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Still-elevated rice prices could stoke inflation and threaten the Bangko Sentral ng Pilipinas’ (BSP) pace of monetary easing, GlobalSource Partners said.

“Such a precarious rice situation does not promise bright prospects for domestic inflation,” GlobalSource Partners Country Analyst Diwa C. Guinigundo said in a report.

“Given the inflationary impact of an expected weakening of the peso-dollar exchange rate, the uptrend in rice prices coupled with creeping fuel price increases and the reported price hikes of 63 goods in February could generate more price pressures.”

Headline inflation averaged 3.2% last year, the first time that full-year inflation fell within the central bank’s 2-4% target since 2021. It was also the slowest since 2.4% in 2020.

“The BSP would have to be careful in issuing forward guidance that commits itself to more rate reductions in the next meetings of the Monetary Board,” Mr. Guinigundo said.

“The supply side does not appear to be supportive of its 2-4% target,” he said, noting that inflation risk-adjusted forecasts for 2025 and 2026 stand at 3.4% and 3.7%, respectively.

For this year, the BSP expects inflation to average 3.3%. Accounting for risks, inflation could average 3.4%.

The Monetary Board delivered a total of 75 basis points of rate cuts last year, bringing the benchmark to 5.75%.

“Since the weight of rice at 8.9% dominates the weight of food in the consumer price index and food weighs heaviest among all the other components, economists and inflation forecasters fear of another surge in inflation this year and the next,” Mr. Guinigundo said.

The Agriculture department has announced plans to declare a food security emergency for rice. This would allow the release of buffer stocks of local rice from the National Food Authority to be sold at subsidized prices.

Mr. Guinigundo said this activity could be a “potential source of corruption.”

“Many buffer stocks could be declared aging and discounted only to be resold with minimal polishing. Given the forthcoming election, local government units  could also use them to win votes,” he said adding that the impact of this move would be “minimal.”

Rice prices were supposed to start declining after the government slashed tariffs on rice imports, Mr. Guinigundo said.

“This did not happen because one, domestic rice production remained weak; and two, profiteering from reduced tariffs did not cease but only benefited importers, wholesalers and retailers who were reported to have engineered the artificial shortage of the food staple.”

President Ferdinand R. Marcos, Jr. issued an executive order that reduced tariffs on rice imports to 15% from 35% until 2028. This took effect in July.

“The problem remains because agricultural policy to stabilize prices of key commodities continues to focus on market dynamics rather than on production and agricultural productivity,” Mr. Guinigundo said.

Rescheduled meeting

Meanwhile, the Monetary Board’s first policy meeting this year was rescheduled to Feb. 13 from Feb. 20, the central bank said on Tuesday.

This as BSP Governor Eli M. Remolona, Jr. is set to attend the Financial Action Task Force (FATF) plenary and meetings in France from Feb. 17-20.

The Philippines has been on the FATF’s gray list since June 2021. Government officials are hopeful that the country can exit the gray list this year. — Luisa Maria Jacinta C. Jocson

The Philippine economy will continue to accelerate from this year to 2026 as domestic demand remains robust, the International Monetary Fund (IMF) said, but warned risks are tilted to the downside due to possible external shocks.

At the same time, Finance Secretary Ralph G. Recto said that the Philippines likely failed to hit its 6-6.5% growth goal for 2024, amid typhoons.

“If it hits 6% in the fourth quarter, I’ll be happy with that. I don’t think it will hit 6% for 2024, but I think it will surpass 6% in 2025,” Mr. Recto told reporters on Jan. 16.

For the first nine months of 2024, Philippine growth averaged 5.8%, the same as the IMF’s projection for the full year. Preliminary fourth-quarter and full-year gross domestic product (GDP) data will be released on Jan. 30.

In its latest World Economic Outlook  update, the IMF kept its GDP forecasts for the Philippines at 6.1% this year and 6.3% for 2026, the same as its projections in October.

These would fall within the government’s 6-8% GDP target for 2025 and 2026.

“Growth for 2025-2026 is projected to be primarily driven by domestic demand, namely consumption and investment,” an IMF spokesperson said in an e-mail.

“Consumption growth will be supported by lower food prices and gradual monetary policy easing,” it added.

Latest data from the Philippine Statistics Authority showed household consumption, which accounts for over three-fourths of the economy, jumped by 5.1% in the third quarter from 4.7% a quarter ago.

“Investment growth is expected to pick up on the back of a sustained public investment push, gradually declining borrowing costs and acceleration in the implementation of public-private partnership projects and foreign direct investments (FDI), following recent legislative reforms,” the IMF said.

Gross capital formation, the investment component of the economy, expanded by 13.1% in the third quarter, a turnaround from the 0.3% dip a year ago.

However, the IMF said that the balance of risks to the growth outlook is tilted to the downside, citing external risks.

“Some of the main downside risks include recurrent commodity price volatility, and new supply shocks, which may necessitate tighter monetary policy to anchor inflation expectations,” it said.

The IMF also cited shocks such as geopolitical tensions which could disrupt trade and other financial flows.

“Higher for longer policy rates in advanced economies (could cause) capital outflows, and tighter financial conditions,” it added.

The multilateral institution also cited climate shocks and extreme weather events which would lead to economic losses.

“There are also upside risks to the outlook, including from higher-than-expected growth in private investment through public-private partnerships, higher inward FDI following a faster-than-expected global recovery, or stronger reform momentum,” it added.

Inflation

Meanwhile, the IMF said it expects inflation to remain within the central bank’s 2-4% target range in the near to medium term.

It projects headline inflation to average 2.8% this year and 3% in 2026.

“However, risks are tilted to the upside, as rising geopolitical tensions, extreme climate events, and recurrent commodity price volatility continue to pose upside risks to inflation,” it said.

Headline inflation averaged 3.2% in 2024, well within the central bank target.

This year, the Bangko Sentral ng Pilipinas (BSP) expects inflation to average 3.3%.

The IMF said the central bank can gradually lower borrowing costs and “move toward a neutral stance.”

“With inflation and inflation expectations returning to the target and the opening of a negative output gap, continued reduction of the policy rate will be appropriate,” it said.

The BSP slashed interest rates by 75 basis points (bps) last year, delivering three straight rate cuts since it began its easing cycle in August.

The central bank has signaled further easing this year as the current policy rate at 5.75% is still in “restrictive territory,” BSP Governor Eli M. Remolona, Jr. earlier said.

“Along the declining rate path, the BSP must ensure that its stance continues to anchor inflation and inflation expectations firmly within the target band.”

“Amidst prevailing uncertainty, a data-dependent approach, and clear and effective communication around policy settings will be important to manage expectations and provide clarity on the BSP’s reaction function,” it added. – Luisa Maria Jacinta C. Jocson, Reporter

Government spending is likely to slow in the first half of 2025 due to the election ban on public works and congressional insertions in the national budget, the Department of Budget and Management (DBM) said.

Budget Assistant Secretary Romeo Matthew T. Balanquit said government spending in the first two quarters “might be lower” compared with the same period in 2024 due to the public works ban ahead of the May elections.

The Commission on Elections (Comelec) will implement a ban on public works on March 28 or 45 days before the May 12 elections. Social welfare dole-outs are also prohibited during the period.

The Development Budget Coordination Committee earlier said there “may be a slowdown in project execution during the first half of 2025 on account of the upcoming midterm national and local elections.”

However, the DBM said that infrastructure spending ahead of the election will not be “disrupted” by the election ban, as “the phasing of the projects is already planned, especially in the transport sector.”

“The only infrastructure projects affected are those worth PHP 707 billion, covering over 12,900 projects, the bulk of which are under the Department of Public Works and Highways (DPWH),” DBM Undersecretary Goddes Hope O. Libiran said.

At the same time, Mr. Balanquit said budget releases may be slower as the congressional adjustments under the 2025 General Appropriations Act will be subject to a process called For Issuance of Special Allotment Release Orders (FISARO) before being released.

The SARO will only be released once agencies meet the necessary requirements and secure approvals from the Executive Secretary and the Office of the President.

“Now, the release might not be that significant because of the PHP 757-billion [adjustments], which is around 11% or 12% of the total budget. So, it’s really a big amount,” Mr. Balanquit told reporters on Jan. 16.

Last year, most of the national budget was already released around the first month without the required conditions.

Meanwhile, former Finance Secretary Margarito B. Teves said that spending on public works usually falls in April and May during election years due to the 45-day ban.

“However, we see the impact as minimal given that the National Government always seeks the exemption of infrastructure projects from the ban, particularly those of national significance,” he told BusinessWorld in an e-mail over the weekend.

Mr. Teves added that the ban will affect projects at the local and district levels more than those at the national level.

“Historically, government spending and therefore gross domestic product spending has dipped slightly on a quarter-to-quarter basis, but an uptick is usually shown in the quarter after the elections,” Ateneo School of Government Dean Philip Arnold “Randy” P. Tuaño told BusinessWorld.

He added that the government had already disbursed a “significant amount” on infrastructure projects, months before the election period started.

The Comelec has exempted 48 infrastructure projects of the Public-Private Partnership  Center such as the Metro Manila Subway Project.

“We will expect a continuation of infrastructure growth in the run-up to the May period,” Mr. Tuaño said.

For the rest of 2025, Mr. Teves said the level of public spending on infrastructure will largely depend on the improvement in the absorptive capacity of the DPWH to carry out projects given that it received more than PHP 1 trillion in the national budget.

“Moreover, the frequency and severity of adverse weather conditions such as typhoons could cause disruptions and delays in the implementation of infrastructure projects especially those in the hard-hit areas,” he said. — Aubrey Rose A. Inosante

The second term of US President-elect Donald J. Trump could add more uncertainty to the Philippine economy, which could possibly impact trade prospects, financial flows, and monetary policy, analysts said.

However, the Philippines, which is heavily reliant on the US for business and economic activity, could also stand to gain from some of Mr. Trump’s policies, they added.

Mr. Trump is set to be sworn in as US president on Jan. 20. For his second term, he has vowed to impose tariffs of up to 60% on imports of Chinese goods and 25% for Canadian and Mexican imports, as well as a 10% universal tariff.

Finance Secretary Ralph. G. Recto told BusinessWorld that it is “too early to tell” what would be the economic implications of Mr. Trump’s policies on the Philippines.

“For now, there’s a lot of uncertainty. Having said that, there are also many opportunities,” he said in a Viber message.

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said that the economic impact of Trump 1.0 versus Trump 2.0 will be more global.

“Remember that during his first term he was focused mainly on punitive trade measures against China. This time around, he seems to be entering office with a more global anti-trade, protectionist agenda,” he said in an e-mail.

The International Monetary Fund (IMF) in its latest World Economic Outlook update warned about the “intensification of protectionist policies,” citing a “new wave of tariffs.”

These could “exacerbate trade tensions, lower investment, reduce market efficiency, distort trade flows, and disrupt supply chains, while also increasing inflationary pressures.”

“The impact of such policies would unfold differently across countries, influenced by trade and financial linkages, and would depend on the magnitude and nature of policy changes,” an IMF spokesperson said in an e-mail.

Opportunity

Mr. Recto, however, said he does not expect the US to impose very high tariffs on imports from all trading partners.

The United States is typically the top destination for Philippine-made goods. In November, exports to the US were valued at $969.09 million, accounting for 17% of the total export sales, data from the local statistics authority showed.

The tariffs could also present as an opportunity for the Philippines, Mr. Recto said. “In addition, western companies operating in China and Taiwan may move their operations to the Philippines.”

The recently passed Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act could encourage investors to move to the Philippines, he added.

“It brings some certain level of comfort to me, however, that the economic team of (Mr. Trump) recently harped on a gradual application of additional tariffs that would give more time for different economies to adjust and recalibrate their own policies,”  Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc. (UnionBank), said.

The Philippines is also not as reliant on exports as its neighbors, Mr. Chanco said.

“As such, should the future Trump administration push through with his campaign pledge to levy wholesale tariffs on all US imports, Philippine economic growth is unlikely to be as affected as its more trade-dependent neighbors,” he said.

“That being said, there’s no escaping the fact that the US remains one of the Philippines’ main export markets, so some pinch would be inevitable,” he added. 

First Metro Investment Corp. Head of Research Cristina S. Ulang said the Philippines could benefit from “friendshoring” given its decades-old alliance with the US.

Friendshoring is defined as a “growing trade practice where supply chain networks are focused on countries regarded as political and economic allies,” according to the World Economic Forum.

“Hopefully, if Mr. Trump’s attitude towards China would be more on bringing down the tensions, that should improve our trade,” Employers Confederation of the Philippines and President Sergio Ortiz-Luis, Jr. said via phone call. 

“We have lost a lot with China in terms of trade, in terms of tourism, and investment,” he added.

At the same time, the Philippines’ Information Technology and Business Process Management sector may face challenges but also opportunities under Mr. Trump’s second term.

“While a second Trump presidency may introduce new hurdles, such as potential shifts in outsourcing trends or tighter trade regulations, the demand for high-quality, technology-enabled services remains unwavering,” Jack Madrid, chief executive officer and president of the IT and Business Process Association of the Philippines, said.

“Protectionist policies, regardless of their origin, challenge us to innovate, upskill, and fortify our value proposition,” he added.

Tighter controls

Meanwhile, analysts warned of the impact of Mr. Trump’s tighter border controls and harsher immigration measures on remittances.

“At this stage, I’m more concerned about the remittance channel. We can’t hide from the fact that there is a not-insignificant number of undocumented Filipinos in the US,” Mr. Chanco said.

“If their status in the country is further compromised by the next administration’s immigration policies, then remittances from one of the country’s largest sources may be impinge.”

Mr. Asuncion also noted that remittance inflows are a “significant economic leg” of the Philippine economy. UnionBank expects overseas Filipino worker remittances to rise by 3% to USD 35.5 billion this year.   

“Downside risk to the remittance forecast would emanate from President-elect Trump’s tighter immigration policy, likely to reduce the number of unauthorized Filipino migrant workers in the US,” Mr. Asuncion said.

“Nonetheless, we maintain our view that the bulk of the remittances from the US are sent by nearly two million legal Filipino migrant workers all over the US.”

Economists also flagged the impact of these policies on the currency, inflation and monetary policy.

Markets are pricing in the inflationary pressures that could stem from Mr. Trump’s plans for tax cuts and tighter tariffs, which could slow the US central bank’s easing cycle.

GlobalSource Partners country analyst Diwa C. Guinigundo said the US Federal Reserve may keep policy rates higher for longer.

“Since Mr. Trump’s tax and tariff policies are potentially inflationary, the US Fed may not be as sanguine as to be more aggressive in its easing policy,” he said.

The Fed began its rate-cutting cycle in September, slashing rates by a cumulative 100 basis points (bps) last year.

“If this is the case, and with potential weakening of the peso this year, the BSP might be more careful in abandoning its fundamentally tight monetary policy,” Mr. Guinigundo said.

The peso fell to the record-low 59-per-dollar level thrice last year. Several economists, multilateral institutions and think tanks have forecasted that the local unit could breach the all-time low this year amid the stronger dollar.

“A stronger-than-expected US economy supports the strong US dollar narrative,” Mr. Asuncion added. 

Despite this, Mr. Chanco said this is unlikely to significantly impact the BSP’s own rate-cutting moves.

“I doubt, at this stage, that this will materially impact the BSP’s easing cycle, though, as the Monetary Board has plenty of room to ease — with inflation now subdued — given how aggressive its tightening cycle was in 2022-23,” Mr. Chanco said. 

“It’s worth remembering that unlike the US, the Philippine economy is clearly in the midst of a cyclical soft patch,” he added.

Mr. Asuncion said that within-target inflation should also allow the central bank to “ease its policy rate further and support its implicit goal of supporting growth past 6% and more employment.”

The BSP, which cut ahead of the Fed in August, delivered a total of 75 bps worth of cuts last year. This brought the policy rate to 5.75%.

Mr. Asuncion said they expect BSP to cut rates by another 75 bps this year to bring the benchmark to 5%.

“Front-loading the bulk of the three rate cuts this year of 25 bps each in the first half of 2025 would be appropriate amid offshore challenges likely to persist,” he added. – Luisa Maria Jacinta C. Jocson and Aubrey Rose A. Inosante, Reporters

The Department of Agriculture (DA) on Thursday said it will likely declare a food security emergency for rice as prices of the staple grain remain stubbornly high.

Agriculture Secretary Francisco P. Tiu Laurel, Jr. said he expects the release of buffer stocks of local rice from the National Food Authority (NFA) by the first week of February, as it awaits the transmittal of a National Price Coordinating Council (NPCC) recommendation calling for the declaration of a food security emergency.

“I don’t have the official recommendation from the NPCC yet, the details are still with the working group. But once it comes to my table, the chances are we will declare, so that we can release the stocks of the NFA,” he told reporters during a market visit in Pasig City.

“Once I receive it, I will also consult the President for his comments,” he added.

The NPCC has approved a resolution urging the DA to declare a food security emergency for rice, which would pave the way for the NFA to release buffer stock to stabilize prices.

Under Republic Act (RA) 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.

Prices of rice have remained stubbornly high despite lower tariffs for imports.

According to the DA’s price monitoring of Metro Manila markets as of Jan. 15, a kilogram of imported special rice was priced between PHP 53 and PHP 65 compared with the PHP 58 and PHP 65 per kilo a year ago.

The price of imported premium rice stood at PHP 50-P60 per kilo as of Jan. 15 from PHP 54-P62 per kilo last year.

On the other hand, imported well-milled rice is currently between PHP 44 and PHP 52, while imported regular milled rice is at PHP 40 to PHP 48 per kilo.

Trade Secretary Maria Cristina Aldeguer-Roque, who chairs the NPCC, said the resolution was made in response to the extraordinary increase in rice prices observed since 2023.

“All the markets must follow the directives of the DA to bring down imported rice prices for the consumers and, at the same time, also protect the wholesaler, the trader, and also the retailer,” she told reporters.

Mr. Tiu Laurel said the DA needs to release the buffer stock from NFA warehouses, which have reached 300,000 metric tons, ahead of the harvest season.

“Harvest season is coming. So, if our warehouses are full, we won’t be able to buy from farmers at a good price. We need to sell it immediately,” Mr. Tiu Laurel said.

Once the NFA’s buffer stocks are released, Mr. Tiu Laurel said the rice will be sold to local government units (LGU), Kadiwa, the Armed Forces of the Philippines, the Philippine National Police, and other government agencies.

The DA said last week that it is looking to sell some of the NFA’s old rice stock to LGUs to free up warehouse space ahead of the rice harvest season.

The NFA would have a buying price for palay, or unmilled rice, ranging from PHP 21 to PHP 23 per kilo for clean and dry, according to the Agriculture department chief.

The NFA would set a selling price of PHP 36 per kilo to LGUs by February and would be further lowered to PHP 33 per kilo by March.

Maximum price

Meanwhile, Mr. Tiu Laurel said that the maximum suggested retail price (SRP) on imported rice, which will be implemented in Metro Manila starting Jan. 20, would also address elevated rice prices.

The DA is set to impose a maximum SRP of PHP 58 per kilogram on imported rice with a 5% broken grain content, a move it says will further lower the retail price of imported rice.

“Every two to three weeks the (maximum SRP) may be adjusted until March,” Mr. Tiu Laurel told reporters.

“After two to three weeks we can adjust it to PHP 55 per kilo, after another two weeks maybe at PHP 52 per kilo. If world price goes down further, it could be just PHP 50 per kilo soon,” he added.

Mr. Tiu Laurel said that importers and retailers had earlier agreed to a profit margin of PHP 10 per kilo.

“I actually also consulted the private sector on this, and we had a meeting with retailers, importers, DTI (Department of Trade and Industry), PCC (Philippine Competition Commission), BIR (Bureau of Internal Revenue), and everybody,” he said. “This decision to peg it at PHP 58 was a decision not made arbitrarily. It’s made through consultation.”

Asked to comment, Federation of Free Farmers National Manager Raul Q. Montemayor said that there is no need to declare a food security emergency on rice due to ample domestic supply.

“I don’t think there is a national food security emergency on rice. There is no shortage in supply, there is no calamity, harvests will start again in March, and prices, while still high, are actually slowly going down,” Mr. Montemayor said in a Viber message.

He added that the government had failed to go after profiteering importers, wholesalers, and retailers.

“Instead of running after them, the government has instead opted to manipulate the law (RA 12708), so it gives them the legal basis for releasing NFA stocks to LGUs in an attempt to lower prices,” he said.

In a Viber message, former Agriculture Undersecretary Fermin D. Adriano said that the limited stock of the NFA may not be enough to influence rice prices.

“Very limited stock compared to the hands of the rice cartel, which controls around 70% of total supply,” Mr. Adriano added. — Adrian H. Halili, Reporter with inputs from Kyle Aristophere T. Atienza