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By Aubrey Rose A. Inosante, Reporter
PHILIPPINE economic advancement might have accelerated in the second quarter; however, annual growth is anticipated to fall below 6% due to uncertainties surrounding US tariffs, Finance Secretary Ralph G. Recto stated.
“I believe the second quarter will undoubtedly surpass the first,” Mr. Recto shared with journalists during an informal press discussion on Wednesday.
Mr. Recto expressed that this second-quarter projection is reliant on governmental expenditure and household consumption, which constitutes over 70% of the economy.
In the initial quarter, gross domestic product (GDP) expanded by 5.4%, below expectations and slower than the 5.9% growth in the same period last year.
For the complete year, Mr. Recto indicated GDP may increase by around 5.7% to 5.8%.
“Realistically, it might be 5.7% or 5.8% for the year. However, there’s still a chance, (but) it largely relies on many uncertainties — uncertainties related to trade policy. There’s no definitive [tariff rate] yet,” Mr. Recto remarked.
Economic officials last month adjusted the annual growth target to 5.5%-6.5% from a previous estimate of 6%-8%, “indicating a more cautious and resilient outlook amid global challenges.”
Last week, US President Donald J. Trump declared a 20% tariff on most Philippine products exported to the US, which is an increase from the previously announced 17% in April.
Philippine trade negotiators are currently in Washington to finalize an agreement with the US.
President Ferdinand R. Marcos, Jr. would meet with Mr. Trump during his official visit to Washington from July 20 to 22.
In a Viber message to BusinessWorld, Budget Secretary Amenah F. Pangandaman expressed her confidence in achieving the GDP growth target this year, supported by strong domestic demand.
“Our growth momentum is anticipated to be mainly propelled by substantial domestic demand, particularly vigorous household spending and accelerated government investments in social services and essential infrastructure,” stated Ms. Pangandaman, who also holds the position of Development Budget Coordination Committee chairperson.
She added that the robust labor market and declining inflation will bolster growth momentum.
Inflation averaged 1.8% during the first six months of the year.
“Additionally, lower inflation allows the Bangko Sentral ng Pilipinas (BSP) to relax monetary policy, which would assist in sustaining consumption and domestic activity, further solidifying our growth trajectory,” Ms. Pangandaman mentioned.
The BSP executed a second consecutive 25-basis-point (bp) reduction at its June 19 meeting, adjusting its policy rate to 5.25%.
BSP Governor Eli M. Remolona, Jr. also indicated they might implement two more reductions this year.
Simultaneously, Finance Undersecretary and Chief Economist Domini S. Velasquez remarked that it may be challenging for GDP to exceed 6% this year amidst an anticipated global downturn due to US tariffs.
She noted that the US tariffs have hindered international trade and “diminished the growth potential of all nations, including the Philippines.”
“We believe that the Philippines has the potential for at least 6% growth. However, it is certainly challenging, especially given some of the obstacles we are currently encountering,” she told reporters late Tuesday.
Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion stated it is becoming progressively difficult for the government to achieve 6% growth this year.
“Achieving the 6% midpoint will depend on how effectively domestic demand can counter external risks,” he conveyed in a Viber message.
“Domestic demand is expected to stay resilient, yet cautious in the short term… Growth will primarily derive from everyday retail avenues, but a broader recovery in consumption may rely on enhanced job creation and improved purchasing power,” he added.
REMITTANCES
Meanwhile, Ms. Velasquez indicated the US tax on remittances could affect 12.8% of the Philippines’ total annual remittances.
“Based on our estimates, using the data from overseas Filipinos, 12.8% report receiving remittances from North and South America,” she informed reporters on Tuesday.
US President Donald J. Trump enacted the “One Big Beautiful Bill” on July 4, which reforms tax rates and expenditures. It enforces a 1% excise tax on cash-based remittances from the US to recipients abroad. This tax will take effect starting January 1, 2026.
Ms. Velasquez mentioned the tax would impact around $1.9 billion in remittances from the US in 2026.
“For instance, we project $36.5 billion in remittances by 2026, of which $1.9 billion will be subject to the 1% tax,” she stated.
In the first five months of the year, cash remittances rose by 3% to $13.77 billion compared to $13.37 billion in the same period last year.
The United States was the largest source of remittances during the five months, representing 40.2% of the total. — with Aaron Michael C. Sy
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