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The Philippines’ digital economy is set to hit USD 36 billion in gross merchandise value (GMV) this year, supported by rapid adoption of e-commerce, transport and delivery services, digital finance and artificial intelligence (AI), according to a report by Google, Temasek Holdings and Bain & Company.

“The Philippines is a digital powerhouse, sustaining its double-digit growth and firmly on track to hit USD 36 billion in GMV by 2025,” Google Philippines Country Manager Prep B. Palacios told a news briefing on Tuesday.

“This momentum is not a temporary spike; it’s a sustained, systemic transformation, a convergence of innovative platforms, a tech-positive regulatory environment and our uniquely AI-curious Filipino consumers with real spending power,” he added.

The report projected that the country’s overall digital economy could reach USD 70 billion to USD 140 billion in GMV by 2030, slightly lower than last year’s forecast of USD 80 billion to USD 150 billion.

E-commerce alone is expected to contribute USD 50 billion, while transport and food services could hit USD 7 billion, online travel USD 8 billion and online media another USD 8 billion by the end of the decade.

Digital payments will remain a key growth driver, with digital financial services projected to expand to USD 200 billion to USD 300 billion in gross transaction value (GTV) by 2030, according to the report. Across Southeast Asia, the digital economy is expected to surpass USD 300 billion in GMV by the end of the decade, fueled by continued digital adoption and monetization strategies.

Charles Benedict Aquino, a partner at Bain, highlighted the resilience of the Filipino market. “The Philippines has shown itself to be resilient, that is the key message we are really seeing,” he told the briefing.

This year, the country’s e-commerce sector is expected to reach USD 24 billion, up 20% from last year. Online travel is projected to grow 33% to USD 4 billion, while online media will hit USD 5 billion and transport and food services USD 4 billion.

Ronald B. Gustilo, national campaigner for Digital Pinoys, said strong performance across these sectors reflects growing trust in digital platforms among both consumers and businesses.

“The Philippines’ digital economy continues to expand, driven by strong growth in e-commerce, transport and delivery services, and the rapid adoption of digital financial tools,” he said in a Viber message. –

Experts noted that the growth potential remains particularly strong in rural and underserved areas as mobile and data connectivity improves. “Logistics will be a requirement and also a growing business,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said via Viber.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said infrastructure gaps, cyberthreats, uneven logistics, regulatory uncertainty and low digital literacy among small businesses could slow digital adoption.

“Overall, growth prospects remain strong, but the digital ecosystem needs better safeguards, faster infrastructure rollout and more support for small businesses to fully realize its potential,” he said.

Cybersecurity was flagged as a pressing concern. Mr. Gustilo warned that phishing and AI-enabled scams could undermine consumer confidence and slow adoption, urging both the government and industry to treat cybersecurity as critical infrastructure.

“Protecting Filipinos online is essential if we want the country’s digital economy to reach its full potential,” he added.

The Department of Information and Communications Technology (DICT) seeks to increase the digital economy’s share of the economy to 12.5% by 2028, fast-tracking digital infrastructure projects and attracting hyperscalers to operate in the country. Data center capacity is projected to reach 1.5 gigawatts by 2028, supported by both foreign and domestic operators.

The digital economy contributed 8.5% of GDP in 2024, little changed from 8.6% in 2023, though it remains below the 2021 peak of 9.2%. Bain’s Mr. Aquino noted that expansion of the digital economy depends in part on continued growth in data center capacity and robust digital infrastructure rollout. — Ashley Erika O. Jose, Reporter

PANGLAO, Bohol — The Bangko Sentral ng Pilipinas (BSP) said it plans to continue setting a range for its inflation target amid potential risks of having a precise goal.

“So, as you know, our current target is 3% plus or minus 1%. Our recent inflation rates are actually even below that range, doing 1.7%…” BSP Governor Eli M. Remolona, Jr. said at a press briefing after a central banking symposium held here on Monday. “I think this is consistent with Governor Sethaput’s advice that we shouldn’t focus too much on the precise number.”

This, after former Bank of Thailand Governor Sethaput Suthiwartnarueput said during the symposium that central banks should have a more flexible inflation targeting framework.

“I would argue that we need to make that inflation targeting framework even more flexible,” Mr. Suthiwartnarueput said. “And why is that? Again, I think given the challenges that we face, we’re likely to face larger and longer deviations from inflation targeting.”

“And so the idea of trying to use very specific numerical targets, I think, is quite uncomfortable,” he added.

Earlier this year, Mr. Remolona said the BSP was eyeing to set a point target for inflation to mirror inflation targeting frameworks of foreign central banks such as the US Federal Reserve.

Currently, the BSP targets full-year headline inflation to settle between 2% to 4%.

“I think we would follow (Mr. Suthiwartnarueput’s) advice and not be too concerned about the precise numerical number,” Mr. Remolona said.

He also noted that the central banks’ inflation expectations are “more or less anchored.”

However, he added that they are developing a mechanism to precisely measure the degree of anchoring.

RRR cut

Meanwhile, the BSP chief said it could trim large banks’ reserve requirement ratio (RRR) but it is not rushing to do so.

“I would say it’s on the table but there’s no urgency in adjusting it,” he said.

Mr. Remolona noted that the current 5% RRR is “pretty low” but any further easing would depend on whether the BSP could successfully manage liquidity in the market.

He added that he is unsure when they would deliver an RRR cut, adding that it would depend on the Monetary Board.

The Monetary Board last reduced universal and commercial banks and non-bank financial institutions with quasi-banking functions’ RRR by 200 bps to 5% on Feb. 21, which took effect in the week of March 28.

It likewise reduced digital banks’ by 150 bps to 2.5%, while thrift banks’ RRR was lowered by 100 bps to 0%. — Katherine K. Chan

Philippine infrastructure spending fell for a third straight month in September, as public works projects continued to undergo tight scrutiny amid a corruption scandal, the Department of Budget and Management (DBM) said.

In its latest disbursement report on Sunday, the DBM said expenditures on infrastructure and other capital outlays declined by 42.6% to PHP 78.7 billion in September from PHP 137.1 billion in the same month last year.

Month on month, it slipped by 7.2% from PHP 84.9 billion in August. This marked the third consecutive decline in infrastructure spending since the 31.6% contraction in July.

“The spending performance of the Department of Public Works and Highways (DPWH) continued to register negative growth rate for the third straight month since July 2025,” the DBM said.

President Ferdinand R. Marcos, Jr. had flagged anomalous flood control projects during his State of the Nation Address in late July. This sparked several investigations into alleged corruption involving lawmakers, government officials, and private contractors.

The DBM attributed the sharp drop in infrastructure spending in September to the delays or non-submission of billings by contractors as the DPWH offices reviewed the implementation and completion of projects around the country. This affected the processing of payment claims and actual disbursements by the DPWH, it added.

“Heightened scrutiny from oversight agencies, such as the Office of the Ombudsman, the Commission on Audit, the Bureau of Internal Revenue, and the Department of Budget and Management, (which) resulted in more conservative and cautious processing of payment claims,” it said.

The DBM said there was also a freeze order on some bank accounts of DPWH implementing offices, which were under investigation.

Bad weather in September also hampered the implementation of projects, it added.

“Nevertheless, payments for the local counterpart of foreign-assisted projects of the Department of Transportation and the RAFPMP (Revised Armed Forces of the Philippines Modernization Program) of the DND (Department of National Defense) partially tempered the decline in infrastructure disbursements,” the Budget department said.

Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said in a Viber message that “tighter ropes on public spending” may have contributed to the drop in infrastructure spending in September.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort attributed the sharp year-on-year decline in infrastructure spending to the government’s implementation of anti-corruption measures amid the anomalous flood control projects.

“Some of the funding for which (were) redeployed to other social spending such as for the Department of Social Welfare and Development (DSWD), Department of Agriculture among others,” he said in a Viber message.

Mr. Ricafort also noted weather-related disruptions, such as typhoons and earthquakes, reduced the number of business days in September.

Nine-month period

For the January-to-September period, the overall infrastructure and capital outlay disbursements stood at PHP 877.1 billion, down 10.7% from PHP 982.4 billion a year ago. This accounted for 87.4% of the PHP 1.0036‑trillion full‑year program.

“(This) was largely due to the lower spending performance of the DPWH. This followed the stricter validation of the status of implementation, quality, and completion of infrastructure projects nationwide amid corruption issues,” the DBM said.

In the third quarter alone, disbursements fell by 30.7% to PHP 256.9 billion from PHP 370.6 billion in the same period in 2024. This was PHP 125.7 billion lower than the PHP 382.6‑billion program for the July-to-September period.

Data from the DBM showed overall infrastructure disbursements, which include infrastructure components of subsidy and equity to government corporations and transfers to local government units, slipped by 8.6% to PHP 1.04 trillion in the end-September period from PHP 1.14 billion a year ago.

The Budget department said the drop in DPWH disbursements shaved off 1.3 percentage points in the third‑quarter 2025 gross domestic product (GDP) growth.

The Philippine economy grew by 4% in the third quarter, the slowest growth seen in over four years or since the first quarter of 2021.

This brought the nine-month tally to 5%, falling short of the government’s 5.5% to 6.5% target.

Economic managers have insisted the spending slump will likely be temporary as reforms and investigations are underway.

However, analysts have warned the drag on economic growth could persist until 2026 unless the government pushes for governance reforms and those behind anomalous flood mitigation projects are jailed.

Mr. Erece said spending may remain subdued in the near future.

“It is difficult to say whether an improvement can be expected next year given the decline in public trust and slow approval of next year’s budget as they closely scrutinize every allocation, especially on infrastructure,” he said.

During plenary debates on the 2026 budget, Senator Sherwin T. Gatchalian said infrastructure spending is expected to reach just 4.7% of GDP in 2026, down from the government’s 5.1% target amid a corruption probe.

Mr. Ricafort said the recovery in infrastructure spending would depend on governance reforms.

“Kung walang risk of corruption, tuloy ang infrastructure spending (If there is no risk of corruption, infrastructure spending will continue),” he said.

Meanwhile, the DBM said capital outlays are expected to partly normalize toward yearend as most public works resume.

“Capital expenditures are expected to partly normalize towards the end of the year with the implementation of most public works by the DPWH will resume before the year ends as governance measures and safeguards against corruption are put in place,” it said.

DPWH Secretary Vivencio “Vince” B. Dizon lifted on Sept. 16 the suspension of procurement for locally funded civil works, as the agency laid out stricter compliance rules.

These include livestreaming of bidding, geotagging of projects, and conduct of road and bridge information application validation.

Other measures cover encoding and verification of project data in the Project and Contract Management Application and Civil Works Application, a ban on contract splitting, and tighter reviews of bidders’ financial capacity under procurement law.

The DBM earlier said the government is banking on the release of PHP 1.307 trillion in programmed spending in the fourth quarter to boost growth, with most funds earmarked for social services. — Aubrey Rose A. Inosante

Finance Secretary Frederick D. Go said that setting a “realistic” revenue collection target is important, as revenue collection targets are at risk amid a corruption probe that has dampened economic growth.

In a Facebook post on Saturday, the Department of Finance (DoF) said Mr. Go “emphasized the importance of setting realistic revenue targets, noting that necessary budget adjustments need to be made.”

As of end-September, revenue collections climbed by 2.24% to PHP 3.367 trillion, equivalent to 74.49% of the government’s PHP 4.52-trillion full-year goal.

In 2026, the government is targeting to collect PHP 4.98 trillion in revenues.

At a meeting with National Treasurer Sharon P. Almanza, Mr. Go discussed the Treasury’s efforts to maintain a sustainable debt profile.

He said that “corrective actions must be taken to address current fiscal challenges and strengthen the government’s overall fiscal challenges.”

The Philippine sovereign debt stood at PHP 17.46 trillion at the end of September, still above the projected year-end debt level of PHP 17.36 trillion this year.

“I want to hear your team’s recommendations on key areas where we can optimize spending, because that’s often where discussions stall. We need to finalize the plan and determine the necessary adjustments,” he was quoted as saying to Ms. Almanza during the meeting.

Mr. Go also expressed full confidence in the Bureau of the Treasury’s expertise in identifying areas where savings can be achieved.

Executive Secretary and former Finance chief Ralph G. Recto earlier said the Development Budget Coordination Committee is likely to review its macroeconomic targets and assumptions in December.

This comes as the Bureau of Internal Revenue and Bureau of Customs are likely to miss their targets amid weak economic growth, lower remittances from the Department of Public Works and Highways and slower global trade that curbed imports.

In a separate statement, the Finance department said Mr. Go met with Finance Undersecretary Euvimil Nina R. Asuncion, head of the Revenue Operations Group, to map out the revenue office’s goals in modernizing revenue administration.

During the meeting, the Finance chief stressed the need for digitalization and urged the team to pursue “small wins” that deliver quick, visible gains for taxpayers.

He also raised prospects for government-to-government assistance, including potential technology transfers from countries such as Japan, to fast-track reforms.

Mr. Go pledged close coordination with the group, backing its push to “foster a culture where taxpayers willingly fulfill their obligations.”

The Finance chief also sat down with World Bank officials to align government priorities and continue partnership through financing, technical support, and disaster-risk solutions.

He showed his appreciation for the lender’s financing support through the Disaster Risk Management and Climate Development Policy Loan with a Catastrophe-Deferred Drawdown Option, which the government can readily access in times of disaster.

The Philippines is preparing to withdraw USD 500 million (PHP 29.27 billion) under this facility to support financing requirements for the immediate response and recovery following recent typhoons that hit the country, the DoF said.

He also met British Ambassador to the Philippines Sarah Hulton OBE to deepen Philippines-UK ties, with talks centering on the Luzon Economic Corridor, development cooperation, and trade and investment opportunities. — A.R.A.Inosante

The Philippines’ balance of payments (BoP) position swung to a surplus in October, narrowing the country’s external position gap in the 10-month period, the central bank said.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that the country’s BoP registered a surplus of USD 706 million in October, a turnaround from the USD 724-million deficit seen a year ago.

This was also wider than the USD 82-million surfeit in September and marked the third consecutive month that the BoP stood at a surplus.

“The Philippines’ balance of payments registered a USD 706-million surplus in October 2025, reflecting improved external accounts,” the BSP said in a statement released late on Wednesday.

BoP refers to the country’s economic transactions with other nations. A surplus indicates more funds entered into the country, while a deficit shows that the country spent more than it received.

The BoP surplus in October brought the country’s 10-month deficit to USD 4.609 billion, a reversal from the USD 4.393-billion surplus in the same period last year.

“For January-to-October 2025, the BoP recorded an overall deficit of USD 4.6 billion, showing signs of narrowing as inflows strengthened,” the central bank said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted that the BoP surplus in October was the best in eight months or since February 2025.

In a note, Mr. Ricafort attributed this to improved weather conditions and the expected tail-end of the seasonal rise in imports in the third quarter.

He said the seasonal increase in remittances and export sales would be positive factors for the country’s BoP position in the fourth quarter.

Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said in a Viber message that increased inflows from exports, remittances and the business process outsourcing sector likely boosted the country’s BoP surplus.

“If global conditions stabilize and imports normalize, we could see the BoP deficit narrow further by yearend,” he added. “But watch out for (US Federal Reserve) policy and oil prices — they’re still key risks.”

Mr. Ricafort also said US President Donald J. Trump’s recent move to exempt some agricultural products from reciprocal tariffs would also help improve the country’s balance of trade and external position.

“For the coming months, BoP data would improve further if anti-corruption measures and other reform measures, especially in further leveling up the country’s governance standards, are taken seriously, just like 10-15 years ago, as these help further improve international investor sentiment or confidence (in) the country,” he added.

The central bank expects the overall BoP position to end at a USD 6.9-billion deficit this year or -1.4% of gross domestic product.

Dollar reserves

Meanwhile, the BSP said the country’s latest BoP position reflected the 1% increase in gross international reserves (GIR) at USD 110.2 billion at end-October from USD 109.1 billion at end-September.

“The rise in reserves to USD 110.2 (billion) gives us a solid buffer against external shocks,” Mr. Tacandong said.

In the 10-month period, the level of dollar reserves was equivalent to 7.4 months’ worth of imports of goods and payments of services and primary income, well above the three-month standard.

“Specifically, the latest GIR level ensures availability of foreign exchange to meet balance of payments financing needs, such as for payment of imports and debt service, in extreme conditions when there are no export earnings or foreign loans,” the central bank said.

It also covers around 3.8 times the country’s short-term external debt based on residual maturity.

The country’s gross reserves are made up of foreign-denominated securities, foreign exchange, and other assets such as gold. Aside from financing its external obligations, these are used by the central bank to help stabilize the peso and also serve as a buffer against global economic disruptions.

The BSP sees dollar reserves settling at USD 105 billion by yearend. — Katherine K. Chan

 

The Department of Finance (DoF) expressed “strong reservations” regarding a proposal to lower the value-added tax (VAT) rate, warning it could cost the government more than PHP 1 trillion in foregone revenues through 2030 and undermine its fiscal consolidation efforts.

In a position paper submitted to the House of Representatives dated Oct. 22, the DoF said House Bill (HB) No. 4302, which proposes to cut the VAT rate to 10% from the current 12%, would lead to substantial revenue losses over the next five years.

A copy of the position paper, which was signed by then-Finance Secretary Ralph G. Recto, was obtained by BusinessWorld on Thursday.

“The estimated impact of the proposed VAT rate reduction is at an annual average of PHP 339 billion from 2026 to 2030… This proposal will translate to a higher fiscal deficit and derail the administration’s fiscal consolidation efforts and plan,” the DoF said.

“Introducing this proposal at this time would risk fiscal stability, equity and growth.”

Based on DoF estimates, the revenue impact of the proposed VAT rate reduction would reach a total of PHP 1.694 trillion from 2026 to 2030. This includes PHP 1.11 trillion in foregone revenues for the Bureau of Internal Revenue and PHP 583.6 billion for the Bureau of Customs.

The DoF said reducing the VAT rate to 10% will increase the deficit by one percentage point of gross domestic product annually.

“The proposal will result in credit rating downgrades, which in turn increase our borrowing costs due to higher interest rates,” it said.

The proposed measure will also compromise debt sustainability, the DoF said.

“Lowering the VAT rate and losing a steady stream of government revenues of around PHP 339 billion yearly would significantly slow down the pace of reduction in the debt ratio planned by the government, leaving the country more vulnerable to fiscal shocks,” it said.

The Philippines has imposed VAT on most goods and services since 1988, including essentials such as food and fuel. Raised to 12% from 10% in 2005, it has become a key revenue source, though critics have argued it disproportionately burdens working-class Filipinos.

The DoF said VAT is an important revenue source for the government, accounting for around 26.5% of total tax take and 29.9% of government revenues.

“VAT, as a consumption tax, grows in tandem with the economy, making it one of the most predictable sources of government revenue and, at the same time, one of the most difficult to evade,” the DoF said.

Batangas Rep. Leandro Antonio L. Leviste filed HB No. 4302 in September seeking to lower the VAT rate, arguing the current tax system is “regressive” and should be reduced to make taxation more progressive.

The DoF said the current VAT system is “relatively neutral and slightly progressive” as most of the goods and services purchased and consumed by poorer households are already not subject to VAT.

“The proposed reduction of VAT will benefit higher-income households who have a larger share in formal consumption,” it said, explaining that lower‑income families tend to have only “small shares” of spending subject to the tax. “The richer households will substantially benefit more than the poorer households.”

While the Philippines has the highest VAT rate in Southeast Asia, the DoF said that a reduction in the rate will not automatically make the VAT system more competitive. It noted the Philippines has the lowest VAT efficiency in the region as it provides a significant number of VAT zero-ratings or exemptions to some sectors.

The DoF said the bill is not an “anti-inflation tool” and won’t automatically lower consumer prices.

It also noted that the bill’s provision giving the President the authority to temporarily return the VAT rate to 12% will disrupt the National Government’s fiscal program.

“The proposal will erode revenue stability and predictability… Making (the VAT) rate dependent on the yearly deficit projection of the Development Budget Coordination Committee would mean uncertainty for revenue and cash programming, budget planning and investors’ decisions,” it said.

“The proposed VAT rate increase based on the deficit target breach would also mean business and consumers facing unpredictable tax burdens, higher compliance costs and deterring long-term investments,” it added.  — Kenneth Christiane L. Basilio, Reporter