By Aubrey Rose A. Inosante, Reporter
PHILIPPINE economic growth is unlikely to achieve the upper end of the federal government’s 5.5-6.5% goal this yr amid higher US tariffs and slowing remittances, analysts said.
Foundation for Economic Freedom President Calixto V. Chikiamco said hitting the 6.5% mark is “possible, but improbable.”
“More so with [US President Donald J.] Trump tariffs on our key exports and a world economic slowdown,” Mr. Chikiamco told BusinessWorld.
The economy grew by an annual 5.5% within the April-to-June period, supported by a rebound in agriculture production and faster household consumption.
For the primary half, gross domestic product (GDP) growth averaged 5.4%, slower than the 6.2% a yr ago.
Economic Secretary Arsenio M. Balisacan said the economy must grow by 5.6% within the second half to realize the low end of the full-year goal, and by 7.5% to hit the upper end of the goal.
“Nonetheless, if the administration keeps its same regular as you go approach, the chances are not only will the federal government fail to achieve its minimum 6% growth goal, but actually achieve lower than 5.5% growth,” Mr. Chikiamco said.
John Paolo R. Rivera, a senior research fellow on the Philippine Institute for Development Studies, said the required 7.5% average growth within the July-to-December period is a “stretch goal but not unimaginable.”
“It’ll require strong export performance despite global headwinds, faster infrastructure rollout after the election spending ban, and sustained household and investment spending,” he said in a Viber message over the weekend.
Mr. Trump imposed a 19% export levy on goods from the Philippines, in addition to Cambodia, Malaysia, Thailand, and Indonesia. This took effect on Aug. 7.
“With the tariff rate on the Philippines’ goods being according to other ASEAN (Association of Southeast Asian Nations) emerging markets, the Philippines risks losing the chance of accelerating its market share within the US,” HSBC economist for ASEAN Aris D. Dacanay said.
Mr. Dacanay said the strong growth in exports is unlikely to be sustained in the subsequent semester.
“But unlike private consumption, we don’t think this strong performance can be sustained. The robust performance was a results of frontloading of import demand across the globe in anticipation of upper US tariffs,” he said.
Nonetheless, BMI said Philippines is well-insulated from the US tariffs “exports-wise,” but there’s a possibility of Mr. Trump raising the tariffs if the Philippines fails to spend at the least 5% of its GDP on military spending.
“If Trump threatens the next tariff due to the nonfulfillment, we anticipate an additional slowdown in export growth for the Philippines,” BMI said.
Mr. Rivera said he expects softer export growth, especially for sectors like electronics, garments, and agriculture.
“Nonetheless, the total effect will likely be gradual, as existing orders and contracts still work through the pipeline,” he said.
“The extent of the slowdown will rely on how briskly exporters can adjust either by negotiating higher terms, shifting to other markets, or moving up the worth chain.”
REMITTANCE SLOWDOWN
Analysts said slowing remittances from overseas Filipino staff (OFWs) may hurt consumer spending within the second half.
“A slowdown in remittances will weigh on private consumption while heightened global uncertainty will proceed to relax,” Fitch Solutions’ unit BMI said.
Household final consumption, which accounts for over 70% of the economy, jumped by 5.5% within the second quarter. It was the fastest for the reason that 8.1% growth in the primary quarter of 2023.
BMI sees private consumption to grow by 5% in 2025.
“About 40% of remittances come from the US and President Donald Trump has clamped down on immigration and imposed a 1% tax on remittances. Remittances, due to this fact, are prone to proceed dragging on consumption growth in the approaching months, diminishing the positive effects of easier monetary policy,” BMI said.
The Bangko Sentral ng Pilipinas (BSP) expects money remittances from OFWs to grow by 2.8% this yr and by 3% in 2026.
The US will start imposing a 1% excise tax on cash-based remittances from the US to recipients abroad on Jan. 1, 2026.
BMI said it kept its GDP forecast at 5.4% for this yr, but lowered its 2026 projection to five.2% from 6.2% for 2026 resulting from slower remittances and tariff uncertainty.
“The upshot is that we maintain our relatively downbeat forecast for fixed investment to expand by 4.5% in 2025, well below the 12.4% over 2015-2019,” it said.
Nomura Global Markets Research said GDP growth will likely slow to five.2% within the second half but kept its full-year forecast at 5.3%.
“We consider private investment spending can be more subdued, as businesses turn more cautious owing to surging global trade policy uncertainty and an increasingly difficult operating environment,” Nomura said.
“In the identical vein, we expect goods export growth to slow resulting from the impact of US tariffs but acknowledge rising downside risks particularly from sectoral tariffs on semiconductors in the approaching quarters.”
Last week, Mr. Trump announced plans to impose tariffs on semiconductors shipped to the US but offered to exempt corporations manufacturing within the US or those who commit to accomplish that, Reuters reported.
Meanwhile, Chinabank Research said it expects growth “to stay modest” as external prospects may remain subdued, given persisting uncertainties and rapidly changing global policies.
“Moving forward, downside risk to growth can be centered on external trade as elevated policy uncertainty and better tariffs weigh on global economic activity,” it said in a policy note on Thursday.
On the demand side, Chinabank anticipates that government spending will likely proceed to quicken for the remainder of the yr.
“We could see a rebound in the approaching quarters as the federal government ramps up delayed projects and as the consequences of rate of interest cuts further materialize.”
Nomura said it expects the BSP to chop its policy rate by 25 bps at its Aug. 28 meeting and by one other 25 bps in October.
“This may take the policy rate to 4.75% this yr, which we predict puts BSP’s monetary stance below its estimate of neutral, though we see some risk that BSP might deliver more in 2026 if inflation stays well inside its 2-4% goal,” Nomura said.
“We proceed to consider BSP stays on a path of a gradual shift to a more accommodative stance, given the benign inflation outlook.”
Meanwhile, Mr. Dacanay said with government infrastructure spending and services exports underperforming, further monetary easing could possibly be needed to assist sustain growth.
“Quickening and deepening the continued easing cycle will help support each sectors. Lower rates of interest may help incentivize further investments, while it could actually also help improve or at the least maintain the competitiveness of the services exports sector via the FX (foreign exchange) channel,” he said.