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Headline inflation likely settled below the 2-4% target band in June, as rising prices of fuel and some food items may have been tempered by lower cost of rice and electricity, the Bangko Sentral ng Pilipinas (BSP) said on Monday.

In a statement, the central bank said inflation may have settled within the 1.1%-1.9% range in June.

If realized, the BSP’s forecast would be much slower than the 3.7% inflation print in June 2024.

At the upper end of the BSP forecast, inflation likely picked up from 1.3% in May.

On the other hand, the low end of the forecast showed June inflation may have been the slowest in 57 months or since the 0.6% seen in October 2019.

A BusinessWorld poll of 17 analysts conducted last week yielded a median estimate of 1.5% for the June consumer price index (CPI).

June inflation data will be released on Friday (July 4).

“Upward price pressures for (June) are likely to be driven by higher meat and vegetable prices, elevated oil prices, and the depreciation of the peso,” the BSP said in a statement.

In June, pump price adjustments stood at a net increase of PHP 6.30 a liter for gasoline, PHP 8.25 a liter for diesel and PHP 6.50 a liter for kerosene.

The peso closed at PHP 56.33 per dollar at the end of June, depreciating by 58.5 centavos from the PHP 55.745 finish at end-May.

“These pressures, however, could be partially offset by lower prices of rice, fish, and fruits, as well as lower electricity rates,” the central bank said.

Manila Electric Co. (Meralco) cut the overall rate by PHP 0.1076 per kilowatt-hour (kWh) to PHP 12.1552 per kWh in June from PHP 12.2628 per kWh in May.

The BSP noted the drop in rice prices in June, which marked the fourth straight month of decline this year.

The Philippine Statistics Authority said prices of rice declined further with regular milled rice averaging PHP 42.77 per kilo in June from the PHP 43.32 per kilo in mid-May.

“Going forward, the BSP remains committed to safeguarding price stability by ensuring that monetary policy settings are conducive to sustainable economic growth and employment,” it said.

At its June 19 meeting, the central bank delivered a second straight 25-basis-point (bp) cut, bringing its policy rate to 5.25% amid a benign inflation outlook and slowing economic growth.

BSP Governor Eli M. Remolona, Jr. also signaled they could deliver one more 25-bp cut this year.

Meanwhile, analysts said non-rice food commodities likely contributed to slightly faster June inflation.

“I forecast inflation to be at 1.5% this June. Driven by higher oil prices as well as some food items such as livestock, fish, and some vegetable items. However, this was partly offset by lower electricity prices,”Oikonomia Advisory and Research, Inc. economist Reinielle Matt M. Erece said.

Meanwhile, Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco said prices of meat, fish, fruits, housing rentals, and electricity costs are some of the factors that drove up consumer prices in June.

The PSA reported that retail price of dressed chicken further rose to PHP 214.49 per kilogram in the first half of June from PHP 212.52 in the second half of May.

“[This] was somewhat offset by deflationary pressures from rice,” Mr. Taningco said.

The BSP last month lowered its baseline forecast for inflation to 1.6% for this year from 2.4%. It also expects inflation to settle at 3.4% for 2026 and 3.3% for 2027. — Aubrey Rose A. Inosante, Reporter

The Bangko Sentral ng Pilipinas (BSP) revised its balance of payments (BoP) forecasts for this year and 2026 amid heightened global uncertainty.

In a statement, the BSP said the overall BoP position is projected to end 2025 at a USD 6.3-billion deficit or -1.3% of gross domestic product (GDP), wider than the previous forecast of a USD 4-billion deficit or -0.8% of GDP.

For 2026, the central bank expects the BoP deficit to shrink to USD 2.8 billion or -0.5% of GDP from the previous projection of USD 4.3 billion or -0.8% of GDP.

“This outlook reflects a continued current account shortfall and moderating financial flows. While the domestic economy benefits from steady growth, low inflation, and ongoing structural reforms, these are offset by global trade uncertainty, heightened geopolitical risks, and weakened investor confidence,” the BSP said.

Latest BSP data showed the country’s BoP stood at a USD 5.8-billion deficit in the January-to-May period, a reversal from a USD 1.6-billion surplus in January to May 2024.

Meanwhile, the BSP also adjusted the forecasts for the country’s current account for this year and 2026.

This year’s current account deficit is now expected to narrow to USD 16.3 billion or -3.3% of GDP, a downgrade from the previous projection of a USD 19.8-billion deficit or -3.9% of GDP.

For 2026, the current account deficit is projected to further shrink to USD 13.6 billion or -2.5% of GDP, smaller than the previously projected USD 21.2 billion or -3.9% of GDP.

“The current account is expected to remain in deficit at around 3% of GDP, indicating a gap in savings over investment amid global uncertainties. As a result, external financing remains necessary to support the country’s infrastructure-led, investment-driven growth strategy,” the BSP said.

The BSP now expects goods exports to contract by 1% this year from the previous forecast of 1% growth. Goods exports are projected to grow by 2% in 2026.

“Goods exports continue to face headwinds from global trade uncertainty, lagging competitiveness, and constraints in the semiconductor industry,” the central bank said.

The BSP also trimmed the goods imports forecast to 1% this year from 4% previously. For 2026, goods imports are projected to grow by 2% from 4% previously.

“Meanwhile, stable domestic demand and infrastructure spending support the growth in imports, but import value is tempered by declining global commodity prices, particularly, for oil,” it said.

Services trade “remains broadly resilient” but the central bank warned that downside risks persist.

The BSP trimmed the growth forecast for services exports to 6% this year from 8% previously. It retained the 8% services exports growth projection for 2026.

The 5% growth forecast for business process outsourcing (BPO) receipts was retained for this year and for 2026.

“Outsourcing revenues are supported by stable demand for contact center services, yet they confront uncertainties due to US job reshoring initiatives and local talent shortages,” the BSP said.

Tourism receipts are projected to grow by 10% this year from 11% previously. For 2026, tourism receipts are expected to expand by 11% from 12% previously.

On the other hand, the BSP also trimmed its services imports growth forecast to 6% this year from 14% previously. It also lowered the growth projection for next year to 7% from 12% previously.

The central bank kept its cash remittance growth projection to 2.8% this year and 3% for 2026.

“Steady remittance flows continue to provide a buffer against trade deficit, supported by strong labor demand for Filipino workers in key sectors as well as by the aging populations in host countries,” the BSP said.

However, emerging protectionist policies in some host countries present emerging risks, it added.

Meanwhile, the BSP said foreign investment inflows are expected to “remain positive but subdued as policy uncertainty and the global slowdown weigh on investor sentiment.”

Financial account outflows could reach USD 13 billion this year, lower than the earlier forecast of USD 16.2 billion. For 2026, the outflows are seen to reach USD 13.2 billion, smaller than the previous projection of USD 17.8 billion.

The BSP now expects foreign direct investments (FDI) to end the year at a net inflow of USD 7.5 billion, smaller than the USD 9-billion projection in March. For 2026, FDI net inflows are expected to hit USD 8 billion, lower than the previous projection of USD 9 billion.

Meanwhile, foreign portfolio investments (FPI) are expected to end at a USD 6.8-billion net inflow this year, higher than the USD 3.9-billion earlier forecast.

For 2026, net inflows of foreign portfolio investments are expected to reach USD 5 billion, lower than the USD 4.1-billion previous projection.

“The moderation in trade and investment flows limits the country’s scope to build up foreign exchange reserves. Nonetheless, reserves are expected to remain ample, providing sufficient liquidity to cushion the economy against external headwinds,” the BSP said.

The central bank also lowered its 2025 gross international reserves (GIR) forecast to USD 104 billion from USD 105 billion previously. It kept the GIR forecast at USD 105 billion for 2026.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the weaker BoP outlook can be attributed to a global economic slowdown due to the US tariff policy and geopolitical risks.

“These external risk factors could also slow down the growth in the country’s structural US dollar inflows such as OFW (overseas Filipino worker) remittances, BPO revenues, foreign tourism receipts,” he said in a Viber message.

Mr. Ricafort said these external challenges may result in slower global investments, exports, employment, increased volatility in global crude oil and other global commodity prices. — Aubrey Rose A. Inosante

Headline inflation may have slightly picked up in June as stable food prices helped offset the spike in fuel prices, analysts said.

A BusinessWorld poll of 17 analysts yielded a median estimate of 1.5% for June inflation, accelerating from the 1.3% in May but still below the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target range.

If realized, this would be the fastest clip in three months or since the 1.8% in March. However, it would be slower than the 3.7% print in June 2024.

The Bangko Sentral ng Pilipinas (BSP) will release its month-ahead inflation forecast for June on Monday, June 30.

The June inflation data will be released by the Philippine Statistics Authority (PSA) on July 4.

Maybank Investment Banking Group Economics Research gave a June inflation forecast of 1.5%, citing a slower rise in food and power costs.

“Factors include sustained low inflation in key groups such as food and electricity which may offset some upside pressures from the increase in fuel cost in the last two weeks of the month due to rise in global fuel prices given the escalation in the Middle East conflict,” Maybank said.

Moody’s Analytics economist Sarah Tan, who expects inflation to have settled at 1.4% in June, said inflation in the food basket likely remained stable, “supported by a modest decline in rice prices.”

The PSA reported that rice prices declined further in June with regular milled rice averaging PHP 42.77 per kilo from the PHP 43.32 per kilo in mid-May.

“Our food-price tracker suggests that food inflation fell further — close to zero — but this should be offset fully by a temporary rebound in housing and utilities inflation to over 3%,” Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said.

Aris D. Dacanay, an economist for ASEAN at HSBC Global Research, noted that electricity rates in Metro Manila declined by 0.9% month on month in June due to lower generation charges.

Manila Electric Co. (Meralco) cut the overall rate by P0.1076 per kilowatt-hour (kWh) to PHP 12.1552 per kWh in June from PHP 12.2628 per kWh in the previous month. Generation charges fell by 0.9% to PHP 7.3552 per kilowatt-hour (kWh) from May.

“We expect June inflation to settle at 1.6% yoy (year on year), up roughly 0.2% from the previous month. Electricity prices as well as cost of select non-rice food items delivered upside pressure to inflation,” Nicholas Antonio T. Mapa, chief economist at Metropolitan Bank & Trust Co., said.

Chinabank Research said inflation likely quickened due to higher pump prices, as well as rising costs of meat, vegetables, and education-related expenses at the start of the new school year.

Fuel price spike

Ms. Tan said the spike in fuel prices triggered by the conflict in the Middle East may have put upward pressure on the utilities basket.

In June, pump price adjustments stood at a net increase of PHP 6.3 a liter for gasoline, PHP 8.25 a liter for diesel and PHP 6.5 a liter for kerosene.

“Retail gas prices surged 3% day-to-day on June 17 as a reaction to rising tensions between Iran and Israel, only to have slightly moderated in the tail-end of the month when tensions de-escalated,” Mr. Dacanay said.

Reuters on Friday reported that oil prices were set for their steepest weekly decline since March 2023, as the absence of significant supply disruption from the Iran-Israel conflict saw any risk premium evaporate.

“While global oil prices have eased following the ceasefire between Israel and Iran, the risk of renewed conflict remains and could drive prices higher again. Still, inflationary pressures may be tempered by declining rice prices,” Chinabank Research said.

ING Philippines said the increase in domestic pump prices “should be temporary” with prices expected to decline in July.

Rate cut outlook

Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said inflation may start accelerating by September as “favorable base from rice will fade by then.”

“Headline prints will likely remain within BSP target which could allow them to cut once more before the end of 2025,” Mr. Neri said.

The Monetary Board delivered a second straight 25-basis-point (bp) cut at its June 19 meeting, bringing its policy rate to 5.25% amid a benign inflation outlook and slowing economic growth.

BSP Governor Eli M. Remolona, Jr. also signaled they could deliver one more 25-bp cut this year.

The BSP slashed its inflation forecast to 1.6% for this year from 2.4%. It also expects inflation to settle at 3.4% for 2026 and 3.3% for 2027.

Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco said he expects inflation to be contained for the rest of the year, with his full-year forecast at 1.9%.

“Upside risks to our inflation outlook include global oil price shock triggered by resurgence of Israel-Iran conflict. We still expect a manageable inflation environment and another quarter-point policy rate cut by the BSP before the year ends,” Mr. Taningco said.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (UnionBank), said he expects inflation to gradually rise to 2% by September and to end the year at 2.5%.

“We anticipate the BSP will continue its policy easing cycle, likely delivering a final 25-bp rate cut in October. This move would allow the central bank to assess the cumulative impact of its earlier rate adjustments while maintaining a supportive stance for growth,” Mr. Asuncion said.

Ms. Tan said the conflict in the Middle East could lead to sustained elevated global oil prices, which may mean higher domestic fuel and utility costs.

The Philippines, a net oil importer, is particularly vulnerable to global oil prices.

“Should these risks materialize, they could constrain the BSP’s scope for further policy easing, particularly if second-round effects begin to build. That said, in the absence of persistent supply shocks, inflation should stay within target,” Ms. Tan said.

For the full year, Moody’s inflation forecast stood at 2.2%.

For his part, Mr. Chanco said he sees ample room and an “urgent need” for two additional 25-bp rate cuts.

The Monetary Board’s remaining policy meetings this year are scheduled for Aug. 28, Oct. 9, and Dec. 11. — Aubrey Rose A. Inosante

Business sentiment  in the Philippines turned less upbeat in the second quarter amid concerns over the impact of the Trump administration’s tariff policy on the economy, a survey by the Bangko Sentral ng Pilipinas (BSP) showed.

The latest BSP Business Expectations Survey showed the overall confidence index (CI) for businesses declined to 28.8% in the second quarter from 31.2% in the first quarter, and from 32.1% a year ago. 

This was the lowest recorded CI since the 23.9% logged in the fourth quarter of 2022. It also marked the second quarter in a row that the index declined since the 44.5% CI in the fourth quarter of 2024.

The survey was conducted from April 4 to May 19, covering 1,527 firms nationwide.

A positive CI indicates that more respondents are optimistic than pessimistic.

“Philippine businesses were cautiously optimistic about the economy in the second quarter of the year. They were primarily concerned about the potential impact of reciprocal tariffs on Philippine exports to the United States and uncertainty over their implementation,” the BSP said in a report.

In April, US President Donald J. Trump announced a baseline 10% tariff on all its trading partners, as well as higher reciprocal tariffs on some countries. The Philippines was slapped with a 17% tariff, the second lowest among Southeast Asian countries.

While the reciprocal tariffs have been paused for 90 days until July 9, the baseline 10% tariff remains in place.

“The expected slowdown in business activity after the May midterm elections and the sugar off-milling season also weighed on business confidence,” the BSP said.

Businesses turned less optimistic for the third quarter, with the CI falling to 39.3% from 45.4% in the previous survey. This was the lowest since 38.2% in the fourth quarter of 2023.

For the next 12 months, firms were less upbeat, with the CI dropping to 51% from 56.4% in the previous quarter.

The BSP said businesses cited “expectations of fewer clients and orders due to expiring contracts and softer market conditions as a reason for their more cautious year-ahead economic outlook.”

Survey respondents expect the peso to appreciate against the dollar over the next 12 months but see an uptick in inflation.

Firms expect the peso to average PHP 57.09 per dollar in the second quarter, PHP 57.12 in the next quarter, and PHP 57.14 for the next 12 months.

Firms also see inflation averaging 2.8% in the second quarter, 2.9% next quarter, and 3% for the next 12 months.

Consumer outlook

Meanwhile, Filipino consumers were more pessimistic in the second quarter but turned positive in their outlook for the third quarter, according to the BSP’s latest Consumer Expectations Survey (CES).

The survey showed the CI in the second quarter fell to -14% from -13% in the previous quarter, as consumers cited “higher inflation, lower family income, and fewer job opportunities” as the reasons for the downbeat sentiment. 

A negative CI means more respondents are pessimistic than optimistic.

For the third quarter, the CI turned positive at 0.6% from -0.5% in the previous survey.

Consumer sentiment for the next 12 months dipped to 11.8% from the 12.4% in the previous survey.

Filipino consumers attributed the positive outlook to higher household income, more jobs and moderating inflation.

“Households expect that the inflation rate may increase in mid-2025 and over the next 12 months. However, inflation expectations are expected to ease during this period as the corresponding inflation rate diffusion indices declined from their Q1 2025 levels,” the BSP said.

Consumers expect inflation to average 3.7% in the next 12 months, a tad lower than the 3.8% in the previous survey.

For the second quarter CES, the BSP surveyed 5,444 households from April 2 to 15. — A.M.C.Sy

The Philippines’ trade deficit in goods further slimmed to a three-month low in May as exports grew while imports continued to fall, the Philippine Statistics Authority (PSA) reported on Friday.

Preliminary data from the PSA showed the country’s balance of trade in goods — the difference between the values of exports and imports — reached a deficit of USD 3.29 billion in May from the USD 4.73-billion gap in the same month last year.

It also slowed down from the revised USD 3.97-billion deficit in April.

The trade deficit in May was the narrowest in three months or since the USD 2.97-billion gap recorded in February.

The country’s monthly trade balance has been in the deficit for 10 years or since the USD 64.95-million surplus recorded in May 2015.

May’s figure brought the trade-in-goods deficit to USD 19.68 billion in the five months to May, narrower than the USD 20.72-billion gap in the same period last year.

“Exports managed to grow solidly, helped along by robust demand for electronics as well as a healthy gain for agro-based exports,” Metropolitan Bank & Trust Co. Chief Economist Nicholas Antonio T. Mapa said in an e-mail.

He added that imports shrank in May due to lower value of oil imports, while raw materials inbound shipments fell.

“Crude oil prices are down on a year-on-year basis, even after the recent uptick in crude oil. Raw materials were lower but we did see a bright spot for consumer imports which was positive, reflecting a still upbeat outlook for household spending this year,” Mr. Mapa said.

Outbound shipments of Philippine-made goods expanded by 15.1% year on year to USD 7.29 billion in May.

This was export’s fifth straight month of expansion this year and the highest since 28.2% climb recorded in April last year.

By value, May’s export haul was the highest level in 31 months or since the USD 7.75 billion logged in October 2022.

The country’s export of electronic products, which include semiconductors, amounted to USD 3.85 billion in May, up by 8% from USD 3.56 billion a year ago.

This segment remained the country’s top export commodity after accounting for more than half of total exports in May.

Outbound sales of other manufactured goods climbed 70.6% to USD 583.06 million, while other mineral products inched up by 0.9% to USD 308.16 million.

The United States cornered most of Philippine-made goods in May with USD 1.104 billion (15.3% share). It was closely followed by Hong Kong (USD 1.108 billion or 15.2% share) and Japan (USD 1.04 billion or 14.3% share).

Meanwhile, the country’s merchandise imports continued to decline for the second straight month in May after contracting by 4.4% annually to USD 10.58 billion.

It was the sharpest fall in 11 months or since the 7.2% drop recorded in June 2024.

May’s import value was the lowest in three months or since the USD 9.76 billion in February.

Imports of electronic products went up by 8% to USD 2.35 billion in May. This accounted for more than a fifth of the total import bill in May.

Mineral fuels, lubricants and related materials, meanwhile, shrank by 39.6% to USD 1.17 billion in May, while imports of transport equipment rose by 17.1% to USD 1.05 billion.

China was the country’s top source of imports with USD 3.15 billion (29.7% share) that month. Indonesia trailed with USD 904.27 million (8.5% share) and Japan (USD 807.89 million or 7.6% share).

Exports climbed by 10.8% to USD 34.20 billion in the five months to May, while imports increased by 4.4% to USD 53.87 billion. These year-to-date expansions were above the government’s downwardly revised targets of a 2% drop in exports and a 3.5% growth in imports this year.

“Year to date export numbers have been encouraging; however, we remain cognizant of looming risks in the form of the US imposed global tariffs, which could slow demand for exports from the Philippines or exports from other countries that make use of Philippine made components,” Mr. Mapa said.

“We are also keeping our eye on import trends, as weak import growth is largely tagged to year-on-year lower oil prices and modest gains in capital imports,” he added.

On the other hand, Philippine Exporters Confederation, Inc. President Sergio Ortiz-Luis, Jr., said that the Philippines is well-positioned amid trade tensions and should look to “maintain its posture” for optimal growth rates in imports and exports for the rest of the year.

US President Donald J. Trump declared increased reciprocal tariffs on the majority of the country’s trading partners in April. Philippine exports are subject to the second-lowest rate in Association of Southeast Asian Nations at 17%.

However, the implementation of these tariffs has been suspended for 90 days, lasting until July, while a standard 10% tariff continues to apply.

Mr. Ortiz-Luis added that the conflict between Israel and Iran will have minimal effects on the country’s trade performance because of the truce struck by the two countries.

“The only problem is fuel,” he told BusinessWorld in a phone interview. “If [prices] are going to go down next week, hopefully the situation can be [stabilized].”

A war broke out in the oil-rich Middle East after Israel attacked Iran’s nuclear sites last June 13. US’ Mr. Trump announced a ceasefire last week, easing concerns over potential disruptions to the critical Strait of Hormuz shipping corridor, Reuters reported. — Matthew Miguel L. Castillo

 

Economic managers cut its gross domestic product (GDP) growth target for this year amid “heightened global uncertainties” arising from the Middle East conflict and US tariffs.

The Philippine economy is now expected to grow by 5.5-6.5% this year from the previous target of 6-8%, the Development Budget Coordination Committee (DBCC) said on Thursday.

It also narrowed the GDP growth target range to 6-7% for 2026 to 2028 from 6-8% previously, “reflecting a more measured and resilient outlook amid global headwinds.”

“The revisions take into account heightened global uncertainties, such as the unforeseen escalation of tensions in the Middle East and the imposition of US tariffs,” Budget Secretary Amenah F. Pangandaman, chair of the DBCC, said during a briefing.

“Despite these headwinds, the DBCC remains vigilant and ready to deploy timely and targeted measures to mitigate their potential impact on the Philippine economy,” she added.

The Philippine economy grew by a weaker-than-expected 5.4% in the first quarter from the 5.9% expansion a year ago.

Department of Economy, Planning, and Development Secretary Arsenio M. Balisacan said GDP has to grow by 5.5-6.5% to reach the low end of the target this year.

The DBCC also tweaked some macroeconomic assumptions on inflation, trade, crude oil and foreign exchange rate.

The inflation assumption for 2025 was narrowed to 2%-3% from a previous outlook of 2%-4%. It kept the 2-4% inflation assumption for 2026 to 2028.

In the first five months, inflation has averaged 1.9%, slightly below the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target range.

“Inflation will continue to be manageable, benign over the near term. Growth may moderate, but remain firm,” BSP Deputy Governor Zeno R. Abenoja said during the briefing.

Oil prices

The DBCC expects Dubai crude oil prices to average USD 60-USD 70 for this year until 2028 from USD 60-USD 80 previously, due to “easing global demand and expected increases in global oil inventories.”

However, Mr. Balisacan warned about the potential impact of a prolonged war in the Middle East.

“If those (oil price) increases persisted for the rest of the year, of course the economy would be badly hit as would be the economies of the rest of the world,” he told reporters.

Oil prices rose on Thursday after a sharp slump after the Israel-Iran ceasefire was announced. Reuters reported Brent crude futures rose 0.37% to USD 67.93 a barrel, while US West Texas Intermediate crude  gained 0.45% to USD 65.21.

On the other hand, the foreign exchange is assumed to “remain stable” and average to P56-P58 per dollar from this year until 2028.

“This is supported by lower domestic inflation and will continue to be shaped by global financial conditions and external trade performance,” the DBCC said.

Sluggish trade

Trade is expected to be sluggish, reflecting the impact of the Trump administration’s tariff policy.

“Goods exports are projected to contract by 2% in 2025 (from a previous projection of 6% growth), largely due to slower global demand and heightened trade policy uncertainties, before recovering to a modest growth of 2% from 2026 to 2028,” DBCC said.

The DBCC also lowered the goods imports growth projection to 3.5% this year from 5% previously. Imports are projected to expand by 4% from 2026 to 2028 from 8% previously, “supported by stable domestic consumption and sustained infrastructure spending.”

US President Donald J. Trump announced higher reciprocal tariffs on most of the country’s trading partners, with Philippine goods facing the second-lowest rate in Southeast Asia at 17%. However, the reciprocal tariffs have been paused for 90 days until July 9. A baseline 10% tariff remains in place.

Special Assistant to the President for Investment and Economic Affairs Frederick D. Go said the Philippines continues to negotiate with the US on the tariffs, without giving details.

Deficit ceiling

Meanwhile, the DBCC now expects the budget deficit as a share of GDP to balloon to 5.5% this year from 5.3% previously. It also sees the deficit as a share of GDP to widen to 5.3% in 2026 from 4.7% previously.

The projected budget gap as a percentage of GDP for 2027 was raised to 4.8% from 4.1% previously, while for 2028, it was revised to 4.3% from 3.7% previously.

“We revised the medium-term fiscal program (MTFP) because when we originally first crafted the MTFP, these external factors were not yet taken into account. Like for instance, we already had a war in Ukraine and Russia. We already had another war in the Middle East and so many global uncertainties,” Finance Assistant Secretary Karlo Fermin S. Adriano said.

Economic managers also proposed a PHP 6.793-trillion national budget for 2026, up 7.4% from 2025.

“The 2026 National Budget prioritizes human capital development by prioritizing investments in quality education, healthcare, and workforce upskilling,” the DBCC said. — with inputs from ARAI

The national government’s budget deficit narrowed in May as faster revenue collection offset a slowdown in spending due to the election ban, the Bureau of the Treasury (BTr) said.

Data from the Treasury showed the Philippines’ budget deficit shrank by 17.01% to PHP 145.2 billion in May from PHP 174.9 billion in the same month a year ago.

“This lower deficit was primarily driven by a robust 13.35% growth in revenue collections, alongside a moderation in expenditure growth to 3.81% during the national elections month,” the Treasury said.

The Commission on Elections’ 45-day ban on public works spending ended after the May 12 elections.

Month on month, the budget balance swung to a deficit from the PHP 67.3-billion surplus in April.

In May, revenue collections jumped by 13.35% to PHP 433.1 billion from PHP 382.1 billion a year earlier.

Tax revenues increased by 6.25% to PHP 322.9 billion in May from PHP 303.9 billion in the same month in 2024, as Customs collections declined.

The Bureau of Internal Revenue (BIR) collected PHP 242.7 billion in May, up 10.71% year on year.

“This increase was primarily driven by corporate income tax (CIT), followed by personal income tax (PIT), excise tax on tobacco products, taxes on government securities, and taxes on banks and financial institutions,” it said.

The intensified collection effort, ongoing digital transformation, and campaign to curb fake transactions and illicit tobacco trade also helped drive BIR collections.

However, the Bureau of Customs (BoC) saw collections fall by 6.94% to PHP 75.7 billion in May, reflecting the impact of Executive Order No. 62 which lowered tariffs on rice, electric vehicles, and other commodities.

Other collections surged by 34.7% to PHP 4.5 billion annually from PHP 3.4 billion.

Nontax revenues jumped by 40.93% to PHP 110.2 billion in May from PHP 78.2 billion in the same period last year.

Treasury income more than quadrupled to P83 billion in May from PHP 20.2 billion a year ago, mainly due to the higher dividend remittances from government-owned and -controlled corporations (GOCCs). Most GOCCs sent their dividend remittances in May this year.

Revenues from other offices — which consisted of other non-tax revenue, privatization proceeds fees, charges and grants — slid by 53.18% to PHP 27.2 billion.

Meanwhile, NG expenditure grew by 3.81% to PHP 578.2 billion in May from PHP 557 billion a year ago.

BTr attributed this increase to higher interest payments, National Tax Allotment releases to local government units and Annual Block Grant to the Bangsamoro Autonomous Region in Muslim Mindanao.

“The implementation of the 2^nd tranche of salary adjustments of qualified civilian government employees pursuant to Executive Order No. 642 also contributed to the growth of spending in May,” it added.

Primary spending — which refers to total expenditures minus interest payments — inched up by 2.5% to PHP 508.3 billion in May from PHp 495.9 billion a year earlier. This also accounted for 87.9% of total May disbursements, BTr said.

Interest payments increased by 14.5% to PHP 70 billion in May this year from PHP 61.1 billion in the same month in 2024, due to higher coupon payments for domestic and external debt.

NG’s primary deficit stood at PHP 75.2 billion, down 33.93% from P113.8 billion in the same month last year.

Five-month gap

In the January-to-May period, the NG budget deficit widened by 29.41% to PHP 523.9 billion from the PHP 404.8-billion gap last year, as the government accelerated spending on infrastructure and social programs.

“NG remains on track to meet its deficit target for the year through prudent fiscal management and efficient use of resources, in line with its Medium-Term Fiscal Program,” the BTr said

During the period, state spending rose by 9.71% to PHP 2.48 trillion from PHP 2.26 trillion a year ago.

Primary expenditures rose by 9.48% to PHP 2.12 trillion as of end-May while interest payments increased by 11.14% to PHP 357.4 billion.

Total revenue collection during the five-month period increased by 5.41% to PHP 1.95 trillion from PHP 1.85 trillion in the same period in 2024.

Tax revenues jumped by 10.49% to PHP 1.75 trillion, “highlighting the sustained strength of the government’s revenue-generating efforts.”

BIR collection rose by 13.8% to PHP 1.35 trillion as of end-May, while Customs collection was up by 0.22% to PHP 381.7 billion.

Meanwhile, non-tax revenues slumped by 24.75% to PHP 200.9 billion in the January-to-May period, “due to several one-off remittances last year.”

Treasury income slipped by 17.44% to PHP 129.2 billion due to the impact of the high base effect last year, which included the one-off gain from the Casecnan Hydroelectric Power Plant privatization proceeds.

Revenues from other offices also slid by 35.1% to PHP 71.7 billion as of end-May.

During the period, the NG’s primary deficit doubled to PHP 166.5 billion, “reflecting the government’s sustained investments in critical programs to support economic growth.”

“The widened budget deficit reflects sustained spending pressures amid slower revenue growth. While the narrower May deficit is a positive sign, it is inadequate to offset the cumulative shortfall from earlier months,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies said. “This underscores the need for improved revenue collection, better tax administration, and more targeted spending.”

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

The Philippines is expected to receive USD 100 million (P5.66 billion) less in remittances next year if US President Donald J. Trump’s “One, Big, Beautiful Bill Act,” which imposes a 3.5% tax on remittances sent by noncitizens, gets congressional nod, according to the presidential palace on Thursday.

The cut is 0.3% of the USD 36.5 billion that overseas Filipino workers (OFWs) are projected to send to their families back home and 0.003% of economic output in 2026, Palace Press Officer Clarissa A. Castro told a news briefing on Thursday, citing estimates by Department of Finance Chief Economist Domini SD. Velasquez.

“Although 41% of the remittances are routed to the US, not all of these are from Filipinos in the US because remittances are routed to the US via correspondent banks,” she added.

Mr. Trump’s controversial bill, which was approved by the US House of Representatives in May, includes a provision imposing an excise tax of 3.5% on money sent abroad by foreign workers in the US. The US Senate is now deliberating on the measure.

Finance Secretary Ralph G. Recto earlier said the legislation, if passed into law in the US, is “a concern” for the Philippines.

Deutsche Bank earlier noted that North and South America account for only 9.8% of OFWs, while the Middle East accounts for around half or 46% of all OFWs.

The Philippines, a labor-exporting country, relies heavily on remittances from millions of OFWs to support domestic consumption and sustain economic growth. These remittances serve as a lifeline for many households and a buffer for the country’s balance of payments.

Cash remittances from OFWs coursed through banks rose by 4% to USD 2.66 billion in April from USD 2.56 billion in the same month a year ago.

In the first four months of 2025, cash remittances went up by 3% to USD 11.11 billion from USD 10.78 billion a year ago.

Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said the One, Big, Beautiful Bill Act, if passed into law, could reduce Filipino households’ incomes by USD 100 million, leading to lower consumer spending.

Mr. Erece said the decline in dollar inflows would shrink the country’s foreign reserves, limiting the central bank’s ability to intervene in currency markets, especially as it diverges from the US Federal Reserve’s policy path, potentially causing further peso depreciation.

“Less reserves mean less power for foreign exchange interventions and buffer for trade and foreign payment,” he said in a Viber chat.

“Now that the Bangko Sentral ng Pilipinas deviates its monetary policy path from the Fed, the dollar may continue to appreciate against the peso, and having [fewer] reserves means [fewer] resources to manage exchange rates.”

However, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said USD 100 million is “relatively negligible” or “minimal,” in the potential effect on the Philippines’ current account, balance of payments, local foreign exchange market, and on the overall economy of the 3.5% proposed tax.

When asked about the bill’s impact on the Philippines’ dollar reserves, Mr. Ricafort said it will be “all the more negligible or minimal.” — Chloe Mari A. Hufana, Reporter