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The Philippine economy may face pressure amid President Donald J. Trump’s policies, which could impact the currency, inflation and remittances, Fitch Ratings said.

“Shifting economic and foreign policies in the US pose risks for the Philippines, as well as for other sovereigns,” Krisjanis Krustins, director at Fitch Ratings’ Asia-Pacific Sovereigns team and primary sovereign rating analyst for the Philippines, said in a report.

Mr. Trump began making good on his threat to impose higher import tariffs on major trading partners. A 10% tariff on all Chinese imports to the US took effect on Tuesday, but steep tariffs on imports from China and Mexico were postponed.

“Further strengthening of the US dollar from trade protectionism could put further pressure on the Philippine peso and inflation, although weaker global growth and diversion of Chinese exports could offset this to some extent,” Mr. Krustins said.

The peso has been under pressure in the past months amid the dollar surge. It fell to a record-low PHP 59 level thrice last year.

The central bank expects inflation to average 3.3% this year and 3.5% in 2026 but warned the balance of risks to the inflation outlook remains tilted to the upside.

“The Philippines would be vulnerable to a change in US immigration policy, given the importance of remittances for domestic consumption, although these are fairly diversified,” Mr. Krustins said.

The United States typically accounts for about 40% of cash remittances to the Philippines.

Apart from tariffs, Mr. Trump also sought to impose harsher immigration measures.

Mr. Trump, a Republican, has taken an array of executive actions to deter illegal immigration, and ramping up arrests and deportations of illegal migrants, Reuters reported.

 ‘Strong growth’

Meanwhile, Fitch expects the country to post “strong medium-term gross domestic product (GDP) growth and gradual fiscal consolidation.”

The credit rater sees the economy growing by 5.9% this year, slightly below the government’s 6-8% target. It expects GDP to expand by 6.2% in 2026.

Growth next year will be driven by further monetary easing, infrastructure spending and trade and investment reforms, it said.

Latest data from local statistics agency showed Philippine GDP grew by a slower-than-expected 5.2% in the fourth quarter. This brought full-year growth to 5.6%, short of the 6-6.5% government goal.

“As noted in June, positive rating action would hinge on even faster growth and debt reduction, or structural improvements, such as stronger governance and GDP per head,” Mr. Krustins said.

“Nevertheless, domestic and external uncertainties have risen, with risks skewed towards slower consolidation,” he added.

The National Government’s budget deficit widened by 5.92% to PHP 1.18 trillion in the first 11 months of 2024, the Treasury reported. The government has set a deficit ceiling at 5.7% of GDP for 2024 and targets to bring this to 3.7% by 2028.

“A focus on growth, as well as the approach of midterm elections in May 2025 will limit the scope for faster debt reduction,” Mr. Krustins said.

“The government already pared its consolidation plans in 2024, and the Finance secretary has ruled out new taxes possibly until the end of the Marcos administration in 2028.”

Fitch also cited domestic political tensions, which could “weigh on economic and fiscal performance.”

“Fierce public disagreements have erupted between President Ferdinand R. Marcos, Jr. and Vice-President Sara Duterte-Carpio and their families,” it added. – Luisa Maria Jacinta C. Jocson, Reporter

Electricity prices at the Wholesale Electricity Spot Market (WESM) declined in January due to a higher average system margin, according to the Independent Electricity Market Operator of the Philippines (IEMOP).

Preliminary data from IEMOP showed that the WESM price system-wide dropped by 14.3% to PHP 2.96 per kilowatt-hour (kWh) in January, from PHP 3.45 per kWh in December 2024.

Supply decreased by 0.2% to 20,110 megawatts (MW). Demand, on the other hand, fell by 5.6% to 12,529 MW. This resulted in a 10.26% increase in the average system margin to 7,581 MW.

“Due to the increase in the average system margin, the system average price decreased by 14.3%, dropping to PHP 2.96 per kWh,” said Arjon B. Valencia, manager for corporate planning and communications at IEMOP.

In Luzon, the spot price decreased by 8.5% month-on-month, falling to PHP 2.98 per kWh from PHP 3.26 per kWh.

Available supply dropped by 1.6% to 13,962 MW. Demand also decreased by 6.4% to 8,741 MW.

WESM prices in the Visayas declined by 19.1% to PHP 3.13 per kWh from PHP 3.87 per kWh the previous month.

The grid’s supply dropped by 4.5% to 2,372 MW. Demand fell by 4.4% to 1,856 MW.

For Mindanao, IEMOP said that WESM prices decreased by 31.9% month-on-month to PHP 2.65 per kWh from PHP 3.88 per kWh.

Supply increased by 8.7% to 3,775 MW, while demand declined by 2.9% to 1,931 MW.

IEMOP operates the WESM, where energy companies can buy power when their long-term contracted supply is insufficient to meet customer needs. — Sheldeen Joy Talavera

Philippine manufacturing activity continued to expand in January, albeit at the slowest pace in five months, S&P Global said on Monday.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) stood at 52.3 in January, easing from the 54.3 logged in December 2024. This was the lowest PMI reading in five months or since the 51.2 reading in August 2024.

In its report, S&P Global said the PMI reading signaled a “solid improvement” in manufacturing conditions in the Philippines.

A PMI reading above 50 denotes better operating conditions than in the preceding month, while a reading below 50 shows a deterioration.

“The Filipino manufacturing sector started the year with a further and strong improvement in demand. Output grew again, albeit at a pace which notably weakened from December,” Maryam Baluch, economist at S&P Global Market Intelligence, said in a statement on Monday.

In January, the Philippines had the fastest PMI reading among six Association of Southeast Asian Nations (ASEAN) member countries ahead of Indonesia at 52.3.

A contraction in manufacturing activity was seen in Thailand (49.6), Vietnam (48.9),  Malaysia (48.7), and Myanmar (47.4).

Demand for Philippine-made goods improved in January, although the pace of growth slightly decelerated from the recent high observed in December, S&P Global said.

“Nevertheless, the rate of expansion in intakes of new orders remained historically robust, as firms reported that strong client demand and the acquisition of new customers drove increased sales,” it said.

S&P noted that solid demand trends drove manufacturing output higher, but January marked the second weakest in the current 10 consecutive months of growth.

This was attributed to competition and elevated raw material prices that constrained production.

However, an increase in production requirements prompted manufacturers to hike purchasing activity in January.

“Companies also focused on stock building, with both pre- and post-production inventories rising at historically strong rates during the latest survey period,” S&P said.

“Notably, stocks of finished goods recorded a fresh increase following a sharp decline in December.”

In January, supply chains remained under pressure. The lack of delivery trucks and port congestion prolonged the average lead times for inputs, S&P said.

The decline in vendor performance in January was the least pronounced in five months.

S&P Global said employment remained flat for the second consecutive month.

The increased sales enticed manufacturing companies to hire more workforce but was offset by reports of resignations, it said.

“Regarding prices, both cost burdens and output charges increased at similar, but historically subdued, rates,” S&P said, adding that high material and transportation costs drove up expenses which firms pass on to their clients.

For the coming year, manufacturers maintained a positive outlook, driven by expectations of stronger market demand and the upcoming election period. However, overall sentiment remained below the trend level.

“If demand trends continue to improve as they have done, then employment growth could be on the cards in the months ahead,” Ms. Baluch said.

Ms. Baluch said the election year will likely help drive growth in the manufacturing sector, citing the survey respondents.

“We could see 2025 shaping up to be another strong year of growth for the Philippines manufacturing sector with industrial production growth forecasted at 3.9% in 2025, up from 2.4% in 2024,” she said.

“In fact, the anticipation of greater demand has already prompted goods producers to increase their inventory levels.”

The Philippines will hold its midterm elections on May 12.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the slower pace in factory activity was partly due to “the seasonal decrease in demand and production activities upon crossing the new year after the Christmas holiday season.”

“Still relatively higher prices, interest rates, and weaker peso exchange rate vs. the US dollar since 2022 also partly weighed on demand and manufacturing activities,” Mr. Ricafort added.

He also said that increased government spending on infrastructure and some election-related spending could benefit some manufacturers that are part of the supply chains for various infrastructure projects.

In an e-mail, Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said the Philippines remains as the region’s main outperformer but “hit a big speed bump.”

“Overall, the regionwide index for January was the softest print in 11 months; at best, its general slowdown is still stabilizing.”

ASEAN PMI stood at 50.4 in January, easing from 50.7 in December.

Mr. Chanco said headline reading will likely fall rather than improve, “as short-term leading indicators continue to weaken.” — Aubrey Rose A. Inosante

The Department of Agriculture (DA) declared on Monday a food security emergency on rice, the latest effort by the government to lower the cost of the staple grain.

“This emergency declaration allows us to release rice buffer stocks held by the National Food Authority to stabilize prices and ensure that rice, a staple food for millions of Filipinos, remains accessible to consumers,” Agriculture Secretary Francisco P. Tiu-Laurel, Jr. said in a statement.

The DA cited the “extraordinary” increase in local rice prices despite the drop in global prices and the reduction in tariffs last July.

Last month, the National Price Coordinating Council approved the resolution urging the DA to declare a food security emergency for rice.

Under Republic Act No. 12708 or the Agricultural Tariffication Act, the Agriculture secretary can declare a food security emergency in case of rice supply shortages or extraordinary price spikes.

Under a food security emergency, the NFA would release its rice buffer stock to government agencies, local government units, and the KADIWA ng Pangulo program.

“The NFA currently holds a buffer stock of approximately 300,000 metric tons (MT) of rice, half of which could be released over the next six months to ensure sufficient supply for emergencies and disaster response,” the DA said.

“The NFA may increase this volume, if necessary, as it prepares to begin palay procurement in the coming weeks,” it added.

The department said the food security emergency “will remain in effect until the situation improves,” adding it will regularly review the situation.

Last week, the NFA said that it would release about 150,000 MT of rice stocks over a six-month period or 30,000 MT per month, allowing the NFA warehouses to free up space during the incoming harvest season.

President Ferdinand R. Marcos, Jr. last year issued Executive Order No. 62 which slashed tariffs on rice imports to 15% from 35% previously until 2028. This was aimed at lowering rice prices and tame inflation.

According to the DA’s price monitoring of Metro Manila markets as of Feb. 1, a kilo of imported special rice was priced between PHP 52 and PHP 61, compared with the PHP 57 and PHP 65 per kilo a year ago.

The price of imported premium rice stood at PHP51 – PHP 58 per kilo as of Feb. 1. from PHP 54 – PHP62 per kilo last year.

On the other hand, imported well-milled rice is currently between P40 and P52 per kilo, while imported regular milled rice is at PHP 38 to PHP 48 per kilo. — A.H.Halili

Headline inflation may have eased in January amid lower electricity rates and food prices, analysts said.

A BusinessWorld poll of 16 analysts yielded a median estimate of 2.8% for the consumer price index (CPI) in January.

This is within the 2.5%-3.3% forecast of the Bangko Sentral ng Pilipinas (BSP) for the month and the 2-4% target range.

If realized, January inflation would have eased from 2.9% in December and matched the 2.8% print a year ago.

The Philippine Statistics Authority (PSA) is set to release January inflation data on Feb. 5 (Wednesday).

“We expect headline inflation to ease, driven by lower food price inflation, while a decline in electricity generation rates partly offset a pickup in retail fuel prices,” Nomura Global Markets Research analyst Euben Paracuelles said.

Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said food inflation has been steady “largely due to reports that rice prices have declined versus prior months with favorable supply prospects following the end of El Niño.”

Rice inflation sharply slowed to 0.8% in December from 5.1% in November and 19.6% a year prior.

The PSA earlier noted the possibility of rice inflation turning negative in January.

“We expect headline inflation to decelerate on the back of retail rice prices falling to P37 per kilogram and electricity prices easing,” HSBC economist for ASEAN Aris D. Dacanay said.

Manila Electric Co. lowered the overall rate by P0.2189 per kilowatt-hour (kWh) to P11.7428 per kWh in January from P11.9617 per kWh in December.

Oil-price hikes

On the other hand, analysts flagged risks that could stoke inflation, such as fuel costs.

“While electricity rates eased on the back of lower generation charges, domestic fuel prices were up over three straight weeks in January due to higher global oil prices,” Sarah Tan, an economist from Moody’s Analytics, said.

In January, pump price adjustments stood at a net increase of P2.65 a liter for gasoline, P4.80 a liter for diesel and P3.80 a liter for kerosene.

Mr. Dacanay said inflation could have eased further if not for other non-core components.

“For instance, retail fuel prices continue to climb due to a strong US dollar, while pork prices jumped as the increase in African Swine Flu cases took a toll on supply,” he said.

“Higher prices were observed for fuel as well as for key food items such as vegetables, meat, fish, and fruits,” Chinabank said.

Food inflation could have also reflected the impact of storm damage late last year, Ms. Tan said.

“Flood damage knocked food production in the final months of 2024, stoking inflation. These upward price pressures are expected to linger into the opening month of the new year,” she added.

Several storms hit the country in the fourth quarter, leading to billions of pesos worth of agricultural damage. The combined effects of tropical cyclones Kristine and Leon resulted in PHP 9.81 billion in agriculture losses.

“Further, water rates were also upwardly revised as of Jan. 1, which will add to households’ and businesses’ utility bills through the year,” Ms. Tan said.

“The higher water rates are said to contribute to the expansion of water service and infrastructure projects,” she added.

The Metropolitan Waterworks and Sewerage System Regulatory Office had approved a P5.95-per-cubic-meter increase for Manila Water Co., Inc. and P7.32 per cubic meter for Maynilad Water Services, Inc., starting January.

“The annual adjustment in water rates in Metro Manila, along with the increase in sin taxes also added to upward price pressures,” Chinabank Research said.

Inflation outlook

In the coming months, inflation is seen to continue settling within the 2-4% target range.

“Looking ahead, inflation will likely remain within target, barring new shocks,” Chinabank Research said.

The BSP projects inflation to average 3.3% this year. Even accounting for risks, it sees inflation potentially hitting 3.4%.

“On a monthly basis, we may see headline inflation bottom out at 2.4% year on year in February and a slight decline from December… as heavyweight CPI housing rental, electricity, water, and gas ease to less than 2%,” Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, said.

“Moving forward, we expect the government’s ongoing efforts to manage rice supply to bring overall inflation down in the next few months,” Mr. Dacanay said.

The government implemented a maximum suggested retail price on imported rice in Metro Manila in late January to address elevated prices.

The within-target inflation outlook will allow the BSP to continue its rate-cutting cycle, analysts said.

‘This will support further monetary policy easing in the Philippines, reducing the pressure on the budgets of households and businesses,” Ms. Tan said.

“This favorable inflation outlook, along with the weaker-than-expected GDP growth in the fourth quarter, supports the case for another interest rate cut by the BSP in its upcoming policy meeting this month,” Chinabank Research said.

Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco said he expects the BSP to deliver a 25-basis-point (bp) rate cut at its first meeting for the year as inflation is likely within the 2-4% target range in January and fourth-quarter growth was weaker than expected.

Sun Life Investment Management and Trust Corp. economist Patrick M. Ella said the latest growth outturn will be a “larger consideration” for the BSP.

The Philippine economy grew by a slower-than-expected 5.2% in the fourth quarter, bringing full-year 2024 growth to 5.6%. This falls short of the government’s 6-6.5% target.

“We think the BSP will have to cut 25 bps for the first Monetary Board meeting this year. The weakness in consumption and private investments points to the need for support from the monetary policy side at the moment,” Mr. Ella said.

“This may lead to a weaker peso in the near term but the pressing need to support growth is immediate,” he added.

However, analysts also said that the BSP’s easing cycle may be derailed as risks persist.

Ms. Tan said the pace of further easing may be more moderate than last year.

“We’re looking at two quarter-point rate cuts by December, with the first coming through in mid-2025 at the earliest,” she said.

“The BSP will be prudent in monitoring global developments that could reinflate inflation and weaken the strength of the peso,” she added.

Mr. Neri likewise expects the central bank to deliver just 50 bps worth of cuts this year.

“That said, we continue to see risks that could limit the BSP’s rate cuts to just 50 bps this year,” he said.

“If BSP becomes too aggressive with easing, the peso could be subject to sizable exchange market pressure, which, in turn, could fuel inflation expectations.”

The peso has been under pressure in the past few months, sinking to the record-low 59-per-dollar level thrice in 2024.

Ms. Tan expects the Monetary Board to keep rates steady at its Feb. 13 meeting as it will likely remain cautious.

BSP Governor Eli M. Remolona, Jr. has signaled the possibility of up to 50 bps worth of rate cuts this year. – Luisa Maria Jacinta C. Jocson, Reporter

More short-term foreign investments entered the Philippines in 2024, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Foreign portfolio investments registered with the central bank through authorized agent banks posted a net inflow balance of USD 2.1 billion last year, a turnaround from the USD 248.84-million outflow in 2023.

These investments are called “hot money” because of the ease with which they can enter or leave a jurisdiction, as opposed to foreign direct investment, which is considered less fickle.

Central bank data showed gross inflows jumped by 39.2% to USD 17.93 billion in 2024 from USD 12.89 billion a year ago.

Over half or 54.2% of these investments went to peso-denominated government securities, while the rest were invested in Philippine Stock Exchange (PSE)-listed shares of banks; holding firms; property; transportation services and food, beverage and tobacco.

In 2024, the top investor countries were the United Kingdom, Singapore, the United States, Luxembourg and Hong Kong, accounting for the bulk or 86.3% of investments.

Meanwhile, gross outflows totaled USD 15.83 billion last year, higher by 20.5% from USD 13.14 billion in 2023.

“Majority (or 96%) of these outflows represented capital repatriation while the remaining 4% pertained to remittance of earnings. The US continued to be the main destination of outflows with 49.8% of total,” the BSP said.

In December alone, the hot money balance stood at a net outflow of USD 487.37 million in 2024, more than double (137.5%) the USD 205.18-million outflow in the previous year.

Gross inflows slipped by 1% to USD 1.055 billion during the month from USD 1.065 billion a year ago. It also fell by 43.4% from the USD 1.86-billion inflows recorded in November.

Broken down, 51.7% of these went to peso government securities while the remaining 48.3% were in PSE-listed securities.

In December, inflows came mostly from the United Kingdom, the United States, Singapore, Germany and Ireland, accounting for 76.3% of investment inflows.

On the other hand, gross outflows rose by 21.4% to USD 1.54 billion from USD 1.27 billion. Month on month, it declined by 12.6% from USD 1.76 billion.

“The US remains to be the top destination of outflows, receiving USD 718.88 million (or 46.6%) of total outward remittances,” it said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the hot money net inflow was due to the start of monetary easing by the US Federal Reserve and BSP.

The US central bank began its easing cycle in September last year, slashing interest rates by a total of 100 basis points (bps) in 2024.

The BSP also kickstarted its rate-cutting cycle in August last year. It reduced borrowing costs by a total of 75 bps by end-2024, bringing the key rate to 5.75%.

This helped “reduce funding costs, spur more investments, employment, trade, and other business activities,” he added.

The country’s recent credit rating upgrades and improvements also supported investor sentiment, Mr. Ricafort said. 

In August, Japan-based Rating and Investment Information, Inc. upgraded the Philippines’ investment grade rating to “A-.”  — Luisa Maria Jacinta C. Jocson

The Philippines has secured a USD 500-million policy-based loan from the Asian Development Act (ADB) that will fund the government’s labor market programs and reforms aimed at boosting job creation.

The Business and Employment Recovery Program-Subprogram 2 supports government efforts “to achieve inclusive economic growth by equipping the country’s labor force, including vulnerable youth, with the skills required to meet evolving industry needs,” the ADB said in a statement.

The program will also aim to raise women’s participation in the workforce through technical and vocational education and training, as well as provide better access to opportunities.

Under the program, the government is targeting to increase formal employment in the private sector by around 600,000 to 700,000 jobs annually. This would help raise the share of private sector jobs to total employment to 51%, versus 49% in 2019.

“While job recovery in the Philippines has been encouraging in the post-COVID-19 (coronavirus disease 2019) period, the quality of jobs remains a critical concern, with many workers still facing challenges such as underemployment, informality, and limited access to decent work opportunities,” ADB Country Director for the Philippines Pavit Ramachandran said.

The program also seeks to provide skills training for 5,000 workers through private sector-led programs such as the SkillsUpNet Philippines.

The government also hopes to boost the number of job placements through public employment service offices in local government units (LGUs) by as much as 120,000 annually.

It also wants more LGUs to implement the JobStart Philippines skills training program for the youth.

Latest data showed the unemployment rate dropped to 3.2% in November, translating to 1.66 million unemployed Filipinos. The November jobless rate was lower than 3.9% in October and 3.6% in the same month in 2023.

For the first 11 months of 2024, the jobless rate averaged 3.9%, easing from 4.5% during the same period in 2023.