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Lawmakers should avoid compromising the proposed P6.793-trillion national budget for next year through congressional insertions, which could undermine the Philippines’ fiscal consolidation efforts and hamper growth prospects, analysts said on Tuesday.

President Ferdinand R. Marcos, Jr. on Tuesday received a copy of the 2026 National Expenditure Program (NEP) from Budget Secretary Amenah F. Pangandaman during a ceremonial turnover at Malacañan Palace.

The record PHP 6.793-trillion spending plan for 2026 will be formally submitted to Congress today (Aug. 13). It is 7.4% higher than this year’s national budget, and is equivalent to 22% of the country’s gross domestic product (GDP).

With the theme “Agenda for Prosperity: Nurturing Future-Ready Generations to Achieve the Full Potential of the Nation,” the Palace said next year’s budget “will build on the solid foundations laid over the past three years of (Mr. Marcos’) administration.”

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the 2026 budget will be pivotal in funding the Marcos administration’s priorities at the midpoint of his six-year term and is critical to keeping the reform agenda on track.

“A well-prioritized budget can spur infrastructure, social protection and job creation. But if questionable insertions divert funds from high-impact projects, they could dilute growth momentum and make fiscal targets harder to hit,” he said in a Viber message.

“Any misallocation at this point could slow the country’s trajectory and make catching up in the last two years far more difficult,” he added.

Next year’s budget is expected to face more public scrutiny after the 2025 national budget was hit with allegations of fund diversions, blank line items by the Executive and concerns over outsized public works allocations.

In his State of the Nation Address, Mr. Marcos warned Congress that he will not sign any General Appropriations Act (GAA) that is “not fully aligned” with the NEP.

“I am willing to do this even if we end up with a reenacted budget,” Mr. Marcos said.

However, Ms. Pangandaman earlier told BusinessWorld that a reenacted budget would hurt the economy and will force the government to fund projects that are not aligned with its 2026 plans.

“The 2026 budget will be pivotal because it’s the main vehicle for translating the administration’s growth and fiscal consolidation goals into concrete programs,” Mr. Rivera said.

The government is targeting 5.5-6.5% GDP growth this year, and 6-7% growth from 2026 to 2028. It also aims to bring down the debt-to-GDP ratio to 60.4% by the end of 2025, and to 56.9% by 2028.

Next year’s spending plan will also be key to how the Marcos administration navigates risks from shifting global trade dynamics, such as the US tariff policies, said Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc.

The US began to impose higher tariffs on most of its trading partners starting Aug. 7. A 19% tariff was slapped on goods from the Philippines, Indonesia, Cambodia, Malaysia and Thailand.

“The 2026 budget and how it is utilized will describe how the administration manages the economy through harsher economic conditions, especially as trade wars may continue to persist and investor sentiment may continue to be affected by it,” he said in a Viber message.

AJ A. Montesa, advisor at budget watchdog People’s Budget Coalition, said congressional insertions in the proposed national budget may redirect funds away from key administration priorities, channeling it toward lawmakers’ own interests.

“Congressional insertions represent political self-interest outweighing the public good,” he said in a Viber message.

“A single congressman doing it may be or seem harmless, but as a whole, congressional insertions can create an inefficient budget misaligned with long-term national needs,” he added.

The Marcos administration is prioritizing infrastructure, industry development, food security and climate resilience in its spending plan for next year, according to a Budget department briefer on the proposed 2026 spending plan.

The government should increase spending on health, social, education and agriculture, which are seen as “high-yield, high-multiplier and job-generating” sectors, Jose Enrique “Sonny” A. Africa, executive director at think tank IBON Foundation, said in a Viber message.

“The reorientation to more social spending immediately improves people’s lives while generating demand, creating jobs and pressing structural change,” he said.

While the national budget has grown annually, Mr. Africa noted that funding for sectors such as health and education has declined as a share of GDP, raising concerns over the government’s spending priorities.

“The fall in social spending as a share of GDP between 2024 and 2025 has to be reversed — health spending drops from 1.4% of GDP to some 1.1%, education from 4.4% to 4.3%, and social security, welfare and employment from 2% to 1.2%,” he said.

He added that more support should be extended to Philippine businesses, including subsidies, to help spur domestic industrialization. “The government needs to start on a more active domestic industrialization policy.”

“The new budget must target productivity and social well-being to keep the country in its growth path and faster economic activity,” said Mr. Erece.

Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said in a Viber message, said the government must reconsider its no-new tax policy and weigh fresh revenue measures and improve revenue collections, as the proposed budget increase could exert additional fiscal pressure,

“The 7.4% increase adds fiscal pressure, especially with limited revenue levers,” he said, adding that it’s only sustainable if state spending is “laser-focused” on government priorities.

“The problem with expenditures in the past three years is that its level is as if we are still in a pandemic,” Luis F. Dumlao, an economics professor at the Ateneo de Manila University said in a Facebook chat. “It may be sustained within the next three years within this administration, but it won’t be beyond future administrations.” —Kenneth Christiane L. Basilio, Reporter with Chloe Mari A. Hufana

The Bangko Sentral ng Pilipinas (BSP) could possibly deliver another rate cut later this month, its top official said on Monday.

BSP Governor Eli M. Remolona, Jr. said a rate cut is “quite likely” at the Monetary Board’s next meeting on Aug. 28.

The central bank has so far lowered borrowing costs by a total of 125 basis points (bps) since it began its easing cycle in August last year. 

If the BSP lowers policy rates this month, this would mark its third straight rate cut. In June, the Monetary Board cut by 25 bps to bring the benchmark rate to 5.25%.

Mr. Remolona said they are expecting to deliver two more rate cuts this year.

“I think two is more likely than one. Two is still more likely,” he told reporters on the sidelines of the Economic Journalists Association of the Philippines Economic Forum.

However, he noted that the possibility of three rate cuts is “unlikely.”

“That would overshoot what we look at as the ‘Goldilocks’ rate, output gap. Our output gap is already small,” he said in mixed English and Filipino.

Mr. Remolona had earlier said that it would take “something very unusual” to warrant a third rate cut this year, such as a drastic slowdown in growth, which was also unlikely.

The economy grew by an annual 5.5% in the second quarter, supported by a rebound in agriculture production and faster household consumption.

For the first half, gross domestic product (GDP) growth averaged 5.4%, slower than the 6.2% a year ago. The government is targeting 5.5-6.5% GDP growth this year.

After the Aug. 28 meeting, the BSP will have two more policy meetings before the end of 2025.

Meanwhile, Mr. Remolona said inflation is still seen settling well within target this year.

“In terms of inflation, we think we’ll hit 2% in 2025,” he said.

“That’s much better than other emerging markets, they would hit 3.1%, and other advanced economies, we think will hit 3.3%. So, (the Philippines will have) lower inflation than advanced economies and emerging markets.”

Headline inflation sharply eased to a near six-year low of 0.9% in July, marking the fifth straight month that inflation settled below the central bank’s 2-4% target range.    

For the first seven months of the year, inflation averaged 1.7%.

“If you look at our forecasts, we see our inflation target remaining within reach. I think we still have work to do,” Mr. Remolona said.

The BSP expects headline inflation to average 3.3% and core inflation at 3.1% in 2027.

“Both are within our target. We’re hoping we can achieve that. I think that would help stabilize the economy, support investment, support lending by our banks,” he added.

Peso performance

Meanwhile, the BSP chief said they are not too worried about the peso’s recent performance.

“It’s not the number itself (we worry about), it’s the way the peso depreciates. If the depreciation is sharp enough over, say, two weeks, one month, that leads to inflation.”

The peso closed at PHP 57.04 against the greenback on Monday, strengthening by seven centavos from its PHP 57.11 finish on Friday. The peso fell to the P58-per-dollar level earlier this month amid hawkish comments from the US Federal Reserve.

“If there are swings like that, we want to dampen that, but we don’t want to remove the swing itself. We want to keep the peso at a certain level. We want to prevent it from weakening too much over a short period of time.”

Mr. Remolona said the central bank has been intervening in “small amounts.”

“We have a little bit of day-to-day intervention just to limit the volatility. We don’t want too much volatility. Volatility is bad for both imports and exports,” he said.

“Most of the time, it’s a strong dollar story rather than peso. But there are some episodes that are not like that. In the June episode, the peso depreciated but the dollar didn’t quite strengthen.” — Luisa Maria Jacinta C. Jocson, Senior Reporter

The Philippine government is seeking an exemption from US tariffs on select exports, particularly semiconductors, a move aimed at safeguarding one of the country’s most important industries.

“We are working on getting several of our exports exempted,” Special Assistant to the President for Investment and Economic Affairs  Frederick D. Go told reporters on the sidelines of the Economic Journalists Association of the Philippines Economic Forum on Monday.

He said an exemption can be sought for products that an exporting country produces in abundance and cannot be produced in the US.

In particular, he said that the government hopes that the US will exempt Philippine-made semiconductor chips from steep tariffs.

“We are hoping that they view the work we do here in the Philippines, which is ATP (assembly, testing, and packaging), to be part of the process that the US may not really want to do. So, we are hoping… and we have expressed this, that ATP is a process that the semiconductor companies would probably want to outsource,” he said.

The Philippines is a key player in the ATP segment of semiconductor production. Electronics and semiconductors are the country’s single largest export category.

Last week, US President Donald J. Trump announced a 100% tariff on imports of semiconductors in a bid to bring back manufacturing to the country. However, he offered exemptions to companies currently manufacturing in the US and planning to do so.

Mr. Go said Mr. Trump’s proposed tariff on semiconductors remains uncertain, but some countries are already claiming exemptions for their semiconductor exports.

“So, we are still seeking clarification from the US Trade Representative side, and of course we are lobbying that our semiconductor exports likewise be exempted if there is such,” he said.

The US had paused tariffs on imports of semiconductors and semiconductor manufacturing equipment, which have been the subject of a US national security investigation. The results are expected to be out within the month.

Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI) President Danilo C. Lachica welcomed the government’s move to seek an exemption for Philippine-made chips.

“We appreciate the government’s effort to secure an exemption for our semiconductor exports,” said Mr. Lachica in a Viber message.

Mr. Lachica warned last week of the devastating effect of the proposed 100% tariff on semiconductors entering the US market on Philippine exporters.

In a separate message, Mr. Lachica said the Philippines’ semiconductor and electronics industries should expand to other markets.

“The impact really would be very complex, and it affects the whole supply chain,” he said, noting it can also drive up logistics costs for semiconductor firms.

He also said the industries should work to move up the value chain into research and development and integrated circuit design and other high-value activities.

Associate Professor of the University of Asia and the Pacific George N. Manzano said some US-owned semiconductor firms may move back to the US if Mr. Trump pushes through with his threatened semiconductor tariff.

“The danger to the Philippines is that 100% tariffs on semiconductors by the Trump administration, might motivate some of these US-owned semiconductor companies to move back operations to the US. I hope it does not lead to that,” Mr. Manzano said.

Diwa C. Guinigundo, country analyst at GlobalSource Partners and a former central bank governor, said a 100% US tariff on semiconductors could hurt the Philippine exporters.

“We are now hit by double whammy: higher reciprocal tariff of 19% and then this 100% on specific product as semiconductors and electronics,” Mr. Guinigundo said in a Viber message.

The US began imposing higher tariffs on most of its trading partners starting Aug. 7. A 19% tariff was slapped on goods from the Philippines, Indonesia, Cambodia, Malaysia and Thailand.

“US imports from the Philippines will be more expensive and domestic demand could possibly decline. We don’t exactly have the lowest cost of doing business to make us more competitive than the rest.”

Transhipment

Meanwhile, Mr. Go said that the Philippines’ deal with the US does not include tariffs on transshipment of goods from third countries.

“The transshipment category applies to countries that the US believes engage in transshipments from a third country… We do not have that clause because we do not, and we are not identified as one of those who engage in transshipments,” he added.

The US imposed a 20% tariff on goods from Vietnam, while transshipments from third countries through Vietnam will face a 40% levy. — Justine Irish D. Tabile and Aubrey Rose A. Inosante

Net inflows of foreign direct investments (FDI) into the Philippines rose by 21.3% year on year in May but declined by 26.9% in the first five months of the year, preliminary data from the central bank showed.

The Bangko Sentral ng Pilipinas (BSP) said the net inflows of FDI jumped by 21.3% to USD 586 million in May from USD 483 million in the same month in 2024, with “inflows from the United States and into manufacturing taking the lead.”

Month on month, net inflows of FDIs slipped by 3.9% from USD 610 million in April.

“The (year-on-year) increase resulted from the significant expansion in nonresidents’ net investments in debt instruments, which rose by 88.3% year-on-year, from USD 227 million to USD 427 million,” the BSP said.

Investments in equity and investment fund shares dropped by 38% to USD 159 million in May from USD 256 million in the same month in 2024.

This was due to the 61.4% decline in nonresidents’ net investments in equity capital (excluding reinvestment of earnings) to USD 62 million in May from USD 161 million a year ago.

Reinvestment of earnings also inched up by 1.4% year on year to USD 97 million in May.

Nearly half (49%) of gross placements of equity capital went into manufacturing, followed by real estate activities (14%); and electricity, gas, steam and air-conditioning supply (13%).

In May, the bulk of FDI inflows came from the US (36%) and Japan (33%), followed by Singapore (12%) and South Korea (12%).

“The uptick in May’s FDI reflects improved investor sentiment due to the country’s solid macroeconomic fundamentals, relatively stable (decelerating) inflation, and infrastructure momentum,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in a Viber message. “Externally, moderating global interest rates and a recovery in regional trade also helped.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the year-on-year improvement in May FDI inflow can be partly attributed to the release of the rules for the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act.

However, this was “counteracted” by the uncertainty over the US tariffs and other protectionist policies, as well as China-Philippines tensions, Mr. Ricafort said.

For the first five months of the year, net inflows of FDI declined by 26.9% to USD 2.96 billion, from the USD 4.04 billion recorded in the same period a year ago.

Net investment in debt instruments plunged by 14.1% in the January-May period to USD 2.149 billion from USD 2.501 billion in the same period in 2024.

Reinvestment of earnings rose by 6% to USD 445 million in the January-to-May period, from USD 420 million a year ago.

Investments in equity capital other than the reinvestment of earnings also went down by 67.6% to USD 364 million in the five-month period from USD 1.123 billion a year ago.

Equity placements plunged by 55% year on year to USD 616 million while withdrawals rose by 1.8% to USD 253 million.

Equity investments during the period were mainly from Japan (39%), the US (21%), Singapore (14%), and South Korea (8%).

At least 48% of equity placements flowed to manufacturing, while 20% went to real estate activities and 12% to the electricity, gas, steam, and air-conditioning supply industries.

Mr. Ricafort said FDI inflows in recent months may have been affected by proposed legislated wage increases that threaten to increase labor costs in the country.

“Local political noises since the latter part of 2024 (Dutertes vs. the Marcoses) could have also partly weighed on the FDI data in recent months,” he said.

Foreign investors could have also been waiting for further rate cuts by the US and Philippine central banks before making investment decisions, he said.

“For the coming months, the release of the CREATE MORE IRR (implementing rules and regulations) could make some foreign investors/FDIs to become more decisive in locating in the country amid enhanced incentives for foreign investors,” Mr. Ricafort said.

Meanwhile, Mr. Rivera noted that the year-to-date decline shows that FDI inflows are still sensitive to policy clarity, geopolitical risks, and tariff developments.

“If growth holds near the 5.4% average in the first half, we can sustain modest FDI recovery in the latter part of the year. To gain stronger traction, the Philippines needs to accelerate reforms in EODB (ease of doing business), investment facilitation, and trade diversification to counter headwinds from global uncertainty,” Mr. Rivera said.

The BSP expects FDI to end the year at a net inflow of USD 7.5 billion. — Katherine K.Chan

The Philippine government is unlikely to extend the 60-day suspension of rice imports after end of October, and has no plans to raise tariffs on rice, Finance Secretary Ralph G. Recto said on Monday.

“The only reason for the suspension essentially is because it’s harvest season,” he said on the sidelines of the Economic Journalists Association of the Philippines Economic Forum on Monday.

Last week, President Ferdinand R. Marcos, Jr. ordered a halt on rice imports for 60 days starting Sept. 1 to provide relief for farmers, upon the recommendation of the Department of Agriculture (DA).

Asked if the government would extend the suspension beyond October, Mr. Recto replied: “unlikely.”

The DA also recommended gradually raising the rice import tariff to its original 35% rate from the current 15%.

Asked if there are plans to hike tariffs, Mr. Recto said: “Wala pa. There are no plans.”

Executive Order (EO) No. 62, which took effect in July 2024, lowered import tariffs on rice to 15% until 2028 to tame inflation. The order is valid until 2028 and is subject to review every four months.

Department of Economy, Planning, and Development Secretary Arsenio M. Balisacan said the government is still studying the impact of a hike in rice tariffs.

“We’ll be meeting our technical group in consultation. We’re preparing the study and then we’ll set an informed basis for the decision or our recommendation,” he told reporters.

Mr. Balisacan said there is a need to balance the interests of farmers, consumers, and the broader economy as it will affect inflation and wages.

“We have to use additional tools to address the concerns of various parties,” he said. “It has to be a win-win for all.”

Mr. Balisacan earlier said there are no inflation risks from the pause on rice imports, citing ample supply.

He cited estimates that supply will remain sufficient even if the government pauses imports for more than 40 days.

“The 60-day rice import pause was a quick fix to protect farmers during harvest — but it’s not a long-term solution. Instead of suspension, we need smart safeguards: fair tariffs, better buffer stocking, and stronger support for local production,” Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said in a Viber message.

However, farmer groups said the 60-day suspension is not sufficient to allow farmers to recover their losses and are calling for the tariff rate to revert to the original 35%.

“The 60-day suspension of rice importation is not truly sufficient for farmers to recover from years of losses caused by the consistently low farmgate prices of palay — a concrete consequence of the Rice Liberalization Law,” Amihan National Federation of Peasant Women and Bantay Bigas spokesperson Cathy L. Estavillo said via a Viber message.

The Rice Tariffication Law or Republic Act (RA) No. 11203, liberalized rice imports by replacing quota restrictions with tariffs, which the government then used to fund rice industry modernization.

“The suspension of importation is proof that RA 11203, despite amending the Rice Competitiveness Enhancement Fund, remains a hindrance to making rice affordable in markets and achieving rice self-sufficiency in the country,” she said.

Ms. Estavillo urged for the immediate review of the 35% tariff and the repeal of Rice Tariffication Law.

Samahang Industriya ng Agrikultura  spokesman Jay Cainglet said that while they welcome the import ban, their “primary and urgent appeal” is for the reversion of the rice import tariff to 35%.

In particular, they are calling for a 35% tariff rate for imports from the Association of Southeast Asian Nations (ASEAN) and 50% for non-ASEAN imports.

“Despite the temporary halt, palay prices are expected to remain depressed, and farmers will continue to incur losses,” he said.

Mr. Cainglet also claimed that the economic team “continues to feed the President false narratives” about the benefits of EO 62.

“In reality, the measure does little to protect local producers or stabilize the rice market. Importers can simply advance or delay their shipments to work around the suspension, especially since the tariff rate remains at a low 15%,” he said.

Foregone revenues

Meanwhile, Mr. Recto said the Bureau of Customs (BoC) is expected to see minimal foregone revenues from the two-month halt of rice imports.

“It will slightly drop, but we expect to hit the revenue targets this year,” he said.

In June, Customs collections rose by 6.4% year on year to PHP 85.46 billion, bringing the seven-month total to PHP 544.23 billion.

This year, the BoC is targeting to collect PHP 958.7 billion.

The Philippines is the world’s biggest rice importer, having brought in 2.44 million metric tons at the end of July, according to the Bureau of Plant Industry.

“Maybe at the end of the year after the harvest season, you probably will import the balance,” Mr. Recto said. — Aubrey Rose A. Inosante, Reporter