NG gross borrowings decline in October

The National Government’s (NG) gross borrowings declined in October amid a drop in foreign debt, the Bureau of the Treasury said.

Data from the Treasury showed that total gross borrowings fell by 32.07% to PHP 87.81 billion in October from PHP 129.26 billion in the same month a year ago.

Month on month, gross borrowings slid by 31.89% from PHP 128.91 billion in September.

Domestic borrowings, which made up the bulk or 83.19% of the total borrowings, rose by 8.28% to P7HP 3.05 billion in October from PHP 67.46 billion in the same month last year.

This was composed of PHP 70 billion in fixed-rate Treasury bonds (T-bonds) and PHP 3.05 billion in Treasury bills (T-bills). There were no fixed-rate Treasury notes and retail Treasury bonds for the month.

On the other hand, external borrowings slumped by 76.12% to PHP 14.76 billion from PHP 61.8 billion in the same month in 2024. This is comprised of project loans.

“(The lower gross borrowings) is consistent with the bigger budget surplus in October 2025 versus a year ago that fundamentally reduced the need for more NG borrowings,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message over the weekend.

In October, the NG fiscal position stood at a PHP 11.2-billion surplus as revenues and expenditures declined amid a corruption scandal. This brought the budget deficit to PHP 1.11 trillion in the 10-month period.

This was the first budget surplus since April and a turnaround from the PHP 248.08-billion deficit in September.

Despite the decline in October borrowings, the NG’s gross borrowings inched up by 2.19% to PHP 2.48 trillion in the first 10 months of the year from PHP 2.43 trillion a year ago.

The 10-month tally made up 95.5% of the revised PHP 2.6-trillion financing program for 2025.

As of end-October, domestic borrowings made up 81.9% of the total.

Domestic debt went up by 9.13% to PHP 2.03 trillion in the period ending October from PHP 1.86 trillion a year ago. This accounted for 96.29% of the PHP 2.11-trillion domestic borrowing program for this year.

Domestic debt was composed of PHP 1.12 trillion in fixed-rate Treasury bonds, PHP 425.61 billion in retail Treasury bonds, PHP 300 billion in fixed-rate Treasury notes, and PHP 184.2 billion in T-bills.

Meanwhile, gross external debt declined by 20.64% to PHP 449.35 billion as of end-October from PHP 566.25 billion a year ago. This accounted for 92.05% of the P488.174-billion external borrowing program this year.

Broken down, foreign debt was composed of PHP 191.97 billion in global bonds, PHP 172.01 billion in program loans, and PHP 85.38 billion in project loans.

The end‑October external debt reflected the USD 3.3-billion global bond issuance completed in late January and settled in February.

In the coming months, Mr. Ricafort said that the lower amount of maturing government securities in the fourth quarter could reduce the need for additional borrowings.

“Going forward, anti-corruption measures/reforms and other priority governance reforms would help narrow budget deficits and also fundamentally reduce the need for additional NG borrowings,” he said.

Mr. Ricafort also noted that rate cuts by the Bangko Sentral ng Pilipinas and US Federal Reserve will help reduce interest payments.

As of Nov. 24, Finance Secretary Frederick D. Go said the government had raised PHP 2.08 trillion through a combination of regular Treasury bills and Treasury bond auctions and special issuances. The government had set a PHP 2.11-trillion domestic issuance program for 2025.

Meanwhile, National Treasurer Sharon P. Almanza said the weaker peso will affect the revaluation of foreign currency-denominated debt.

She said the peso, which hit an all-time low on Nov. 12, may hurt the NG’s efforts in bringing down the NG outstanding debt to PHP 17.36 trillion by yearend, as the forecast had assumed a lower foreign exchange rate.

NG outstanding debt slipped by 0.07% to PHP 17.46 trillion at the end of September from PHP 17.47 trillion at end-August.

However, this was still 0.6% above the projected year-end debt level of PHP 17.36 trillion. — Aubrey Rose A. Inosante

Peso slide to PHP 60 per dollar ‘probable’

The peso could slide to the P60-per-dollar level amid a dovish central bank and market concerns over corruption issues, analysts said.

On Wednesday, the local unit closed at PHP 58.69 versus the greenback, recovering by 44 centavos from the previous day’s record low of PHP 59.13, Bankers Association of the Philippines data showed.

“P60 (per dollar) is probable, but not a done deal. The Bangko Sentral ng Pilipinas (BSP) has the firepower to defend the peso, and our core fundamentals are still solid. What’s weighing us down is uncertainty — especially from the floodgate scandal/tariff uncertainty which caused the dollar to strengthen,” Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said in a Viber message.

MUFG Global Markets Research said in a note on Wednesday that the peso’s depreciation has been more severe than expected.

“While we had already been anticipating some headwinds to PHP (Philippine peso) from a more dovish BSP, coupled with the corruption issues arising from flood control projects, the move in PHP has admittedly been weaker than we anticipated,” MUFG said.

“We were expecting other offsetting positives such as lower inflation, strong private investment including in renewable energy projects, an expected pickup in FDI (foreign direct investment) from the past surge in FDI approvals, coupled with seasonal inflows from remittances to boost the PHP. Admittedly, this has not happened yet,” it added.

Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said in a report that the peso depreciation has been driven by high crude oil prices, BSP’s dovish stance, net foreign selling in the stock market and the substantial current account deficit.

Mr. Neri said the BSP might continue to let the peso depreciate as inflation expectations remain below target.

“Also, allowing the peso to weaken might be a strategic move for them since a weaker peso could support growth and household spending through its impact on remittances. Recent statements from central bank officials indicate that supporting growth is a greater priority in the near term,” he said.

The BSP said in a statement on Tuesday that it would not intervene in the foreign market to offset day to day volatility, and will instead focus on minimizing the peso’s impact on inflation.

“Expect BSP to act decisively if global shocks worsen or volatility spikes,” Mr. Ravelas added.

The peso opened Wednesday’s session at PHP 59.15 versus the dollar. Its intraday best was PHP 58.65, while its worst showing was PHP 59.26 — an all-time intraday low against the greenback.

Dollars exchanged rose to USD 2.01 billion on Wednesday from USD 1.75 billion on Tuesday.

“The peso appreciated as market participants took profit from (Tuesday’s) lows. This is also in anticipation of likely dovish policy signals from the US central bank overnight, which will continue to drive strength into the local currency (on Thursday),” a trader said in a Viber message on Wednesday.

The US Federal Reserve is widely expected to cut interest rates by a quarter of a percentage point to the 3.75%-4% level on Wednesday.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the peso was also supported by remittances sent by overseas Filipino workers (OFWs) to their families ahead of the long holiday weekend.

“This is followed by the start of Christmas holiday-related spending, thereby making it more attractive for some OFWs and other US dollar earners to convert their US dollars for pesos near the record high,” he added.

For Thursday, Mr. Ricafort sees the peso moving between PHP 58.45 and PHP 58.80 per dollar, while the trader sees it ranging from PHP 58.60 to PHP 58.85.

Meanwhile, Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message that the peso’s prolonged depreciation could prompt the BSP to be more cautious due to its potential inflationary impact.

“Imported fuel, food, and materials get pricier, and those costs tend to feed into consumer inflation after a few months. It’s not an instant hit, but a sustained weak peso could make the BSP more cautious if inflation expectations rise,” he said.

Monetary Board member and former BSP Governor Benjamin E. Diokno has said the central bank may cut its key interest rate again in December and further in 2026 to offset a possible drag on growth caused by the corruption scandal and trade uncertainties.

The BSP earlier this month lowered interest rates by 25 basis points (bps) to 4.75%. It has cut rates by 175 bps since it began its easing cycle in August 2024.

Mr. Limlingan said the US dollar’s persistent strength due to a strong US economy could keep the peso under pressure despite easing trade tensions.

“Unless US data soften, the peso might stay under pressure,” he said.

Mr. Limlingan said the seasonal increase in remittances in the last two months of the year may slow the peso’s slide but the dollar is likely to remain strong.

“Import-heavy industries, manufacturing, retail, and firms that have foreign-denominated debt exposure would feel the squeeze since everything they bring in costs more in peso terms,” he said.

Meanwhile, export-related industries, BPOs (business process outsourcing), and OFWs will benefit from the peso depreciation.

Another trader said in an e-mail that consumer-heavy companies could be hit, as well as companies that import oil and have high exposure to dollar-denominated debt.

The trader said banks could see improved trading gains if they are able to take advantage of the foreign exchange volatility.

A weak peso is also beneficial for the property sector as this would lower property prices for foreign buyers, the trader said. — Aaron Michael C. Sy, Reporter

PHL stocks extend climb before Fed decision

Philippine shares rose further on Wednesday as players continued to buy cheap stocks and amid expectations of a US Federal Reserve cut overnight.

The benchmark Philippine Stock Exchange index (PSEi) went up by 0.17% or 10.61 points to close at 5,963.77, while the broader all shares index rose by 0.43% or 15.70 points to end at 3,605.21.

“The local market extended its gains as investors continued with their bargain hunting. Hopes of a rate cut by the Federal Reserve and a solid agreement between the US and China in their meeting this week gave the market a boost… However, gains were eventually trimmed as investors traded cautiously amid lingering concerns primarily the Philippines’ corruption issues and their impact on economic outlook,” Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message.

“The Philippine market ended higher as traders took advantage of the cheaper prices,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

The US Federal Reserve was expected to cut interest rates by a quarter of a percentage point on Wednesday as policymakers steer the US economy based on limited data that has nevertheless kept concerns about the strength of the job market top of mind, Reuters reported.

Economists polled by Reuters were nearly unanimous in expecting the US central bank to reduce its benchmark policy rate to the 3.75%-4% range when its latest two-day meeting concludes.

Mr. Tantiangco and Mr. Limlingan said the peso’s rebound against the dollar also boosted market sentiment. The peso surged by 44 centavos to close at PHP 58.69 per dollar on Wednesday from its new all-time low of PHP 59.13 on Tuesday, Bankers Association of the Philippines data showed.

The local unit opened the trading session weaker at PHP 59.15 and even hit an intraday low of PHP 59.26 per dollar, but managed to recoup its losses in the afternoon session.

Most sectoral indices closed higher on Wednesday. Mining and oil jumped by 3.29% or 402.36 points to 12,633.05; industrials rose by 1.38% or 121.63 points to 8,894.1; holding firms increased by 0.78% or 37.64 points to 4,844.89; and financials went up by 0.55% or 11 points to 1,981.64.

Meanwhile, property went down by 0.77% or 17.06 points to 2,181.48 and services dropped by 0.63% or 14.37 points to 2,268.05.

“LT Group, Inc. was the day’s top index gainer, jumping 5% to PHP 14.70. Ayala Land, Inc. was the worst index performer, dropping 2.66% to PHP 20.15,” Mr. Tantiangco said.

Advancers outnumbered decliners, 110 to 74, while 61 names closed unchanged.

Value turnover jumped to PHP 6.46 billion on Wednesday with 690.95 million shares changing hands from Tuesday’s PHP 4.64 billion with 1.18 billion issues traded.

Net foreign selling went up to PHP 477.97 million from PHP 432.57 million. — Alexandria Grace C. Magno with Reuters

Peso slumps to new all-time low

The Philippine peso breached the PHP 59-per-dollar level for the first time on Tuesday, amid market concerns of slowing economic growth and expectations of further monetary easing.

At the same time, the Bangko Sentral ng Pilipinas (BSP) said it will allow market forces to determine the peso-dollar exchange rate.

The local unit closed at PHP 59.13 versus the greenback, sinking by 23 centavos from its PHP 58.90 finish on Monday, Bankers Association of the Philippines data showed.

This was a new all-time low for the peso, eclipsing the previous record of PHP 59 logged on Dec. 19, 2024.

Year to date, the peso has depreciated by PHP 1.285 or 2.17% from its PHP 57.845 finish on Dec. 27, 2024.

The peso opened Tuesday’s session steady at PHP 58.90 versus the dollar, which was already its intraday best. Its worst showing was at PHP 59.20 against the greenback.

Dollars exchanged rose to USD 1.75 billion on Tuesday from USD 1.6 billion on Monday.

“The recent peso depreciation may reflect market concerns over a potential moderation in economic growth due in part to the infrastructure spending controversy, as well as expectations of additional monetary policy easing by the BSP,” the central bank said.

On Monday, Monetary Board member Benjamin E. Diokno said the BSP may cut its key interest rate again in December and further in 2026, as the economy may “slow down a bit” due to a corruption scandal and trade uncertainties.

The BSP earlier this month lowered interest rates by 25 basis points (bps) to 4.75%. It has cut rates by 175 bps since it began its easing cycle in August 2024.

The BSP said the peso will continue to be supported by “resilient remittance inflows, still relatively fast economic growth, low inflation, and ongoing structural reforms.”

“Foreign exchange inflows from business process outsourcing, tourism, and overseas Filipino workers continue to buffer external shocks,” it added.

It also said it continues to maintain “robust” foreign reserves, which stood at $108.8 billion at end-September.

‘Market forces’

The BSP also signaled it may tolerate more weakness in the peso.

“When we do participate in the market, it is largely to dampen inflationary swings in the exchange rate over time rather than to prevent day-to-day volatility,” it said.

A trader said in an e-mail that the peso fell after the BSP’s latest signals.

“The peso closed to record levels after the BSP ruled out any near-term intervention in the local FX (foreign exchange) market despite apparent pressures on the local currency,” the trader said.

First Metro Investment Corp. Head of Research Cristina S. Ulang said in a Viber message the peso’s recent weakness will likely have a minimal impact on inflation.

“In terms of inflation, the pass-through is really small coming from the peso-dollar weakness, but of course, the confidence level is being eroded by the weak peso,” she said.

Another trader said in a text message that the peso could remain at the PHP 59 level in the short term if weakness persists, but this could be offset by the seasonal increase in remittances towards the yearend.

“Seasonally speaking, we expect dollar inflows courtesy of remittances. So, we expect natural support for the peso moving forward,” the trader said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that local sentiment could be supported by reforms toward addressing corruption.

“The US dollar/peso exchange rate would now be a function of the BSP in terms of smoothening the volatility, as one of the major catalysts going forward,” he said.

“Thus, ignoring the BSP factor would be a mistake for those looking for higher levels.”

For Wednesday, both Mr. Ricafort and the first trader see the peso moving at PHP 58.95 to PHP 59.20 per dollar. — A.M.C.Sy

SEIPI projects single-digit growth in electronic exports

Philippine exports of semiconductor and electronic products may see single-digit growth this year, but uncertainty over the US tariff policy continues to cloud the industry’s outlook, the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) said.

“We’re looking forward to a single-digit growth, which means anywhere from 1% to 9%,” SEIPI President Danilo C. Lachica told reporters on the sidelines of the Philippine Semiconductors and Electronics Convention and Exhibition on Tuesday.

“My official position is still flat [growth,] but like I said before, there are signs of a positive outlook, modest growth,” he said.

Citing the latest trade data, Mr. Lachica said there are signs of export growth.

“If you look at the PSA (Philippine Statistics Authority) numbers, it looks like we might look forward to that modest growth, a single-digit growth. But now, the projection for the industry is still flat,” he said.

PSA data showed that as of end-August, exports of electronic products reached USD 29.48 billion, 7.4% higher than a year ago. Semiconductor exports during the period likewise grew by 4.9% year on year to USD 22.07 billion.

The SEIPI board is set to meet in November to review its industry projections.

“Even though I’ve seen positive movement, I was hesitant to declare, ‘OK, we’re going to grow,’ because who knows what’s going to happen with the US tariffs,” Mr. Lachica said. “It depends on what side of the bed Trump wakes up on.”

US President Donald J. Trump earlier threatened to slap sectoral tariffs on chips as high as 300%, a move expected to bring back manufacturing to the US.

At present, semiconductor exports are not included in the 19% tariff imposed by the US on Philippine-made goods.

The US Supreme Court is set to hear oral arguments on Nov. 5 on the legality of Mr. Trump’s tariffs.

“We’ll just continue to ride the wave of zero-percent tariffs for semiconductors and some selected EMS (electronics manufacturing services) products,” Mr. Lachica said.

The SEIPI official said Philippine exports of electronics and semiconductors to the US have declined since the tariffs took effect in August.

“The US Embassy called me and asked, ‘Why are the exports to the US decreasing?’ I said, ‘Why do you think?’” Mr. Lachica said.

The electronics industry is looking to diversify its trade relations with the European Union (EU) and the rest of Asia to mitigate the risks of the US’ uncertain tariff policies, Mr. Lachica said.

“One of the strategies, notwithstanding the progress of the tariff, is we’re looking at diversifying our markets, whether that’s the EU or whether that’s with the rest of Asia,” he added.

Meanwhile, Mr. Lachica said the ongoing corruption scandal involving infrastructure projects is a “major concern” for the industry as investors may reconsider expansion plans in the country.

Asked if corruption in government is affecting investor sentiment, Mr. Lachica replied: “Absolutely.” — Beatriz Marie D. Cruz

ASEAN, China seal upgraded free trade deal

KUALA LUMPUR — The Association of Southeast Asian Nations (ASEAN) and China on Tuesday signed an upgraded free trade pact that seeks to deepen regional integration in the face of increased protectionism from the US.

Closer economic cooperation instead of confrontation could help overcome global uncertainties amid coercion and bullying, Chinese Premier Li Qiang told the ASEAN-China Summit meeting after the signing, in a swipe at the US.

ASEAN leaders including Philippine President Ferdinand R. Marcos, Jr. witnessed the signing of the third revision of the deal that was first inked in 2002 and took effect in 2010.

“The ACFTA (ASEAN-China Free Trade Area) 3.0 Upgrade Protocol seeks to expand ASEAN-China cooperation into new and emerging areas, including the digital and green economies, supply-chain resilience, competition and consumer protection, as well as support for micro, small, and medium enterprises (MSME),” according to a statement from Mr. Marcos’ office.

The free trade agreement (FTA) lowers tariffs on goods and boosts the flow of services and investment in an area that covers a combined market of more than two billion people.

Chinese trade with the 11-member bloc reached USD 771 billion last year, making ASEAN its biggest trading partner, according to ASEAN data.

Beijing is looking to deepen its engagement with the region, which has a combined gross domestic product (GDP) of USD 3.8 trillion, as it seeks to offset the impact of steep import tariffs imposed globally by US President Donald J. Trump’s administration.

China and ASEAN are also members of the Regional Comprehensive Economic Partnership, the world’s largest trade bloc, encompassing nearly one-third of the global population and around 30% of global GDP.

Mr. Trump slapped almost all of its trading partners with varying tariff levels. He imposed a 30% tariff on Chinese exports to the US in a bid to protect his country’s industries.

The US has also imposed a 19% duty on many goods from the Philippines, Cambodia, Malaysia, Thailand and Indonesia since Aug. 7.

The Philippine Department of Foreign Affairs (DFA) earlier said the new protocol aims to make the regional trade framework “more modern, more comprehensive, and better aligned with today’s global realities.”

The enhanced deal expands the scope of the original ACFTA — which focused on goods, services, and investment — to include new areas such as fair competition, consumer protection, digital transformation, green growth, and supply-chain connectivity.

It also strengthens mechanisms to support MSMEs, helping them integrate more effectively into regional value chains.

According to the DFA, the upgrade will “open new opportunities for high-impact cooperation” in critical areas that are key to the region’s long-term resilience and sustainability.

It also introduces frameworks to promote inclusive and broad-based growth across member economies.

The original ASEAN-China FTA, launched in 2010, covers trade in goods, rules of origin, customs and trade facilitation, technical regulations, sanitary measures, and investment cooperation.

The latest revision reflects both sides’ efforts to future-proof their trade ties amid shifting global economic conditions.

ASEAN Studies lecturer at De La Salle-College of St. Benilde Josue Raphael J. Cortez said the ACFTA 3.0 serves as Beijing’s strategic move to strengthen its regional influence amid intensifying US efforts to expand its own economic foothold in Southeast Asia through tariff-based policies.

While the Philippines can use the upgraded pact as limited leverage, its complex political and security ties with China temper this advantage, he added.

“With the Philippines trying to widen its trading relations both with traditional and new markets, the promise this agreement holds is a challenge for Washington to overcome by proving that the alliance we share goes beyond issues of mutual benefit in the political and security sphere. And as treaty allies, we show the same extent of commitment as well to the geoeconomic challenges of our time,” he said via Facebook Messenger. — Chloe Mari A. Hufana

Shares rise on bargain-hunting before Fed move

PHILIPPINE STOCKS closed higher on Tuesday as players picked up cheap stocks following the market’s two-day slide, but sentiment remained cautious before the US Federal Reserve’s policy decision.

The benchmark Philippine Stock Exchange index (PSEi) went up by 0.32% or 19.40 points to close at 5,953.16, while the broader all shares index rose by 0.21% or 7.78 points to 3,589.51.

“The Philippine market ended higher, driven by bargain-hunting after two consecutive days of strong selling. Investors remained cautious, closely monitoring upcoming earnings reports and the anticipated next move by the US Federal Reserve, which could influence market direction,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

“The market snapped its losing streak, but the rebound of a third of a percent was unconvincing as investors await the Fed’s rate cut decision,” AP Securities, Inc. Research Head Alfred Benjamin R. Garcia said in a Viber message.

Fed policymakers are widely expected to reduce US short-term borrowing costs this week by a quarter of a percentage point for the second time this year as they look to prevent further slowing in the labor market, Reuters reported.

Odds are it won’t be the last of the series.

Climbing unemployment insurance claims suggest that labor market demand continues to cool, even as the government shutdown delays publication of most official economic statistics, including the unemployment rate, last estimated at 4.3% in August.

Milder-than-expected inflation readings, including last week’s report that the consumer price index rose 3% in the 12 months through September, have put worries of tariff-driven price pressures on the back burner.

A quarter-point rate cut on Wednesday at the close of the Fed’s two-day meeting would put the policy rate in the 3.75%-4% range. Financial markets are betting heavily on further rate cuts in both December and January.

Back home, sectoral indices closed mixed on Tuesday. Mining and oil slumped by 4.42% or 565.68 points to 12,230.69; industrials dropped by 0.27% or 24.08 points to 8,772.47; and property slipped by 0.01% or 0.39 point to 2,198.54.

“The mining sector counter was the biggest loser with a decline of 4.4% as gold prices continue to slump,” Mr. Garcia said.

Meanwhile, financials rose by 1.15% or 22.44 points to 1,970.64; services increased by 0.42% or 9.76 points to 2,282.42; and holding firms edged up by 0.05% or 2.43 points to 4,807.25.

Advancers narrowly beat decliners, 95 to 94, while 62 names closed unchanged.

Value turnover went down to P4.64 billion on Tuesday with 1.18 billion shares changing hands from Monday’s P18.77 billion with 11.82 billion issues traded.

Net foreign selling increased to P432.57 million from P313.66 million. — Alexandria Grace C. Magno with Reuters

Nomura slashes Philippine growth forecast amid graft scandal

PHILIPPINE ECONOMIC GROWTH may slow to 4.7% this year, as government spending is expected to further decline amid the corruption investigation in infrastructure projects, Nomura Global Markets Research said.

In a report dated Oct. 27, Nomura Chief ASEAN (Association of Southeast Asian Nations) Economist Euben Paracuelles and Macroeconomic Research Analyst Yiru Chen said the gross domestic product (GDP) forecast was slashed to 4.7% this year from 5.3% previously as downside risks increased due to the corruption scandal involving flood control projects.

“This pencils in GDP growth slowing to just 4% in the second half from 5.4% in the first half and is based on the assumption that the decline in government expenditures in September will worsen in the next 3-4 months,” they said.

Nomura’s latest forecast is below the government’s 5.5-6.5% GDP growth target for the year and is slower than the 5.7% growth in 2024.

“Taking into account the sharp drop in fiscal spending in September, we think the ‘bad scenario’ on the growth impact of the ongoing corruption scandal is materializing,” they said.

Third-quarter GDP data will be released on Nov. 7.

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.

Latest Treasury data showed government expenditures declined by 7.53% in September, worsening from the 0.7% drop in August, mainly due to lower spending by the Department of Public Works and Highways. Nomura also noted that government spending declined by 2.8% in the third quarter, a reversal of 1.6% growth in the second quarter.

“Excluding interest payments and debt servicing, expenditure growth slumped even more to -10.2% y-o-y (year on year) in September from -3.5% in August, the weakest since 2020. This suggests a relatively rapid deterioration in the pace of budget disbursements after President Marcos brought to light the corruption scandal of flood control projects,” they said.

Nomura also noted that the reallocation of funds to other types of capital expenditures such as school buildings has been “challenging” to implement.

“In addition, we incorporate some spillovers into other components of domestic demand, which were also evident in these previous episodes, including household consumption spending. Our forecast continues to take into account the impact of the US tariffs, which, as we have argued before, pose significant headwinds for goods exports,” they said.

The US had imposed a 19% duty on many goods from the Philippines starting Aug. 7.

Nomura also maintained its fiscal deficit forecast at 5.5% of GDP for this year.

“The decline in government expenditures, which we now assume in the coming months (under the ‘bad’ scenario), puts the MTFF (medium-term fiscal framework) target of 5.5% still within reach. Nevertheless, our fiscal deficit forecast implies a weaker fiscal impulse in Q4, when the output gap will likely remain negative,” they said.

For 2026, Nomura maintained its Philippine GDP forecast at 5.6%, but uncertainty over the timely passage of the 2026 national budget poses risks to the outlook.

“For now, we monitor signs of whether the budget can be passed on time, i.e. by December. If not, the ‘severe’ scenario could play out, potentially prolonging fiscal tightening with no new disbursements allowed until a new budget is enacted,” they said.

RATE CUTS
Meanwhile, the Bangko Sentral ng Pilipinas (BSP) will likely implement another 50 basis points (bps) worth of cuts in this easing cycle, bringing the benchmark rate to 4.25%.

“We still pencil in a 25-bp cut at BSP’s next meeting in December and another 25 bps in Q1 2026, i.e. a more frontloaded trajectory, based on our view that the corruption scandal could hit growth in the near term significantly,” Nomura said.

The central bank lowered borrowing costs earlier this month by 25 bps to 4.75%. Its latest move brought its total reductions to 175 bps since it began its easing cycle in August 2024.

“Still, we continue to see the risk of BSP delivering additional policy rate cuts next year if the more ‘severe’ scenario materializes, including a delay in the enactment of the 2026 budget,” they added.

Separately, Budget Assistant Secretary Romeo Matthew T. Balanquit said easing inflation rates and low borrowing costs could still drive the country’s third-quarter growth.

“My only good hope is that we have a low inflation rate, 1.7% year to date,” he told reporters on the sidelines of an event on Monday. “So, with that, I am expecting a high contribution [from household] consumption.”

Inflation accelerated to 1.7% in September, faster than 1.5% in August but slower than the 1.9% in the same month last year. In the nine-month period, headline inflation matched the Bangko Sentral ng Pilipinas’ (BSP) 1.7% full-year target.

“And one more would be the investment because of the CREATE MORE (Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy) and also the low interest rates. I am hopeful that the private sector will step up,” Mr. Balanquit added.

IMPACT ON LUXURY GOODS, SERVICES
Meanwhile, Capital Economics said the corruption scandal may not just affect investments but also hurt sales of luxury goods in the country.

“The experience from other emerging markets suggest that, even if the ongoing corruption scandal in the Philippines doesn’t fuel further unrest, a more concerted effort by the government to clamp down on graft could hurt investment as well as purchases of luxury goods and services,” it said in an Oct. 22 report.

Even if unrest is avoided, Capital Economics said there could be more concerted effort to look into corruption across the economy.

“The resulting backdrop of heightened political uncertainty and fear of getting caught up in corruption allegations could prompt firms to delay investment,” it said.

It noted individuals may also avoid buying land or property, while others with illicit gains could move assets abroad “which may result in a spike in capital outflows and weigh on the currency.”

“The government could also try to clamp down on ostentatious public sector consumption. That could weigh on demand for luxury goods and services,” Capital Economics said.

It also said the Philippine government could try other policies to curb corruption such as demonetization.

BSP Governor Eli M. Remolona, Jr. has already rejected a proposal to demonetize P1,000 and P500 bills as an anti-money laundering measure, saying it may do more harm than good.

“We’ve warned before that if the government turns to populist measures, investors could build in higher risk premia on Filipino assets,” Capital Economics said. — K.K.Chan

Tighter US immigration policies, weak job market could hurt PHL remittances

Stricter visa and immigration policies in the United States could slow demand for Filipino workers and potentially dampen remittance inflows, analysts said.

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said a weakening US labor market has started to affect remittances from US-based migrant Filipino workers.

“We’re arguably already starting to see the softening in the US job market impact remittances from Filipinos there,” Mr. Chanco told BusinessWorld in an e-mail.

He noted that the growth in remittances from US-based Filipinos has slowed to 0.5% in August, “a far cry from its previous peak of 4.2% in the middle of last year.”

“This ongoing slowdown certainly poses a downside risk to the BSP’s (Bangko Sentral ng Pilipinas) 3% growth assumption for remittances,” he added.

In August, cash remittances grew by 3.2% to USD 2.977 billion from USD 2.885 billion a year ago.

This brought the cumulative cash remittances in the January-to-August period to USD 22.909 billion, 3.1% higher than the USD 22.217 billion seen in the same period last year. The bulk or 40.4% of the remittances came from US-based Filipino workers.

The BSP projects cash remittances to increase by 3% to USD 35.5 billion this year.

Since assuming office in late January, US President Donald J. Trump has tightened border enforcement, ordered a crackdown on illegal immigration and has moved to limit foreign workers.

“Such policies tend to make OFWs more cautious, possibly reducing remittance amounts or sending frequency,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in a Viber message.

“Given that the US is a major source of Philippine remittances, these developments could make it harder to hit the BSP’s 3% growth target for remittances,” he added.

Visa issue

Meanwhile, the International Monetary Fund (IMF) said the US government’s move to impose a USD 100,000 fee on new H-1B visas may pose a risk to remittances from the US.

“The fee on H-1B visas could impact remittances from the US, but we do not have specific estimates at this point,” an IMF spokesperson told BusinessWorld in an e-mail, adding that they will monitor further developments and evaluate its impact once additional information becomes available.

In September, Mr. Trump issued a proclamation that required employers who are sponsoring foreign-born workers through the H-1B work visa to pay a one-time fee of USD 100,000 fee to the US government.

H-1B visas allow foreign workers to temporarily work for US companies in industries such as science, information technology, engineering and finance. The fees are typically shouldered by employers.

Angelo B. Taningco, research head and chief economist at Security Bank, said stricter US immigration and visa policies may have a moderate to minimal effect on overseas Filipino workers (OFWs) remittances.

“I think OF remittance flows from US to the Philippines would be moderately impacted by restrictive US immigration policy, but minimally affected by the hefty USD 100k H-1B visa fee because there are not many Filipino H-1B visa applicants,” he told BusinessWorld in an e-mail.

Workers from India account for the majority or about 70% of the total H-1B visa approvals.

On the other hand, Filipinos hold less than 1% of the total number of H-1B visas, according to IT & Business Process Association of the Philippines President and CEO Jonathan R. Madrid.

Nonetheless, Mr. Rivera said the new visa fee could reduce future remittance inflows by discouraging new applicants.

“The new USD 100,000 fee on new H-1B visa petitions raises the cost of working legally in the US, which could discourage new entrants or slow the growth of that skilled migrant stock, thus dampening future remittance volumes,” he said.

Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., noted that lower remittances could hit the economy as it might limit household spending.

“Lower remittances may show lower disposable income of families with OFWs, thus lower disposable income may result in lower spending,” he said in a Viber message. “Lower spending results in slower jobs and income growth within the domestic economy.”

Mr. Rivera also said weaker inflows could also put a strain on foreign exchange reserves as well as put more pressure on the peso and external balance.

“The Filipino diaspora in the US is still the largest globally — by far — so I highly doubt that making it difficult for new entrants to come into the country in the future will instantly affect the US’ position as the largest origin market for remittance inflows,” Mr. Chanco said.

“For now, with total remittance growth holding fairly steady at 3%, these aforementioned developments in the US shouldn’t have a significant bearing on the Philippines growth prospects,” Mr. Chanco added. — Katherine K. Chan

ASEAN, South Korea launch FTA upgrade talks

KUALA LUMPUR — Philippine President Ferdinand R. Marcos, Jr. on Monday pushed for an expanded free trade deal between the Association of Southeast Asian Nations (ASEAN) and South Korea, saying this would keep markets open and counter growing protectionist trends in the global economy.

Mr. Marcos said a review of the ASEAN-Korea Free Trade Agreement (AKFTA) marks a “shared determination” to ensure the partnership remains relevant amid global economic uncertainty.

“The Philippines welcomes the launch of the negotiations to upgrade the ASEAN-Korea Free Trade Area, a timely step in strengthening ASEAN-Korea economic ties and ensuring that our partnership remains relevant in today’s rapidly changing global economy,” he said during the 26^thASEAN-Republic of Korea Summit in Kuala Lumpur.

The President added that enhancing the trade pact would reaffirm both sides’ commitment to transparency, fairness and cooperation in trade.

Trade between ASEAN and South Korea reached USD 187.1 billion in 2023, according to the South Korean Ministry of Foreign Affairs.

Seoul is the regional bloc’s second-largest trading partner, while ASEAN is South Korea’s second-largest investment destination, with foreign direct investment inflows reaching USD 10.8 billion in 2022 and USD 7.31 billion in 2023.

ASEAN Studies lecturer at De La Salle-College of St. Benilde Josue Raphael J. Cortez said the review of the AKFTA underscores the need for trade partnerships to adapt to current geoeconomic challenges.

As ASEAN’s second-largest trading partner, South Korea plays a key role in ensuring mutual economic resilience amid global shifts, he noted.

“This strengthening of partnership is undoubtedly a win-win situation, especially since trade diversification is not an alternative anymore today, but is an imperative that every nation-state must embrace,” he said via Facebook Messenger.

If realized, the upgraded FTA would boost trade in agriculture and machinery, enhance tourism-driven growth, and attract more South Korean investments to the region, he added.

For the Philippines, the deal could strengthen its electronics exports and provide alternative sources of oil, petroleum, and agricultural goods, supporting both energy stability and food security, Mr. Cortez noted.

RCEP

During the 5^th Regional Comprehensive Economic Partnership (RCEP) Leaders’ Summit on Monday, Mr. Marcos urged the member states to accelerate the accession process to expand the bloc’s membership and ensure that businesses, especially micro, small, and medium enterprises (MSMEs), fully benefit from the world’s largest free trade agreement.

He noted that early expansion would deepen regional integration, reinforce supply-chain resilience, and reaffirm ASEAN’s central role in shaping Asia’s economic future.

“It is in our collective interest to advance the accession process without delay,” Mr. Marcos said.

The RCEP brings together the ASEAN member states along with China, Japan, South Korea, Australia and New Zealand, covering nearly a third of global gross domestic product (GDP) and trade.

“RCEP exemplifies ASEAN’s commitment to a rules-based trading system — our strongest anchor amid today’s global uncertainties,” the Philippine president said.

“It provides a stable and predictable framework for trade and investments, allowing our economies to grow and develop together in an environment of trust, fairness, and transparency.”

Mr. Marcos called on all RCEP parties to enhance cooperation on awareness-building and capacity development, enabling MSMEs to utilize the pact’s benefits better.

He added that Manila is ready to collaborate with other members on a regional campaign to promote the pact and facilitate dialogue, business matching and cross-border collaboration.

“To further demonstrate our commitment, the Philippines will be pleased to host this International Trade Forum in November next year,” he said.

The President also underscored the need for RCEP to evolve with global trends, highlighting the importance of cooperation in digital trade, the creative economy, green transition, and innovation.

According to Mr. Cortez, the President’s remarks highlighted the Philippines’ openness to collaborate with other nations and underscore the importance of multilateral approaches to today’s economic challenges.

He noted the regional trade pact offers a framework for both developed and developing members to protect their economic interests amid global market volatility and geopolitical uncertainty.

“One has to bear in mind that trade is not merely affected by skyrocketing tariffs, but also political and armed conflicts. With every part of the world today seemingly challenged by political uncertainty, trade disruptions are inevitable,” Mr. Cortez said.

“Hence, it is in the best interest of RCEP not only to devise collective frameworks, but also to widen its membership as these new signatories, in one way or another, will always be an alternative should the need arise.”

He urged the bloc to expand its focus beyond traditional industries to emerging sectors like the creative economy and innovation — while ensuring such progress does not disadvantage low-skilled workers, in line with RCEP’s founding principles.

Tariff talks continue

Palace Press Officer Clarissa A. Castro quoted Special Assistant to the President for Investment and Economic Affairs Frederick D. Go as saying the tariff negotiations between Manila and Washington continue.

This as Malaysia and Cambodia signed trade pacts with the US over the weekend, while framework trade agreements with Vietnam and Thailand were also inked.

“There are also some issues that we can describe as comprehensive, particularly concerning trade rules and regulations, as well as nontariff measures like services and investments,” Ms. Castro said in Filipino during a briefing at the Kuala Lumpur Convention Center on Monday.

“These involve issues related to protecting our country’s interests, especially in sectors such as agricultural products — like coconuts, pineapples, sugar, cocoa — and electronic products,” Ms. Castro said, noting these are among the areas Manila cannot easily address at the moment.

Since Aug. 7, the US has imposed a 19% duty on many goods from the Philippines, Cambodia, Malaysia, Thailand and Indonesia.

“ASEAN values its partnership with the United States and seeks to build practical, strategic, and forward-looking collaboration that delivers concrete outcomes for our businesses and citizens alike,” Mr. Marcos said during the 13^th ASEAN-US Summit on Sunday. — Chloe Mari A. Hufana, Reporter

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