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Philippine economic growth seen to pick in the second semester, amid an expected rebound in government spending following the election-tied ban, Budget Secretary Amenah F. Pangandaman said.

“Hopefully. I think it’s 6% [in the second semester],” Ms. Pangandaman told reporters on the sidelines of a Department of Budget and Management (DBM) event on Wednesday.

This forecast depends on the pace of public expenditures after the election ban on public works, she said. The 45-day ban started on March 28 and ended with the May 12 elections.

“Our first semester performance is just hitting the low-end of this program, so we must be growing 6% or higher in the second half,” Budget Assistant Secretary Romeo Matthew T. Balanquit told BusinessWorld.

The gross domestic product (GDP) grew by 5.5% in the second quarter, slightly faster than the 5.4% print in the first quarter but slower than the 6.5% a year ago.

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

Economy Secretary Arsenio M. Balisacan earlier said GDP must grow by 5.6% for the rest of the year to achieve the low end of the full-year target.

“Better than the 5.5% in the third quarter. Better because we started again. We released the NCA (Notice of Cash Allocation). You can see agencies began procuring again,” Ms. Pangandaman said.

Latest disbursement report from DBM showed government spending increased by 21.2% to PHP 578.2 billion in May. This was a turnaround from the 27.8% annual contraction in April due to the election ban on public works spending.

The budget department has ordered government agencies to submit their “catch-up plans” to bolster spending for the rest of year.

“They are already submitting submissions to direct the programs and the agency projects. But yes, we’ll get their catch-up plans soon and then we’ll release it to the public,” she said.

Asked if she expects revisions to the 5.5% to 6.5% growth outlook this year, Ms. Pangandaman, who chairs the Development Budget Coordination Committee (DBCC), said: “Not yet.”

The second meeting of the economic managers for this year will likely be scheduled in the end of September, she said.

The DBCC revised macroeconomic assumptions in July to reflect a “more measured and resilient outlook amid global headwinds.”

However, Ateneo Center for Economic Research and Development Director Ser Percival K. Peña-Reyes said faster spending alone may not be enough to lift growth beyond 6% for the second half.

“Our forecast is below 6%,” he said in a Viber message, noting external risks such as uncertainty in the US tariffs.

Mr. Trump last month imposed a 19% duty on the Philippines, which took effect on Aug. 7.
The new rate is slightly lower than the 20% the US had threatened to impose, but higher than the 17% tariff announced during the “Liberation Day” in April.

Mr. Peña-Reyes also noted the lower approvals in foreign investment commitments, which plunged by 64.4% to PHP 67.38 billion in the second quarter, down from the revised PHP 189.5 billion in same period last year. – Aubrey Rose A. Inosante

The Philippines’ balance of payments (BoP) position swung to a USD 167-million deficit in July as the government paid off external debt, the central bank said on Tuesday.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed the BoP position stood at a USD 167-million deficit in July, a reversal from the USD 226-million surplus recorded in June and the USD 62-million surplus in July 2024.

“The BoP deficit reflected National Government’s (NG) drawdowns on its foreign currency deposits with the BSP to service external debt obligations,” the BSP said in a statement.

For the first seven months, the BoP deficit widened to USD 5.756 billion, marking a reversal from the USD 1.504-billion surplus in the January-July period last year.

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

“Preliminary data indicate that the year-to-date BoP deficit was largely due to the continued trade in goods deficit,” the central bank said.

The Philippines’ balance of trade in goods, or the difference between the values of exports and imports, posted a USD 3.95-billion deficit in June, based on data from the Philippine Statistics Authority.

For the first semester, the trade deficit narrowed to USD 23.97 billion from the USD 25.06-billion deficit a year ago.

“This (BoP deficit) was partly offset by the sustained net inflows from personal remittances from overseas Filipinos, foreign borrowings by the NG, and foreign portfolio investments,” the BSP added.

This comes amid prevailing “global trade uncertainty, heightened geopolitical risks, and weakened investor confidence,” the BSP said.

Earlier this year, the central bank revised its BoP forecasts for 2025 to a USD 6.3-billion deficit and for 2026 to a USD 2.8-billion gap.

“The latest BoP deficit (is) partly due to some payment of foreign currency debts and other foreign obligations (as well as the) continued trade deficit and net imports of the country in recent months,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in an e-mail. “Though (this was) offset by some frontloading of Philippine export sales before Trump’s higher tariffs take effect.”

He also noted that the deficit came “amid the continued Trump risk factor or premium that led to some market volatility worldwide in view of the Aug. 7 deadline for the United States’ trade deals and tariffs.”

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the BoP deficit “reflects the growing pressure from trade imbalances and external payments, particularly rising imports, weaker exports, and possibly some debt-related outflows.”

“It is a reminder that global uncertainties and tariff risks continue to weigh on our external sector,” he said via Viber.

“While the National Government and BSP still have tools to stabilize the BoP such as boosting tourism, remittances, and managing capital flows, the outlook remains cautious. Without stronger exports or a more stable Philippine peso, deficits may persist in the near term,” he added.

The BSP expects the overall BoP position to end at a USD 6.3-billion deficit or -1.3% of gross domestic product this year.

GIR decline

Meanwhile, the country’s gross international reserves (GIR) slipped to USD 105.4 billion as of end-July from USD 106 billion at end-June.

“The level of GIR remains an adequate external liquidity buffer, equivalent to 7.2 months’ worth of imports of goods and payments of services and primary income,” the BSP said. “Moreover, it covers about 3.4 times the country’s short-term external debt based on residual maturity.”

GIR comprises foreign-denominated securities, foreign exchange, and other assets such as gold. It enables a country to finance imports and foreign debts, maintain the stability of its currency, and safeguard itself against global economic disruptions.

The central bank expects GIR to settle at USD 104 billion by end-2025. — Katherine K. Chan

The government will not introduce new tax proposals in the 20^th Congress, Finance Secretary Ralph G. Recto said, reaffirming the administration’s fiscal consolidation strategy despite record-high debt.

Speaking with reporters after a Development Budget Coordination Committee briefing at the House of Representatives on Monday evening, Mr. Recto said the Marcos administration would instead focus on previously filed measures including an excise tax on single-use plastics and a tax amnesty program.

Asked whether the Department of Finance would back additional tax initiatives, Mr. Recto replied: “No.”

He also said the government was not considering increases in existing tax rates too.

“We only have the single-use plastics remaining, that’s number one,” he said. “Also possibly, a tax amnesty.”

Mr. Recto had earlier stressed that new revenue measures were unnecessary, pointing to what he described in April as the country’s “robust” fiscal position.

Government data showed the Philippines’ debt-to-gross domestic product ratio had risen to 63.1% as of end-June, its highest level since 2005. The figure remains above the 60% threshold that multilateral lenders view as manageable for developing economies.

The debt ratio is expected to ease to 61.3% by yearend, though still above the earlier 60.4% target, according to a Finance department handout.

Outstanding debt stood at a record PHP 17.27 trillion in June, up 2.1% from the previous month and 11.5% higher than a year earlier.

The excise tax on single-use plastic bags was one of the 28 priority bills identified by the Legislative-Executive Development Advisory Council. While it was approved by the House on third reading in 2022, the measure was stuck at the Senate Ways and Means Committee.

The Finance department last year said the government could raise up to PHP 33.8 billion in excise taxes on single-use plastic bags.

Three measures, which all seek to impose a PHP 100-per-kilogram excise tax on single-use plastic bags, have been refiled at the House. A Senate counterpart bill proposes a lower rate of PHP 20 per kilogram.

Mr. Recto in early August said the government is also looking at proposing a tax amnesty that will involve an amnesty charge set at a yet-to-be-determined percentage of the outstanding unpaid tax, in exchange for immunity from civil, criminal and administrative penalties.

Lawmakers in the House and Senate are pushing for a general tax amnesty that will impose a 2% amnesty tax rate dependent on the total assets of taxpayers up to 2024.

The Finance department’s decision to hold off on introducing new taxes is a “good move” given that proposing new levies could dampen household spending, said Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc.

“More taxes will effectively reduce disposable income of households since more of their income will be directed to taxes rather than consumption,” he said in a Viber message.

“Fiscal consolidation is important to better manage debt and budget efficiency, but if it comes at the expense of economic performance then it may be best to rethink the strategy to achieve this goal,” he added.

While the proposed excise tax on single-use plastics and tax amnesty could boost state revenues, the government should look at expanding the tax base and ensure that revenue streams are “future-proof,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said.

“These should be seen as complementary, not core, measures,” he said in a Viber message. “What we need is better tax administration, improved enforcement and expanded coverage of existing tax measures.”

Mr. Rivera said that if the Finance department reverses its initial stance, then it should look at its impact on Filipino consumers and businesses.

“Any move must be weighed against inflation risks and its impact on consumers and businesses.” — Kenneth Christiane L. Basilio, Reporter

The Marcos administration has shelved a plan to overhaul the pension system for military and uniformed personnel (MUP), Finance Secretary Ralph G. Recto said.

Analysts have warned that the current pension system for MUPs is a “fiscal time bomb” that threatens the Philippines’ fiscal sustainability.

“I think we discussed that already,” he told reporters on the sidelines of a House Committee on Appropriations briefing late on Monday. “Wala na ’yung  (There will be no) MUP reform so far for the remainder of the term.”

“The reform will be costly at this point in time,” Mr. Recto said without providing details.

However, Budget Secretary Amenah F. Pangandaman said the fate of the MUP reform bill will still be discussed in the Legislative-Executive Development Advisory Council (LEDAC) meeting next month.

“We’ll have to sit down. We still have a LEDAC (meeting),” she told BusinessWorld when asked about Mr. Recto’s statement.

Ms. Pangandaman warned that government allocations for MUP pensions will consume a larger share of the national budget in the coming years and could pose a possible fiscal burden if left unchecked.

“As you know, we have a limited fiscal space — so the pension will eat up a chunk of the budget. It will keep piling up, and it’s going to grow even more,” she told BusinessWorld on the sidelines of the briefing late on Monday.

Under the 2026 National Expenditure Program, the proposed allocation for the Pension and Gratuity Fund is at PHP 197.99 billion, 36.8% higher than PHP 144.72 billion this year.

Unlike government and private sector employees whose pension contributions are regularly remitted to the Government Service Insurance System and Social Security System, MUPs do not contribute to their own pension funds.

In 2023, the Department of Finance (DoF) under then-Secretary Benjamin E. Diokno pushed to reform the MUP pension system, warning of the risk of a “fiscal collapse.”

At that time, the DoF proposed to require contributions from all active personnel and new entrants and removed the full indexation of pensions.

However, the House in 2023 approved a version that does not require mandatory contributions from active personnel. Under the approved version, new entrants would be required to contribute 9% of their salary, while the National Government counterpart was set at 12%. It also provided for the automatic indexation of MUP pensions at 100% of the increase in the base pay of active personnel.

The Senate did not pass a counterpart bill for the MUP reform.

‘Fiscal time bomb’

Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said it’s a “risky move” for the government to shelve plans to reform the MUP pension system.

“The current pension setup is a fiscal time bomb — fully funded by taxpayers, no contributions from personnel, and pensions indexed to active salaries,” he told BusinessWorld in a Viber message on Tuesday.

Mr. Ravelas said failure to reform the pension system could saddle the government with a PHP 14-trillion liability and a possible fiscal collapse in the long term.

“We need reform, but with care. Either set up a dedicated, government-backed pension fund seeded with revenues from privatization,” he said.

Mr. Ravelas suggested mandatory pension contributions from new entrants, while scrapping the current automatic indexation of benefits. He said the government should instead implement a fixed annual adjustment of pensions tied to inflation.

Filomeno S. Sta. Ana III, coordinator of Action for Economic Reforms, said delaying the MUP reform may ease political tension in the short term, but it risks long-term fiscal sustainability.

“The current pension system for military and uniformed personnel is noncontributory and ballooning. It consumes a growing portion of the national budget, crowding out funds for education, health, and infrastructure,” Mr. Sta. Ana said.

He also warned that the National Government may face bigger deficits and heavier borrowing down in the future.

“The sooner we address it, the better for long-term economic stability,” he added. — Aubrey Rose A. Inosante and Kenneth Christiane L. Basilio, Reporters

Cash remittances are projected to remain resilient for the rest of the year, potentially surpassing the Bangko Sentral ng Pilipinas’ (BSP) 2.8% full-year growth target, analysts said.

However, they also warned of possible external shocks that could dampen remittance growth.

“We’re on track. First-half growth hit 3.1%, already above BSP’s 2.8% forecast,” Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said in a Viber message.

“If global labor markets stay resilient and the peso remains competitive, we could even beat the (BSP’s) 2.8% full-year target.”

Money sent home by overseas Filipino workers (OFWs) rose by 3.1% to USD 16.75 billion in the first six months of the year, with land-based workers contributing the bulk of the increase.

The BSP is targeting a 2.8% growth in remittances this year, and 3% growth for 2026.

Remittance inflows are expected to accelerate ahead of the holiday season, analysts said.

“We expect remittances to remain a constant and reliable source of foreign currency over the next few months, with a seasonal acceleration as we enter the fourth quarter of the year,” Metropolitan Bank & Trust Co. (Metrobank) Chief Economist Nicholas Antonio T. Mapa said.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said the BSP’s full-year target of 2.8% remittance growth is “well within reach.”

“Remittance flows are expected to remain resilient, supported by seasonal inflows during the ‘ber’ months and improving global labor conditions,” he said.

Analysts warned the US government’s 1% tax on remittances, which will take effect on Jan. 1, 2026, will have a dampening effect on remittances from US-based Filipinos.

“However, the proposed 1% remittance tax in the US could pose downside risks in 2026. While the BSP’s 3% growth target remains achievable, the tax may dampen inflows from the US — currently the largest source — unless mitigated by digital remittance innovations or policy support,” Mr. Asuncion said.

The tax will be applied on cash-based remittance transfers from US-based senders, regardless of citizenship status.

BSP data showed the US remained the top source of remittances to the country in the first half, accounting for 40.1% of total remittances for the period.

“The proposed 1% US remittance tax could dampen inflows (from formal channels) slightly if implemented, but its real impact will depend on scope, implementation, and possible offsets from fintech cost reductions or regulatory responses,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in Viber message.

Mr. Ravelas said the proposed tax is a “red flag,” as it might encourage senders to use informal channels.

“That’s a red flag. The US sends over 40% of our remittances. A 1% tax could dampen flows or push senders to informal channels,” he said. “We’ll need to watch how it’s implemented and prepare support mechanisms for OFWs.”

Mr. Mapa said OFWs have been “creative” in finding ways to send money back home in the past.

“We could still expect remittance flows to remain robust in the near term,” he said.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted US protectionist policies and stricter immigration rules could weigh on remittances from the US.

“Trump’s threats of higher reciprocal tariffs and other America-first policies could also slow down global trade, investments, employment including some OFW jobs, and overall world economic growth,” he said in an e-mail. “This could also indirectly slow down the growth in OFW remittances from other countries around the world.” — Katherine K. Chan