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The Philippines should expand its trade relations with ASEAN, China, and the European Union (EU) in response to the 20% tariff imposed by the US, regardless of the outcome of President Ferdinand R. Marcos, Jr.’s visit to Washington next week, an academic said.

Josue Raphael J. Cortez, who lectures on diplomacy at the College of St. Benilde, said the Philippines needs to prepare to trade with alternative partners if negotiations with the US falter.

The new tariff is higher than the 17% rate initially assigned to the Philippines in early April.

“Should ASEAN members fail to achieve their aim to lower the tariffs, bolstering trade ties with their neighbors would be the way to go,” he said via Messenger chat. “It is high time that the bloc members strengthen their trading with one another because trade has been stagnant for the longest time at roughly 20-30%.”

Philippine exporters are not expected to be competitive at the 20% tariff, while the narrower differential relative to export competitors also weakens the case for relocating factories here.

Ahead of the Washington meeting, Mr. Cortez said Manila must prepare fallback options if talks fail to result in a tariff rollback.

China remains the Philippines’ largest trading partner, with the US coming in third, but the territorial dispute with Beijing complicates the prospect of deeper cooperation.

“Further deepening our economic ties with it can be a boon or a bane for us,” Mr. Cortez said.

The South China Sea remains a source of friction with China, with ties between Beijing and Manila at their worst in years in the face of frequent ship-to-ship confrontations in the Philippine exclusive economic zone.

The tariff uncertainty highlights the urgency of bringing ASEAN economies deeper into their integration project.

“It is high time that ASEAN members once again strengthen trading with one another, especially if they fail to achieve their aim of lowering tariffs with external partners,” Mr. Cortez said.

President Donald J. Trump imposed fresh tariffs on key members of the 10-nation bloc, with Vietnam managing to lower its rate to 20% from 46% in April.

Mr. Cortez also pointed to the EU as a potential alternative economic partner should negotiations with the US turn sour. The EU is the Philippines’ fourth-largest trading partner and a major source of foreign direct investment.

“Given that we are aligned with it both politically and economically, it will also be a good opportunity for us to further solidify our relationship,” he added.

Successful negotiations with Washington this month would bolster Mr. Marcos’ diplomatic standing ahead of his State of the Nation Address later this month, according to Mr. Cortez.

“It will not simply show how influential he is as the chief architect of Philippine foreign policy. It may also reflect his regime’s commitment to international norms and standards,” he said.

A successful negotiation with Washington may signal that Manila is a viable partner for open markets, willing to adjust and adapt to changing times, he noted.

“Despite nuanced views, with some arguing that we are heavily reliant on Washington, we still ascertain as a country that should we find something debilitating to our interests, we will not hesitate to utilize all the possible means for us to renegotiate something for ourselves,” he added.

According to a Reuters report last week, Foreign Affairs Secretary Ma. Theresa P. Lazaro confirmed the first meeting between the two presidents.

Ms. Lazaro told Reuters the fresh tariffs will be discussed, among others, with a Philippine delegation bound for Washington this week to negotiate.

A White House official earlier told Reuters the meeting was set for July 22. Philippine officials have announced the dates for the Marcos visit as July 20-22.

The US goods trade deficit with the Philippines widened to USD 4.9 billion in 2024, a 21.8% increase from 2023. — Chloe Mari A. Hufana, Reporter

Subsidies provided to government-owned and -controlled corporations (GOCCs) fell 18.73% year on year in May to PHP 7.92 billion, the Bureau of the Treasury (BTr) said.

The Treasury reported that month on month, May subsidies dropped 45.57% from April.

The National Government (NG) extends subsidies to GOCCs to help fund operational expenses not covered by their revenue.

In May, the National Irrigation Administration (NIA) topped the subsidy list with PHP 3.54 billion or 44.72% of the total.

The National Electrification Administration received PHP 1.25 billion and National Food Authority (NFA) PHP 750 million.

The Philippine Fisheries Development Authority was granted PHP 724 million in subsidies in May. It did not receive subsidies in the previous month.

State-run firms on the subsidy list included the Philippine Heart Center (PHP 385 million), the Sugar Regulatory Administration (PHP 208 million), the Philippine Coconut Authority (PHP 170 million), the Philippine Rice Research Institute (PHP 133 million), the National Kidney and Transplant Institute (PHP 124 million), and the Philippine Children’s Medical Center (PHP 120 million).

Other GOCCs obtaining subsidies exceeding PHP 50 million include the Development Academy of the Philippines (PHP 77 million), the Light Rail Transit Authority (PHP 74 million), the Cultural Center of the Philippines (PHP 60 million), the Lung Center of the Philippines (PHP 59 million), the National Dairy Authority (PHP 58 million), the Philippine Institute for Development Studies (PHP 44 million), the Center for International Trade Expositions and Missions (PHP 27 million) and the Philippine Institute of Traditional and Alternative Health Care (PHP 20 million).

Those receiving less than PHP 20 million were the People’s Television Network, Inc. (PHP 18 million), the Metropolitan Waterworks and Sewerage System (PHP 14 million), the Aurora Pacific Economic Zone and Freeport Authority (PHP 10 million), the Philippine Tax Academy (PHP 10 million), the Philippine Center for Economic Development (PHP 9 million), and the Subic Bay Metropolitan Authority (PHP 8 million).

The Southern Philippines Development Authority, The Tourism Infrastructure & Enterprise Zone Authority, and the Zamboanga City Special Economic Zone Authority all received PHP 7 million in May. 

Receiving no subsidies were the Land Bank of the Philippines, the Small Business Corp., the National Housing Authority, the National Power Corp., the Philippine National Railways, the Bases Conversion Development Authority, the Intercontinental Broadcasting Corp.-13, the Philippine Crop Insurance Corp., the Power Sector Assets and Liabilities Management Corp. (PSALM), and the Tourism Promotions Board.

“This could be part of the fiscal reform measures to (limit) subsidies to GOCCs (to) priority and mission-critical items for economic growth and development,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said over the weekend.

In order to plug the budget deficit, profitable state-run firms with surpluses have been requested to remit more dividends, he said.

As of May 15, the Department of Finance had collected PHP 76 billion in GOCC dividends.

In the first five months, the budget deficit widened 29.41% year on year to PHP 523.9 billion, as the government accelerated spending on infrastructure and social programs.

In the first five months, GOCC subsidies hit PHP 45.05 billion, down 21.03% from a year earlier.

The NIA was the top recipient in the five months with PHP 15.34 billion. This was followed by PSALM (PHP 8 billion) and the NFA (PHP 3.75 billion).

In a separate report, PIDS, the government think tank, urged the government to repurpose the NIA’s idle irrigation water rights for broader public use, including household supply and other municipal needs.

PIDS reported that more than 1.3 million liters per second of irrigation water, intended for farmland — now goes largely unused as many agricultural areas have been converted into residential and commercial communities. — Aubrey Rose A. Inosante

The Presidential palace on Thursday raised alarm over the US decision to increase tariffs on Philippine exports to 20%, as a high-level delegation prepares to fly to Washington next week to seek adjustments.

The Philippine Exporters Confederation, Inc. (Philexport) also expressed concern about the country’s shrinking trade leverage with the US after US President Donald J. Trump’s move to hike tariffs from the “Liberation Day” rate of 17%.

“We are concerned that, notwithstanding our efforts and constant engagements, the US still decided to impose a 20% tariff on Philippine exports,” the Trade department said in a separate statement.

Still, Frederick D. Go, special assistant to the President for investment and economic affairs, said the new tariff remains the “second lowest” among Association of Southeast Asian Nations (ASEAN) member states, next to Singapore’s 10%.

Mr. Trump first announced the sweeping tariff changes on April 2 — dubbed “Liberation Day” — and implemented a 90-day pause that ended on July 9.

The US President said in posts on his Truth Social media platform that starting Aug. 1, he would impose a 20% tariff on goods from the Philippines, 30% on goods from Sri Lanka, Algeria, Iraq, and Libya, and 25% on Brunei and Moldova.

Mr. Go said the Philippine government is pursuing further negotiations.

“We remain committed to continuing negotiations with the United States in good faith to pursue a bilateral comprehensive economic agreement or, if possible, a free trade agreement,” he  told a news briefing.

The delegation — composed of Mr. Go, Trade Secretary Ma. Cristina A. Roque, Trade Undersecretary Ceferino S. Rodolfo and Trade Undersecretary Allan B. Gepty — is scheduled to visit Washington from July 14 to 18.

“The economic team and the Department of Trade and Industry will continue to advance key economic reforms to sustain a competitive and investor-friendly business environment,” Mr. Go said, citing the need to build more global trade ties.

Philippine Ambassador to the US Jose Manuel “Babe” G. Romualdez said the Philippines would seek to lower the duty, which remains among the lowest reciprocal duties in Southeast Asia.

“We are still planning to negotiate that down,” he said in a text message.

‘Unilateral impositions’

The Philippine Trade department said it understands the US concerns about trade imbalances and its push to boost local manufacturing.

“However, global supply chains are deeply interconnected, and unilateral trade impositions will have adverse effects on the global economy,” it said. “Thus, we believe in the need for constructive engagement to address trade issues.”

US goods trade with the Philippines reached about USD 23.5 billion last year, according to data from the Office of the United States Trade Representative. US exports to the Philippines stood at USD 9.3 billion, a 0.4% increase from 2023, while imports from the Philippines hit USD 14.2 billion, up 6.9% year in year.

The resulting US goods trade deficit with the Philippines widened to USD 4.9 billion in 2024, a 21.8% increase from a year earlier.

Finance Secretary Ralph G. Recto, for his part, said the Philippines does not plan to retaliate. “Trade negotiations are ongoing. [There are] no plans to increase tariffs on US imports,” he told BusinessWorld in a text message.

Despite the higher levies, Mr. Recto said the economy is still expected to grow by 5.5% to 6.5% this year.

Philexport President Sergio Ortiz-Luis, Jr. described the US tariff hike as “very unfortunate.”

“We do not mind the increase from 17%, except the fact that some of our major competitors have their tariffs decreased, especially Vietnam, which is at the same level with us,” he told BusinessWorld by telephone.

The group expressed concern that the Philippines might no longer be able to offer trade concessions without hurting local industries.

Mr. Ortiz-Luis noted that other countries currently negotiating with the US enjoy more bargaining power.

“Unfortunately, they can negotiate because they have leverage that we do not have because we have given them up already,” he said. “We have given the US [military] bases, they are putting ammunition here, we are buying used equipment from them, but the others are not.”

Mr. Ortiz-Luis urged the government to take the export sector and micro, small, and medium enterprises (MSME) more seriously, warning that the US tariff could still change before Aug. 1.

“It has so far been just lip service in terms of product development, joining international trade, and marketing,” he said. “No funding that matters is coming from the government.”

“Those are the things that are being forgotten… These are investments that we cannot afford to miss,” he added.

He also said any future talks with the US should highlight the country’s limited export volume.

“We cannot offer anything anymore. I cannot think of anything we can offer on the trade side, except things that will probably affect our agricultural imports from the US,” Mr. Ortiz-Luis said.

Instead of focusing solely on the tariff hike imposed by the US, the government should direct its efforts toward export product development and market diversification, he said.

Despite the 20% tariff, he remains optimistic that the country could still meet its revised export goal.

“We have already abandoned the Export Development Council’s target. What we are using now is the PDP target, and I think we can still achieve that,” Mr. Ortiz-Luis said, referring to the USD 113.42-billion export target under the Philippine Development Plan (PDP).

Foreign Buyers Association of the Philippines (FOBAP) President Robert M. Young said Manila should negotiate with Washington for a 10% tariff.

“Second is the oft-repeated call for the drastic improvement to level up our production capabilities and ease in doing business in order to compete and still remain on the radar of US buyers,” he said by telephone.

The 20% tariff could lead to weaker exports, slower economic growth, employment risks and investment uncertainty, Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., said in a Viber message.

“Consider diversifying export markets, exploring US-based manufacturing partnerships, and leveraging ASEAN trade networks,” Mr. Ravelas said.

He also called for an acceleration in free trade agreement talks to cushion the economic impact of the tariff hike.

Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) President Danilo C. Lachica said further clarification is needed on the nature of the higher US tariff.

“There is still a need to clarify if the 20% is reciprocal or the total tariff,” he said.

‘Wake up call’

The Philippine Chamber of Commerce and Industry (PCCI) said the 20% tariff could hurt local industries.

“This development underscores the importance of diversifying our export markets, strengthening regional trade partnerships and investing in domestic competitiveness,” PCCI President Enunina V. Mangio said in a Viber message.

She urged the government to boost its support for local industries amid mounting global trade pressures.

Ser Percival K. Peña-Reyes, director at the Ateneo Center for Economic Research and Development, said the 20% duty is “still relatively lower” than most Philippine neighbors “so there’s still the potential to attract businesses from elsewhere.”

But investors won’t come in unless the Philippines boosts competitiveness, he said in a Viber message. He said tax holidays, reduced corporate income taxes, duty-free importation of equipment and raw materials and subsidized infrastructure could draw in investments.

Meanwhile, former Tariff Commissioner George N. Manzano said the Philippines remains in a relatively better position than other export-driven economies due to the lower tariffs and the exemption of key products like semiconductors.

“It’s not really as problematic as other countries that export, like maybe Bangladesh — it exports a lot of garments, which are not exempted,” he said by telephone.

Trade Justice Pilipinas said the higher US tariffs should serve as a “wake-up call” not only for the Philippine government but also for the broader ASEAN.

“Today’s tariff hike is not just a trade issue; it exposes the deep flaws of an export-dependent development strategy that leaves our economy at the mercy of global markets and the political whims of foreign leaders,” it said in a statement.

The group urged the Philippines to use the moment as an opportunity to strengthen ties with regional neighbors.

The recent announcement should compel the Philippines to rethink and deepen regional solidarity with ASEAN, it added. — Chloe Mari A. Hufana, Justine Irish D. Tabile and Aubrey Rose A. Inosante with Reuters

Foreign direct investments (FDI) in the Philippines rose 7.1% year on year in April, boosted by inflows from Japan and investments in the manufacturing sector, according to the central bank.

“Net foreign direct investments (FDI) into the Philippines remained positive in April 2025, with inflows from Japan and into manufacturing taking the lead,” the Bangko Sentral ng Pilipinas (BSP) said in a statement.

FDI net inflows hit USD 610 million in April, up from USD 570 million a year earlier and from USD 498 million in March. The latest figure marked a rebound from the 27.8% contraction posted in March.

The BSP attributed the growth to a 24.3% yearly increase in nonresidents’ net investments in debt instruments issued by local affiliates to USD 522 million.

However, equity capital investments — excluding reinvestment of earnings — plunged by 94.1% to just USD 4 million from a year ago.

Japan accounted for the biggest share of equity placements at 32%, followed by the US (18%), Singapore (13%), South Korea (13%) and Taiwan (9%).

Almost half (47%) of April’s investments were channeled into the manufacturing sector, while the financial and insurance, and real estate sectors each accounted for 16%.

Reinvestment of earnings also rose 3.3% to USD 84 million in April.

Total investments in equity and investment fund shares fell 41.1% to USD 88 million from April 2024.

“The increase in FDIs in April led by higher inflows into manufacturing, particularly from Japan, suggests renewed investor interest in the Philippines as a production hub amid global supply chain shifts,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in a Viber message.

“Strategic sectors like electronics and auto parts are attracting capital as firms diversify away from China and seek cost-effective alternatives in Southeast Asia,” he added.

But he said the 20% tariffs imposed by the US on the Philippines could weigh on FDI sentiment in the months ahead.

On Thursday, the US government raised tariffs on Philippine exports to 20%, up from 17%, under President Donald J. Trump’s sweeping tariffs on US trading partners.

“Investors may reassess the Philippines’ competitiveness compared with peers like Vietnam or Thailand, which may negotiate more favorable trade terms,” Mr. Rivera said.

He urged the government to respond with “swift trade diplomacy,” provide support to affected sectors and enhance the country’s investment appeal through stable policies, incentives and improved logistics.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the April FDI was supported by the recent passage of a measure that expands fiscal incentives and reduces corporate income taxes on foreign investors.

Despite the FDI rebound in April, FDI net inflows for the first four months dropped 33.4% to USD 2.37 billion from a year ago.

Debt instrument investments slid 24.3% to USD 1.72 billion, while equity capital investments excluding reinvested earnings plunged 68.6% to USD 302 million.

Equity placements dropped 57.5% to USD 509 million, while withdrawals fell 11.8% to USD 207 million.

Major sources of equity investments during the period included Japan (40%), the US (17%), Singapore (14%), South Korea (7%) and Malaysia (6%).

Most investments flowed into the manufacturing sector (47%), followed by real estate (21%) and financial and insurance (14%).

Meanwhile, reinvestment of earnings for January to April rose 7.4% to USD 348 million from a year earlier. — A.M.C. Sy

 

The Philippines might struggle to bring its debt-to-gross domestic product (GDP) ratio back to the internationally accepted threshold of 60% as global uncertainties and slower growth weigh on fiscal recovery, analysts warned.

“With the downgrade in growth forecasts and the sustained increase in debt levels, we may not be able to see an immediate return of the debt-to-GDP ratio to 60%,” Diwa C. Guinigundo, country analyst at GlobalSource Partners and a former central bank governor, said in a Viber message.

The country’s debt-to-GDP ratio rose to 62% in the first quarter, the highest since 2005 and exceeding the 60% benchmark widely recognized by institutions like the International Monetary Fund.

While the Bureau of the Treasury had cited a more flexible 70% ceiling for emerging economies, the ratio now is above the Marcos administration’s target of 60.4% by yearend and 56.3% by 2028.

In response to a wider fiscal gap, Finance Secretary Ralph G. Recto recently adjusted the borrowing plan to PHP 2.6 trillion from PHP 2.55 trillion.

Still, some experts see potential for improvement if growth accelerates and borrowing is channeled wisely.

“If the economy sustains a growth rate of around 5.5% to 6% annually, and debt accumulation moderates, we could see the ratio ease back toward 60% within the next 18 to 24 months,” Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., told BusinessWorld in a Viber message.

However, first-quarter GDP came in at a weaker-than-expected 5.4%, down from 5.9% a year earlier and below the government’s 5.5% to 6.5% goal this year.

Mr. Ravelas said the optimistic scenario hinges on the assumption that there would be no “major external shocks” and that borrowings are allocated efficiently.

“If investments go into infrastructure, digitalization and human capital development — areas with high multiplier effects — then yes, growth can outpace debt,” he said.

“But if borrowing merely plugs fiscal gaps and subsidies [are provided] without boosting productivity, the ratio may remain elevated or worsen. The key is quality of spending, not just quantity,” he added.

Jose Ma. Clemente S. Salceda, an economist and former congressman, said the debt ratio remains “manageable,” especially since the bulk of obligations are obtained locally, limiting vulnerability to foreign exchange shocks.

“I’m not worried even if we stay at around 60% debt-to-GDP,” the former Committee on Ways and Means chairman of the House of Representatives said via a Viber message. “Global expectations of debt sustainability evolved during COVID.”

National Treasurer Sharon P. Almanza earlier said 80% of borrowings this year would be raised locally, while 20% will be sourced externally — a strategy meant to buffer the impact of a larger deficit ceiling.

As of end-May, the country’s outstanding debt stood at PHP 16.92 trillion, with 69.6% obtained domestically.

Still, Mr. Salceda flagged concerns over future shocks and fiscal space.

“The real question is whether our economy and tax base are growing fast enough to support another shock,” he said, noting that from 2004 to 2019, the country reduced its debt-to-GDP to 39.6% from 71.6% by expanding the economy and improving tax revenue.

He warned that the proposed 2026 national budget of PHP 6.793 trillion — only 7.4% higher than this year — would be “contractionary in real terms” when nominal GDP is expected to grow by about 8%.

“The government’s role in driving growth will be more limited, so spending must be efficient and well-targeted,” Mr. Salceda said, adding that sectors like infrastructure, food systems, education and digital services are key to widening the tax base and supporting long-term revenue resilience.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the Eurozone’s Stability and Growth Pact sets a standard of 60% debt-to-GDP and a 3% deficit ceiling.

Rather than focusing solely on targets, Mr. Ricafort said improving recurring tax collections is crucial, particularly by maximizing existing laws and clamping down on tax evasion.

“In a worst-case scenario and as a final option, new taxes and higher tax rates, among other tax reform measures, [may be needed] to structurally increase the recurring sources of National Government tax revenue collections,” he added.

Despite the concerns, multilateral organizations remain cautiously optimistic.

In its Philippine Economic Update on July 7, the World Bank projected that the country’s debt-to-GDP ratio would fall to 60.2% by 2025 and 59.7% in 2026. The trend is expected to continue, dropping to 59.4% in 2027 and 59.1% by 2028, by the end of the Marcos administration.

“The projected decline in interest rates should also lower the cost of debt financing,” the World Bank said, citing planned fiscal consolidation and recovering growth. — Aubrey Rose A. Inosante, Reporter

The 15% tariff on imported rice will remain unchanged at least until November, according to the Department of Economy, Planning, and Development (DEPDev), as the government seeks a “win-win” solution that balances inflation control with protecting local farmers.

“Not in the immediate [term], but most likely by November,” DEPDev Undersecretary for Policy and Planning Rosemarie G. Edillon told a news briefing on Wednesday. “After four months, we will submit the study to the President.”

The lower tariff was introduced through Executive Order (EO) No. 62, which took effect in July 2024 and slashed the import duty on rice to 15% from 35% until 2028. The EO mandates a review every four months to assess its impact.

The announcement comes amid a petition from farmer groups, including the Samahang Industriya ng Agrikultura, to go back to the original 35% duty to shield local producers from the influx of cheaper rice imports.

The Department of Agriculture, meanwhile, said it would recommend a gradual tariff increase during the next harvest season.

Ms. Edillon said they met to discuss the review and petition, and they agreed that the periodic review is meant to report on what has happened, not to make recommendations at this stage.

The lowered tariff appears to be achieving its inflation-control goals. Rice prices dropped by 14.3% in June, improving from the 12.8% decline in May, according to the local statistics agency. It was the sharpest drop since 1995.

Rice supply also appears to be stable. As of June, the country’s rice inventory reached 2.24 million metric tons (MT), 3.5% more than a year earlier. “Most of them are still in the warehouses. And we had the bumper harvest, actually, for the first half,” Ms. Edillon said.

She added that the rice import volume would be capped at 3.5 million MT for the year.

The government is also exploring more measures to support farmers, including enhanced access to the Rice Competitiveness Enhancement Fund, which provides planting assistance.

The DEPDev is also participating in discussions on whether to restore the regulatory powers of the National Food Authority (NFA), which was stripped of many functions following the Rice Tariffication Law.

Speaker Ferdinand Martin G. Romualdez said the House of Representatives is ready to act on a draft bill that seeks to reinstate the NFA’s market functions once it reaches the chamber.

The Agriculture department has said the draft legislation includes provisions for the NFA to manage buffer stocks, regulate rice marketing and set floor prices for rough rice.

“I think at that time, the context was different. So NFA was so much in debt. It was really bleeding, hemorrhaging,” Ms. Edillon said, referring to the agency’s former monopoly on imports. “It was not really fulfilling its mandate… What we need to consider now is how the market has adjusted to the new regime.”

She also acknowledged the challenges in setting floor prices. “It will be very tricky though, operationalizing it and even estimating it. But yes, that’s something that we’re studying as well.” — Aubrey Rose A. Inosante

The PHP 50 daily minimum wage hike for Metro Manila workers that will take effect on July 18 is unlikely to fuel inflation, according to economists.

Its limited coverage means it probably won’t be inflationary compared with earlier proposals for a nationwide wage hike, said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc.

“It’s going to take effect this month, so that has to be factored in,” he told Money Talks with Cathy Yang on One News on July 2. “But versus PHP 100 to PHP 200, I think PHP 50 is a huge difference from the huge uptick that was originally proposed by Congress.”

The P50 wage hike is a “well-calibrated move,” said Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co.

“It boosts worker income without significantly stoking inflation,” he said. “Given current low inflation and soft growth, the impact should be manageable — especially if businesses adjust gradually and productivity improves.”

“It’s a positive step, but we’ll need to watch for second-round effects in labor-intensive sectors,” he added.

The Labor department last week said the PHP 50 daily wage increase — the biggest pay hike ever granted by the National Wages and Productivity Commission — would benefit about 1.2 million workers in the Philippine capital and nearby cities and provinces.

The new daily minimum wage in the National Capital Region (NCR) is expected to increase to PHP 695 in the nonagricultural sector.

The pay of workers in the farm sector, service and retail outlets with 15 or fewer staff members and factories with fewer than 10 workers will go up to PHP 658.

Congress adjourned last month without approving the bill seeking to hike the daily minimum wage by PHP 100-PHP 200. Economic managers had warned that the legislated wage hike could have “dangerous repercussions” for the Philippine economy.

Philippine inflation picked up to 1.4% in June from 1.3% in May amid higher utility costs, the government reported on Friday.

This was slower than 3.7% in June last year and was within the central bank’s 1.1% to 1.9% forecast for the month. This was also below the 1.5% median estimate in a BusinessWorld poll of 17 analysts.

National Statistician Claire Dennis S. Mapa on Friday said the latest wage hike’s impact on inflation could be lagged, adding that this would likely be reflected in personal care, miscellaneous goods, and services.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said a PHP 50 wage hike that is given to other regions could add a percentage point to inflation.

“Businesses tend to pass the higher minimum wages, or pass-through effects, as much as possible, depending on competition locally and from imports,” he said in a Viber message.

Ateneo Center for Economic Research and Development Director Ser Percival K. Peña-Reyes said the NCR wage hike could “lead to job losses or inflation if the hike is merely artificially imposed and is not commensurate with any actual productivity increase.”

IBON Foundation Executive Director Jose Enrique “Sonny” A. Africa said the hike is “minuscule” and should not have any impact on consumer prices.

“The P50 NCR wage hike is just 0.4% of NCR establishment expenses and barely 2.5% of profits,” he said in a Viber message.

He added that “any firm that raises prices because of the tiny hike is just using that as an excuse for further profiteering.” — Aubrey Rose A. Inosante