Philippines loses tariff edge as US also sets 19% rate on 4 ASEAN members

The Philippines may have lost its edge in the US market as the US imposed a similar 19% tariff on imports from Indonesia, Cambodia, Malaysia and Thailand, analysts said.

Analysts warned this may undermine the Philippines’ competitiveness as it erodes the margin of preference and limits opportunities for trade diversion.

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 (ASEAN) — the Philippines, Cambodia, Malaysia, Thailand and Indonesia. This will take effect on Aug. 7.

“What we’ve been saying before is that a 20% or even 19% tariff is acceptable — as long as our competitors have higher rates than us,” Philippine Exporters Confederation, Inc. (Philexport) President Sergio Ortiz-Luis, Jr. said in a phone interview over the weekend.

“The problem now in Asia is that countries like Japan and South Korea have even lower tariffs, and now we’ve been matched by Indonesia, Thailand, and the rest of the ASEAN+5, who are also our direct competitors. That’s where the problem lies for us.”

The Philippines had received the smallest tariff discount among ASEAN members even though Philippine President Ferdinand R. Marcos, Jr. met with Mr. Trump at the White House. The new rate is slightly lower than the 20% the US had threatened to impose, but higher than the 17% tariff announced in April.

Unliked the Philippines, other ASEAN countries received significant tariff discounts from the US, namely, Indonesia (from 32%) Malaysia (from 25%), Thailand (from 36%), Cambodia (from 36%), and Vietnam (from 46%).

At the same time, Mr. Trump set 15% duty on goods from South Korea (from 25%) and Japan (from 25%).

As the new US tariffs are set to take effect on Aug. 7, Trade Secretary Ma. Cristina A. Roque said the talks with the US are still ongoing to come up with a “mutually beneficial deal.”

“While some ASEAN member states got also 19% reciprocal tariff rate, I am not aware what deals or concessions were given for that because every country has its own sensitivities and priorities,” Ms. Roque told BusinessWorld in a Viber message on Saturday.

Lower exports

Mr. Ortiz-Luis warned the higher US tariffs will dampen demand for Philippine goods, which will lead to lower exports for the US market. He said this also leaves no room for Philippine exporters to increase prices as regional competitors now have similar or lower tariff rates.

In June, the United States was the top destination for Philippine-made goods amounting to USD 1.22 billion, 35.2% higher from the same month a year ago.

“[Exporters] will be scared. We look to the government now to come up with mitigating measures to support our exporters. But I don’t know if the government is prepared to do that,” he said.

Mr. Ortiz-Luis also said the exporters group is still in the dark on the comprehensive details of the recent US-Philippines trade deal

Jose Enrique A. Africa, executive director at IBON Foundation, said “the Philippines loses much of the margin of preference and price-based advantage that the government was counting on to offset our underdeveloped manufacturing workforce, infrastructure, and ecosystem.”

He also said the changes in tariff rates in the region further reduce the chances of the Philippines benefiting from trade diversion or US manufacturers looking for supply-chain players.

“The right direction is definitely not to recklessly pursue more free trade agreements, since decades of such openness have already led to our premature deindustrialization and current inability to compete or take advantage of market access, even when it exists on paper,” Mr. Africa said.

Former Tariff Commissioner George N. Manzano said the Philippines is “not disadvantaged” even though it has the same US tariff rates as Cambodia, Malaysia, Thailand, and Indonesia.

“My only observation is that in relative terms, we paid a steep price in concessions in terms of tariff revenue foregone by agreeing to duty-free imports of US imports in some products compared to our ASEAN neighbors, because we had a reduction of only 1 percentage point from 20%,” Mr. Manzano told BusinessWorld in a Viber message.

Finance Secretary Ralph G. Recto earlier said the government is anticipating between PHP 3 billion and PHP 6 billion in foregone revenues following its decision to grant zero tariffs on selected US products such as automobiles, wheat, soy, and pharmaceuticals.

Meanwhile, Ms. Roque said the Philippines remains competitive as it recently introduced economic reforms such as the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act, and free trade agreements with other countries. — Aubrey Rose A. Inosante, Reporter

BSP to refine economic surveillance tools

The Bangko Sentral ng Pilipinas (BSP) is working on further refining their economic surveillance tools to better capture data and enhance policymaking, an official said.

The central bank is shifting from mainly traditional data to more soft data in their monitoring, surveillance, and assessment, BSP Deputy Governor Zeno Ronald R. Abenoja said.

“We’re trying to improve a lot of things at the central bank, including our ability to monitor what’s happening on the ground real time and what it means going forward,” he told reporters on Friday.

“As we improve the surveillance, it helps us communicate, hopefully, what we think is happening on the ground and what we think are important developments that could affect policies moving forward.”

For example, the BSP is studying how to mine more data from the Consumer Expectations Survey and Business Expectations Survey.

“We are reviewing the instruments. We want to improve the ease of filling up or getting more information,” he said, adding that they are also reviewing the content of these surveys.

The BSP is also looking at how to streamline the data without sacrificing the information gathered.

“We are trying to improve our ability to mine more information from these different surveys. We are also trying to improve our understanding of what’s happening in the different regions.”

Mr. Abenoja said the BSP is also working to improve the data capture effectiveness of their surveys, and is considering the use of supplementary surveys.

He cited the US Federal Reserve, which uses strategic surveys on consumer sentiment that have more forward-looking aspects of household expectations.

“We’re thinking of doing those types (of survey) that are more forward-looking to have a sense how households are thinking of reacting or their expectations under different circumstances.”

Policy recommendations to the Monetary Board would be based on more solid and current information, he added.

The BSP is also keen on implementing more early warning exercises to better “anticipate possible scenarios that could influence developments and impact our policy stance.”

It is also studying how to leverage developments in the information technology sector and harness computing power.

FX playbook

Meanwhile, Mr. Abenoja said they are in the process of developing an “FX (foreign exchange) playbook.”

“There are a lot of studies, analysis being done on the relationship between exchange rate and inflation, exchange rate and inflation expectations,” he said.

BSP Governor Eli M. Remolona, Jr. earlier said they are seeking to develop a “playbook” to guide foreign exchange intervention.

“There are asymmetric effects and threshold effects. The impact of FX movements on inflation is not the same in the sense that the significant, sharp depreciation over a short period of time could have big implications on inflation,” Mr. Abenoja said.

“But we may want to smooth out this impact on inflation because sometimes there are swings, there is a deficit and then it suddenly returns to the previous level. But the impact on inflation is already there,” he said.

Mr. Abenoja said there is room for foreign exchange intervention to smooth out its effects.

“The playbook is being reviewed… to ensure there is a development on our analysis of the dynamics of foreign exchange market. We want to preserve our flexible exchange rate regime,” he said.

“But probably we can improve the inflation dynamics by smoothing out some of these temporary effects of exchange rate on inflation, so we’re doing the playbook.”

Meanwhile, in a separate memorandum, the BSP is advising banks on the revised the Residential Real Estate Price Index (RREPI), which seeks to provide a more comprehensive overview of the sector.

In a memorandum posted on its website, the BSP reminded universal and commercial banks, thrift banks and digital banks to submit their quarterly reports on residential real estate loans and appraised commercial properties in view of the revised index.

“With the transition to the hedonic methodology, the RREPI has been renamed the Residential Property Price Index (RPPI),” it said.

All references to the RREPI shall now refer to RPPI, it added.

“This change aligns the index’s nomenclature with international standards and more accurately reflects its comprehensive coverage of residential property prices on the banking segment of the market.”

The BSP monitors banks’ exposure to the property sector as part of its mandate to maintain financial stability.

The RREPI tracked the average price changes of residential properties across different housing types and locations.

The BSP in a separate notice said the RREPI relied on “simple averages (and) oversimplified the residential property market by assuming homogeneity within the stratum and failing to address outliers.”

“The use of hedonic regression — widely regarded as the gold standard in property price index generation — allows for the observation of how intrinsic characteristics of the residential real estate market independently influence prices,” it added.

The latest first-quarter data were released with the RPPI format. Latest data showed that the RPPI rose by an annual 7.6% in the January-March period, though slower than the 9.8% expansion logged in the fourth quarter. — Luisa Maria Jacinta C. Jocson

Stocks to move sideways before inflation, GDP

Stocks could move sideways this week as investors await the release of the latest Philippine inflation and gross domestic product (GDP) data.

On Friday, the bellwether Philippine Stock Exchange index (PSEi) ended its six-day slide as it rose by 0.85% or 53.40 points to close at 6,306.13, while the broader all shares index went up by 0.39% or 14.76 points to end at 3,751.67.

Week on week, however, the PSEi was down by 1.67% or 107.05 points from its 6,413.18 finish on July 25.

“A late-week rebound proved insufficient to reverse the sustained market selloff, heavily influenced by lingering caution following the State of the Nation Address (SONA) and mounting anxieties over new US tariff rates on Philippine exports,” online brokerage 2TradeAsia.com said in a market note.

“The local market has been on a six-day decline, which was only snapped last Friday on bargain hunting. Bearish sentiment took over last week amid investors’ dismay over the recent SONA, uncertainties on the Federal Reserve’s policy outlook, and worries on global trade. With last week’s fall, the market is now back to the 6,150-6,400 trading range,” Philstocks Financial Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message.

For this week, the market will focus on the July inflation report to be released on Tuesday (Aug. 5) and the second-quarter gross domestic product data that will come out on Thursday (Aug. 7), Mr. Tantiangco said.

“A well contained inflation figure and a GDP growth print significantly faster than the prior quarter’s 5.4% may give the market a boost.”

Mr. Tantiangco added that investors will monitor the peso’s movement against the dollar after the local unit fell to the P58 level anew last week.

“A rebound of the local currency may also help the market, but a further depreciation may also bring the market lower,” he said. “Finally, investors are expected to watch out for further second quarter corporate reports.”

Mr. Tantiangco said the market is expected to continue its decline if there are no positive catalysts this week. “The market is exhibiting a bearish bias, forming a lower high and lower low when compared to July 14’s peak and July 17’s trough. With its six-day decline, the bourse has fallen below its 10-day, 50-day, and 200-day exponential moving averages. Its moving average convergence/divergence line is moving downwards below the signal line.”

2TradeAsia.com put the PSEi’s immediate support at 6,300 and resistance at 6,600.

“Navigate this week with a tilt toward quality, defensive plays to hedge inflation risks, while eyeing selective consumer plays for momentum and second quarter tailwinds,” it said.

“Stay nimble as global data drops could sway sentiment, while prudence remains paramount, with thin trading volumes expected during the Chinese Ghost Month.” — Revin Mikhael D. Ochave

SSS to hike pensions starting Sept.

The Social Security System (SSS) is implementing a landmark pension reform program starting this September, which will gradually increase the monthly pensions of all pensioners over a three-year period.

The Social Security Commission (SSC) approved the SSS Pension Reform Program, which features a structured, three-year increase in pensions for all SSS pensioners, on July 11.

This is the first multi-year adjustment of pensions in the SSS’ 68-year history.

“After careful actuarial review, we are rolling out a rational and sustainable pension increase that uplifts all pensioners without compromising the fund’s actuarial soundness,” SSS President and Chief Executive Officer Robert Joseph M. De Claro said in a statement.

Starting this year, all pensioners as of Aug. 31, 2025, will receive annual pension increases every September until 2027.

The pension for retirement and disability pensioners will be raised by 10% every September until 2027. The pension for death or survivor pensioners will be increased by 5%.

“After three years, pensions will have increased by approximately 33% for retirement/disability pensioners and 16% for death/survivor pensioners,” the SSS said.

Around 3.8 million pensioners will benefit from the pension reform. This includes 2.6 million retirement/disability pensioners and 1.2 million survivor pensioners.

The SSS said the pension reform program “will not necessitate any contribution increase.”

Mr. De Claro said the actuarial team confirms that the pension fund “remains financially sound.”

Quoting its chief actuary, the SSS said the reform will slightly shorten the fund’s lifespan — to 2049 from 2053 previously, but this is offset by strong cash flow from previous contribution reforms and better collection efforts.

Mr. De Claro said they are “committed to restoring fund life back to 2053 through coverage expansion and improved collection efficiency.”

Finance Secretary Ralph G. Recto, who chairs the SSC, said the pension hike will help spur economic growth as pensioners will have additional spending power.

The SSS estimated the pension hike will inject around PHP 92.8 billion into the Philippine economy from 2025 to 2027, but the Department of Finance (DoF) estimated this could reach up to PHP 117.2 billion.

“For retirement pensioners aged 60-89 (99.4% of all retirement pensioners), around PHP 4,923 is the average monthly pension just before implementation of this reform program. Such a pension amount will grow to about PHP 6,548 after the third tranche of pension increase — an increase of PHP 1,625 or 33%,” the DoF said.

“After three years of pension increases starting September 2025, SSS will have paid about PHP 41,145 in additional pensions to such average retirement pensioner,” it added.

Meanwhile, the SSS said it is able to implement the pension reform due to strong cash flows from the increase in incremental contribution rates that was completed in January 2025.

Under Republic Act No. 11199 or the Social Security Act of 2018, the SSS implemented incremental contribution rate hikes of one percentage point every two years starting in 2019 from the original contribution rate of 11%. — AMCS

BSP sees July inflation settling at 0.5% to 1.3%

The Bangko Sentral ng Pilipinas (BSP) on Thursday said it expects headline inflation to settle below 2% in July.

The central bank’s month-ahead forecast showed that inflation likely fell within the 0.5%-to-1.3% range in July. If realized, July inflation would be slower than the 1.4% print in June and the 4.4% clip a year ago.

“Upward price pressures for the month are likely to be driven by higher meat and vegetable prices partly due to unfavorable weather conditions, increased electricity rates, elevated domestic fuel costs, and the depreciation of the peso,” it said.

Manila Electric Co. (Meralco) hiked rates by PHP 0.4883 per kilowatt-hour (kWh) in July, bringing the overall rate for a typical household to PHP 12.6435 per kWh from PHP 12.1552 per kWh a month earlier.

The peso fell to PHP 58.32 against the greenback at end-July from its finish of P56.33 at end-June. The peso’s close at end-July was its weakest in almost six months or since its PHP 58.34 finish on Feb. 4.

“These price pressures, however, could be partially offset by the continued decline in rice prices,” the BSP added.

Rice inflation has been steadily declining for the past few months amid several government interventions for the staple grain. In June, rice inflation contracted for the sixth straight month to a record 14.3%, the biggest drop since 1995.

“Going forward, the BSP will continue to monitor developments affecting the outlook for inflation and growth in line with its data-dependent approach to monetary policy decision-making.”

The local statistics agency is set to release the July inflation data on Aug. 5 (Tuesday).

IMF Forecast

Meanwhile, the International Monetary Fund (IMF) projects Philippine headline inflation to settle below 2% this year, giving the central bank more space to ease policy rates further.

Following the release of its World Economic Outlook (WEO), the IMF said it expects inflation to average 1.8% this year, below the central bank’s 2-4% target.

“The headline inflation projections have been revised down by 0.8 percentage point (ppt) and 0.6 ppt for 2025 and 2026 respectively, reflecting lower-than-expected inflation outturn in the first half of 2025,” an IMF spokesperson said in an e-mail.

Headline inflation picked up to 1.4% in June from 1.3% in May but slowed from 3.7% a year ago. This brought the six-month average inflation to 1.8%.

The BSP expects inflation to average 1.6% this year.

Risks to the inflation outlook are “broadly balanced,” the IMF said, but cited risks such as higher commodity prices due to escalating geopolitics, supply-chain disruptions and climate shocks, among others.

For 2026, the multilateral institution sees inflation settling at 2.3%, lower than the BSP’s 3.4% forecast.

With inflation expected to be well-contained, the central bank can continue its rate-cutting cycle.

“Monetary policy has room to be more accommodative amid a benign inflation outlook,” the IMF said.

The central bank has been on an easing cycle since August last year, lowering borrowing costs by a total of 125 basis points. This brought the benchmark to 5.25%.

BSP Governor Eli M. Remolona, Jr. has said a rate cut is still on the table at the Monetary Board’s Aug. 28 meeting.

“Amidst prevailing uncertainty and with two-sided risks to inflation, a data-dependent approach, and clear and effective communication around policy settings will be important to manage expectations.”

Uncertainty persists

Meanwhile, the IMF said its latest gross domestic product (GDP) projection for the Philippines this year reflects the impact of “recent global trade policy conflicts and elevated policy uncertainty.”

In its latest WEO, the IMF maintained its 2025 growth forecast for the Philippines at 5.5%. This would fall at the lower end of the government’s 5.5-6.5% target for the year.

“Real GDP growth forecast for 2025 is unchanged relative to April WEO reflecting offsetting effects from higher growth in trading partners contributing positively, and lower-than-expected first-quarter outturn and higher energy prices contributing negatively.”

The IMF had also raised its 2026 projection to 5.9% from 5.8% previously, citing “robust consumption and an increase in investment, which will be supported by monetary policy easing.”

“The forecast for 2026 reflects a positive contribution from smaller-than-expected consolidation in 2026 as announced in the authorities’ revised Medium Term Fiscal Framework.”

At its June meeting, the Development Budget Coordination Committee revised its fiscal program to account for external factors.

The government is now aiming to bring down its deficit to 4.3% of GDP by 2028, versus its previous target of 3.7%.

The growth outlook for next year is also expected to be partially offset by a “higher impact of uncertainty on private demand” that was initially priced in during the April forecasts, it added.

Meanwhile, the IMF said that downside risks to growth include escalating trade measures, prolonged uncertainty and geopolitical tensions.

“Extreme climate events and other natural disasters also constitute downside risks.”

“On the upside, accelerated implementation of structural reforms and a reduction in infrastructure gaps can contribute to higher growth over the medium-term,” it added. — Luisa Maria Jacinta C. Jocson, Senior Reporter

Details of Philippine-US trade deal still being finalized

The Philippines’ reciprocal trade agreement with the US is still being finalized a day before its expected implementation, the Department of Trade and Industry (DTI) said.

“Our talks are still ongoing. We just have to see what will happen on Aug. 1,” said Trade Undersecretary Allan B. Gepty on the sidelines of the British Chamber of Commerce Philippines 2025 Midyear Economic Briefing.

“The announcement is 19% but let us see what will happen. There are still a lot of things that we are ironing out,” he added.

The US is expected to implement the 19% tariff on Philippine goods starting today (Aug. 1), slightly lower than the 20% rate that US President Donald J. Trump threatened to impose.

While this is the second-lowest rate in Southeast Asia, the rate is still higher than the 17% announced in April.

Philippine government officials have justified the modest tariff shift to the few concessions it had offered. The Philippines had agreed to grant zero tariffs on automobiles, wheat, soy, medical equipment, and pharmaceutical products from the US.

“Well, maybe what I can say is that we are working on the details. So, the details, of course, cover other terms and conditions of the agreement because it’s not just market access,” said Mr. Gepty.

“So, there is a set of rules that we are negotiating. But of course, as I have mentioned before, it is covered by our nondisclosure agreement,” he added.

Citing previous US pronouncements, Mr. Gepty said that Washington is also interested in a lot of measures that basically affect trade.

“So, that is why we also have to address those measures, like the nontariff barriers,” he said. “Definitely there will be some announcements to be made once there is a set of parameters that will be agreed upon by both sides.”

“What is really important is that we engage with the US. Because the US is a major trading and investment partner of the country. And of course, we’re really advocating for a free trade agreement (FTA),” he added.

Limited impact

Meanwhile, Finance Undersecretary and Chief Economist Domini S. Velasquez said the impact of the US tariff on the Philippine economy will likely be “very limited.”

“It’s not just the Philippines, but we compare it with others. Until we have that kind of clarity, we don’t know. We know it’s limited given that we have smaller exports compared to the rest of the world,” she told reporters on the sidelines of an event on Thursday.

“(For) full-year GDP, (the impact is) very limited. For exports, of course, it will have an impact… but we need to see the whole picture,” she added.

The Philippines’ new US tariff rate is now the same as Indonesia, and slightly lower than Vietnam’s 20%.

“For the Philippines, we do think it is still one of the lowest in the region at 19%… for example, semiconductors, which take up a majority of the exports of the Philippines, remain to be zero tariffs or exempt for now.”

“Looking at our domestic situation, the Philippine economy continues to grow at a solid pace, broadly aligned with the 6% target of the government,” she added.

The government is targeting 5.5-6.5% growth this year. The Philippine Statistics Authority is set to release second-quarter GDP data on Aug. 7.

Ms. Velasquez noted the recent trade deficit data, which showed a surge in exports, reflecting the frontloading done by US importers.

Latest data from the Philippine Statistics Authority (PSA) showed the country’s trade deficit narrowed to USD 3.95 billion in June as exports jumped by 26.1% to USD 7.02 billion. This marked the sixth straight month of annual expansion for exports.

In June, the United States was the top destination for Philippine-made goods at USD 1.22 billion or a 17.3% share to total exports.

“We’re a little bit more cautious in the second half of the year in terms of trade because imports in the US have increased. Exports, not just in the Philippines but in the rest of Asia, have increased also because of this front-loading of exports to the US,” Ms. Velasquez said.

Meanwhile, Ms. Velasquez said the government is continuing to implement reforms and policies that will further open up the economy and generate investor interest.

“There’s difficulty for foreign investors to come in here. Now that we’ve liberalized (several sectors), what we need to do is incentivize investors to come into the Philippines.”

“Unfortunately, it’s a very uncertain environment and it’s a little bit more difficult as opposed to your business-as-usual kind of environment,” she said.

The Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act (CREATE MORE) is one such measure that the government is banking on to bring in more investors.

“This administration is building on past liberalization reforms by actively incentivizing foreign investment through the CREATE MORE Act,” she said.

The CREATE MORE Act has yielded a total of 182 projects with committed investments worth P90.13 billion since the approval of its implementing rules and regulations. It is also expected to generate more than 40,000 jobs. — Justine Irish D. Tabile and Luisa Maria Jacinta C. Jocson

Government looks to raise PHP 30 billion from RTBs

The government is looking to raise at least PHP 30 billion from the sale of its first retail Treasury bond (RTB) offering this year.

In a notice on its website dated July 30, the Bureau of the Treasury (BTr) said it is planning to sell a minimum PHP 30 billion worth of five-year peso-denominated RTBs due in 2030.

This will be the government’s 31^st RTB offering and the first time that small-denominated government securities will be available on an e-wallet.

The rate-setting auction is scheduled for Aug. 5.

“The interest rate shall be based on current market levels of comparable securities rounded down to the nearest one-eighth (1/8) of one percent (1%),” the BTr said.

The final interest rate will be determined through a Dutch auction with the government securities eligible dealers. In a Dutch auction, the rate for the bond is determined by starting with the highest rate and incrementally lowering it until it is accepted by the auction participants.

The public offer period will run from Aug. 5 to Aug. 15, unless ended earlier by the Treasury.

The RTBs are scheduled to be issued and settled on Aug. 20. It will also mature on Aug. 20, 2030.

The RTB 31 will be sold in minimum denominations of PHP 5,000 and in multiples of PHP 5,000 thereafter, with a maximum investment amount of PHP 500,000, while each exchange offer will have a minimum amount of PHP 5,000.

Due to the RTB offer, the BTr will cancel the scheduled auction for five-year Treasury bonds on Aug. 5.

The Treasury is also offering a bond exchange program for holders of government bonds maturing on Sept. 9, 2025 (FXTN 10-60), Feb. 4, 2026 (FXTN 03-01), and Feb. 14, 2026 (FXTN 07-62). The exchange offer also runs from Aug. 5 to 15.

“The purpose of the invitation is to present a reinvestment opportunity for holders of the Eligible Bonds given its forthcoming maturity dates. The Exchange Offer is likewise intended to manage refinancing risk in the debt portfolio of the Republic and is an integral part of its overall liability management program,” the BTr said.

BTr set the repurchase price for eligible bondholders at 99.79% of the face value to be exchanged for the FXTN 10-60, 99.92% for FXTN 03-01, and at 100.42% for the FXTN 07-62.

The RTBs will be available through over-the-counter placement in bank branches and digital channels such as the BTr Online Ordering Facility, the Bonds.PH mobile app, the Overseas Filipino Bank mobile banking app, and the Land Bank of the Philippines mobile banking app.

The RTBs will also be available to users of the GCash app through GBonds for a minimum of PHP 5,000.

Finance Secretary Ralph G. Recto previously said the government could be aiming to raise PHP 200 billion from the RTBs.

A trader said in a text message that the government could raise as much as PHP 500 billion from the offer if the yield reaches 6.125% due to the exchange option, but this would depend on the July inflation figure.

“If July CPI (consumer price index) data confirms Bangko Sentral ng Pilipinas (BSP) will be able to cut next month, then the RTB might fetch 6%. If not 6.125%,” the trader said.

The Philippine Statistics Authority will release July inflation data on Aug. 5.

The RTBs could fetch a coupon rate of 6% due to about PHP 800 billion in maturing bonds from August to September, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

This would be higher than the 5.9345% seen for the five-year bond according to the PHP Bloomberg Valuation Service (BVAL) Reference Rates as of July 31.

Mr. Ricafort also noted holders of the maturing five-year RTBs issued in 2020 may be looking for reinvestment opportunities “since these were set near record low of 2.625% five years ago and would be reinvested possibly at more than twice the yield at around 6%.”

The Treasury last offered RTBs in February 2024, raising P585 billion from five-year notes at a coupon rate of 6.25%.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.56 trillion or 5.5% of gross domestic product this year. — Aaron Michael C. Sy

PSEi hits one-month low as tariff deadline looms

The benchmark index sank to the 6,200 level on Thursday, hitting a one-month low, as investors were cautious ahead of the Trump administration’s Aug. 1 tariff deadline and after the US Federal Reserve kept rates unchanged.

The Philippine Stock Exchange index (PSEi) dropped by 1.03% or 65.50 points to close at 6,252.73, while the broader all shares index went down by 1.05% or 39.68 points to 3,736.91.

This was its lowest close in over a month or since it finished at 6,218.28 on June 23.

“The local market dropped further as investors continued to deal with global trade uncertainties as the US’ Aug. 1 negotiations deadline looms,” Philstocks Financial Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message. “Investors also digested the outcome of the Fed’s latest policy meeting wherein rates were kept unchanged and no definite outlook was given.”

“(The) PSEi went down… as investors are already cautious in their positions about the potential impact and how it might affect stock market movements ahead of tomorrow’s tariff deadline,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

US President Donald J. Trump said on Wednesday that his tariff deadline will not be extended. He also announced a 25% tariff rate on products from India, a 50% duty on copper pipes and wiring, and a 15% tariff on goods from South Korea.

Meanwhile, the US central bank held interest rates steady on Wednesday and Federal Reserve Chair Jerome H. Powell’s comments after the decision undercut confidence that borrowing costs would begin to fall in September, Reuters reported.

Mr. Powell said the Fed is focused on controlling inflation — not on government borrowing or home mortgage costs that Mr. Trump wants lowered — and added that the risk of rising price pressures from the administration’s trade and other policies remains too high for the central bank to begin loosening its “modestly restrictive” grip on the economy until more information is collected.

The latest policy decision was made by a 9-2 vote, what passes for a split outcome at the consensus-driven central bank, with two Fed governors dissenting for the first time in more than 30 years.

All sectoral indices closed in the red on Thursday. Mining and oil plunged by 3.01% or 273.77 points to 8,808.23; holding firms sank by 1.6% or 86.45 points to 5,299.36; financials declined by 1.48% or 33.07 points to 2,190.06; industrials retreated by 1.31% or 120.32 points to 9,002.71; services lost 1.22% or 27.26 points to end at 2,194.68; and property fell by 0.93% or 22.29 points to 2,351.30.

Value turnover went up to PHP 7.85 billion on Thursday with 902.65 million shares traded from the PHP 4.66 billion with 800.01 million shares exchanged on Wednesday.

Decliners overwhelmed advancers, 134 against 61, while 56 names closed unchanged.

Net foreign buying was at PHP 228.54 million on Thursday, a turnaround from the PHP 57.49 million in net selling recorded on Wednesday. — Revin Mikhael D. Ochave with Reuters

Philippine debt hits record-high PHP 17.27T

The national government’s (NG) outstanding debt jumped to a fresh high PHP 17.27 trillion as of end-June, data from the Bureau of the Treasury (BTr) showed.

The latest data from the BTr showed outstanding debt rose by 11.5% from PHP 15.48 trillion in the same month in 2024.

Despite hitting a fresh high, the Treasury said outstanding debt “remains sustainable.”

Month on month, NG debt inched up by 2.1% from PHP 16.92 trillion in May due to “strong investor demand for government securities,” the BTr said.

NG debt is the total amount owed by the Philippine government to creditors such as international financial institutions, development partner-countries, banks, global bondholders and other investors.

The bulk or 69.2% of the total debt was owed to domestic creditors, while the rest was owed to foreign creditors.

Domestic debt, which is composed of government securities, increased by 13% to PHP 11.95 trillion as of end-June from PHP 10.57 trillion in the same month last year.

Month on month, domestic borrowings rose by 1.4% from PHP 11.78 trillion at end-May.

The BTr said it prioritizes domestic borrowings because it is “consistent with the government’s goal to boost the local capital market while lowering foreign exchange risks and building investor trust in Philippine-issued securities.”

On the other hand, external debt rose by 8.3% to PHP 5.32 trillion as of end-June from PHP 4.91 trillion a year ago. It also went up by 3.5% from PHP 5.14 trillion in the previous month.

Foreign debt was composed mainly of PHP 2.71 trillion in government securities and PHP 2.6 trillion in loans.

External debt securities consisted of PHP 2.29 trillion in US dollar bonds, PHP 252 million in euro bonds, PHP 59.32 billion in Japanese yen bonds, PHP 56.38 billion in Islamic certificates and PHP 54.77 million in peso global bonds.

As of end-June, the NG-guaranteed obligations “remained stable” and inched up by 0.4% to PHP 345.11 billion from PHP 343.65 billion a year ago.

“The year-to-date decline of PHP 4.33 billion since end-2024 highlights continued efforts to manage contingent liabilities while supporting essential sectors,” the BTr said.

Month on month, it also increased by 0.4% from the end-May level of PHP 343.58 billion.

“After the NG released a statement effectively raising the debt ceiling for the country, the new inflow of borrowings seems to be in line with their goal of further increasing their spending to drive growth and development,” Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said in a Viber message.

Earlier this month, Palace Press Officer Clarissa A. Castro said the Department of Finance considers 70% of gross domestic product (GDP) to be the international threshold for sustainable borrowing, as opposed to the 60% rule-of-thumb that multilateral banks often hold developing countries to.

NG debt as a share of GDP rose to 62% at the end of the first quarter, the highest in 20 years. This is a significant jump from the 60.7% posted at the end of 2024.

“The National Government’s prudent debt management approach strategy reflects the Marcos, Jr. administration’s commitment to safeguarding fiscal sustainability, supporting inclusive growth, and ensuring that every peso borrowed is used to build a stronger economy for the Filipino people,” the BTr said.

The NG’s outstanding debt is projected to reach PHP 17.35 trillion by end-2025. — A.R.A.Inosante

Trade deficit narrows to USD 3.95B in June

The Philippines’ trade-in-goods deficit narrowed to USD 3.95 billion in June, as double-digit export growth was driven by frontloading in the run-up to higher US tariffs, the Philippine Statistics Authority (PSA) said on Wednesday.

Preliminary data from the PSA showed the country’s balance of trade in goods — the difference between the values of exports and imports — stood at a USD 3.95-billion deficit in June, slimmer than the USD 4.34-billion gap a year earlier. It was the widest trade deficit since the USD 3.97-billion gap seen in April.

Month on month, the trade gap widened from the revised USD 3.63-billion deficit in May.

Outbound shipments of Philippine-made goods jumped by 26.1% year on year to USD 7.02 billion in June, marking the sixth straight month of annual expansion. This was also the fastest growth in exports since 28.2% in April 2024.

Month on month, exports slid by 4% from USD 7.31 billion in May. Export receipts for June were also the lowest since USD 6.78 billion in April.

On the other hand, the value of imports picked up 10.8% year on year to USD 10.98 billion in June from USD 9.9 billion in the same month a year ago.

The growth in imports was the fastest since 17.8% logged in March.

Month on month, imports inched up by 0.3% from USD 10.95 billion in May.

For the first semester, the trade deficit narrowed to USD 23.97 billion from the USD 25.06-billion deficit a year ago.

The country’s balance of trade in goods has been in the red for over a decade or since the USD 64.95-million surplus in May 2015.

In the January-to-June period, exports increased by 13.2% to USD 41.24 billion, while imports rose by 6% to USD 65.22 billion.

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said in a research note that trade was “flattered hugely by base effects in June,” as exports and imports saw a decline last year.

“The widening of the trade deficit would’ve been more pronounced if not for the still-favorable seasonal effects in play, particularly on the export side,” he said.

Frontloading

In a note, Chinabank Research said exports grew faster in June amid signs of frontloading by US importers due to uncertainty over tariffs.

US President Donald J. Trump in April announced a 17% “reciprocal tariff” on Philippine goods, but implementation was paused until July. Earlier this month, Mr. Trump set a 19% tariff on Philippine goods after a meeting with Philippine President Ferdinand R. Marcos, Jr. It will take effect on Aug. 1.

“Shipments to the US — the Philippines’ top export market — surged (+35.2%), suggesting some frontloading by US importers before higher US tariffs take effect, alongside some base effects (i.e., exports to the US fell 19.8% in June 2024),” Chinabank Research said.

In June, the United States was the top destination for Philippine-made goods at USD 1.22 billion (17.3% share). It was closely followed by Hong Kong (USD 1.065 billion or a 15.2% share), Japan (USD 974.8 million or a 13.9% share), and China (USD 733.99 million or a 10.5% share).

However, Mr. Chanco pointed out the month-on-month decline in exports in June was caused by the “broad-based pullback in demand from a number of key markets, namely, Japan (-10.1%), Hong Kong (-7.6%), and China (-1.6%).”

By major type of goods, exports of manufactured goods went up by 27.3% year on year to USD 5.53 billion in June. This made up the bulk of total outbound sales during the month.

Electronic products, which accounted for more than half of exports and 70.3% of manufactured goods, rose by 30% to USD 3.89 billion.

Semiconductors, which made up a little over 40% of exports and 74% of electronic products, climbed by 24.6% year on year to USD 2.89 billion.

“Month on month, however, semiconductor exports were flat, underscoring the sector’s fragile recovery. A risk is the potential imposition of US tariffs on currently exempt semiconductors, depending on the result of the US’ national security probe into chip imports,” Chinabank Research said.

Silver linings

Meanwhile, Mr. Chanco said there are a few silver linings in the import data, “which is a far more important health-check for the Philippines’ domestic demand driven economy.”

“Specifically, the recovery in previously subdued capital goods imports is going from strength to strength… with their continued surge in June masking a poor month for consumer goods and purchases of raw materials and intermediate goods,” he said.

PSA data showed imports of capital goods grew by 31.1% to USD 3.71 billion in June.

Chinabank Research said the surge in capital goods was “driven by a sharp rise in telecommunication equipment and electrical machinery (+30.4%), and transport-related assets such as aircraft, ships and boats (+702.4%).”

“This indicates that domestic service businesses remain optimistic even in the face of uncertainties,” it added.

Imports of raw materials and intermediate goods inched up 2.9% to USD 3.67 billion in June.

“Demand for consumer goods held firm (+13.1%), with household consumption benefiting from low and stable inflation and robust labor market conditions. The country’s pledge to slash tariffs on automobiles from the US may contribute to the increase in this category moving forward,” Chinabank Research said.

By commodity group, electronic products, which accounted for more than a fifth of total imports, went up by 14.9% to USD 2.56 billion in June.

Orders of semiconductors, which accounted for 70% of electronic products and 16.3% of total imports, rose 22.8% year on year to USD 1.79 billion in June

China remained the main source of imported products, which accounted for 28.2% of the total or USD 3.1 billion. Japan followed with a 7.9% share or USD 870.15 million and South Korea’s 7.8% share or USD 853.26 million.

Ateneo de Manila University economics professor Leonardo M. Lanzona said the trade data showed strong growth in exports to other markets which could help offset a potential slowdown in demand from the US.

“The Philippines appears to be maintaining strong growth despite trade headwinds, suggesting domestic demand and other sectors are compensating for trade challenges,” Mr. Lanzona said. “It is recommended then that we strengthen the domestic economy at least for now but make sure that this leads to greater exports later.”

The Development Budget Coordination Committee in June raised the export growth assumption for this year to 5% from 3%. It lowered the import growth assumption to 2% from 4%. — Pierce Oel A. Montalvo

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