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The Philippines’ reciprocal trade agreement with the US is still being finalized a day before its expected implementation, the Department of Trade and Industry (DTI) said.

“Our talks are still ongoing. We just have to see what will happen on Aug. 1,” said Trade Undersecretary Allan B. Gepty on the sidelines of the British Chamber of Commerce Philippines 2025 Midyear Economic Briefing.

“The announcement is 19% but let us see what will happen. There are still a lot of things that we are ironing out,” he added.

The US is expected to implement the 19% tariff on Philippine goods starting today (Aug. 1), slightly lower than the 20% rate that US President Donald J. Trump threatened to impose.

While this is the second-lowest rate in Southeast Asia, the rate is still higher than the 17% announced in April.

Philippine government officials have justified the modest tariff shift to the few concessions it had offered. The Philippines had agreed to grant zero tariffs on automobiles, wheat, soy, medical equipment, and pharmaceutical products from the US.

“Well, maybe what I can say is that we are working on the details. So, the details, of course, cover other terms and conditions of the agreement because it’s not just market access,” said Mr. Gepty.

“So, there is a set of rules that we are negotiating. But of course, as I have mentioned before, it is covered by our nondisclosure agreement,” he added.

Citing previous US pronouncements, Mr. Gepty said that Washington is also interested in a lot of measures that basically affect trade.

“So, that is why we also have to address those measures, like the nontariff barriers,” he said. “Definitely there will be some announcements to be made once there is a set of parameters that will be agreed upon by both sides.”

“What is really important is that we engage with the US. Because the US is a major trading and investment partner of the country. And of course, we’re really advocating for a free trade agreement (FTA),” he added.

Limited impact

Meanwhile, Finance Undersecretary and Chief Economist Domini S. Velasquez said the impact of the US tariff on the Philippine economy will likely be “very limited.”

“It’s not just the Philippines, but we compare it with others. Until we have that kind of clarity, we don’t know. We know it’s limited given that we have smaller exports compared to the rest of the world,” she told reporters on the sidelines of an event on Thursday.

“(For) full-year GDP, (the impact is) very limited. For exports, of course, it will have an impact… but we need to see the whole picture,” she added.

The Philippines’ new US tariff rate is now the same as Indonesia, and slightly lower than Vietnam’s 20%.

“For the Philippines, we do think it is still one of the lowest in the region at 19%… for example, semiconductors, which take up a majority of the exports of the Philippines, remain to be zero tariffs or exempt for now.”

“Looking at our domestic situation, the Philippine economy continues to grow at a solid pace, broadly aligned with the 6% target of the government,” she added.

The government is targeting 5.5-6.5% growth this year. The Philippine Statistics Authority is set to release second-quarter GDP data on Aug. 7.

Ms. Velasquez noted the recent trade deficit data, which showed a surge in exports, reflecting the frontloading done by US importers.

Latest data from the Philippine Statistics Authority (PSA) showed the country’s trade deficit narrowed to USD 3.95 billion in June as exports jumped by 26.1% to USD 7.02 billion. This marked the sixth straight month of annual expansion for exports.

In June, the United States was the top destination for Philippine-made goods at USD 1.22 billion or a 17.3% share to total exports.

“We’re a little bit more cautious in the second half of the year in terms of trade because imports in the US have increased. Exports, not just in the Philippines but in the rest of Asia, have increased also because of this front-loading of exports to the US,” Ms. Velasquez said.

Meanwhile, Ms. Velasquez said the government is continuing to implement reforms and policies that will further open up the economy and generate investor interest.

“There’s difficulty for foreign investors to come in here. Now that we’ve liberalized (several sectors), what we need to do is incentivize investors to come into the Philippines.”

“Unfortunately, it’s a very uncertain environment and it’s a little bit more difficult as opposed to your business-as-usual kind of environment,” she said.

The Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act (CREATE MORE) is one such measure that the government is banking on to bring in more investors.

“This administration is building on past liberalization reforms by actively incentivizing foreign investment through the CREATE MORE Act,” she said.

The CREATE MORE Act has yielded a total of 182 projects with committed investments worth P90.13 billion since the approval of its implementing rules and regulations. It is also expected to generate more than 40,000 jobs. — Justine Irish D. Tabile and Luisa Maria Jacinta C. Jocson

The national government’s (NG) outstanding debt jumped to a fresh high PHP 17.27 trillion as of end-June, data from the Bureau of the Treasury (BTr) showed.

The latest data from the BTr showed outstanding debt rose by 11.5% from PHP 15.48 trillion in the same month in 2024.

Despite hitting a fresh high, the Treasury said outstanding debt “remains sustainable.”

Month on month, NG debt inched up by 2.1% from PHP 16.92 trillion in May due to “strong investor demand for government securities,” the BTr said.

NG debt is the total amount owed by the Philippine government to creditors such as international financial institutions, development partner-countries, banks, global bondholders and other investors.

The bulk or 69.2% of the total debt was owed to domestic creditors, while the rest was owed to foreign creditors.

Domestic debt, which is composed of government securities, increased by 13% to PHP 11.95 trillion as of end-June from PHP 10.57 trillion in the same month last year.

Month on month, domestic borrowings rose by 1.4% from PHP 11.78 trillion at end-May.

The BTr said it prioritizes domestic borrowings because it is “consistent with the government’s goal to boost the local capital market while lowering foreign exchange risks and building investor trust in Philippine-issued securities.”

On the other hand, external debt rose by 8.3% to PHP 5.32 trillion as of end-June from PHP 4.91 trillion a year ago. It also went up by 3.5% from PHP 5.14 trillion in the previous month.

Foreign debt was composed mainly of PHP 2.71 trillion in government securities and PHP 2.6 trillion in loans.

External debt securities consisted of PHP 2.29 trillion in US dollar bonds, PHP 252 million in euro bonds, PHP 59.32 billion in Japanese yen bonds, PHP 56.38 billion in Islamic certificates and PHP 54.77 million in peso global bonds.

As of end-June, the NG-guaranteed obligations “remained stable” and inched up by 0.4% to PHP 345.11 billion from PHP 343.65 billion a year ago.

“The year-to-date decline of PHP 4.33 billion since end-2024 highlights continued efforts to manage contingent liabilities while supporting essential sectors,” the BTr said.

Month on month, it also increased by 0.4% from the end-May level of PHP 343.58 billion.

“After the NG released a statement effectively raising the debt ceiling for the country, the new inflow of borrowings seems to be in line with their goal of further increasing their spending to drive growth and development,” Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said in a Viber message.

Earlier this month, Palace Press Officer Clarissa A. Castro said the Department of Finance  considers 70% of gross domestic product (GDP) to be the international threshold for sustainable borrowing, as opposed to the 60% rule-of-thumb that multilateral banks often hold developing countries to.

NG debt as a share of GDP rose to 62% at the end of the first quarter, the highest in 20 years. This is a significant jump from the 60.7% posted at the end of 2024.

“The National Government’s prudent debt management approach strategy reflects the Marcos, Jr. administration’s commitment to safeguarding fiscal sustainability, supporting inclusive growth, and ensuring that every peso borrowed is used to build a stronger economy for the Filipino people,” the BTr said.

The NG’s outstanding debt is projected to reach PHP 17.35 trillion by end-2025. — A.R.A.Inosante

The Philippines’ trade-in-goods deficit narrowed to USD 3.95 billion in June, as double-digit export growth was driven by frontloading in the run-up to higher US tariffs, the Philippine Statistics Authority (PSA) said on Wednesday.

Preliminary data from the PSA showed the country’s balance of trade in goods — the difference between the values of exports and imports — stood at a USD 3.95-billion deficit in June, slimmer than the USD 4.34-billion gap a year earlier. It was the widest trade deficit since the USD 3.97-billion gap seen in April.

Month on month, the trade gap widened from the revised USD 3.63-billion deficit in May.

Outbound shipments of Philippine-made goods jumped by 26.1% year on year to USD 7.02 billion in June, marking the sixth straight month of annual expansion. This was also the fastest growth in exports since 28.2% in April 2024.

Month on month, exports slid by 4% from USD 7.31 billion in May. Export receipts for June were also the lowest since USD 6.78 billion in April.

On the other hand, the value of imports picked up 10.8% year on year to USD 10.98 billion in June from USD 9.9 billion in the same month a year ago.

The growth in imports was the fastest since 17.8% logged in March.

Month on month, imports inched up by 0.3% from USD 10.95 billion in May.

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

The country’s balance of trade in goods has been in the red for over a decade or since the USD 64.95-million surplus in May 2015.

In the January-to-June period, exports increased by 13.2% to USD 41.24 billion, while imports rose by 6% to USD 65.22 billion.

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said in a research note that trade was “flattered hugely by base effects in June,” as exports and imports saw a decline last year.

“The widening of the trade deficit would’ve been more pronounced if not for the still-favorable seasonal effects in play, particularly on the export side,” he said.

Frontloading

In a note, Chinabank Research said exports grew faster in June amid signs of frontloading by US importers due to uncertainty over tariffs.

US President Donald J. Trump in April announced a 17% “reciprocal tariff” on Philippine goods, but implementation was paused until July. Earlier this month, Mr. Trump set a 19% tariff on Philippine goods after a meeting with Philippine President Ferdinand R. Marcos, Jr. It will take effect on Aug. 1.

“Shipments to the US — the Philippines’ top export market — surged (+35.2%), suggesting some frontloading by US importers before higher US tariffs take effect, alongside some base effects (i.e., exports to the US fell 19.8% in June 2024),” Chinabank Research said.

In June, the United States was the top destination for Philippine-made goods at USD 1.22 billion (17.3% share). It was closely followed by Hong Kong (USD 1.065 billion or a 15.2% share), Japan (USD 974.8 million or a 13.9% share), and China (USD 733.99 million or a 10.5% share).

However, Mr. Chanco pointed out the month-on-month decline in exports in June was caused by the “broad-based pullback in demand from a number of key markets, namely, Japan (-10.1%), Hong Kong (-7.6%), and China (-1.6%).”

By major type of goods, exports of manufactured goods went up by 27.3% year on year to USD 5.53 billion in June. This made up the bulk of total outbound sales during the month.

Electronic products, which accounted for more than half of exports and 70.3% of manufactured goods, rose by 30% to USD 3.89 billion.

Semiconductors, which made up a little over 40% of exports and 74% of electronic products, climbed by 24.6% year on year to USD 2.89 billion.

“Month on month, however, semiconductor exports were flat, underscoring the sector’s fragile recovery. A risk is the potential imposition of US tariffs on currently exempt semiconductors, depending on the result of the US’ national security probe into chip imports,” Chinabank Research said.

Silver linings

Meanwhile, Mr. Chanco said there are a few silver linings in the import data, “which is a far more important health-check for the Philippines’ domestic demand driven economy.”

“Specifically, the recovery in previously subdued capital goods imports is going from strength to strength… with their continued surge in June masking a poor month for consumer goods and purchases of raw materials and intermediate goods,” he said.

PSA data showed imports of capital goods grew by 31.1% to USD 3.71 billion in June.

Chinabank Research said the surge in capital goods was “driven by a sharp rise in telecommunication equipment and electrical machinery (+30.4%), and transport-related assets such as aircraft, ships and boats (+702.4%).”

“This indicates that domestic service businesses remain optimistic even in the face of uncertainties,” it added.

Imports of raw materials and intermediate goods inched up 2.9% to USD 3.67 billion in June.

“Demand for consumer goods held firm (+13.1%), with household consumption benefiting from low and stable inflation and robust labor market conditions. The country’s pledge to slash tariffs on automobiles from the US may contribute to the increase in this category moving forward,” Chinabank Research said.

By commodity group, electronic products, which accounted for more than a fifth of total imports, went up by 14.9% to USD 2.56 billion in June.

Orders of semiconductors, which accounted for 70% of electronic products and 16.3% of total imports, rose 22.8% year on year to USD 1.79 billion in June

China remained the main source of imported products, which accounted for 28.2% of the total or USD 3.1 billion. Japan followed with a 7.9% share or USD 870.15 million and South Korea’s 7.8% share or USD 853.26 million.

Ateneo de Manila University economics professor Leonardo M. Lanzona said the trade data showed strong growth in exports to other markets which could help offset a potential slowdown in demand from the US.

“The Philippines appears to be maintaining strong growth despite trade headwinds, suggesting domestic demand and other sectors are compensating for trade challenges,” Mr. Lanzona said. “It is recommended then that we strengthen the domestic economy at least for now but make sure that this leads to greater exports later.”

The Development Budget Coordination Committee in June raised the export growth assumption for this year to 5% from 3%. It lowered the import growth assumption to 2% from 4%. — Pierce Oel A. Montalvo

Analysts are urging the Philippine government to abolish the “outdated” travel tax, but the Department of Finance (DoF) has warned this could lead to as much as PHP 5.1 billion in revenue losses.

In a statement sent to BusinessWorld, the DoF said it is reviewing Senate Bill (SB) No. 424, which seeks to remove the travel tax imposed on individuals leaving the Philippines via international flights.

“Highly preliminary (estimates show the) removal of travel tax would have cost the government around P5.1 billion in 2023,” the DoF said via Viber message on Friday.

“We will be projecting 2025 onwards and the distributional impact,” the DoF said.

Senator Alan Peter S. Cayetano, author of SB 424, has estimated PHP 4 billion in foregone revenue from the removal of the travel tax. However, he expects the government to gain around PHP 299 billion through increased tourism and spending.

The travel tax was first imposed under Republic Act No. 1478 in 1956 and later amended through Presidential Decree No. 1183, issued by then-President Ferdinand E. Marcos in 1977.

The government collects a travel tax of PHP 1,620 (USD 28.35) from economy air passengers and PHP 2,700 (USD 47.24) from first class air passengers.

Exempted from paying the travel tax are overseas Filipino workers (OFW), Filipino permanent residents abroad who stayed less than a year in the Philippines, and children aged two years and below.

“Abolishing the travel tax is a bold move, people-first move. It empowers more Filipinos to explore, spend, and stimulate the economy. We may lose roughly P4 billion in tax, but we stand to gain close to PHP 300 billion in tourism and local business growth. It’s a smart trade-off,” Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said in a Viber message.

Filomeno S. Sta. Ana III, coordinator of Action for Economic Reforms, said the removal of the travel tax would mean less revenues for the government that is already facing “a worrisome fiscal problem.”

“[Travelers] are willing to pay the tax. The travel tax is not a disincentive for both Filipinos and foreigners to travel to and from the Philippines. And the travel tax is not the real barrier to attracting tourists,” Mr. Sta. Ana said in a Viber message.

Mr. Sta Ana pointed out that the bigger question is how the travel taxes are being used.”

Under the law, 50% of the proceeds from the travel tax collection go to the Tourism Infrastructure and Enterprise Zone Authority (TIEZA), while 40% of the proceeds go to the Commission on Higher Education for tourism-related education programs. The remaining 10% goes to the National Commission for Culture and the Arts.

Nigel Paul C. Villarete, a senior adviser on public-private partnerships at the technical advisory group Libra Konsult, Inc., said most Filipino travelers are not aware of how the travel tax proceeds are used.

“The government must find ways to fund the same. Or we tax the airlines directly since they will still get it from the ticket sales. There are many ways of doing that (instead of collecting it from air travelers),” Mr. Villarete said.

Analysts said the removal of the travel tax would make international flights more affordable for Filipinos and boost tourism activity.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said removing the travel tax would lower the cost of international travel for Filipinos.

“The P5.1-billion revenue loss from abolishing the travel tax is relatively small in the broader fiscal picture, but it funds important programs in education, tourism, and culture,” Mr. Rivera via Viber message said.

Raymond “Mon” Abrea, chairman and chief executive officer of the Asian Consulting Group, said the removal of the travel tax is long overdue as it discourages tourism and regional mobility.

“The Philippines remains the only ASEAN (Association of Southeast Asian Nations) country that still imposes this outdated tax on outbound travelers,” Mr. Abrea told BusinessWorld in a Viber message at the weekend.

He noted that while OFWs are exempt, the travel tax disproportionately affects ordinary residents, particularly those flying economy.

“We can’t promote tourism while charging people to leave the country. It’s time to align with our ASEAN neighbors and put the people’s mobility — and the economy — first,” Mr. Abrea said.

He said TIEZA collected P7.8 billion from its share of the travel tax last year, but this can be subsidized by the general fund.

Mr. Rivera said the government should ensure there is a sustainable alternative to funding tourism investments.

“But until then, a full repeal may be premature. A more targeted reform like exempting OFWs, students, or low-income travelers might be a more balanced approach,” he said.

Eleanor L. Roque, tax principal of P&A Grant Thornton, also backed the removal of the travel tax, citing its high cost and inconvenience for passengers.

“The government has been collecting travel tax since 2009 when it was approved but we have not seen any substantial improvement in tourism because of it,” she said in a Viber message.

Air passengers can pay the travel tax at airport payment counters, the TIEZA website and authorized travel agencies. Travelers can also opt to include payment of the travel tax when buying their airline tickets.

“Abolishing the travel tax would encourage more Filipinos to travel abroad and thus benefit that segment of the aviation sector catering to international travel,” Rene S. Santiago, former president of the Transportation Science Society of the Philippines, said in a Viber message to BusinessWorld.

Under Mr. Cayetano’s bill, nationals from ASEAN member states are also exempted from the travel tax.

This would also align the Philippines with its commitments under the ASEAN Tourism Agreement of 2002, which calls for the gradual elimination of travel levies among member countries to promote regional mobility and tourism integration.

Mr. Marcos last year granted travel tax exemptions to all travelers departing from international airports and seaports in Mindanao and Palawan to any destination in the Brunei Darussalam-Indonesia-Malaysia-Philippines-East ASEAN Growth Area. The tax exemption will be in place until June 30, 2028. — Aubrey Rose A. Inosante, Reporter with inputs from Ashley Erika O. Jose

The  Bangko Sentral ng Pilipinas (BSP) could continue lowering interest rates at its meeting in August, its top official said.

BSP Governor Eli M. Remolona, Jr. told reporters on Tuesday that a rate cut is still “on the table” at the Monetary Board’s next policy review on Aug. 28.

If realized, this would mark the third straight rate cut delivered by the Philippine central bank.

The BSP has so far reduced borrowing costs by a total of 125 basis points since it began its easing cycle in August last year.

Key data releases such as the second-quarter gross domestic product (GDP) will be available by the next policy meeting, Mr. Remolona noted.

He said he expects GDP to have expanded by “around 5.5%” in the second quarter, which would be slightly faster than the 5.4% GDP growth in the first quarter.

The Philippine Statistics Authority is set to release second-quarter GDP data on Aug. 7.

The government is targeting a 5.5-6.5% growth this year.

The BSP can also continue easing rates even after the US starts imposing a 19% tariff on goods from the Philippines starting Aug. 1.

Mr. Remolona said the impact of the tariffs on the Philippine economy will be “modest.”

“Globally it’s much clearer now than before. Our issue is more the global spillover effects than the direct effect,” he said.

“A lot of sectors are exempt. We’re not a big trading economy so that limits the impact on us.”

The Philippines’ new US tariff rate is now the same as Indonesia, and slightly lower than Vietnam’s 20%. 

Meanwhile, the BSP chief said he is keeping his outlook for two more rate cuts this year.

After August, the Monetary Board has two remaining meetings scheduled for October and December.

Asked if there was a possibility for a third rate cut, Mr. Remolona said it would take “something very unusual” to warrant this scenario.

A drastic slowdown in growth was also “very unlikely,” he added.

“Growth has to slow down dramatically… it will depend on not just the quarterly growth but the prospects.”

Meanwhile, Mr. Remolona said they are still comfortable with the peso at the P57 level.

“That’s still quite strong,” he said in mixed Filipino and English.

The peso closed at PHP 57.31 per dollar on Tuesday, depreciating by 11 centavos from its PHP 57.20 finish on Monday. This was its weakest close in more than a month or since its PHP 57.58 close on June 23.

“As you know, we don’t have a target for the peso. I’m more concerned about the potential inflationary effects.” — Luisa Maria Jacinta C. Jocson,  Senior Reporter

The International Monetary Fund (IMF) raised its gross domestic product (GDP) growth forecast for the Philippines for 2026 but kept its projection for this year amid heightened global uncertainty.

In its latest World Economic Outlook (WEO), the IMF upwardly revised its 2026 Philippine growth forecast to 5.9% from 5.8% previously. However, this would be below the government’s 6-7% GDP growth target for next year.

The IMF’s Philippine economic growth projection for 2026 is higher than Indonesia (4.8%), Malaysia (4%), and Thailand (1.7%).

At the same time, the IMF maintained its GDP growth forecast for the Philippines at 5.5% this year, the same as its estimate in April. This would fall at the low end of the government’s 5.5-6.5% target range for 2025.

The IMF projects the Philippines’ GDP growth this year to outpace that of Indonesia (4.8%), Malaysia (4.5%), and Thailand (2%).

“Since the April 2025 WEO, uncertainty has remained elevated even as effective tariff rates have come down,” the IMF said in its report.

US President Donald J. Trump announced a 19% tariff on Philippine goods, following a meeting with President Ferdinand R. Marcos, Jr. last week. The new rate will take effect on Aug. 1

At the time the April WEO came out, the Philippines was slapped with a 17% tariff in Mr. Trump’s initial round of “Liberation Day” tariffs.

The IMF noted that the staff projections in the July update are “based on real-time current trade policy.”

IMF Chief Economist Pierre-Olivier Gourinchas in a speech at the report launch said that the US has “partly reversed course, pausing the higher tariffs for most of its trading partners.”

“Despite these welcome developments, tariffs remain historically high, and global policy remains highly uncertain, with only a few countries having reached fully fleshed out trade agreements,” he said.

“This modest decline in trade tensions, however fragile, has contributed to the resilience of the global economy so far.”

The IMF anticipates global growth at 3% for 2025 and 3.1% for 2026, both higher than its 2.8% and 3% projections in April.

“This resilience is welcome, but it is also tenuous. While the trade shock could turn out to be less severe than initially feared, it is still sizeable, and evidence is mounting that it is hurting the global economy,” Mr. Gourinchas said.

Mr. Gourinchas also warned that risks to the global economy “remain firmly to the downside” as the current trade environment remains “precarious.”

“Tariffs could well reset at much higher levels once the ‘pause’ expires on Aug. 1 or if existing deals unravel. If this were the case, model-based simulations suggest global output would be 0.3% lower in 2026,” he said.

Ongoing trade uncertainty would weigh on investment and activity without comprehensive agreements, he added.

“The geopolitical environment also remains fragile, with a potential for more negative supply disruptions.”

The IMF also flagged high public debt and deficits, which make economies vulnerable to financial shocks.

“The lack of fiscal space makes these countries especially vulnerable to a sudden tightening in financial conditions that increase term premia.”

“Such tightening becomes even more likely if central bank independence — a cornerstone of macroeconomic, monetary and financial stability — is undermined.”

Mr. Gourinchas said that vital policy recommendations include restoring stability in trade policy; preserving central bank independence; restoring fiscal space and efforts towards long-term productivity.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the IMF may have maintained its 2025 growth projection due to expectations of the possible global economic slowdown stemming from the US tariffs.

“Though the local economy is relatively resilient and less affected amid relatively lower goods exports at around three to five times smaller compared to other major ASEAN (Association of Southeast Asian Nations) countries that are more export-dependent,” he said.

“Local economic growth would also be spurred by expansionary fiscal policy through deficit spending in view of wider budget deficits by the National Government, particularly the wider targets, provided by fiscal space available,” he added. — Luisa Maria Jacinta C. Jocson