Archives: Business World Article

The Department of Agriculture (DA) said it has been assured by Philippine trade negotiators that no concessions will be made to the US that will harm domestic producers of agricultural goods.

Agriculture Secretary Francisco P. Tiu Laurel, Jr. said the reassurance covers rice and sugar, which the Philippines does not import from the US, as well as corn, chicken, fish, and pork.

Left out of his list is wheat, which the Philippines does not produce in commercial quantities, which domestic industries use for food production and animal feed.

The Philippine negotiating team, led by Secretary Frederick D. Go, who heads the Office of the  Special Assistant to the President for Investment and Economic Affairs, and Trade Secretary Maria Cristina Aldeguer-Roque, made the reassurances as they negotiate the technical details of the preliminary trade deal with the US, under which Philippine exports pay a US tariff of 19%.

President Donald J. Trump last week said the Philippines has granted duty-free access to some US imports.

The DA, citing Malacañang, said a final trade agreement is still being hammered out by trade negotiators.

“Secretary Go… assured the Philippines has not made any concessions that would harm local producers,” it said.

The Philippine negotiating team has said that any trade agreement “must strike a balance between improving market access and safeguarding the livelihoods of Filipino workers and farmers,” the DA said. — Kyle Aristophere T. Atienza

The National Government’s (NG) budget deficit ballooned to PHP 241.6 billion in June as state spending outpaced revenue collections, the Bureau of the Treasury (BTr) said on Thursday.

Data from the Treasury showed the Philippines’ budget deficit widened by 15.56% to PHP 241.6 billion in June from PHP 209.1 billion in the same month a year ago.

Month on month, the budget deficit widened by 66.46% from PHP 145.2 billion in May.

In June, state spending jumped by 8.49% to PHP 548.5 billion from PHP 505.6 billion in June 2024.

The BTr attributed the faster spending to higher National Tax Allotment shares of local government units, the annual block grant to the Bangsamoro Autonomous Region in Muslim Mindanao, personnel services, and interest payments.

Primary spending — which refers to total expenditures minus interest payments — grew by 9.14% to PHP 491.1 billion in June from PHP 450 billion a year earlier. This accounted for 89.53% of the total June disbursements.

Interest payments increased by 3.19% to PHP 57.4 billion in June this year from PHP 55.6 billion in the same month in 2024.

NG’s primary deficit stood at PHP 184.2 billion in June, up by 20.04% from PHP 153.4 billion in the same month last year.

Meanwhile, revenue collections went up by 3.5% to PHP 306.9 billion in June from PHP 296.5 billion in the same month last year.

“The sustained double-digit growth in tax collections offset the high base effect of the one-off remittances under nontax revenues last year,” the BTr said.

Tax revenues increased by 12.35% to PHP 280.1 billion in June from PHP 249.3 billion in the same month in 2024.

The bulk came from the Bureau of Internal Revenue (BIR), which collected PHP 200.5 billion in June, up by 16.24% from PHP 172.5 billion a year ago.

Collections by the Bureau of Customs (BoC) rose by 3.23% to PHP 77 billion, while other offices’ revenues rose by 16.71% to PHP 2.6 billion.

On the other hand, nontax revenue slumped by 43.25% year on year to PHP 26.8 billion in June “due to the high base effect of one-off remittances in 2024.”

The BTr’s revenues surged by 116.49% to P16.1 billion in June from PHP 7.4 billion a year ago, thanks to the NG’s bigger share in profits of the Philippine Amusement and Gaming Corp. as well as dividend remittance from the Power Sector Assets and Liabilities Management Corp.

Income from other offices also dropped by 73.04% to PHP 10.7 billion in June.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the budget deficit in June was the widest in three months since March.

“Budget deficits could increase the need for additional borrowings from a cash flow perspective,” he said.

First-half gap

In the first six months of the year, the NG budget deficit widened by 24.69% to PHP 765.5 billion from the PHP 613.9-billion gap last year.

The BTr said the budget deficit remained relatively within target as it was 0.63% above the programmed PHP 760.7 billion for the first half.

Revenue collection in the first half increased by 5.15% to PHP 2.26 trillion from PHP 2.15 trillion in the same period in 2024. This was 0.89% lower than the programmed PHP 2.28 trillion for the six-month period.

Tax revenues rose by 10.74% to PHP 2.03 trillion as of end-June, 1.3% below the PHP 2.06 trillion program.

BIR collections increased by 14.11% to PHP 1.55 trillion as of end-June, driven mainly by increases in corporate income tax, value-added tax, and personal income tax. However, this was 1.52% below the PHP 1.58-trillion program.

“Additional sources of higher revenue came from increased excise tax collections on tobacco, including electronic cigarettes, through the Bureau’s continued efforts to intensify the crackdown on the illicit tobacco trade and the strict implementation of the mandatory excise tax stamps on vapor products,” it said.

Higher percentage tax collections from banks and financial institutions also helped boost BIR revenues.

The BoC collection inched up by 0.71% to PHP 458.8 billion as of end-June, but 0.58% below the PHP 461.4-billion program.

Nontax revenues slumped by 27.53% to PHP 227.7 billion in the January-to-June period. It exceeded the PHP 221.4 billion program by 2.87% amid better-than-expected income of the BTr.

Treasury income slipped by 11.37% to PHP 145.3 billion in the first half, while other offices’ income fell by 45.14% to PHP 82.5 billion.

Meanwhile, state spending rose by 9.49% to PHP 3.03 trillion as of end-June, from P2.76 trillion a year ago. It was just 0.51% below the PHP 3.04-trillion disbursement program for the period.

Primary expenditures rose by 9.41% to PHP 2.61 trillion as of end-June, while interest payments increased by 9.97% to PHP 414.8 billion.

In the first half, the NG’s primary deficit widened by 48.16% to PHP 350.7 billion. It exceeded the first-half program of PHP 343.7 billion by 2.04%.

“Although interest payments grew, the bulk of the deficit growth can be attributed to higher expenses due to government projects and disbursement to local government units,” Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said.

“The budget deficit can still be managed as revenue collection is still strong and debt obligations are growing at a modest pace. As long as each expenditure results in better productivity then the deficit may still be manageable,” he said.

For this year, the NG’s deficit ceiling is capped at PHP 1.56 trillion or 5.5% of gross domestic product. — Aubrey Rose A. Inosante

President Ferdinand R. Marcos, Jr. secured over USD 21 billion in investment pledges from US companies during his official visit to Washington.

“We return to the Philippines with over USD 21 billion in investment pledges that have the potential to create thousands of direct and indirect jobs for Filipinos within our country,” Mr. Marcos said in his arrival statement on Wednesday evening.

During his US trip, Mr. Marcos said he met with business leaders and top executives of top companies involved in healthcare, infrastructure, semiconductor, renewable energy and digital technology sectors.

The President said US companies expressed strong interest in expanding operations in the Philippines, particularly in infrastructure, logistics, clean energy, and advanced manufacturing. US firms are also exploring partnerships in healthcare, digital transformation, and workforce development.

Mr. Marcos also said new investments in semiconductor and electronics manufacturing would strengthen the Philippines’ position in global value chains.

In addition to private sector pledges, the US government committed additional funding for the Luzon Economic Corridor and other projects.

“We welcome the US government’s pledge of an additional USD 15 million for private sector development under the Luzon Economic Corridor initiative and an additional USD 48 million in foreign assisted projects. We will continue to work with the State department as well as with the US Congress for the implementation of these programs,” Mr. Marcos said.

The Luzon Economic Corridor is being undertaken via a trilateral commitment among the Philippines, US and Japan. The initiative aims to enhance the connectivity of Luzon’s key economic areas — Subic Bay, Clark, Metro Manila and Batangas.

In a separate virtual briefing on Thursday, Special Assistant to the President for Investment and Economic Affairs Frederick D. Go said the Philippines is poised to receive a USD 500-million investment from a major hospital group to build a world-class medical facility in the country.

Mr. Go, who was part of the Philippine delegation to Washington, told reporters that the hospital project is among several investment pledges secured during Mr. Marcos’ recent trip.

He said US private equity firm Cerberus Capital, which owns the Subic shipyard where Hyundai is building a shipbuilding facility, is also planning to invest between P10 billion and P15 billion (USD 172 and USD 258 million) in the Philippines.

Originally set to open in 2026, Hyundai’s facility could begin operations as early as the fourth quarter of this year, Mr. Go added.

Meanwhile, infrastructure investor I Squared Capital, which already has significant operations in the country, plans to expand into liquefied natural gas and cold storage.

Mr. Go and Trade Secretary Ma. Cristina A. Roque also met with top global investment firms Cerberus Capital, I Squared Capital, and KKR & Co., Inc. that are looking at pursuing expansion opportunities in the Philippines.

Another firm, Global Infrastructure Partners (GIP), is also looking at a “very large” investment in Philippine infrastructure, Mr. Go said.

In a disclosure to the stock exchange, Aboitiz Equity Ventures, Inc. said it is now finalizing a strategic partnership with GIP that involves the acquisition of a 40% stake in its infrastructure arm Aboitiz InfraCapital, Inc.

Mr. Marcos reaffirmed his administration’s commitment to a stable, transparent, and rules-based business environment, assuring investors of continued reforms to streamline processes and improve ease of doing business.

Oikonomia Advisory and Research, Inc. economist Reinielle Matt M. Erece said the investments, if realized, are expected to boost economic growth by creating more jobs, raising incomes, and increasing productivity.

“If they do (materialize), they will greatly help in providing more job opportunities for Filipinos, increase income growth, and overall be good for economic growth,” he said via Viber.

Mr. Erece said that to maximize these pledges, the government must improve the efficiency of government processes, including the reduction of red tape and provide reliable government platforms and offices.

“If investors see that the country has a good business environment and they feel welcome, they are more likely to set up shop within the Philippines.”

Meanwhile, Mr. Marcos invited Mr. Trump to visit Manila in 2026 when the country hosts the Association of Southeast Asian Nations (ASEAN) Summit as its chairman.

“I look forward to hosting President Trump next year to attend the ASEAN meetings under the Philippines’ chair, which also coincides with the commemoration of our 80^th year of diplomatic ties and 75 years of the Mutual Defense Treaty,” Mr. Marcos said in his arrival statement after a three-day official visit to the US.

Mr. Marcos underscored the significance of his meeting with Mr. Trump to the US, saying Washington remains Manila’s “oldest and only treaty ally.” He described their alliance as crucial to regional stability and said his trip reaffirmed both nations’ “ironclad commitment” to their security pact. — C.M.A. Hufana

 

The government Thursday said that the details of the US-Philippines deal concerning the US reciprocal tariff are still being finalized but noted that the government will protect the interest of Philippine domestic industries.

“The details are not yet final. The Philippines and the US will still have to negotiate the details of the agreement, including products that are covered by market access commitments on both sides,” Trade Secretary Ma. Cristina A. Roque said in a statement.

The statement was jointly issued by the Department of Trade and Industry (DTI) and the Office of the Special Assistant to the President for Investment and Economic Affairs (OSAPIEA).

The government will be working closely with stakeholders in finalizing the trade deal with the US.

“We are mindful of the sensitivities of our domestic stakeholders, and the same will be duly considered in the negotiations,” Ms. Roque said.

Special Assistant to the President for Investment and Economic Affairs Frederick D. Go said that the “concessions we will extend are strategic to the Philippines.”

“These are products that we do not locally produce and are critical inputs to reducing the cost of healthcare, for example,” he said.

The two officials had accompanied Philippine President Ferdinand R. Marcos, Jr. during his meeting with US President Donald J. Trump at the White House.

After the meeting, Mr. Trump announced a 19% tariff would be imposed on Philippine goods, while the Philippines will open its markets to US goods.

The 19% tariff rate is slightly lower than the threatened 20% but is higher than the 17% “reciprocal tariff” announced by Mr. Trump in April. The new tariff will be implemented starting Aug. 1.

“This revised tariff rate places the Philippines among the most competitive Southeast Asian economies trading with the US,” the DTI and OSAPIEA said.

The Philippines’ new US tariff rate is now the same as Indonesia, and slightly lower than Vietnam’s 20%. Singapore faces the lowest US tariff rate of 10%.

“Enhanced market access will enable the Philippines to become a more attractive destination for export-oriented investments — opportunities that might have otherwise gone to our neighbors,” Mr. Go said.

Since the US imposed a “relatively mild” tariff on Philippine goods, the Philippines could attract more foreign investments while its exports gain a “competitive edge” as a manufacturing hub focused on the US market.

“This encourages foreign companies targeting the US to consider relocating their operations here, creating more investment and job opportunities for Filipinos,” the DTI and OSAPIEA said.

The trade deal with the US is not just limited to tariffs but also includes other trade-related matters which will be finalized by negotiators.

“Our objective is to ensure that this bilateral deal will complement our existing international trade commitments as well as the capabilities and needs of our domestic industries,” the DTI and OSAPIEA said.

Agri sector

At a briefing in Malacañang, Mr. Go said the negotiating team sought to protect the agricultural sector during tariff negotiations with the US.

Mr. Go dismissed criticisms that the Philippines gave up too much in the deal, emphasizing that the government focused on protecting sectors where local production is strong.

While the Philippines is opening its market for US automobiles, wheat, soy and pharmaceuticals, Mr. Go said they preserved tariff protections on key sectors such as rice, corn, sugar, pork, chicken, and fisheries.

“I can guarantee you that we thoroughly studied all of our major industries in the Philippines, where we are a significant producer, and we did not include them in what we gave to America,” he said in Filipino. “The DTI carefully reviewed which products we need to protect and which of our farmers we need to protect, and we protected all of them.”

Mr. Go said that zero tariffs on US pharmaceuticals would lower the cost of medicines in the country.

He said zero tariffs on US-made vehicles would not hurt the domestic industry since there is minimal vehicle manufacturing in the country.

“By opening the automotive sector, we are not hurting any local producers,” he said.

He noted lifting tariffs on imports of US wheat and soy would help reduce overall food prices.

In a separate statement, the Federation of Philippine Industries expressed its readiness to collaborate with the government in making sure that the deal will not “compromise national industrial resilience.”

However, the group stressed the need for structured consultations with industry stakeholders and transparency in the disclosure of products covered by the agreement in mitigating the potential adverse impact.

“These measures may also support the timely activation of appropriate safeguard mechanisms for sectors at risk,” it said.

‘Treated shabbily’

With the Philippines losing its advantage of a lower tariff rate compared to its neighbors, the economy could face headwinds and struggle to attract foreign direct investments, HSBC Global Research economist for ASEAN Aris D. Dacanay said.

Mr. Dacanay said the reciprocal tariff of 19% would erase the Philippines’ competitive advantage, and “risks putting Philippine exports at a disadvantage in the US market.”

“In contrast to Indonesia and Vietnam, which succeeded in lowering their respective tariff impositions without their heads of state physically making a state or official visit to the US capital, the initial diplomatic efforts of the Philippines yielded disappointing results,” GlobalSource Partners Country Analyst Diwa C. Guinigundo said in a report.

“So, the Philippines thought that at the initial round of tariff imposition, it was a winner. It was not. It was instead treated shabbily by the US government.”

Mr. Guinigundo said it is now “imperative for the Philippines to capture relocation and supply-chain shifts as the US and China trade war intensifies.”

“Manila should prepare, and prepare seriously, to host all the companies fleeing from China and other high-tariff countries in electronics, semiconductor packaging, production of converters, power supplies and telecom devices.”

Mr. Dacanay said the Philippines will likely continue negotiating with the US to secure a lower tariff rate.

“Based on the trade deals Vietnam and Indonesia have had with Washington, finding ways to open domestic markets to the US seems to be a useful bargaining chip,” he said.

“In the meantime, without the relative advantage of a lower tariff rate, the Philippines will likely rely on its old (but effective) playbook of maintaining a robust reform narrative to attract investments and technologies from abroad.”

On the other hand, University of Asia and the Pacific professor emeritus Bernardo M. Villegas said there is no need to pursue a lower tariff rate.

“It’s not worth the effort. Because we are not really oriented towards exports. If it just prolongs and prolongs the discussion, it’s not worth it,” he told BusinessWorld on the sidelines of a forum. “Trade is not a very important part of GDP. So, I wouldn’t worry about the differences,” he added.

Fitch Solutions’ CreditSights in a separate report likewise said the tariff will not significantly impact Philippine economic growth.

“We anticipate the US tariffs to have a limited impact on the Philippines’ economy, given the Philippines’ low export exposure to the US, and relatively low export contribution to its total GDP,” it said.

The US goods trade deficit with the Philippines reached nearly USD 5 billion in 2024, up by 21.8% from 2023. This as US goods trade with the Philippines amounted to around USD 23.5 billion while US goods exports stood at USD 9.3 billion.

The US is the top export destination for Philippine goods, accounting for about 16% of total exports in the first five months of the year. — Justine Irish D. Tabile, Luisa Maria Jacinta C. Jocson and Chloe Mari A. Hufana

US President Donald J. Trump on Tuesday announced he was imposing a new 19% tariff rate for goods from the Philippines, following a meeting with President Ferdinand R. Marcos, Jr. at the White House.

“It was a beautiful visit, and we concluded our trade deal, whereby the Philippines is going open market with the United States, and zero tariffs. The Philippines will pay a 19% tariff,” Mr. Trump said on his Truth Social platform.

While the new tariff rate is slightly lower than the threatened 20%, the 19% rate is higher than the 17% “reciprocal tariff” that Mr. Trump announced in April.

“One [percentage point] might seem like a very small concession. However, when you put it in real terms, it is a significant achievement,” Mr. Marcos told reporters in Washington following his meeting with Mr. Trump in the Oval Office. A copy of the transcript was released to the media.

“They told us that it is because of the special relationship between the Philippines and the United States.”

Contrary to Mr. Trump’s social media post, Mr. Marcos clarified that the Philippines will only open its market for US automobiles.

“The major areas that he (Mr. Trump) said were automobiles. Because we have a tariff on American automobiles, we will open that market and no longer charge tariffs on that,” he said.

As part of the deal, Mr. Marcos said the Philippines will also increase US imports of soy and wheat products, as well as medicine.

“There’s still a lot of detail that needs to be worked out on the different products,” he said, adding the template has been laid out.

A Reuters report quoted Philippine Ambassador to the United States Jose Manuel Romualdez as saying this was “an evolving good deal for both countries that could be further improved over time.”

Mr. Trump said the “very big numbers” in the trade agreement would only grow larger.

Data from the United States Trade Representative showed the US goods trade with the Philippines amounted to around $23.5 billion in 2024. US goods exports stood at $9.3 billion, while imports from the Philippines totaled $14.2 billion, bringing the US goods trade deficit with the Philippines to nearly $5 billion, up by 21.8% from 2023.

The US is a top export destination for Philippine goods, accounting for around 16% of total exports such as semiconductors and electronic products in the January-to-May period.

Still second lowest

Meanwhile, the Department of Economy, Planning, and Development (DEPDev) said the new 19% tariff puts the Philippines in a good position compared with its Southeast Asian neighbors.

“But still, if you look at the entire Association of Southeast Asian Nations (ASEAN) so far, we’re second to Singapore. To me, it’s still a very good outcome,” DEPDev Secretary Arsenio M. Balisacan told reporters on the sidelines of a conference on Wednesday.

Mr. Balisacan said the potential impact of the 19% and previous 20% tariff is “not really that much.”

“We are more worried about the indirect one. Indirect is how other countries’ tariffs will look like compared to us. That’s the one that’s more important because of the potential trade diversion benefits,” he said.

The Philippines’ new US tariff rate is now the same as Indonesia, and slightly lower than Vietnam’s 20%. Singapore faces the lowest US tariff rate of 10%.

While Vietnam was able to secure a 20% tariff, any transshipped goods will be subject to a 40% rate.

“How much of that are actually imports from China indirectly through Vietnam? That will be affected by the high tariff,” he said.

Asked about the zero tariff on US automobile imports, Mr. Balisacan said this is not a cause for concern.

“When you look at the current account deficit, you don’t look at it country by country. You should look at the total and that’s what matters,” Mr. Balisacan said.

“As a country, you should be able to accept a deficit from a country where you can import much cheaper products than what you can get elsewhere. And then you are able to export your products to where you can command higher value.”

Mr. Balisacan said the Philippines will heavily rely on domestic demand against the backdrop of these trade uncertainties.

“That’s what you can count on. And that’s actually what’s saving our economy now with all this uncertainty in the global economy.  It’s domestic,” he said.

“We have to strengthen that even as we are preparing for better times in trade, in the global economy. Still, we need to keep doing reforms to improve our competitiveness. Unlike in past decades, though the global economy improved, we were not ready. So, we missed the boat. Still a lot of things to do.”

IBON Foundation Executive Director Jose Enrique A. Africa said this new trade deal heavily favors the US.

“This is a bad deal, and President Marcos, Jr. is coming home empty-handed. There are virtually no benefits for the Philippines and only costs,” he said in a Viber chat.

Zero tariffs on US automobiles, in particular, could result in revenue losses, provoke trade tensions with other auto exporters like Japan, Korea, China, and the European Union, and hinder any plans to develop a domestic automotive industry, he added.

The economist also noted that the public must know the full extent of the concessions made by the Philippines, especially on the economic and defense fronts. — Chloe Mari A. Hufana, Reporter and Luisa Maria Jacinta C. Jocson, Senior Reporter