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The Philippine economy now sits at a “sweet spot” as inflation remains benign while the country’s banking sector and external position are strong, the Bangko Sentral ng Pilipinas (BSP) said.

“Amid the swirling controversies over corruption, I am pleased to report a piece of good news. We think the economy is in good shape,” BSP Governor Eli M. Remolona, Jr. said during a briefing at the Senate on Monday.

“Indeed, our economy is in what I would call a ‘sweet spot,’ and I think this would help our fiscal strategy (to) make it more effective,” he added.

For the first half, gross domestic product (GDP) growth averaged 5.4%, slower than the 6.2% a year ago.

Inflation averaged 1.7% in the January-July period, below the BSP’s 2-4% annual target.

Mr. Remolona said the central bank tamed inflation with its aggressive rate hikes.

Last week, it cut its key policy rate by 25 basis points (bps) to 5%. The central bank has so far lowered borrowing costs by a total of 150 bps since it began its easing cycle in August 2024.

“This lowering of the policy rate stimulates demand, it helps the economy grow, and because we did it in a very measured approach, it hasn’t led to inflation,” Mr. Remolona said.

He said inflation looks like it will stay within BSP’s 2-4% target range.

The BSP projected inflation to average 1.7% this year, before picking up to 3.3% in 2026 and 3.4% in 2027.

At the same time, Mr. Remolona also attributed the economy’s current state to the “sound” performance of the local banking system.

“The banks have solid balance sheets, assets are growing, deposits are growing, (and) income of banks is growing,” he said.

Mr. Remolona added that banks have maintained enough capital and liquidity.

“Looking at liquidity standards, international liquidity standards, our banks also hold liquidity that far exceeds the international standard,” he said. “At the same time, the loans are not so risky.”

Mr. Remolona also said digitalization and financial inclusion can help increase consumers’ savings, especially in a country where “savings rate tends to be quite low.”

Meanwhile, the BSP chief said the country has “more than enough” international reserves.

At end-July, the country’s gross international reserves slipped to $105.4 billion from $106 billion in June. — K.K.Chan

Headline inflation may have slightly picked up in August as rising food and electricity costs were tempered by low rice prices, analysts said.

A BusinessWorld poll of 16 analysts yielded a median estimate of 1.3% for the August consumer price index (CPI), picking up from 0.9% in July but slower than the 3.3% clip in August 2024.

If realized, August would mark the sixth month in a row that inflation was below the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target range.

The Philippine Statistics Authority is scheduled to release the August inflation data on Friday, Sept. 5.

The BSP projects inflation to have settled within the 1% to 1.8% range in August.

“Upward price pressures for the month are likely to arise from higher costs of fruits, vegetables, and fish due to unfavorable weather conditions,” the BSP said in a statement late on Friday. “Higher electricity rates, elevated domestic fuel costs, and the depreciation of the peso likewise contribute to upside price pressures.”

However, these could be partially offset by the low prices of rice and meat, the BSP said.

Metropolitan Bank & Trust Co. (Metrobank) said inflation likely picked up to 1.3% in August from the near six-year low in July because of “accelerating food prices due to disruptive weather and higher energy costs.”

It noted that fish and vegetable prices rose as supply was disrupted after typhoons in late July and early August. However, the price of meat and fruits went up year on year, but at a slower pace.

Tropical storms Crising, Dante and Emong, and the southwest monsoon brought heavy rains and flooding in late July until early August, left PHP 4.86 billion worth of agricultural damage, according to the Department of Agriculture.

Energy costs

Price pressures also emanated from higher power rates and pump prices in August.

“Among the factors for upward inflation pressures include higher price inflation for fish, fruits, and vegetables due to inclement weather, electricity rate hike, and higher petroleum prices,” Angelo B. Taningco, research head and chief economist at Security Bank, said.

Metrobank noted that the three major electricity players in the country — Manila Electric Co. (Meralco), Visayan Electric Co., and Davao Light and Power Co. — raised their rates in August due to higher power supply costs and transmission fees.

Meralco hiked rates by P0.6268 per kilowatt-hour (kWh) in August, bringing the overall rate for a typical household to P13.2703 per kWh. This translates to an additional P125 in the total electricity bill of residential customers consuming 200 kWh.

Chinabank Research noted upward adjustments in domestic pump prices in August.

“However, these were likely tempered by the month-on-month decline in the prices of rice, meat, and LPG (liquefied petroleum gas),” Chinabank said.

As of Aug. 26, pump price adjustments stood at a net increase of P0.70 per liter for gasoline, P0.50 a liter for kerosene, and P0.30 for diesel.

However, Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said the August print is still “soft” as rice prices remained low and consumer demand has not picked up much.

Rice prices

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said low prices of rice could help inflation stay below the BSP’s target.

“Inflation could remain relatively benign and still below the BSP’s inflation target of 2%-4% (near the lower end of the said range), largely due to lower rice prices, which account for 9% of the CPI basket due to lower tariff on imported rice since early July 2024,” he said.

However, Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said upside risks to inflation include a rise in palay prices in some regions ahead of the government’s 60-day ban on rice imports and potential supply disruptions.

“On the downside, base effects from last year’s La Niña and sustained rice deflation may temper inflation,” he said.

Rice inflation has been decelerating in the last few months on the back of the government’s measures to curb rising prices of the staple grain, including lowering the tariffs on rice.

The 60-day suspension of rice imports starts today (Sept. 1) and will end on Oct. 30. It covers imports of regular milled and well-milled rice but excludes varieties that are not commonly produced locally.

Maybank Economist Azril Rosli said the impact of Mr. Marcos’ rice import ban will likely be felt starting in the fourth quarter.

“We anticipate that immediate pass-through effects to consumer prices will remain limited during the late third quarter to early fourth quarter 2025 period,” he said.

“We expect the more pronounced impact of this supply-side intervention to materialize in subsequent months, particularly from late fourth quarter 2025 through early first quarter 2026, as the policy implementation fully takes effect and market adjustments occur.”

Arindam Chakraborty, an economist at ANZ Research, said lower international rice prices may have helped sustain food price deflation in August.

“Going forward, the potential reversal of rice import tariff reductions could introduce upward pressure on food prices,” Mr. Chakraborty said. “Even so, given moderate demand conditions, we expect inflation to remain below BSP’s official target range in 2025.

Meanwhile, Mr. Asuncion said recent wage hikes and the weak peso as among the drivers of August inflation.

“The slight uptick from July’s 0.9% is driven by emerging pass-through effects from higher energy prices, wage adjustments, and imported goods — especially amid a weaker peso,” he said.

The local unit closed at P57.13 per dollar on Friday, stronger by P1.19 from its P58.32 finish a month ago, Bankers Association of the Philippines data showed.

Euben Paracuelles, a research analyst at Nomura Global Markets Research, noted that August core inflation is likely to remain unchanged. Core inflation slightly picked up to 2.3% in July from 2.2% in June.

“Core inflation, however, likely remained unchanged from the previous month, consistent with stable demand conditions and the still-negative output gap,” he said.

Rate cut impact

Analysts expect the impact of the Monetary Board’s latest policy rate cut on inflation in the coming months to be “muted.”

“The immediate effect of this rate cut on actual inflation is expected to be muted,” Mr. Asuncion said. “With demand-side pressures still soft and supply-side factors — such as rice deflation and China’s producer price weakness — continuing to dominate, the cut is unlikely to trigger a sharp rebound in prices in the near term.”

At its Aug. 28 meeting, the central bank delivered a third straight 25-basis-point (bp) cut, bringing its policy rate to 5%. BSP Governor Eli M. Remolona, Jr. also signaled they could deliver one more 25-bp cut this year, depending on data.

Mr. Rosli said the 25-bp cut “will likely generate modest inflationary pressures.”

“Lower borrowing costs should stimulate consumer credit demand, particularly for durable goods and housing-related expenditures, creating upward pressure on inflation,” he said. “However, given the subdued economic momentum, this demand-side stimulus is expected to be measured rather than pronounced.”

Mr. Ravelas said the rate cut is a “calculated push” that could support the country’s growth without stoking inflation.

“If demand starts to recover, we might see inflation edge up, but for now, it’s a calculated push to keep the economy moving,” he added.

Reinielle Matt M. Erece, an economist at Oikonomia Advisory & Research, Inc., said rate cuts may drive up inflation as consumer demand increases.

“Rate cuts, along with the onset of the holiday season, may spark higher demand for goods and services,” Mr. Erece said. “This may cause an uptick in inflation as spending on goods may drive prices higher.”

The central bank said it will keep monitoring factors that could influence its inflation and growth outlook, following its data-driven approach to monetary policy decision making.

The BSP’s next policy-setting meetings are in October and December. — Katherine K. Chan

The Bases Conversion and Development Authority (BCDA) said it is hoping to double its investment approvals to P70 billion this year and breach P100 billion in funds remitted to the Treasury since 1993.

“Last year, our investment approvals were around PHP 30 billion, now it is already more. Our target this year is around P70 billion, which is double last year,” BCDA President and Chief Executive Officer Joshua M. Bingcang said at a roundtable on Friday. 

“It is because more of our infrastructures are complete, so we are prepared to welcome more investment,” he added.

According to Mr. Bingcang, the BCDA has approved PHP 57 billion worth of investment pledges as of August.

“We are on track to reach P70 billion by year-end. So, I think what will happen is we will have the third biggest approvals after the Board of Investments and the Philippine Economic Zone Authority,” he added.

The Philippine Statistics Authority (PSA) has reported that the BCDA approved around PHP 32 billion worth of investment pledges last year.

These include the P4-billion waste-to-energy deal it entered into with Indian engineering firm Uttamenergy Ltd.

The project will be developed by a consortium of Uttamenergy and the Philippines’ Global Heavy Equipment and Construction Corp. and ATD Waste-to-Energy Corp.

He said that the BCDA is set to visit South Korea and Japan in September and October, respectively.

Separately, Mr. Bingcang said the BCDA is on track to breach PHP 100 billion in remittances to the government since May 1993.

“We will breach the PHP 100-billion remittance to the National Government. We were at PHP 96 billion as of May,” he said.

Remittances as of May consisted of PHP 78 billion in disposition proceeds, PHP 12.1 billion in dividends, PHP 3.9 billion in guarantee fees, and PHP 1.8 billion in other remittances.

He added that the BCDA will also be investing around PHP 1 billion over the next two years in improving the Subic–Clark–Tarlac Expressway (SCTEX).

“My goal is to complete all the interchanges that were not done before because we didn’t have the budget. Now, because we have extra revenue on top of our payment to our Japan International Cooperation Agency loan, it’s time to give back and reinvest,” he said.

He said that the goal is to demonstrate improved services on the toll road alongside higher tolls.

“We’ll be completing three more interchanges in Luisita (Tarlac), Hermosa (Bataan), and Mabalacat (Pampanga). We will also be installing road lighting,” he added.

For lighting, the BCDA has earmarked PHP 300 million, as well as PHP 250 million for each interchange.

“We’ll be investing around PHP 1 billion for the improvement of SCTEX, probably over two years because the approval process is not under our control; we will still need the approval of the Toll Regulatory Board,” he added.

He said that the PHP 1 billion is already earmarked for SCTEX and noted that more services on the toll road are being planned.

“We will be coming up with more service facilities in SCTEX, especially if you’re going to Subic. There are none currently,” he said.

He said fuel station concessions can be directly negotiated and may not go through bidding. — Justine Irish D. Tabile

The Department of Tourism (DoT) said its Philippine Golf Experience (GolfEx) project hopes to position the Philippines as a premier golfing destination.

“It has been a long-held desire to bring golf and tourism together in a way that truly unlocks their potential,” Tourism Secretary Ma. Esperanza Christina G. Frasco said in a statement over the weekend.

She said the Philippines has more than a hundred world-class golf courses.

“What was needed was a deliberate effort to place golf within our broader national strategy, not only as a sport but also as an experience that brings together play and culture as well as community,” she added.

The DoT views golf tourism as a high-value and low-impact form of tourism that induces travelers to stay longer, spend more, engage deeply with the destination, and return.

The DoT launched GolfEx at Clark, Pampanga, which is itself an emerging golf and leisure hub.

“Clark is ready for the golf tournaments and all kinds of sports tournaments,” said Clark Development Corp. President and Chief Executive Officer Agnes VST Devanadera. — Justine Irish D. Tabile

The national government’s (NG) budget deficit sharply narrowed in July amid the sluggish pace of revenue collection and spending, the Bureau of the Treasury (BTr) said on Thursday.

Data from the BTr showed that the budget gap shrank by 34.42% to PHP 18.9 billion in July from PHP 28.8 billion in the same month a year ago.

Month on month, the fiscal gap plunged by 92.17% from the PHP 241.6-billion deficit in June.

In July, revenues went up by 3.26% to PHP 472.3 billion from PHP 457.4 billion in the same month last year, as higher tax collections offset the decline in nontax revenues.

Tax revenues, which made up the bulk of revenue collections, jumped by 5.01% to PHP 423 billion in July from PHP 402.8 billion in the same month in 2024.

Collections by the Bureau of Internal Revenue (BIR) rose by 4.83% to PHP 335.3 billion in July from PHP 319.8 billion a year ago. This included a PHP 3.8-billion tax refund.

“The BIR sustained its strong performance due to higher revenues from corporate income tax. This was followed by personal income tax, tax on government securities, excise tax on tobacco products, percentage tax on banks and fi-nancial institutions, and documentary stamp tax,” the BTr said.

Collections by the Bureau of Customs (BoC) increased by 6% to PHP 85.2 billion, net of a PHP 256-million tax refund, while other offices’ revenues fell by 3.47% to PHP 2.6 billion.

The BTr attributed the higher Customs revenue to the 12.69% year on year increase in excise tax collections, as well as the 6.13% rise in value-added tax collections.

On the other hand, nontax revenues slid by 9.66% to PHP 49.3 billion in July from PHP 54.6 billion in the same month in 2024, mainly due to the 62.6% plunge in collections by other offices to PHP 13 billion.

However, this was offset by the 82.42% surge in Treasury income to PHP 36.3 billion in July from PHP 19.9 billion a year ago. This was attributed to strong dividend remittances, interest income on NG deposits, and NG share from Manila International Airport Authority’s profits.

Meanwhile, government spending inched up by 1.02% to PHP 491.2 billion in July from PHP 486.2 billion in the same month in 2024.

The BTr said the increase was driven by higher National Tax Allotment releases to local government units, the Annual Block Grant to the Bangsamoro Autonomous Region in Muslim Mindanao, interest payments and personnel services expenditures.

“Spending in July was weighed down by the timing of big-ticket disbursements of the Department of Public Works and Highways, Department of Social Welfare and Development, and Department of National Defense for their respective banner programs,” it said.

Primary expenditure (net of interest payment) fell by 5.36% to PHP 385 billion in July, while interest payments went up by 33.72% to PHP 106.2 billion.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort attributed the narrower fiscal deficit in July to a deceleration in overall government spending.

“The narrower budget deficit sends a positive signal for fiscal and debt management,” he said in a Viber message.

7-month deficit

In the first seven months of the year, the NG budget deficit ballooned by 22.04% to PHP 784.4 billion from the PHP 642.8-billion gap last year, as expenditure growth outpaced revenues.

The BTr said the budget deficit was on track to hit the revised PHP 1.56-trillion full-year deficit ceiling.

“This performance underscores the government’s commitment to support economic development while keeping within the bounds of prudent fiscal management,” it said.

State spending rose by 8.22% to PHP 3.52 trillion in the January-to-July period. This was already 57.82% of the P6.08-trillion revised full-year expenditure program.

Primary expenditures rose by 7.26% to PHP 2.99 trillion as of end-July, while interest payments went up by 14.1% to PHP 521 billion.

On the other hand, total revenue collection during the January-to-July period increased by 4.82% to PHP 2.73 trillion from PHP 2.61 trillion in the same period last year. The BTr said the cumulative collection was 60.45% of the PHP 4.52-trillion revised full-year program.

Tax revenues rose by 9.71% to PHP 2.46 trillion as of end-July, which was already 58.27% of the PHP 4.21-trillion target.

BIR collections stood at PHP 1.89 trillion, up 12.34% as of end-July, driven mainly by increases in corporate income tax, value-added tax, and personal income tax. This was 58.68% of the BIR’s PHP 3.22-trillion full-year target.

Customs collection inched up by 1.51% to PHP 544 billion as of end-July. This was 56.74% of the revised PHP 958.7-billion program for the year.

Nontax revenues plunged by 24.88% to PHP 277 billion for the first seven months of the year, largely due to the base effect of non-recurring large dividend remittances in 2024. It accounted for 91.87% of the PHP 301.5 billion-full-year nontax revenue program.

Treasury income dipped by 1.21% to PHP 181.6 billion as of end-July, while other offices’ income slumped by 48.41% to PHP 95.4 billion.

Mr. Ricafort said the narrower budget deficit reduces the urgency for more borrowings, implementing new taxes and raising tax rates.

The NG deficit ceiling is set at PHP 1.56 trillion this year, equivalent to 5.5% of gross domestic product (GDP). This is projected to decline to PHP 1.55 trillion, or 4.3% of GDP, by 2028. — Aubrey Rose A. Inosante, Reporter

The Philippines is asking the US to exempt exports of agricultural products and other goods from the 19% tariff imposed by US President Donald J. Trump, a Trade official said on Thursday.

Trade Undersecretary Allan B. Gepty said the government is seeking US tariff exemptions for exports of agricultural commodities, electronics, vehicle tires, bags and aircraft parts.

“We submitted a list of products we asked the US to exempt from the imposed tariff rates, because these are key and complementary items. And some of them, in fact, are not even produced or manufactured there (in the US),” he told senators at a Senate briefing on the tariff set by Washington on Philippine exports.

“The immediate need right now is we want to negotiate for an exemption, because we want to protect our industries whose main export market is the US,” he added.

The US began imposing a 19% tariff on Philippine goods starting Aug. 7.

“We already submitted to the US the products that should be exempted from the reciprocal tariffs,” he said.

Mr. Gepty said about 23% of the country’s total exports to the US are exempted from the 19% tariff.

In June, the United States was the top destination for Philippine-made goods amounting to USD 1.22 billion, 35.2% higher from the same month a year ago.

Around 53% of the Philippines’ total exports to the US were semiconductors and electronics, Mr. Gepty said.

The US has yet to set new global tariffs for semiconductors and pharmaceuticals. Mr. Trump had earlier said he plans to announce higher tariffs on imports of semiconductors, but companies that plan to build manufacturing facilities in the US would be exempted.

“Ninety-nine percent of our semiconductors as of now are still exempted, there’s still no problem” he said. “If the 100% continues, that’s a big problem,” he added.

Mr. Gepty said most of the semiconductors are made by US companies in the Philippines and exported to the US. He noted the higher tariffs would pose problems for the US supply chain, particularly for its defense industry.

Meanwhile, the Philippines has not formally granted zero tariffs on US products, as negotiations over a reciprocal trade agreement remain ongoing, he said.

“We have not yet concluded and signed [any deal].”

Senator Maria Imelda “Imee” R. Marcos said that any trade deal with the US should undergo a Senate review, citing concerns it could be lopsided and pose risks to domestic industries.

“[Based on] the scant information that we have been provided, it’s clearly more onerous upon the Philippines and extremely beneficial to the US,” she said. “There is even more reason that this agreement should be submitted for the concurrence of the Senate.”

Mr. Trump said in July that the Philippines is “going to open market with the United States, and zero tariffs,” following his meeting with President Ferdinand R. Marcos, Jr. in Washington.

Also on Thursday, Department of Economy, Planning, and Development Undersecretary Rosemarie G. Edillon said the effects of US tariffs on Philippine exports could lead to modest medium-term gains through trade diversion.

However, the US tariffs are projected to trim 0.013% from the country’s gross domestic product by next year, she added.

“If we manage the transition well, then we think that… in the medium term, it could have positive effects by virtue of trade diversion,” she said. “It’s minus 0.013% from the baseline, and this is equivalent to USD 70 million in the short term.”

The impact of the US tariff was partly mitigated as the Philippines is not a major exporter, she said.

Meanwhile, US tariffs could help ease inflationary pressures in the country, as trade disruptions slow global economic activity and dampen demand, Bangko Sentral ng Pilipinas Deputy Governor Zeno Ronald R. Abenoja said.

“In the near term, because of the moderation of economic activity both globally and possibly the domestic economy, this could lessen pressures on the inflation rate right now,” he said. “We are seeing inflation rate below 2% on average for 2025.” — Kenneth Christiane L. Basilio, Reporter