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The Philippines’ trade-in-goods deficit narrowed in almost four years in February as exports eased while imports declined, the Philippine Statistics Authority (PSA) reported on Friday.

Preliminary data from the PSA showed the country’s trade balance in goods — the difference between the values of exports and imports — reached USD 3.16 billion from the revised USD 5.12-billion deficit in January and the USD 3.56-billion gap a year earlier.

February saw the narrowest trade deficit in 46 months since the USD 3.09-billion deficit in April 2021.

Export receipts rose for the second straight month by 3.9% to USD 6.25 billion February from USD 6.02 billion a year earlier.

However, this pace was slower than revised 6.3% growth in January and the 17.9% surge recorded in February last year.

Meanwhile, imports declined by 1.8% year on year to USD 9.41 billion in February, reversing the revised 11.2% growth in January and the 6.6% rise in February 2024.

It was the sharpest import fall since the 3.3% drop in November 2024.

Year to date, the trade-in-goods deficit widened by 4.6% to USD 8.28 billion from the USD 7.91-billion gap in the January-February period last year.

Outbound sale of goods expanded by 5.1% to USD 12.62 billion in the first two months of 2025, while imports grew by 4.9% to USD 20.90 billion.

The Development Budget Coordination Committee (DBCC) projects 6% and 5% growth in exports and imports, respectively, this year.

“Lowered imports may be because, as rate cuts are anticipated, domestic firms may delay their projects and have lesser need to import materials until then,” Rischelle Alysha T. Legaspi, an economist at Oikonomia Advisory and Research, Inc., said in an e-mail.

She added that the growth in exports may be attributed to “other countries stocking up on supply” as US President Donald J. Trump’s reciprocal tariffs looms on the global market.

“I think it’s partly because of geopolitical aspects… what [Mr.] Trump is doing and what he has done,” Sergio R. Ortiz-Luis, president of Philippine Exporters Confederation, Inc., said in a phone interview.

Mr. Trump has recently threatened to further raise tariffs the US has already imposed on the European Union and Canada if these continue their collaboration in countering his trade policies, Reuters reported.

Since taking office at the start of the year, Mr. Trump has slapped a 20% tariff on all Chinese imports and 25% levy on steel and aluminum imports.

Automobiles manufactured outside of the United States may face a 25% tariff if the White House pushes through with this in the upcoming trade policy announcement on April 2.

Since its easing cycle in August, the Bangko Sentral ng Pilipinas (BSP) slashed benchmark rates by a total of 75 basis points (bps) bringing policy rate at 5.75%.

However, in February during its first policy meeting this year, the BSP kept its policy settings, surprising market expectations and at the same time signaled fewer rate cuts this year.

Headline inflation in February decelerated to 2.1%, bringing the average inflation rate in the first two months to 2.5%, within the central bank’s 2-4% target.

Manufactured goods, which made up the bulk of the country’s exports, grew by 3.6% to USD 5.18 billion in February from USD 5 billion a year ago.

By commodity group, electronic products, which made up 56.3% of exported manufactured goods, rose by 2.5% year on year to USD 3.52 billion.

Semiconductors, which accounted for 41% of outgoing electronic products, declined by 4.1% to USD 2.54 billion.

Exports of other manufactured goods jumped 34.6% to USD 412.60 million, while machinery and transport equipment rose by 13.9% to USD 254.62 million in February.

The United States remained the top destination for Philippine-made goods, with exports valued at USD 986.84 million accounting for 16% of the total.

It was followed by Japan with USD 984.76 million (15.7% share), Hong Kong with USD 873.64 million (14%), China with USD 646.59 million (10.3%), and The Netherlands with USD 347.70 million (5.6%).

Meanwhile, imports of raw materials and intermediate goods, which accounted for 37.8% of the total imports, rose by 1.7% to USD 3.56 billion in February from USD 3.50 billion a year earlier.

Imports of capital goods grew by 1.8% to USD 2.61 billion, while consumer goods increased by 7.7% to USD 1.89 billion.

By commodity group, electronic products had the highest import value at USD 2.11 billion, up 9.8% in February from USD 1.92 billion a year ago.

Imports of semiconductors, which accounted for the bulk of electronic products, went up by 14.8% to USD 1.50 billion.

Imports of mineral fuels, lubricants and related materials, on the other hand, declined by 23.2% year on year to USD 1.32 billion, while transport equipment rose by 12.2% to USD 914.70 million.

China was the biggest source of imports in February with USD 2.46 billion worth of goods, accounting for 26.1% of the total import bill.

It was followed by Japan with USD 841.87 million (8.9% share), Indonesia with USD 803.17 million (8.5%), South Korea with USD 671.99 million (7.1%), and the United States with USD 647.25 million (6.9%).

Both analysts were optimistic in the country’s chances of meeting the government’s growth targets for imports and exports in 2025.

Ms. Legaspi said the country may attain the government’s trade targets this year and that further investments should be made in improving the manufacturing sector.

“Hindrances to these goals, however, would include geopolitical tensions which disrupt supply chains and domestic inflation, which could make us more reliant on imports,” she said.

“We don’t know ’til now what US would do. So, it depends, a big factor is what US is going to do,” Mr. Ortiz-Luis said.

In a research note, Chinabank Research said that external demand may remain subdued moving forward, with risks from elevated uncertainty amid an escalating global trade war and higher US tariffs.

It also added that potential economic slowdown in major trading partners such as the US and China may be a factor.

“This trade gap could widen this year as potential changes in the global trade landscape could hurt export demand,” Chinabank Research added. — M.M.L. Castillo

Department of Trade and Industry (DTI) Secretary Ma. Cristina A. Roque on Thursday expressed confidence the Philippines will not be affected by reciprocal tariffs to be imposed by US President Donald J. Trump.

At the same time, the Philippines is seen to experience moderate spillover effects from US tariff policies, the DBS Bank report said.

Mr. Trump is planning to announce on April 2 reciprocal tariffs targeting countries that are responsible for much of the US trade deficit.

“For now, we do not have any information yet, so it is business as usual. But we feel that we will not be affected as we are allies,” Ms. Roque told reporters on Thursday.

“Our trade deficit with them is very minimal, so it is not something that we (should) worry about for now,” she added.

Data from the Tradeline Philippines showed that the total trade between the Philippines and the US reached USD 20.3 billion last year. The Philippine exports to the US hit USD 12.1 billion, while imports from the US reached USD 8.2 billion. This brought the US trade-in-goods balance — the difference between exports and imports — to a USD 3.9-billion deficit in 2024.

Ms. Roque said that she has already arranged a meeting with her US counterparts to discuss the planned reciprocal tariffs.

According to DBS’ vulnerability heatmap, the overall direct US tariff impact will have moderate spillover risks on the Philippines, as well as Singapore and Indonesia.

“Direct impact from US tariffs is likely to be limited, with Philippines’ contribution to value-add to US imports amongst the smallest versus ASEAN-6 (Association of Southeast Asian Nations) countries, and the size of the bilateral trade surplus (is) moderate versus peers,” according to a report authored by DBS senior economists Chua Han Teng and Radhika Rao.

On the other hand, Thailand, Vietnam and Malaysia are “relatively more vulnerable.”

The DBS report also estimated the potential impact of reciprocal tariffs on gross domestic product (GDP) of ASEAN-6 countries.

“The domestically oriented nature of Indonesia and Philippine economies shields them, limiting the spillover impact to less than 0.3 percentage point.”

In terms of direct impact on growth, DBS estimates the tariffs will only be a “negligible risk” to Philippine economic output.

“While the US is an important trade partner (accounting for 16.6% of the total), exposure to targeted sectors like pharma, and semiconductors, etc. is modest,” it said.

The US is the top destination for Philippine exports. Philippine exports to the US accounted for nearly 17% of total export sales in 2024, while imports from the US were only equivalent to 6.4% of total imports.

However, DBS noted the country’s value-added tax (VAT) rate of 12%, which “leaves the economy open to reciprocal action, albeit the scale is likely to be limited as the weighted average tariff rate on the US is small at 3.3%.”

For the ASEAN-6 region, DBS said economies “face higher direct and indirect risks from tariffs under the current administration.”

“Additionally, in the past six to seven years, the ASEAN-6 region has become more embedded in global supply chains, accompanied by a bigger share in global trade, whilst attracting strong investment interest.”

Mr. Trump’s sweeping tariffs are more “wide-ranging” than the first term, DBS said.

Meanwhile, DBS also flagged the sectors that could possibly be slapped with reciprocal tariffs.

For the Philippines, this includes transportation goods and animal products.

Moving forward, DBS said economies in the region are likely to seek bilateral discussion and concession agreements with the United States.

“A broad range of conciliatory options include diplomatic and other economic steps,” it said, citing bilateral trade agreements and critical mineral agreements.

“Secondly, the region might seek to step up purchases from the US, for instance agricultural inputs, machinery, aircrafts, energy and defense, to balance the trade gaps.”

DBS also called for greater collaboration within the region to soften the blow of tariff moves.

“ASEAN-6 has also maintained a close relationship intra-region, even amid increased foreign direct investment and trade linkages with China over the past decade.”

“Besides trade, strong trade co-operation is also supported by multilateral agreements such as the Regional Comprehensive Economic Partnership trade pact (RCEP) and a potential upgrade to the ASEAN Trade in Goods Agreement (ATIGA), with discussions underway.”

Meanwhile, S&P Global Ratings in a separate report said the Philippines will be less affected by US tariff policies compared with its Asia-Pacific neighbors.

“Australia, Indonesia, New Zealand and the Philippines should be less at risk of US tariffs, as they generally have low import tariffs, no major bilateral goods surplus with the US,” it said.

“As tariffs tend to be levied on goods, trade will be more resilient in economies where a substantial share of exports is of services. This is the case for the Philippines and, especially, India,” it said.

However, the credit rater still noted that the region will face indirect risks from the tariff conflict.

“Slower growth internationally as a result of trade friction and the associated uncertainty will weigh on exports. Also, Asian manufacturers will feel pressure from Chinese manufacturers, as Chinese producers seek alternatives to the US market,” S&P said.

“Despite these external strains, we generally project domestic demand momentum to remain solid, especially in most emerging-market economies. This is important, given the large role that domestic demand plays nowadays in most Asia-Pacific economies.”

S&P Global expects the Philippine economy to grow by 6% this year and 6.1% in 2026, both within the government’s 6-8% target band.

Meanwhile, Foreign Buyers Association of the Philippines (FOBAP) President Robert M. Young said that there may be a “big chance” that the Philippines will not be exempted from the reciprocal tariff due to its tariff rate differential with the US.

“But again, who knows? It’s difficult to read the mind of Trump. However, as I mentioned before, the Philippines should seriously and urgently (and no nonsense) develop and refocus the trade activities and engagement with the other economies,” he said in a Viber message.

“Lesson learned in relying on the US, which is a big mistake,” he added. – Justine Irish D. Tabile and Luisa Maria Jacinta C. Jocson, Reporters

The country’s financial sector is seen to remain robust and is well-positioned to absorb shocks, the Bangko Sentral ng Pilipinas (BSP) said, but noted external headwinds that pose risk to the sector.

“The Philippine financial system remains resilient but faces moderate risks that warrant close monitoring,” the BSP said in its latest financial stability report.

“The propagation of global uncertainties, including heightened geopolitical tensions, evolving monetary policies in major economies, and potential shifts in the United States following the outcome of the presidential elections could impact the Philippine economy.”

In the report, the BSP said the banking sector growth will be supported by ample buffers and stable financial markets.

“Banks have high capital buffers and ample liquidity, which would allow the financial system to absorb potential losses and/or support economic activity,” it said.

“Financial markets are stable with no signs of asset price misalignments and high share of domestic investor participation.”

The Philippines’ international reserves are also deemed adequate and can cushion the country from shocks, it added.

Latest data showed the country’s dollar reserves rose by 3.3% month on month to USD 106.65 billion as of end-February. This was also 4.6% higher than USD 101.99 billion in the same period a year ago.

“On balance, the banking sector remains healthy as characterized by limited endogenous risks or internal weaknesses,” the central bank said.

“Nonbank financial institutions (NBFIs), although small compared with the size of the Philippine banking system, expose banks to common exposure risk through their shared investments and holdings.”

Credit supply is also seen to remain stable amid improved profitability, robust capital base and ample liquidity.

“Although growth is slower than pre-pandemic levels, the banking system is well-positioned to support the domestic economy, with an expansion in its lending portfolio.”

Bank lending jumped by 12.8% to PHP 13.02 trillion in January, its fastest pace in over two years.

Inflationary pressure

However, the BSP flagged global risks such as inflationary pressure and changing economic policies.

It cited the World Uncertainty Index (WUI) and the Global Economic Policy Uncertainty (GEPU) Index, which have been on an upward trend.

“The cost of production materials (especially in the industrial sector) may accelerate due to supply-chain disruptions amid geopolitical instability and lag-effects of global monetary policy easing.”

Primary risk considerations include disruptions in global supply chains and logistics, the BSP said.

Banks also face asset valuation risks, the BSP said, citing elevated nonperforming loans (NPL) and growth in unsecured consumer loans.

The industry’s NPL loan ratio rose to 3.38% in January from 3.27% in December. This was the highest in two months or since the 3.54% in November.

“Recent global uncertainty stems from concerns on geopolitics and economic policies that affect international trade and investment flows.”

“A ‘macro-market disconnect’ — when macroeconomic risks are not properly priced in by market players — could affect asset valuations and may be subject to severe corrections.”

Capital flight is another risk financial markets could face, it added. Foreign investors account for about 46% of trading in the local bourse.

“Portfolio flows reflect investor risk sentiment and translate to FX (foreign exchange) movements. Portfolio investments are vulnerable to outflows.”

Risks also stem from debt servicing and high “maturity walls,” the central bank said.

“Corporate earnings are reverting to pre-pandemic levels. However, increased leverage and sustained funding mismatches especially in large corporates pose vulnerabilities.”

“Significant reliance on bank funding and the degree of interconnectedness among corporates with Domestic Systemically Important Banks (DSIBs) could amplify risks to the financial sector,” it added.

The BSP said the “interconnectedness of large conglomerates to the banking system may expose the financial system to risks coming from the corporate sector given increasing leverage and funding mismatches.”

The sector also faces emerging risks from financial technology such as artificial intelligence adoption.

“While innovations can enhance efficiency and financial inclusion, the increasing influence of technology also introduces new challenges, such as cybersecurity threats, operational risks, system failures or algorithmic errors, and biases that could undermine regulatory compliance.”

Meanwhile, the BSP noted further monetary easing, which would also bolster the financial system’s growth.

“The transition towards an accommodative interest rate environment could encourage investment in capital-intensive projects, business expansion, and household consumption.”

“Looser financing conditions could pave the way for enhanced credit availability for businesses and consumers to ramp up investments and rebuild savings as buffer to shocks.”

The BSP began its easing cycle in August last year, cutting rates by a total of 75 basis points (bps) by end-2024.

Despite delivering a pause last month, the central bank has said it is still on an easing trajectory. BSP Governor Eli M. Remolona, Jr. has signaled the possibility of a 25-bp cut at the Monetary Board’s meeting on April 10.

“Priority measures could enhance the stability and resilience of the Philippine financial system if aligned with monetary policy and banking supervision,” the BSP said.

It also called for the further enhancement and deepening of capital markets; improvement of reporting frameworks; and development and adoption of macroprudential tools. — Luisa Maria Jacinta C. Jocso

Moody’s Analytics trimmed its economic growth forecasts for the Philippines to below 6% for this year and 2026, reflecting the impact of uncertainties arising from the United States’ tariff policies.

However, Moody’s Analytics economist Sarah Tan said the Philippines still stands out as one of the fastest-growing economies in Southeast Asia.

Moody’s Analytics projects Philippine gross domestic product (GDP) to grow by 5.9% this year, slightly slower than its 6% baseline forecast in November.

For 2026, it also trimmed its Philippine GDP growth projection to 5.8% from 6.1% previously.

If realized, these forecasts would both fall short of the government’s 6-8% target for 2025 and 2026.

“While the expected growth is shy of the government’s target, it will mark the strongest expansion in three years,” Ms. Tan said in a webinar on Wednesday.

“Private consumption and investment will be the key driver of growth in the Philippines, supported by a stable inflation and easing monetary policy.”

Household spending typically accounts for about three-fourths of the Philippine economy.

On the other hand, Ms. Tan said the growth outlook was downgraded to account for the impact of recent US tariff policies.

Moody’s Analytics Head of Japan and Frontier Market Economics Stefan Angrick said the previous forecasts were produced in November before US President Donald J. Trump was elected president.

Since taking office in January, Mr. Trump has imposed a 20% levy on all Chinese imports; 25% tariffs on imports from Canada and Mexico, as well as duties of 25% on all steel and aluminum imports.

“Anything that happens outside the region, trade friction will depress growth elsewhere in the world. That will then feed into aggregate demand and depress growth in the Asia-Pacific region indirectly,” Mr. Angrick said.

“For (Asia-Pacific) overall, we expect GDP growth this year to come in just north of 3.5%, which is down from about 4% last year.”

The region is more exposed to these risks as it is dependent on free trade and is subsequently more vulnerable to a slowdown in global trade, Mr. Angrick said.

However, he noted that some parts of Southeast Asia do not heavily export to the US.

“The direct exposure to changes in the US tariff regime is more moderate,” he added.

Ms. Tan said the Philippines’ reliance on exports is “pretty small” compared with its neighbors.

“The impact of Trump policies on the Philippine economy is not as large as what we’re seeing in other countries, maybe like in Thailand or Indonesia,” she said.

“But the reciprocal tariffs or any tariffs that come from the US will definitely hurt the Philippine exporters, only because the US is the largest export destination for the Philippines.”

Mr. Trump has also threatened to impose reciprocal tariffs on countries that tax US imports as early as April.

“It is unlikely to leave a huge dent on the macroeconomy, but it will definitely hurt these exporters and manufacturers,” Ms. Tan added.

The US is the top destination for Philippine-made goods. Last year, Philippine exports to the US were valued at USD 12.12 billion or nearly 17% of total export sales.

Easing inflation

Meanwhile, Moody’s Analytics expects headline inflation to remain within the central bank’s 2-4% target until 2026.

“This year, we are expecting inflation to ease further and interest rates to go down even more and so that will boost private spending and investment,” Ms. Tan said.

Moody’s Analytics sees inflation averaging 2.8% this year and 3% in 2026.

The Bangko Sentral ng Pilipinas’ (BSP) baseline forecast for inflation is at 3.5% for both 2025 to 2026. Accounting for risks, inflation could hit 3.7% in 2026.

Moody’s Analytics Chief APAC Economist Steve Cochrane said central banks in the region will be able to further support their economy by reducing interest rates.

“It may be a very slow process, but there will be some continued normalization of rates going forward,” he added.

The BSP last month opted to keep its key rate steady at 5.75% amid global trade uncertainties.

However, BSP Governor Eli M. Remolona, Jr. has said they are still on an easing cycle, signaling the possibility of a 25-basis-point (bp) cut at the Monetary Board’s meeting on April 10.

Ms. Tan said they expect the BSP to cut by 50 bps to 5.25% by the end of 2025.

“As US tariffs could slow global demand and the pace of interest rate normalization, the Philippine central bank will be more cautious about monetary easing to avoid significant weakening of the peso,” she said.

Structural reforms

Meanwhile, the International Monetary Fund (IMF) separately said that Southeast Asia, including the Philippines, could stand to benefit from the “ambitious” reform packages.

“Countries such as Indonesia, Malaysia, the Philippines, Thailand, and Vietnam — the five largest emerging markets out of 10 economies in the Association of Southeast Asian Nations (ASEAN) — could increase long-term real economic output,” IMF economist Anne-Charlotte Paret Onorato said in a blog.

On average, the IMF said growth in these economies could increase by 1.5% to 2% after two years and even as high as by 3% after four years if “comprehensive and simultaneous economy-wide reform packages” are implemented.

These reforms not only support faster potential growth but also help economies attain higher income levels, it said.

“Wide-ranging reforms can build resilience to shocks in the face of uncertainties and help the private sector drive growth,” it said, but noted these reforms often entail “substantial political economy challenges.”

The main structural areas these economies must address include trade openness, the IMF said.

“While the six main ASEAN economies are generally more open than the average emerging market in the Group of 20, these countries still have more barriers to trade  —and are relatively harder to trade with,” Ms. Onorato said.

“Improving logistics and trade facilitation to make cross-border transactions faster, cheaper, and less uncertain would help the five largest ASEAN emerging market countries boost economic growth.”

The multilateral institution also called for the need to address the “lagging services trade.”

The Philippines’ trade in services fell by 19.8% to USD 14.58 billion in 2024 from USD 18.18 billion in 2023, latest data from the central bank showed.

This as service exports rose by just 7.5% year on year to USD 51.98 billion from USD 48.33 billion compared with imports, which jumped by 24% to USD 37.4 billion from USD 30.15 billion.

This could help “maximize pro-competitive gains and technological spillovers, while creating high quality jobs,” the IMF said.

“In fact, the transition to a more services-based economy by emerging markets does not mean that the scope for catching-up with advanced economies’ income levels would be diminished — however, making the most of it requires facilitating the transition to highly productive services.”

The IMF noted the need for high-quality education and more apt job-matching to enhance productivity.

ASEAN economies must also improve investment attractiveness and further boost financial inclusion, it added.

“On human development, it is striking that all major ASEAN emerging market countries enjoy a demographic advantage relative to benchmarks,” Ms. Onorato said.

“In other words, they generally have relatively more people working than dependents (such as children and elderly individuals). Therefore, there is an opportunity to implement reforms now before aging populations increase fiscal burdens such as pensions and healthcare.”

Moving forward, the IMF said deliberate and ambitious structural reform packages can help bolster sustainable and inclusive growth.

“A major simultaneous reform package improving business and external regulation, governance, and human development could raise output levels by up to 3% after four years. The benefits from enacting a single major economic reform would be more modest.”

These reforms can also make economies more resilient amid external headwinds.

“Amid a shock-prone global environment, ambitious economy-wide structural reforms can also help build resilience by fostering diversified, broad-based, inclusive growth at the domestic level, and ensuring a credible and robust institutional framework to further unleash private sector-driven growth.” — Luisa Maria Jacinta C. Jocson