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Headline inflation likely quickened to a six-month high in September, but still below the 2-4% target, due to a rise in food and fuel costs, analysts said.

A BusinessWorld poll of 12 analysts yielded a median estimate of 1.9% for September inflation, within the Bangko Sentral ng Pilipinas’ (BSP) 1.5-2.3% forecast for the month.

If realized, inflation would have accelerated from 1.5% in August but steadied from the 1.9% clip in September 2024.

This would also be the fastest print in six months or since the 2.1% in February.

September may also be the seventh month in a row that the consumer price index fell below the central bank’s 2-4% target range.

The Philippine Statistics Authority is scheduled to release the September inflation data on Tuesday, Oct. 7.

“Inflation in the Philippines likely quickened to 1.9% (year on year) in September from 1.5% in August, after a series of tropical storms damaged crops and pushed up food prices,” Moody’s Analytics economist Sarah Tan said in an e-mail.

Last month, typhoons Mirasol, Ragasa (locally known as Nando) and Bualoi (Opong), coupled with the southwest monsoon, brought heavy rains and flooding in parts of the country.

“Food prices in September surged, mainly because of the strong storms that hit the country. Prices for vegetables and fish shot up significantly, with vegetable prices seeing a particularly dramatic rise compared to last year’s weaker price base,” Metropolitan Bank Trust & Co. (Metrobank) said in a note.

Emilio S. Neri, Jr., lead economist at the Bank of the Philippine Islands, said inflation may have quickened to 1.9% in September, “lifted by higher fish prices amid rains and rising rice costs following the government’s rice import suspension order.”

The 60-day suspension on imports of regular milled and well-milled rice took effect on Sept. 1.

“The ban was put in place to help lift local palay prices and protect Filipino farmers from financial loss. Despite the ongoing import ban, sustained deflation in rice prices this month will continue to temper headline inflation,” Metrobank said.

Energy costs

Higher cost of fuel, electricity and cooking oil may have also pushed up inflation in September, Chinabank Research said.

“However, these upward price pressures were likely tempered by declines in the prices of rice, meat, vegetables, fruits, and sugar,” it said.

In September, pump prices posted a net increase of PHP 2.80 per liter for gasoline, PHP 3.70 per liter for diesel and PHP 2.50 per liter for kerosene.

“I surmise that headline inflation for the month of September 2025 have gone up to 1.7%, owing to the conglomeration of several factors, foremost of which is the unceasing increase in the price of basic petroleum products notably diesel product which in a month’s time has cumulatively increased by more than PHP 4,” Emmanuel J. Lopez, professorial lecturer at the University of Santo Tomas Graduate School, said in an e-mail.

Metrobank said Manila Electric Co. (Meralco) rates were lower month on month in September, but remained elevated compared to last year.

Meralco cut electricity rates by PHP 0.1852 per kilowatt-hour (kWh) in September, bringing the overall rate for a typical household to PHP 13.0851 per kWh from PHP 13.2703 per kWh a month ago. However, this is still higher than the PHP 11.7882 per kWh recorded in September 2024.

“Visayas Electric and Davao Light also saw higher prices for the month, attributed to power plant outages across the country,” Metrobank added.

Angelo B. Taningco, research head and chief economist at Security Bank, said the peso depreciation may have also contributed to the inflation uptick last month.

The peso closed at P58.196 per dollar on Sept. 30, weakening by P1.066 or 1.83% from its finish of P57.13 on Aug. 29.

Outlook

Chinabank Research said it expects inflation to remain low for the rest of the year, with average inflation settling below the 2-4% target.

Reinielle Matt M. Erece, an economist at Oikonomia Advisory & Research, Inc., said inflation may pick up ahead of the Christmas season as “higher demand adds to price pressures.”

“For the rest of the year, there is a chance inflation could edge up with holiday demand, weather risks, and global oil price movements. But barring major shocks, it would likely stay below or at 2%,” Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said.

The state weather bureau earlier said they are anticipating that five to nine more tropical storms will hit the country before yearend.

“Looking ahead, inflation risks are skewed to the upside as favorable rice base effects fade, with the extension of the import suspension through yearend adding pressure,” BPI’s Mr. Neri said.

He said inflation will likely stay at the 2% level until December before climbing above 3% in the first half of 2026 due to “base effects and potential supply shocks from possible supply-chain disruptions linked to Trump’s tariffs.”

“Meanwhile, the influx of cheap Chinese exports into global markets, including the Philippines, may help temper price pressures,” Mr. Neri added.

In a separate commentary, Diwa C. Guinigundo, country analyst at GlobalSource Partners, said the projected faster headline inflation may prompt the BSP to pause at its next policy-setting meeting. 

“Rice and fish prices remain elevated, while higher fuel costs add another layer of strain on household budgets. These factors are expected to intensify headline inflation,” he said.

“Given this backdrop, the BSP may find it prudent to hold its policy rate steady in the upcoming Monetary Board meeting, prioritizing financial stability over short-term growth support,” he added.

On Aug. 28, the central bank lowered borrowing rates by 25 basis points (bps) to 5%. It has so far slashed the benchmark interest rate by 150 bps under the current easing cycle.

The Monetary Board is set to have its last two meetings this year on Oct. 9 and Dec. 11. — Katherine K. Chan

The Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) said exports may possibly hit USD 110 billion in five years, but uncertainty clouds the outlook.

“It is possible… I will just leave it at that because there are a lot of external factors,” said SEIPI President Danilo C. Lachica at the pre-event conference for the 20^th Philippine Semiconductor & Electronics Convention and Exhibition (PSECE) on Thursday.

He said the industry’s growth will be driven by new and emerging technologies.

“The drivers of growth for the electronics industry will be new devices and new technology in different sectors, whether they may be automobiles, devices, cellphones, computers, data centers, or renewable energy,” Mr. Lachica said.

Under the roadmap, the industry is targeting to make the Philippines a consistent and reliable global partner for packaging USD 70 billion of semiconductors, assembling USD 40 billion of electronics, and providing globally recognized integrated circuit (IC) design services by 2030.

Mr. Lachica said exports are rising but the industry still expects flat growth this year.

“This year, the (SEIPI) board projected a flat growth for 2025. However, we’ve seen some movements. In fact, if you look at the year-to-date numbers through August, we were seeing modest growth,” he said.

“Don’t get your hopes up too much (but) you may even go up by maybe 5% or something like that.”

The outlook is still uncertain because of the geopolitical factors, which include the US tariffs.

“But hopefully we’ve had enough momentum through August that we will sustain that modest growth for the year,” Mr. Lachica said.

Data from the Philippine Statistics Authority showed that exports of electronic products reached USD 29.48 billion in the first eight months, up 7.4% from a year ago.

“Almost everything has electronic components, and the Philippines does the assembly and packaging for those devices… so, the overall demand in the world is increasing notwithstanding the tariffs, so that causes optimism on our part,” the SEIPI official said.

US President Donald J. Trump previously announced plans to impose sectoral tariffs on chips as high as 300% in a bid to bring back manufacturing to the US.

“If we continue with our pattern that we are seeing [in the first eight months], we may even reach, if not exceed, the 2023 numbers this year,” Mr. Lachica said.

In 2023, exports of electronics reached USD 45.65 billion.

Meanwhile, Office of the Special Assistant to the President for Investment and Economic Affairs Undersecretary Ma. Angela E. Ignacio said that the government is targeting to move from traditional assembly, test, and packaging (ATP) to a more advanced ATP in the next five years.

“And of course, we want to move into the IC design industry as well, because we have realized that most of it is coming from Filipinos, so we want to promote it and let them come home and develop the industry here,” she said, adding they are also looking at wafer fabrication plants in the future.

To support this, the Semiconductor and Electronics Industry Advisory Council on Thursday unveiled its five-year workforce development plan.

“So, the target is 128,000 new jobs across the said industries, and we have three technical working groups working on this,” Ms. Ignacio said.

SEIPI has long been urging the government to build a USD 10-million lab-scale wafer fab, but Mr. Lachica said that the government has yet to find the funding for the project.

However, he warned that the country should not wait too long, as it may “miss the boat,” noting that the Philippines is already missing out on a significant amount of exports.

Aside from increasing exports, having its own wafer fab will allow the country to increase the localization of electronic exports, Mr. Lachica said.

He said that the industry has already made strides in localization, producing around PHP 130 million worth of localized parts. However, this is still relatively small versus what the country is importing, he added.

“If we can localize 1% of the materials we import, that will be something like PHP 15 billion, which means a lot of jobs and a lot of prevention of dollar leakage,” he added.

He warned, however, that the Philippines still does not have the capacity to produce most of these materials.

“So, there is a lot of work that needs to be done, but we are making progress slowly but surely,” he added.

SEIPI is set to hold PSECE 2025 from Oct. 28 to 30 at the SMX Convention Center Manila, Pasay City, which is expected to host 250 local and international companies from China, Germany, and Taiwan. — Justine Irish D. Tabile, Reporter

The Philippine government must deliver swift and credible results in its investigation into allegations of corruption in flood control projects, to avoid hurting growth prospects and losing the confidence of investors and the business community, experts said.

Department of Economy, Planning, and Development  Undersecretary Rosemarie G. Edillon said investor confidence can be restored if the probe into alleged irregularities in some projects is conducted swiftly and impartially.

“We have to show results. We have to demonstrate credibility. Maybe, that’s what (investors) need to see,” she told BusinessWorld on the sidelines of an event on Wednesday, noting that the capital market tends to be “flighty.”

Financial markets have been rattled by the widening probe into corruption in flood control projects. Separate investigations by Congress, the Ombudsman, and the Independent Commission for Infrastructure are looking into alleged collusion among Department of Public Works and Highways officials, contractors, and even lawmakers to divert billions in funds meant for flood control projects.

Ms. Edillon also said waning investor confidence should be viewed in the context of broader global market, including US tariff policies that continue to weigh on sentiment.

However, she noted that ensuring political issues do not seep into the economy is a “big challenge.”

Economists and business groups also warned that the Marcos administration’s graft probe is now becoming politicized and lacks substance, stoking unease among the private sector.

Foreign Buyers Association of the Philippines President Robert M. Young said the government-wide probe has devolved into a “circus” and became politicized, citing abrupt leadership changes in both the House and Senate, as well as the creation of a new infrastructure oversight body.

“This is lacking a clear roadmap or a plan,” Mr. Young told BusinessWorld over the phone on Wednesday. “All these are making the businessmen jittery and nervous. They have a feeling of pessimism and withdrawal to conduct business, which explains why the stock market has this week-long slump.”

He also noted the peso weakness is also dampening business sentiment.

“As the Senate hearing progresses, revealing the extent of corruption done by key legislators’ reckless impunity, the government has lost the trust of the private sectors. This negative sentiment has weakened business confidence and will take time to regain,” Philippine Chamber of Commerce and Industry Chairman George T. Barcelon said in a Viber message.

Ateneo Center for Economic Research and Development Director Ser Percival K. Peña-Reyes warned that unless key figures are prosecuted, investor sentiment will continue to deteriorate.

“The big fish, as it were, should be held accountable,” he said in a Viber message.

Mr. Peña-Reyes also said capital flight is possible similar to the debt crisis in the early 1980s during the time of the late President Ferdinand E. Marcos, Sr.

Meanwhile, Foundation for Economic Freedom President Calixto V. Chikiamco said the flood control mess only adds to the bearish investor sentiment in the capital market.

“However, a disruptive political event, such as a military takeover, will fuel economic chaos and massive capital flight,” Mr. Chikiamco said.

Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said the Philippine economy is in a “holding pattern.”

“Growth is slowing, confidence is shaky, and corruption is clouding the outlook. The fundamentals are there — but we’re not firing on all cylinders. The steep discount to our peers reflects doubt,” he said.

GlobalSource Partners Country Analyst Diwa C. Guinigundo said political uncertainty linked to corruption in some infrastructure projects “could undermine investor confidence and sustain depreciation pressures on the peso.”

Meanwhile, Ms. Edillon warned that the country’s growth outlook faces downside risks as concerns over corruption are weakening investor sentiment.

Asked if this would have an impact on the economy, she said: “We don’t know yet. We have to wait for the results of the investigation.”

The government is targeting 5.5% to 6.5% growth for 2025.

Investment inquiries

Meanwhile, Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) President Danilo C. Lachica said investments are still coming in the country.

“Well, even if (investors) don’t verbalize it, I’m sure there will be concern. But then again, let’s be realistic, there is some level of corruption in whatever country you’re in, right? It’s just how much is exposed,” he said at a conference on Thursday.

“But in terms of investments, there are still some that come in. In fact, Murata is expanding, and I’m going to Cebu to (see) another company for their expansion. So, there are some that are still happening. It’s not that the faucet has been shut off, but we could do better,” he added.

Mr. Lachica said corruption is a concern for the industry, noting its direct effect on investments due to ghost projects that could have addressed flooding issues and eased the flow of goods.

Office of the Special Assistant to the President for Investment and Economic Affairs Undersecretary Ma. Angela E. Ignacio said they continue to receive inquiries from investors.

“We’re really just focusing on promoting our investments. We continue to get very promising inquiries from a lot of the countries still very interested in investing in the Philippines, because, as we’ve said, there are a lot of reforms that have been put in place over the past three years,” she said.

“So, I think they’re only finding it very attractive now to go into the Philippines, even our tariff situation. We’re still in a good place, as we’re actually in the low regime for the tariff, so many are still looking at us. We haven’t had any concerns,” she added.

First Philippine Industrial Park Head of External Affairs Ricky A. Carandang said issues on corruption may not immediately result in loss of investor confidence in the Philippines.

“The decisions made by the locators tend to be long term, so an event like this will make them concerned, but it is not going to immediately lead to a change of plan,” he said. “For example, if they have plans to expand, that is not going to stop just because of this.”

Mr. Carandang also said investors are giving President Ferdinand R. Marcos, Jr. the benefit of the doubt.

“He has done a lot for investors. And I think they are watching to see how this is resolved, and if the Marcos administration is perceived to be doing the right things in light of the crisis, I think it can be something that will benefit the country,” he added. — Aubrey Rose A. Inosante and Justine Irish D. Tabile, Reporters

Factory activity in the Philippines contracted for the first time in six months in September, as manufacturers saw a drop in output and new orders, S&P Global said on Wednesday.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) slipped to 49.9 in September from 50.8 in August.

A PMI reading below 50 shows a deterioration in operating conditions from the preceding month, while a reading above 50 denotes better operating conditions.

This was the second contraction this year, or since the 49.4 reading in March, as manufacturers cut output amid uncertainty surrounding US tariff policies at the time.

“The Philippines PMI survey data showed the manufacturing sector moving into negative territory at the end of the third quarter which, despite indicating only a fractional decline, has been highly unusual in the sector’s post-pandemic history,” David Owen, a senior economist at S&P Global Market Intelligence, said.

According to S&P Global, this was only the third time in over four years that the Philippines’ manufacturing PMI fell below 50.

“New orders and output decreased slightly, as firms mentioned a fall in client numbers and a modest drop in production from the suspension of rice imports,” Mr. Owen said.

Based on S&P Global’s Association of Southeast Asian Nations (ASEAN) data, the Philippines and Malaysia (49.8) both saw a contraction in factory activity in September.

Thailand recorded the highest PMI reading (54.6), followed by Myanmar (53.1), Indonesia (50.4), and Vietnam (50.4).

The Philippines’ PMI reading was also below the 51.6 average for ASEAN in September.

S&P said Philippine manufacturing firms saw a decline in sales for the first time since March.

“Weaker operating conditions were mainly attributed to a renewed (albeit marginal) drop in new order intakes in September,” it said. “However, order books with foreign clients continued to improve, signaling that the downturn was mainly centered on the domestic market.”

Manufacturers had to scale back production in September, ending three straight months of expansion.

S&P noted that firms surveyed said that aside from weak demand, adverse weather conditions and a ban on rice imports negatively affected output.

Despite this, goods producers increased purchases of raw materials and other components in September, although the rate of growth was slower than August.

“In contrast, post-production inventories declined due to lower output as well as some efforts to reduce backlogs of work, which dropped for the first time since April,” it said.

The survey data also showed a “subdued jobs market” in September.

Firms also saw higher input costs in September, which prompted them to marginally increase selling prices.

Also, S&P noted the level of business confidence was the second highest since November 2024. Most firms were generally confident of an improvement in sales in the next 12 months.

“However, with overall sentiment in the year-ahead remaining upbeat in September, and purchasing quantities increasing, manufacturers appear hopeful that the dip in sector performance is temporary,” Mr. Owen said.

Supply disruptions

Analysts said the decline in manufacturing activity can be attributed to supply disruptions caused by heavy rains and floods in September.

“This was mainly due to weak demand, high input costs, and supply disruptions, including weather-related issues,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in a Viber message. “The sluggish factory orders and softer business sentiment reflect broader economic headwinds.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said manufacturing activity was affected by fewer working days due to bad weather, US tariffs and the so-called “ghost month.”

“(Higher tariffs) led to some wait-and-see attitude for some exports from the country and also exports in the global supply chains in terms of more cautious stance on their production and capacity,” he added.

“Temporary dip”

S&P Global Marketing Intelligence Economics Associate Director Jingyu Pan said the decline in Philippine factory output in September is only a “temporary dip.”

She said new export orders remained steady even as the US implemented the 19% tariff on Philippine-made goods on Aug. 7.

“If we take just a little bit of a step back and look at all the other PMI that has been released for the Asian region so far, you are certainly getting quite a bit of mixed picture… It’s undeniable that we’re still seeing some of this frontloading across the APAC region,” Ms. Pan said.

Ms. Pan also noted that recent flooding was a more immediate drag on production than the government-wide probe into anomalous flood control projects.

While manufacturers remain optimistic about a recovery over the next 12 months, Ms. Pan warned that the recent earthquake could be a “big factor” and could weigh on output in the coming months.

“Cebu is a manufacturing hub as well, and electronics sector has been a key sector over there. That could actually dampen the picture going forward based on initial potential assessment here,” she said, but will depend on the extent of infrastructure damage in the region. – Aubrey Rose A. Inosante, Reporter

Philippine inflation may have settled between 1.5% and 2.3% in September, amid higher prices of rice, fish and fuel, the Bangko Sentral ng Pilipinas (BSP) said.

At the lower end of the BSP’s forecast range, the headline inflation rate may have steadied month on month at 1.5%, the same as in August.

Inflation could have also picked up from the 1.9% print in September 2024.

The September print might also mark the first time in six months that the consumer price index (CPI) would have settled within the BSP’s 2-4% target range or since the 2.1% in February.

“Upward price pressures for the month are likely to arise from higher prices of rice and fish,” the central bank said in a statement on Wednesday. “Elevated domestic fuel costs likewise contribute to upside price pressures for the month.”

In August, rice inflation declined at a faster pace of -17% from -15.9% in July. Earlier, National Statistician Claire Dennis S. Mapa said that this might be the lowest for rice inflation this year.

Rice prices may have picked up in September, reflecting supply disruptions caused by bad weather and the 60-day ban on rice imports. The 60-day suspension on regular milled and well-milled rice imports took effect on Sept. 1.

At the same time, the BSP said lower costs of vegetables, meat and electricity may have partially tempered inflation in September.

Last month, the Manila Electric Co. lowered the overall electricity rate by PHP 0.1852 per kilowatt-hour (kWh) to PHP 13.0851 per kWh this month from PHP 13.2703 per kWh in August.

“Going forward, the BSP will continue to monitor evolving domestic and international developments affecting the outlook for inflation and growth in line with its data-dependent approach to monetary policy formulation,” it said.

In a separate commentary on Wednesday, Aris D. Dacanay, HSBC economist for ASEAN (Association of Southeast Asian Nations) said inflation concerns, particularly on food, must be “on the table” in the Monetary Board’s next policy meeting.

“Accelerating to 2.7% y-o-y (from 2.3%), core inflation surprised to the upside in August, while inflationary pressures will likely persist from now until October as typhoons Ragasa (Nando) and Bualoi (Opong) likely took a toll on food supply,” he said.

Mr. Dacanay added that the extension of the rice import ban will add to the potential supply shock caused by typhoons.

However, he noted that the Monetary Board may be more cautious amid the peso’s weak performance against the United States’ dollar.

On Tuesday, the peso closed at PHP 58.196 against the dollar, its weakest in two months or since the PHP 58.32 per dollar seen on July 31.

HSBC expects the BSP to keep the benchmark rate at 5% at its next policy-setting meeting on Oct. 9.

“We think there is limited data to conclude with conviction that, indeed, the economy is slowing down,” Mr. Dacanay said. “While consumer vehicle purchases (are) falling and government capital spending (is) tightening, goods exports are still holding up.”

In August, the BSP trimmed its benchmark policy rate by 25 basis points (bps) for a third-straight meeting, bringing the rate to 5%. Since August last year, it has lowered borrowing costs by a total of 150 bps.

BSP Governor Eli M. Remolona, Jr. earlier said they could deliver a cut this month if the data show a slowdown in the economy. However, he noted at the Aug. 28 policy-setting meeting that the easing cycle is nearly over.

The Monetary Board has two policy-setting meetings left this year, on Oct. 9 and Dec. 11. — Katherine K. Chan

Philippine economic growth is expected to moderate this year and in 2026 amid ongoing trade uncertainties and geopolitical tensions across the globe, the International Monetary Fund (IMF) said.

The IMF trimmed its Philippine growth forecast to 5.4% for this year, slightly lower than its 5.5% projection in July.

If realized, gross domestic product (GDP) growth will be at the low end of the National Government’s 5.5-6.5% target band this year.

For 2026, the IMF also cut its growth forecast to 5.7% from 5.9% previously. However, this is below the government’s 6-7% target for next year.

The IMF said the economy is expected to remain resilient, but downside risks warrant “close attention.”

“Risks to the growth outlook are tilted to the downside. The main external risks stem from prolonged global trade policy uncertainty, geopolitical tensions, and disruptive financial market corrections,” IMF Mission Head Elif Arbatli Saxegaard said at a briefing after the conclusion of the 2025 Article IV Consultation with the Philippines on Wednesday.

“On the domestic front, more frequent and intense climate shocks would cause notable macroeconomic losses. On the upside, accelerated implementation of structural and governance reforms would support investor confidence and the fiscal multiplier and raise potential growth. Risks around inflation are broadly balanced.”

Ms. Saxegaard said the growth outlook was revised to reflect the weaker-than-expected growth in the first half.

For the first half, GDP growth averaged 5.4%, slower than the 6.2% a year ago.

Ms. Saxegaard said growth will be affected by the higher tariffs imposed by the US on Philippine goods. The US began imposing a 19% tariff on goods from the Philippines on Aug. 7.

“It will weigh on exports and investment,” she said.

She also noted growth will be “supported by monetary easing and recent legislative measures to promote private investment.”

Meanwhile, the IMF sees inflation averaging 1.6% this year, before picking up to 2.6% next year.

“The pickup in inflation is expected to be driven by (the) food and transport crisis,” Ms. Saxegaard said. “And that reflects essentially the decline in negative base effects that have been dragging down inflation this year. So, as those base effects recede, we expect a pickup.”

She said core inflation is expected to “remain muted” at 2.5% in 2026.

“The BSP (Bangko Sentral ng Pilipinas) has room for a slightly more accommodative stance to help bring inflation back to the target faster and reduce economic slack amid elevated downside risks to growth,” Ms. Saxegaard said. “Policy will need to remain data dependent amidst prevailing uncertainties around the output gap and the neutral rate, and two-sided risks to inflation.”

On Aug. 28, the central bank slashed its key interest rate by 25 basis points (bps) for a third consecutive time to 5%. It has cut the benchmark by a total of 150 bps since August last year.

Corruption

Asked about recent corruption scandals involving some government projects, Ms. Saxegaard said the IMF will continue to monitor the developments.

“It’s not yet clear whether and how these allegations will impact investor and private sector confidence, as well as their perceptions and behavior,” she said.

The IMF welcomed recent reforms to reduce infrastructure gaps and promote foreign direct investment, but effective implementation is key.

“Enhancing fiscal governance and the rule of law and reducing corruption vulnerabilities are critical for inclusive and sustainable growth,” Ms. Saxegaard said.

The IMF urged the Philippine government to continue implementing gradual fiscal consolidation “to replenish fiscal buffers and support external balance.”

“The authorities should consider implementing concrete and durable tax measures to limit the need for restraint in priority spending which tends to have a larger impact on growth and disproportionately impacts the vulnerable,” she said.

Ms. Saxegaard suggested several tax measures including monitoring the cost of tax incentives and improving the efficiency of the value-added tax (VAT).

“On the tax administration side, better or enhanced use of data analytics and compliance risk management would, in our view, help support revenue mobilization,” she said. “On tax policy options, there are several measures that would have positive benefits. We do think that also monitoring the cost of tax incentives would be desirable as well as enhancing the efficiency of the VAT.”

Meanwhile, Ms. Saxegaard said that risks to the country’s financial system remain moderate as the banking sector has strong capital and liquidity buffers.

“Nonetheless, vulnerabilities in the real estate sector, strong bank interconnectedness with complex conglomerate structures, and fast-growing consumer credit warrant close monitoring,” she added.

The IMF Staff Report will be released between November and early December this year. — Katherine K. Chan

The Bangko Sentral ng Pilipinas (BSP) revised its balance of payments (BoP) and current account projections for this year and 2026, as global uncertainties persist.

“The balance of payments is projected to remain in deficit over the next two years, driven by sustained pressures on the current account,” the BSP said in a statement on Wednesday.

The central bank said the overall BoP position is expected to end the year at a USD 6.9-billion deficit or -1.4% of gross domestic product (GDP), wider than its earlier forecast of a USD 6.3-billion deficit or -1.3% of GDP.

For 2026, the central bank expects the BoP deficit to widen to USD 3.4 billion or -0.6% of GDP from the previous projection of USD 2.8 billion or -0.5% of GDP.

In the first eight months, the Philippines’ BoP position swung to a USD 5.397-billion deficit, a reversal from the USD 1.592-billion surplus seen in the same period in 2024.

At the same time, the BSP now sees the current account deficit widening to USD 16.4 billion or -3.3% of GDP this year, from its previous projection of USD 16.3 billion or -3.3% of GDP.

For 2026, it expects a wider current account deficit of USD 15.5 billion or -2.9% of GDP from its previous projection of USD 13.6 billion or -2.5% of GDP.

“The current account shortfall is expected to stay at around 3% of GDP in 2025 and 2026. These reflect a widening trade-in-goods gap, subdued services receipts, and restrained capital inflows amid global uncertainty and shifting trade policies,” the BSP said.

The central bank also expects goods exports and imports to remain sluggish in the next two years, mainly due to “softening global demand, easing commodity prices, and tempered domestic growth momentum.”

Goods exports are projected to grow by 1% this year, a turnaround from the -1% decline previously expected. For 2026, goods exports are seen to expand by 1%, lower than the previous projection of 2%.

On the other hand, the BSP maintained the goods imports forecast to 1% this year but trimmed the growth projection for 2026 to 1% from 2% previously.

“Infrastructure investments, potential trade diversion, and efforts to diversify export and import partners may help cushion external shocks,” the BSP said. “However, structural constraints, such as logistical inefficiencies, skills mismatches, and elevated input costs, continue to weigh on export competitiveness.”

For services exports such as business process outsourcing (BPO) and tourism, the BSP sees slower growth for this year and next year “as the sector contends with uncertainties surrounding US reshoring policies and weakening inbound travel.”

It slashed services exports growth forecasts to 2% this year from 6% previously; and to 5% in 2026 from 8% previously.

However, the central bank retained its growth forecast for BPO revenues at 5% this year and for 2026.

The BSP cut growth projections for travel receipts this year to 1% from 10% previously. For next year, travel receipt growth is seen at 3% in 2026 from 11% previously.

For services imports, the BSP kept its 6% growth forecast for this year, but cut its 2026 forecast to 6% from 7% previously.

The BSP expects remittances to grow by 3% this year, a tad faster than its 2.8% previous forecast. It kept its forecast at 3% for 2026.

“Overseas Filipino remittances are expected to remain a resilient source of external support, underpinned by strong global labor demand and sustained confidence in formal transfer channels, despite the impending US tax on remittances,” it said.

On the other hand, foreign investment inflows may slightly soften amid “heightened global financial volatility and cautious investor behavior.”

“However, recent policy reforms — including amendments to the Investors’ Lease Act — are poised to improve the investment climate,” the BSP said.

Financial account outflows this year could hit USD 13.4 billion, slightly higher than the previous forecast of USD 12.9 billion. These outflows are expected to hit USD 14.4 billion next year, higher than the previous USD 13.2-billion forecast.

The central bank retained its forecasts for foreign direct investments (FDI) net inflows at USD 7.5 billion this year and USD 8 billion next year.

However, net inflows of foreign portfolio investments are projected to reach USD 6.2 billion by end-2025, slightly lower than the USD 6.8-billion previous projection. The BSP kept its forecast for 2026 at USD 5 billion.

Meanwhile, gross international reserves (GIR) are expected to hit USD 105 billion this year, a tad higher than the previous forecast of USD 104 billion. For 2026, the GIR is projected to reach USD 106 billion, slightly higher than the previous forecast of USD 105 billion.

“Gross international reserves are expected to remain adequate, providing a robust buffer against external liquidity needs even as global market conditions evolve,” the central bank said.

The BSP said it will continue to monitor emerging risks that might impact the external sector.

In a separate report, Bank of America (BofA) Global Research said the Philippines is the only country in the Association of Southeast Asian Nations (ASEAN) whose current account balance has been showing “a steady trend of wider deficits.”

“Despite the growing headwinds from external trade, current account balances across the region have remained in a manageable state, with only Philippines showing a steady trend of wider deficits, while other economies in the region remain rangebound,” it said.

In terms of goods balances, BofA identified the Philippines as an “underperformer,” alongside Malaysia.

“Within ASEAN, goods balances are the biggest driver of current account balances, with again Malaysia and Philippines being the underperformers, while Vietnam and Indonesia showing a trend of steady improvement,” it said.

Meanwhile, BofA said the Philippines’ information technology (IT) service revenues may partly offset the country’s goods deficit.

It also noted that remittances growth has lagged behind nominal growth.

“The relative importance of remittances and primary transfers in current account balances is slowly declining, as remittances growth, especially in the Philippines has consistently run behind nominal growth, and for other economies, has been mixed,” BofA said. — Katherine K. Chan