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Analysts are divided on the Philippine central bank’s easing trajectory for the rest of 2025, as an escalating conflict in the Middle East and oil price spike clouds the inflation outlook.

“We still see room for further policy easing to support economic momentum, and expect another rate cut of 25 basis points (bps) by the end of the year,” Moody’s Analytics economist Sarah Tan said in an e-mail.

“Policy easing will continue into 2026 as well. Monetary easing would support the domestic economy amid a complex external environment,” she added.

The Bangko Sentral ng Pilipinas (BSP) on Thursday cut the target reverse repurchase rate by 25 bps to 5.25% from 5.5% amid a moderating inflation outlook and weaker-than-expected first-quarter economic growth.

BSP Governor Eli M. Remolona, Jr. said on Friday that a rate cut in August was on the table depending on the data and a further escalation in the Middle East conflict.

“We could do another rate cut in August or we could pause and do the rate cut in October instead of August. That’s one possibility. But we’re looking at the data every day and we’re going to decide in August what the next move should be,” he said in an interview with CNBC.

The Monetary Board’s remaining policy meetings this year are scheduled for Aug. 28, Oct. 9, and Dec. 11.

Deutsche Bank Research also expects the BSP to cut by 25 bps in August.

“Our baseline for one more 25-bp rate cut in August remains, as we think that annual inflation is likely to stay near the lower end of BSP’s 2-4% target barring an escalation in the Middle East conflict,” it said in a note.

Ms. Tan said the BSP’s policy outlook has turned “slightly gloomier” due to the escalating conflict in the Middle East and uncertainties arising from the Trump administration’s trade policies.

“Political volatility across key oil-producing nations leaves the market vulnerable to sudden shocks. This could fuel higher global oil prices, which is concerning for the Philippines due to its heavy reliance on imported oil. This could add upward price pressures in the domestic economy and risks depreciation of the peso,” she said.

However, Moody’s Analytics does not see inflation breaching the central bank’s 2-4% target this year. The BSP expects inflation to average 1.6% this year, 3.4% in 2026 and 3.3% in 2027.

On the other hand, ANZ Research and Nomura Global Markets Research said the BSP may deliver two more rate cuts this year.

“Given the BSP’s inflation forecast of 1.6% for 2025, a terminal rate of 5% would imply that real rate would still remain elevated at 3.4%. Consequently, we think the BSP will have to cut rates two more times by 25 bps each in Q3 and Q4 2025 bringing the terminal rate to 4.75%,” ANZ Research said.

Nomura Global Markets Research said it expects two 25-bp cuts at the BSP’s August and October meetings “mainly supported by the low inflation outturns in coming months.”

However, the main risk to its view is the timing of these next cuts, Nomura said.

“An escalation in the Middle East conflict that is accompanied by further increases in oil prices could keep BSP from cutting and instead prompt it to leave the policy rate unchanged in the near term,” it said.

“The BSP also highlighted in the policy statement today that the Monetary Board will continue to assess the impact of prior monetary policy adjustments, which in our view suggests BSP could pause, if the domestic economy shows signs of improvement in the short run,” Nomura added.

Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri, Jr. said in a June 19 report that while a rate cut was still possible this year, as the central bank should remain cautious as an overly aggressive easing cycle could leave the economy vulnerable to abrupt rate hikes by the US Federal Reserve.

He added the Monetary Board’s easing cycle could be disrupted if the conflict in the Middle East escalates further.

“Containing inflation should remain the top priority, since high inflation has been the main reason for the slowdown in GDP growth — more so than the current level of interest rates. Keeping inflation stable, even without additional cuts, will likely boost the economy. A resurgence in inflation, even with the rate cuts, could hold back growth again,” Mr. Neri said.

Pause

Meanwhile, some analysts said the BSP may pause its easing cycle for the rest of the year.

“Developments in commodity markets, global demand and trade tensions are at this point the biggest risk factors for inflation and therefore the BSP’s easing path,” Fitch Ratings’ Asia-Pacific Sovereigns Director Krisjanis Krustins said in an e-mail.

Mr. Krustins said he does not expect any more rate cuts by the BSP this year. He said the BSP will likely resume easing with a 25-bp cut in 2026, bringing the rate to 5%.

“This would imply a relatively small differential between the Philippines and the US in terms of policy rates, compared to history,” he said.

Mr. Remolona on Friday said the interest rate differential between the Fed and the BSP could narrow to 50 bps.

Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the BSP will likely pause at its Aug. 28 meeting as the central bank will first assess the effect of its cumulative rate cuts in addition to the reduction of banks’ reserved requirement ratio (RRR).

“We reckon this evaluation will focus on transmission lags and the current high real interest rate environment to determine whether further easing is warranted,” he said.

The BSP on March 28 cut the RRR of universal and commercial banks and nonbank financial institutions with quasi-banking functions by 200 bps to 5%. The RRR for digital banks was also lowered by 150 bps to 2.5%, while the ratio for thrift lenders was cut by 100 bps to 0%.

Mr. Asuncion said the BSP could cut the target reverse repurchase rate up to 3% to 3.5% before pausing, aligning with pre-pandemic levels and the central bank’s inflation target. — A.M.C. Sy

Global oil prices are expected to soar amid a widening conflict in the Middle East after the US attacked Iranian nuclear sites.

“World oil prices could rise further because of the new development. The potential increase in premium and freight, which are projected to rise because of the expanded scope of hostilities, could be factored in the expected movement on domestic prices next week,” Jetti Petroleum, Inc. President Leo P. Bellas said in a Viber message.

The impact of the potential increase in freight would be determined “as soon as trading commences early (Monday) morning,” Mr. Bellas said.

As of June 21, diesel is projected to go up by PHP 4.90 to PHP 5.10 per liter; and gasoline by PHP 3.20 to PHP 3.40 per liter, an industry player said.

If realized, this would be the sixth consecutive week of price hike for gasoline and four straight weeks for diesel.

The US launched airstrikes on three nuclear sites in Iran, US President Donald J. Trump said late on Saturday, saying these facilities “have been completely and totally obliterated,” Reuters reported.

Mr. Bellas said that industry players are set to meet with the Department of Energy (DoE) on Monday to look for ways to cushion the impact of the looming big-time price hike.

He said that the meeting aims “to discuss the implementation of the price increase (this week) on staggered basis, promos and discount offerings of stations to help mitigate the impact of the price increase, among other things.”

Before the US attack on Saturday, analysts at Oxford Economics modeled three scenarios, including a de-escalation of the conflict, a complete shutdown in Iranian oil production and a closure of the Strait of Hormuz, “each with increasingly large impacts on global oil prices,” Reuters reported.

In the most severe case, global oil prices jump to around USD 130 per barrel, driving US inflation near 6% by the end of this year, Oxford said in the note.

“Although the price shock inevitably dampens consumer spending because of the hit to real incomes, the scale of the rise in inflation and concerns about the potential for second-round inflation effects likely ruin any chance of rate cuts in the US this year,” Oxford said in the note, which was published before the US strikes.

In comments after the announcement on Saturday, Jamie Cox, managing partner at Harris Financial Group, agreed oil prices would likely spike on the initial news. But Mr. Cox said he expected prices to likely level in a few days as the attacks could lead Iran to seek a peace deal with Israel and the United States.

Rodela I. Romero, assistant director of Oil Industry Management Bureau of the Department of Energy, said on Friday that there is a “major oil price shock looming as the Israel-Iran conflict threatens critical global shipping passage.”

The DoE earlier said that the government is prepared to roll out fuel subsidies to transport operators and farmers to contain the broader impact of high fuel costs on the prices of basic goods and services.

Fuel companies in the Philippines are mandated to maintain at least a 30-day fuel inventory to help stabilize local supply. If global crude prices exceed the USD 80 per barrel threshold, fuel subsidies for public transport drivers and fisherfolk will be automatically triggered.

President Ferdinand R. Marcos, Jr. said last week that the government may extend fuel subsidies to sectors severely affected to a spike in oil prices.

“Fuel subsidies are the correct policy response because allowing an increase in transport fares will hit the commuting public hard and strengthen inflationary pressures. Moreover, it’s possible that these subsidies may only be temporary if the Middle East crisis passes,” Calixto V. Chikiamco, president at Manila-based Foundation for Economic Freedom, said in a Viber message.

Impact on inflation

As oil prices rise due to the developments in the Middle East, analysts warned this could stoke inflation and dampen consumer confidence, as well as hurt remittances.

“Its economic impacts will include higher inflation risks, as the Middle East where these conflicts are happening is the main source of our country’s oil,” Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said in a Viber message.

“In addition, a lot of OFWs (overseas Filipino workers) are working in this region which may also negatively impact remittance inflows and of course their overall safety,” he said.

BSP Governor Eli M. Remolona, Jr. earlier warned that rising global oil prices and the weakening peso could bring inflation to 5%, breaching the 2-4% target range.

“We have a bad scenario, if I may call it that, in which our inflation rate could exceed 5%. But we hope it doesn’t happen and we’re carefully watching that,” Mr. Remolona said in an interview with Cathy Yang on One News TV on June 22.

Mr. Remolona also said the 5% inflation scenario would involve Dubai crude reaching USD 100 per barrel and the peso sharply depreciating.

“Our good scenario, or I would say our central scenario says, inflation will go up to around 3.4%,” he said.

Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co. said the Middle East conflict has a minimal impact on remittances for now.

He warned the conflict may escalate further and spread to other Middle East countries where there are significant numbers of OFWs such as Saudi Arabia, the United Arab Emirates, and Qatar.

Data from the Bangko Sentral ng Pilipinas said remittances from the Middle East region stood at USD 1.97 billion in the first quarter, up 6.51% from the same period last year.

Juan Paolo E. Colet, managing director at China Bank Capital Corp., said that oil companies need to manage their procurement, inventory, and hedging strategies well to mitigate the impact of potential price spikes and supply disruptions.

Mr. Colet said that while the government can offer subsidies to public transportation providers to cushion the impact of higher oil prices, this can only be a short-term solution.

“Our policymakers must look beyond the current conflict in the Middle East to make our country resilient to oil shocks. That includes investing in mass transit systems, fast-tracking renewable energy and battery energy storage projects, and promoting the shift to EVs (electric vehicles),” he said in a Viber message. — Sheldeen Joy Talavera and Aubrey Rose A. Inosante, Reporters with Reuters

Agriculture is expected to post stronger growth in the second quarter, driven by a significant rise in rice and corn output, the Department of Agriculture (DA) said on Sunday.

Palay (unmilled rice) output is projected at 4.36 million metric tons (MMT) in the second quarter, which would be up 13% from a year earlier, the DA said in a statement.

This also represents an upgrade to the 4.34 MMT forecast issued in April.

The increase is driven by the growth in riceland to be harvested — up 9.2% at 972,730 hectares — and improved yields, projected at 4.48 MT per hectare, up from 4.32 MT previously.

The DA cited favorable weather, increased government support through the Rice Competitiveness Enhancement Fund (RCEF), contract farming initiatives, and stronger palay procurement by the National Food Authority (NFA).

The NFA currently buys palay at between PHP 18 and PHP 24 per kilo.

The farmgate price of palay has averaged PHP 17.75 per kilogram, down 28.9% year on year in May.

Month on month, the palay farmgate price fell 1.6% in May.

The DA said corn production is expected to grow “even more dramatically,” noting that based on the standing crop as of May 1, the government projects second-quarter output to increase 27% year on year to 1.487 MMT.

The land area to be harvested is set to expand 16% to 402,690 hectares.

Rice and corn production are major contributors to crop production, which accounts for about 57% of agricultural output.

Meanwhile, the DA said in a separate statement it is putting the “final touches” on a draft bill that aims to restore critical functions of the NFA.

The bill seeks to amend the Rice Tariffication Law to grant certain regulatory powers to the NFA to “better manage buffer stocks” and “regulate rice distribution and marketing,” it said.

The bill also seeks to empower the NFA to set a floor price for palay, and support farmers’ cooperatives and recipients of rice processing systems funded under the RCEF.

“It will also refine protocols for DA-led rice imports to ensure the country can respond swiftly to supply shortages and sudden spikes in commodity prices,” the DA added.

“Critically, the measure grants the NFA greater flexibility in managing the appropriate level of buffer stock and ensuring that they are always of optimum quality — an essential tool in supporting not only the P20-per-kilo rice goal but also broader government efforts to ensure price stability and protect both producers and consumers,” the DA said. — Kyle Aristophere T. Atienza, Reporter

US President Donald J. Trump’s proposal to tax the money sent home by foreign workers, may hurt the Philippine economy as remittances and household consumption are likely to slow, experts said.

Finance Secretary Ralph G. Recto said the “One, Big, Beautiful Bill Act,” if passed into law in the US, is “a concern” for the Philippines which relies heavily on remittances from overseas Filipino workers (OFWs).

“But (it) will be difficult to implement. May be bad for the US and the US dollar. Those remittances may go through informal or other channels,” he said in a text message to BusinessWorld.

Mr. Trump’s controversial bill, which was approved by the US House of Representatives in May, includes a provision imposing an excise tax of 3.5% on money sent abroad by foreign workers in the US.

The US Senate is now deliberating on the measure.

The Center for Global Development estimated the tax will apply to around 40 million non-US citizens — green card holders, temporary workers and undocumented immigrants. However, remittances made by US citizens and nationals are exempted from the tax.

GlobalSource Partners Country Analyst Diwa C. Guinigundo said the tax will not just impact remittances from the US, but from other countries as well.

“Definitely, this would discourage OFW remittances not only from the US but also from other parts of the global market. Most remittance agents course their remittances to the Philippines through their US correspondent banks,” he said in a Viber message.

“Based on the existing protocol of last touch, remittances from OFWs in the Middle East, Europe and elsewhere would also be subject to that 3.5% tax regardless of where those incomes were made.”

Cash remittances jumped by 3% to USD 34.49 billion in 2024 from the USD 33.49 billion registered in 2023.

The US remained the top country source of cash remittances, accounting for 40.6% of the total.

In a blog post on May 28, the Center for Global Development estimated that the Philippines will see a USD 476.53-million reduction in annual remittances if the US tax is implemented.

Mr. Guinigundo said OFW remittances are a major driver of household final consumption expenditure, which accounts for around three quarters of annual gross domestic product (GDP).

“Obviously, if reduced significantly, lower OFW remittances could also weaken the overall balance of payments position, gross international reserves and ultimately the exchange rate and inflation,” he said. “This is serious risk for the peso and domestic inflation.”

In April, balance of payments deficit ballooned to USD 2.56 billion, wider than the USD 1.97-billion gap in the previous month, and the USD 639-million deficit in April 2024.

This brought the gross international reserve (GIR) level to USD 105.3 billion at its end-April position, lower than USD 106.7 billion as of end-March.

IBON Foundation Executive Director Jose Enrique “Sonny” A. Africa said the tax would be the “latest erosion of purchasing power” for remittance-reliant families, on top of rising prices and weak domestic jobs prospects.

“Yes, the 3.5% tax should be a point of concern and something that the Philippine government should raise directly with the US that has benefited so much from Filipinos working there,” Mr. Africa said in a Viber Message.

For his part, World Bank Philippine Lead Economist Gonzalo Varela said he expects remittances “will remain strong.”

“It’s an important source of income for households… The remittances received by the Philippines have been quite robust and have been also counter-cyclical. Meaning, when the economy is doing poorly, actually remittances can compensate for that to some extent,” he said at a briefing on Thursday.

The BSP projected a 2.8% growth in cash remittances to an estimated USD 35.5 billion this year. Next year, cash remittances are projected to grow by 3% to USD 36.5 billion.

Informal channels 

Meanwhile, analysts expect OFWs to frontload remittances or choose informal channels to send money home if the tax is implemented.

“Depending on when this piece of legislation is passed and when the proposed excise tax will take effect, I suspect there’ll be a short-term rush in transfers from the US to the Philippines in a bid to get ahead of the levy that could be imposed,” Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco told BusinessWorld in an e-mailed statement.

In the long term, Mr. Chanco said the 3.5% rate would not materially affect the transfers, and senders and recipients would likely absorb the costs.

ANZ Research Chief Economist Sanjay Mathur said the US tax is unlikely to permanently “impair” remittances to the Philippines or other economies that rely heavily on remittances.

“We can, however, expect a frontloading of remittances ahead of the tax and then a slowdown in the initial year of implementation,” he said.

“Remittances typically target a certain amount in local currency to host families and should continue.”

Mr. Guinigundo said the tax on remittances may also push OFWs to consider informal channels and “even encourage people to go into less transparent medium like cryptocurrency.”

Middle East conflict 

Meanwhile, the Palace said the Israel-Iran conflict has no significant impact on remittances or labor deployment as of now.

“We spoke with Undersecretary Alu Dorotan Tiuseco of the Department of Finance (DoF), and according to her, the impact on remittances remains limited for now,” said Palace Press Officer Clarissa A. Castro in Filipino during a news briefing.

“Given the remittances from Israel and Iran amounted to USD 106.4 million in 2024, it’s .03% of total remittances,” she added.

While direct exposure remains minimal, the DoF warned that a wider regional escalation could deliver a more substantial blow to the country’s dollar inflows.

“Typically, when oil prices rise, the cost of goods in the market also goes up,” she said. “That could hurt household consumption and dent our growth outlook.”

However, Mr. Africa said that if the conflict escalates, it will affect demand for OFWs in the region.

There are more than 1,000 Filipinos living in Iran and more than 30,000 in Israel.

In the first quarter of 2025, remittances from the Middle East region stood at USD 1.97 billion, up 6.51% from the same period last year.

Cash remittances from Israel dipped by 0.44% to USD 42.61 million in the first quarter from USD 42.79 million a year ago. Remittance from the Islamic Republic of Iran stood at USD 1,000 in the January-to-April period. — Aubrey Rose A. Inosante, Reporter with Chloe Mari A. Hufana

The Philippines could still achieve the export target set under the Philippine Development Plan (PDP) this year if it is able to maintain its advantage amid the US reciprocal tariffs, an industry group said.

“Our target is the same, but we will not hit the target set under the Philippine Export Development Plan (PEDP),” Philippine Exporters Confederation, Inc. President Sergio R. Ortiz-Luis, Jr. told BusinessWorld on the sidelines of the group’s 2^nd Quarter General Membership Meeting on Thursday.

“We are now following the target under PDP; hopefully we will hit USD 110 billion,” he added.

Under the PDP, total exports are expected to hit USD 113.42 billion this year.

On the other hand, the target under the PEDP is higher with exports projected to reach USD 163.6 billion this year.

“The semiconductors and services are doing well, but what will happen next will depend on Trump. Right now, we are all speculating,” he said.

“But so far, so good, and if the situation stays the same, we can expect growth from our semiconductor and electronics and information technology and business process management (IT-BPM) industries,” he added.

US President Donald J. Trump announced higher reciprocal tariffs on most of the country’s trading partners, with Philippine goods facing the second-lowest rate in Southeast Asia at 17%. However, the reciprocal tariffs have been paused for 90 days until July. A baseline 10% tariff remains in place.

According to Mr. Ortiz-Luis, the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) anticipates this year’s exports to reach the same level as in 2023.

“SEIPI gave us some assurance as it anticipates export revenues reaching USD 46 billion this year, driven by a robust global demand despite tariff challenges,” he said.

The IT-BPM sector’s export revenues are expected to hit USD 40 billion this year, Mr. Ortiz-Luis said.

“Further, despite projections that gross domestic product growth may be slower due to the US reciprocal tariffs, the Philippines is seen to outperform its Asian counterparts due to our robust consumer and services sector, compared to the investment and trade-driven economies in Asia,” he said.

“Having said that, and while we have entered into the uncertainties, risks, and challenges presented by the US tariff regime, the latest export performance in the country may be an indicator of things to come,” he added.

Citing data from the Philippine Statistics Authority (PSA), Mr. Ortiz-Luis said there has been a 7% annual increase in exports to USD 6.75 billion in April, driven by electronics, manufactured goods, and agricultural products.

“In the April performance, exports to the US also rose 10.6% to USD 1.03 billion, up from USD 971 million a year ago,” he said.

“Philippine exports to the US average about 20% of the country’s annual performance. Will this be affected by the reciprocal tariff? That is the question,” he added.

On the other hand, Mr. Ortiz-Luis said some sectors are not as bullish about their exports amid the reciprocal tariffs.

“Furniture, garments and textiles, and coconuts are not as bullish about their exports to the US because of the higher tariff, especially if their raw materials are sourced from economies that have been slapped with the bigger tariffs,” he said. “Unfortunately, for these sectors, the US comprises the bulk of the market.”

The US tariff policy shows the need for the Philippines to strengthen other markets and diversify where there are significant opportunities, Mr. Ortiz-Luis said.

In particular, he said that the Association of Southeast Asian Nations (ASEAN) members accounted for 15% or USD 11.02 billion of the country’s total export revenue.

The Philexport official said the government should review its positioning in the region amid the implementation of the ASEAN Economic Community Strategic Plan for 2026-2030.

“Serving as a five-year strategic roadmap, it aims to position our region as the world’s fourth-largest economic bloc by 2030, with a target to double the digital economy to an estimated USD 2 trillion,” he said.

“ASEAN and the rest of Asia indeed offer viable business propositions considering the supply-chain disruptions, high logistics costs, and regional productivity networks that we have already established here,” he added.

More FTA?

Mr. Ortiz-Luis said the country must also explore opportunities beyond the US and ASEAN by entering free trade agreements (FTAs).

“It is then timely that we have started with our FTA negotiations with the Middle East, Canada, and other countries that promise to open new and significant opportunities for our exporters,” he said.

“The Philippines has likewise formally submitted its application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership this year,” he added.

However, he said that there is also a need to review the country’s existing FTAs after exports to South Korea declined in the first four months despite a bilateral FTA between the Philippines and Korea entering into force on Dec. 31.

“Philippine goods being shipped to South Korea saw a double-digit decline,” he said.

PSA data showed exports to Korea declined 25.5% to USD 1 billion in the January-to-April period, or four months after the FTA took effect.

Mr. Ortiz-Luis said that exporters are also facing domestic economic pressures that are slowing down the sector’s growth momentum, such as the proposed legislated wage hike. “Highlighting the broader negative economic implications, we instead keep reiterating to allow the wage boards to do their job and for the government to strengthen policies that stimulate job creation and sustain our economy,” he added.

Although the failed passage of the wage hike bill was welcomed by the exporters group, he said that there are a number of measures that the 19^th Congress failed to approve, namely the  Magna Carta for Micro, Small, and Medium Enterprises (MSMEs), the International Trade Maritime Act, the PhilPorts Act, and the National Quality Infrastructure.

He also said that there is a need to provide MSMEs with targeted funding for export promotion, market compliance and certification, research and development, and technology and innovation. — Justine Irish D. Tabile, Reporter