas spokesperson Cathy L. Estavillo said via a Viber message.

The Rice Tariffication Law or Republic Act (RA) No. 11203, liberalized rice imports by replacing quota restrictions with tariffs, which the government then used to fund rice industry modernization.

“The suspension of importation is proof that RA 11203, despite amending the Rice Competitiveness Enhancement Fund, remains a hindrance to making rice affordable in markets and achieving rice self-sufficiency in the country,” she said.

Ms. Estavillo urged for the immediate review of the 35% tariff and the repeal of Rice Tariffication Law.

Samahang Industriya ng Agrikultura  spokesman Jay Cainglet said that while they welcome the import ban, their “primary and urgent appeal” is for the reversion of the rice import tariff to 35%.

In particular, they are calling for a 35% tariff rate for imports from the Association of Southeast Asian Nations (ASEAN) and 50% for non-ASEAN imports.

“Despite the temporary halt, palay prices are expected to remain depressed, and farmers will continue to incur losses,” he said.

Mr. Cainglet also claimed that the economic team “continues to feed the President false narratives” about the benefits of EO 62.

“In reality, the measure does little to protect local producers or stabilize the rice market. Importers can simply advance or delay their shipments to work around the suspension, especially since the tariff rate remains at a low 15%,” he said.

Foregone revenues

Meanwhile, Mr. Recto said the Bureau of Customs (BoC) is expected to see minimal foregone revenues from the two-month halt of rice imports.

“It will slightly drop, but we expect to hit the revenue targets this year,” he said.

In June, Customs collections rose by 6.4% year on year to PHP 85.46 billion, bringing the seven-month total to PHP 544.23 billion.

This year, the BoC is targeting to collect PHP 958.7 billion.

The Philippines is the world’s biggest rice importer, having brought in 2.44 million metric tons at the end of July, according to the Bureau of Plant Industry.

“Maybe at the end of the year after the harvest season, you probably will import the balance,” Mr. Recto said. — Aubrey Rose A. Inosante, Reporter

Central banks must remain a “stabilizing force” amid uncertainties in the global economy, the Bank for International Settlements (BIS) said.

“The most important task, particularly in these highly uncertain times, is for central banks to be a stabilizing force and maintain or, in some cases, rebuild trust in monetary policymaking,” BIS Deputy Head of the Monetary and Economic Department Frank Smets told BusinessWorld in a virtual interview.

This kind of trust creates positive dynamics, he added, which helps stabilize inflation expectations and maintain price stability.

“What this means for actual actions of central banks will be different across countries,” Mr. Smets said.

“For countries like the Philippines or countries in East Asia that are on the receiving end of the US tariffs, the rise in tariffs is more likely to be a negative demand shock.”

Markets have been rattled these past few months amid the United States’ flip-flopping tariff policies.

US President Donald J. Trump has set a 19% tariff on Philippine goods, which will take effect starting Aug. 7.

Countries like the Philippines could see falling demand for exports, which could lead to disinflationary pressures, particularly from lower commodity prices, Mr. Smets said.

“In those countries, the room for easing monetary policy is probably greater. It’s really a differentiated picture depending on the country.”

The Bangko Sentral ng Pilipinas (BSP) has said the impact of the US tariffs on the Philippines will be “modest” as the country is not a trading economy.

The central bank is currently in the midst of an easing cycle, so far lowering interest rates by a total of 125 basis points (bps) since August last year.

BSP Governor Eli M. Remolona, Jr. has also signaled the possibility of further easing this year despite these tariff policies.

“Whether the country retaliates or not will have an important impact on the likely inflation effects. But the most important thing for central banks is to stay steady and be a force of stability rather than uncertainty,” Mr. Smets said.

“Heightened policy uncertainty and unpredictability, particularly in the US, is putting the soft landing that we had expected until the beginning of this year into jeopardy.”

In its latest Annual Economic Report, BIS said consensus forecasts show global growth at just 2.7% in 2025. This was slightly lower than the above 3% forecast at the beginning of the year, Mr. Smets pointed out.

“A big part of the discussion is what are the effects of this trade policy uncertainty on the global economy,” he said.

“It’s clear that this heightened uncertainty, not only on trade policy, but also on fiscal policy, migration policy, and central bank independence, has affected the growth outlook.”

Central banks must “deal with the immediate fallout while keeping top of mind the deeper, structural weaknesses that threaten the resilience of the global economy,” according to the report.

“Success will depend on maintaining public trust — trust in central banks’ capacity to act and do so in the public interest. Trust in their commitment to low inflation was decisive in quelling pandemic-era inflation.”

“Now, trust in public institutions — including the trust in money — needs to serve as a fixed point for others to rally around.”

System for the future

Meanwhile, the BIS in its report also highlighted the need to build a monetary and financial system for the future.

“We should maintain the benefits of the current system, the two-tiered monetary system that we have, while enabling the new technologies to improve it,” Mr. Smets said.

The BIS proposed a “trilogy” of tokenization, namely, tokenized central bank reserves, tokenized bank deposits and tokenized government bonds, which will all reside on a unified or interoperable ledger.

“Tokenized central bank reserves would ensure what we call the singleness of money, because the settlement at par really happens on the central bank’s balance sheet,” he said.

Bringing commercial bank deposits into tokenization would also help maintain the elasticity of money. “Firms that expected to be hit by the tariffs and therefore anticipated a future need of working capital have increased their credit lines with the banks quite dramatically.”

“A well-working banking system can do that and thereby avoid gridlocks in liquidity. By bringing the commercial bank deposits into this tokenized world, this elasticity would be maintained.”

“Finally, we also suggest that other assets, and particularly government bonds, could be tokenized on the same platform. This would, for example, allow collateral management, including for central bank operations, to be automated on one ledger.”

Mr. Smets also noted Project Nexus, where the BSP is one of the five central bank partners in the region that established the Nexus Scheme Organisation, which will manage the project in its live implementation stage.

“The project aims at enhancing cross-border payments by linking domestic instant payment systems. That’s one example of where central banks get together and try to solve a real issue, which is international payments.”

This would also mark the BIS’ first Innovation Hub project that will be put into live implementation, Mr. Smets added.

The BSP earlier said it is seeking to strengthen collaboration on regional payment connectivity to foster a more inclusive financial ecosystem by enabling fast, seamless, and cheaper cross-border payments across the region.

“On the issue of the future monetary system, central banks must play a catalytic role. They can articulate their vision of the future monetary system to provide a guidepost for all stakeholders,” Mr. Smets added.

Meanwhile, he also noted the importance of developing and deepening local financial markets.

“That remains a priority. Authorities, including in the Philippines, continue to implement reforms to ease market access for borrowers and investors and lower transaction costs. This has resulted in the inclusion of bonds from several Asian economies in global bond indices.”

The Philippine government has been seeking ways to deepen its capital markets. The BSP has been working to enhance the interest rate swap market and the government securities repo market to improve benchmarks for a smoother yield curve.

“Developing the domestic financial system is a step in the right direction, but it’s not a panacea as you also increase the integration with the global investor community and the interconnectedness with global financial conditions,” Mr. Smets said.

“But for the real economy, this is definitely a good development. More generally, the region’s resilience, which has been shown in the response to the pandemic crisis, has been enhanced by reforms made during recent decades.”

These reforms include an increase in banks’ capital and liquidity buffers, implementing adequate loan loss provisions for banks and growing levels of foreign exchange (FX) reserves.

“The high level of FX reserves in Asia has helped resilience in response to some of the stresses. The strengthening of monetary policy frameworks has also helped the effectiveness of the monetary policy response,” he said.

“And then, finally, also the active use of macroprudential measures and capital market liberalization efforts. The theme here is that many of the good reforms that many countries in the region have implemented over the past years continue to be important.” — Luisa Maria Jacinta C. Jocson, Senior Reporter

Subsidies provided to government-owned and -controlled corporations (GOCCs) fell 26.68% from a year earlier in June, the Bureau of the Treasury (BTr) reported.

The BTr said budgetary support to GOCCs was PHP 7.45 billion in June, against P10.16 billion a year earlier.

Month on month, GOCC subsidies fell 5.90% from PHP 7.92 billion in May.

State-owned firms receive monthly subsidies from the National Government to support their daily operations if their revenue is insufficient.

In June, the National Food Authority (NFA) topped the subsidy list with PHP 3.43 billion or 46.07% of the total. It received no subsidies in February and March.

This was followed by the National Irrigation Administration (NIA), which received PHP 2.39 billion.

The Philippine Fisheries Development Authority was granted P268 million in subsidies in June.

State-run firms on the subsidy list included the Philippine Heart Center (PHP 184 million), the Philippine Coconut Authority (PHP 165 million), the National Kidney and Transplant Institute (PHP 124 million), the Philippine Children’s Medical Center (PHP 114 million), and the National Power Corp. (PHP 106 million).

Other GOCCs obtaining subsidies of less than P100 million include the Philippine Rice Research Institute (PHP 96 million), the Subic Bay Metropolitan Authority (PHP 86 million), the National Dairy Authority (PHP 75 million), the Light Rail Transit Authority (PHP 74 million), and the Philippine National Railways (PHP 72 million).

Those receiving less than PHP 50 million were the Lung Center of the Philippines (PHP 49 million), the Development Academy of the Philippines (PHP 40 million), the Cultural Center of the Philippines (PHP 34 million), the Philippine Institute of Traditional and Alternative Health Care (PHP 29 million), the Center for International Trade Expositions and Missions (PHP 20 million), the People’s Television Network, Inc. (PHP 18 million), the Metropolitan Waterworks and Sewerage System (PHP 14 million) and the Sugar Regulatory Administration (PHP 11 million).

Also in this tier were the Aurora Pacific Economic Zone and Freeport Authority (PHP 10 million), the Philippine Institute of Traditional and Alternative Health Care (P8 million), the Southern Philippines Development Authority (PHP 7 million), the Philippine Tax Academy (PHP 5 million), the Philippine Center for Economic Development (P5 million), and the Zamboanga City Special Economic Zone Authority (PHP 4 million).

Receiving no subsidies were the Land Bank of the Philippines, the Small Business Corp., the National Electrification Administration, the National Housing Authority, the Bases Conversion Development Authority, the Intercontinental Broadcasting Corp.-13, the Philippine Crop Insurance Corp., the Power Sector Assets and Liabilities Management Corp., the Tourism Infrastructure & Enterprise Zone Authority and the Tourism Promotions Board.

In the first six months, GOCC subsidies totaled PHP 52.50 billion, down 21.89%.

The NIA was the top recipient during the period with PHP 17.73 billion. This was followed by PSALM (PHP 8 billion) and the NFA (PHP 7.18 billion).

As of July, the Department of Finance had collected PHP 105 billion in GOCC dividends. — Aubrey Rose A. Inosante

The growth in Philippine exports seen in the first half could start slowing down beginning in early August after the 19% US reciprocal tariff took effect, an analyst said.

Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said there was some frontloading of exports in recent months to avoid the US tariffs.

“But once the US tariffs become effective on Aug. 7, this could slow exports to the US by many countries,” he said via Viber.

Preliminary data from the Philippine Statistics Authority indicate that exports grew 13.2% in the first half to USD 41.24 billion.

Of the total, 16%, or USD 6.598 billion, was accounted for by the US. US shipments rose 13.2% from a year earlier.

In a recent trade forecast, the World Trade Organization (WTO) said that a surge of imports in the US ahead of widely anticipated tariff hikes contributed to the upward revision to the projections for 2025.

Starting Aug. 8, the WTO projects world merchandise trade to grow 0.9% in 2025, up from the -0.2% projected in April.

“Global trade has shown resilience in the face of persistent shocks, including recent tariff hikes. Frontloaded imports and improved macroeconomic conditions have provided a modest lift to the 2025 outlook,” WTO Director-General Ngozi Okonjo-Iweala said.

“However, the full impact of recent tariff measures is still unfolding. The shadow of tariff uncertainty continues to weigh heavily on business confidence, investment, and supply chains. Uncertainty remains one of the most disruptive forces in the global trading environment,” she added.

For next year, the WTO projects a 1.8% increase in world trade.

Despite the temporary boost of frontloading and more favorable global macroeconomic outlook on trade, the WTO still expects recent tariff changes to have an overall negative impact.

“This stems from a combination of factors. On the one hand, the US-China truce and exemptions for motor vehicles are contributing positively,” the WTO said.

“On the other hand, higher ‘reciprocal’ tariff rates introduced on Aug. 7 are expected to weigh increasingly on imports in the United States and depress exports of its trading partners in the second half of 2025 and in 2026,” it added.

Mr. Ricafort said Philippine exports are around three to five times smaller compared to those of other Association of Southeast Asian Nations (ASEAN) countries, insulating it from the tariff impact.

“The Philippine economy is not that export dependent and lately domestically driven, wherein about 70% of the economy was accounted for by consumer spending,” he said.

“The markets are still in a wait-and-see mode if Trump would be willing to compromise and settle for lower negotiated tariffs during the trade negotiations, given the TACO track record in recent months,” he added, referring to the “Trump Always Chickens Out” investment thesis being peddled by market traders.

The TACO thesis holds that Mr. Trump usually issues threats at the start of negotiations, then backs off later.

Despite this, Mr. Ricafort said the Philippines needs to diversify its export markets to other affluent markets.

“It is also better to diversify export winners beyond electronics, like agricultural export winners such as coconut oil, bananas, pineapples, mangoes, other tropical fruits, tuna, other seafood, or marine products,” he added.

Economic affairs officers Rajan Sudesh Ratna and Jing Huang of the UN Economic and Social Commission for Asia and the Pacific (ESCAP) are projecting that the US tariffs will reduce ASEAN exports to the US.

According to their report, “the higher tariffs will reduce China’s competitiveness and prompt global buyers to seek alternative suppliers, both reducing demand and redirecting trade flows.”

However, it said ASEAN countries will benefit from this shift, “gaining market share as trade is diverted away from China.”

“All ASEAN member countries gain purely through trade diversion rather than trade creation, indicating that while overall demand remains unchanged, supply sources are shifting,” it said.

“ASEAN’s ability to absorb trade diverted from China demonstrates the importance of flexible supply chains and open trade policies,” it added.

However, they said ASEAN must explore alternate markets beyond China, as their exports “may face challenges due to increased costs associated with tariffs, especially if their exports are levied duties for China.”

To address these challenges, they recommended that bloc members increase intra-ASEAN trade.

“Strengthening intra-regional trade through harmonization of regulations and reduction of tariffs among member states will create a more robust internal market within ASEAN itself and prevent them from absorbing the external shock emanating from the additional US tariffs,” they said.

They said ASEAN should adopt a collective approach to enhancing bargaining power in negotiations with external partners to reduce reliance on the US market.

They added that “ASEAN can capitalize on the shifting trade dynamics by promoting bilateral and regional economic partnerships with China.”

Another recommendation is for ASEAN to look into market diversification, focusing on countries with which it has free trade agreements (FTAs), and to actively pursue new FTAs.

They also recommended a focus on services trade and the adoption of digital policies.

“With the US reciprocal tariffs imposed across the board on almost all countries with higher duties on China, some of the supply chain linkages of ASEAN members are likely to be disrupted,” they said.

“ASEAN must formulate an alternate export strategy. In this regard, looking at other important markets, focusing on services trade by including it in its FTAs, entering into FTAs with other major trading partners, and discussing how to enhance intra-ASEAN trade are some of the options,” they added. — Justine Irish D. Tabile

The Philippines’ gross international reserves (GIR) slipped in July amid lower gold prices and as the government paid back more of its foreign debt, preliminary data from the central bank showed.

The Bangko Sentral ng Pilipinas (BSP) on Thursday reported that dollar reserves dipped by 0.3% to USD 105.7 billion as of end-July from USD 106 billion as of end-June.

Year on year, the GIR inched down by 1% from USD 106.74 billion.

The central bank said the decline was mainly due to “lower global gold prices and the National Government’s drawdowns on its foreign currency deposits with the BSP to service external debt obligations.”

Ample foreign exchange buffers protect the country from market volatility and ensure that it is capable of paying its debts in the event of an economic downturn.

The central bank said the latest GIR provides “a robust external liquidity buffer.”

The level of dollar reserves as of end-July is enough to cover about 3.4 times the country’s short-term external debt based on residual maturity.

It is also equivalent to 7.2 months’ worth of imports of goods and payments of services and primary income.

“By convention, GIR is viewed to be adequate if it can finance at least three months’ worth of the country’s imports of goods and payments of services and primary income,” the BSP said.

“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.”

International reserves are foreign assets of the BSP held mostly as investments in foreign-issued securities, monetary gold, and foreign exchange.

These are supplemented by claims to the International Monetary Fund (IMF) in the form of reserve position in the fund and special drawing rights (SDRs).

The BSP’s foreign exchange holdings plunged by 34.3% to USD 826.3 million as of July from USD 1.26 billion as of end-June. Year on year, it rose by 2.1% from USD 809 million.

The value of the central bank’s gold holdings edged lower by 0.1% to USD 13.78 billion from USD 13.8 billion as of June. On the other hand, it jumped by 33.7% from USD 10.31 billion a year earlier.

At end-July, spot gold was down 1.5% at USD 3,275.92 per ounce. US gold futures settled 0.8% lower at USD 3,352.8, Reuters reported.

Gold tends to perform well during economic uncertainty and a low-interest-rate environment further supports the non-yielding asset.

BSP data showed foreign investments increased by 0.2% to USD 86.42 billion as of July from USD 86.26 billion a month ago. However, it dropped by 5.1% to USD 91.1 billion from the same period in 2024.

The country’s reserve position in the IMF slipped by 0.5% to USD 729 million from USD 732.4 million in the previous month. Year on year, it went up by 1.3% from USD 719.9 million.

SDRs — or the amount which the Philippines can tap from the IMF’s reserve currency basket — was unchanged month on month at USD 3.94 billion.

Meanwhile, net international reserves decreased by 0.3% to USD 105.7 billion as of end-July from USD 106 billion as of end-June.

Net international reserves refer to the difference between the GIR and reserve liabilities, including short-term foreign debt, and credit and loans from the IMF.

“The decline in GIR may be caused by larger debt repayments to address maturing securities and other obligations,” Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the drop in GIR was also amid the continued “Trump risk factor that led to some market volatility worldwide.”

Markets have been in a wait-and-see mode amid the US’ flip-flopping tariff policies.

In an executive order signed on July 31, US President Donald J. Trump imposed a 19% duty on many goods from five members of the Association of Southeast Asian Nations — the Philippines, Cambodia, Malaysia, Thailand and Indonesia. This was expected to take effect on Thursday (Aug. 7).

Meanwhile, Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said that the dollar reserves could trend lower in the coming months if the BSP intervenes to support the peso.

“If the BSP intervenes to keep the US dollar from breaching P59 and P60, we should see further depletion of our GIR,” he said in a Viber message.

BSP Governor Eli M. Remolona, Jr. told Bloomberg on Tuesday that the central bank is intervening more forcefully during periods of extended peso weakness as part of a new strategy, gradually moving away from day-to-day intervention.

He said the central bank adopted a new formula that determines the magnitude of peso losses that require stronger intervention to curb price pressures, Bloomberg reported.

“They aren’t worried about breaches of these levels though since inflation is pretty low,” Mr. Neri added.

Inflation sharply eased to a near six-year low of 0.9% in July from 1.4% in June and 4.4% a year ago, marking the fifth straight month that it settled below the central bank’s 2-4% target.

For the first seven months of the year, inflation averaged 1.7%, a tad higher than the BSP’s 1.6% forecast for 2025. — Luisa Maria Jacinta C. Jocson