By Aubrey Rose A. Inosante, <\/b>Correspondent<\/i><\/p>\n
PHILIPPINE economic advancement is <\/span>unlikely to attain the upper <\/span>end of the government\u2019s 5.5-6.5% objective this year due to elevated US tariffs <\/span>and declining remittances, analysts mentioned.<\/p>\n Foundation for Economic Freedom President Calixto V. Chikiamco remarked that reaching the 6.5% level is \u201cfeasible, but unlikely.\u201d<\/p>\n \u201cEspecially with [US President Donald J.] Trump\u2019s tariffs on our major exports and a worldwide economic deceleration,\u201d Mr. Chikiamco stated to BusinessWorld. <\/i><\/p>\n The economy expanded by an annual 5.5% during the April-to-June timeframe, fueled by a recovery in agricultural output and accelerated household expenditure.<\/p>\n For the first half of the year, gross domestic product (GDP) growth averaged 5.4%, which is slower than the 6.2% observed a year prior.<\/p>\n Economic Secretary Arsenio M. Balisacan indicated that the economy needs to grow by 5.6% in the second half to meet the lower end of the annual target, and by 7.5% to achieve the upper limit of the goal.<\/p>\n \u201cHowever, if the administration maintains its steady-as-she-goes approach, it is probable that not only will the government fall short of its minimum 6% growth aim, but may actually realize less than 5.5% growth,\u201d Mr. Chikiamco expressed.<\/p>\n John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, stated that the 7.5% average growth needed for July-to-December is a \u201cchallenging target but not unachievable.\u201d <\/span><\/p>\n \u201cIt will necessitate strong export performance despite global challenges, quicker infrastructure implementation after the election spending restriction, and sustained consumer and investment spending,\u201d he conveyed in a Viber message over the weekend.<\/p>\n Mr. Trump instituted a 19% export tax on goods from the Philippines, along with Cambodia, Malaysia, Thailand, and Indonesia, effective August 7.<\/p>\n \u201cGiven that the tariff rate on Philippine products aligns with other ASEAN (Association of Southeast Asian Nations) emerging markets, the Philippines risks losing the chance to enhance its market share in the US,\u201d stated HSBC economist for ASEAN Aris D. Dacanay.<\/span><\/p>\n Mr. Dacanay indicated that the robust expansion in exports <\/span>is unlikely to be maintained in the upcoming semester.<\/span><\/p>\n \u201cHowever, while private consumption is expected to remain strong, we do not anticipate this export performance will be persistent. The vigorous results stemmed from a frontloading of import demand globally due to anticipation of higher US tariffs,\u201d he explained.<\/span><\/p>\n Nevertheless, BMI stated that the Philippines is well-protected from the US tariffs \u201cexport-wise,\u201d although there exists a possibility of Mr. Trump elevating the tariffs if the Philippines does not allocate at least 5% of its GDP towards military spending.<\/p>\n \u201cIf Trump threatens to increase tariffs due to noncompliance, we forecast a further deceleration in export growth for the Philippines,\u201d BMI cautioned.<\/p>\n Mr. Rivera expressed his expectation of softer export growth, especially in sectors like electronics, garments, and agriculture.<\/p>\n \u201cHowever, the full impact will probably be gradual, as existing orders and agreements continue to be processed,\u201d he noted.<\/p>\n \u201cThe magnitude of the slowdown will depend on how swiftly exporters can adapt, either by negotiating improved conditions, pivoting to other markets, or advancing up the value chain.\u201d<\/p>\n REMITTANCE SLOWDOWN \u201cA reduction in remittances will dampen private spending while intensified global uncertainty will continue to suppress,\u201d Fitch Solutions\u2019 unit BMI mentioned.<\/p>\n Household final consumption, which represents over 70% of the economy, surged by 5.5% in the second quarter, marking the fastest increase since the 8.1% growth seen in the first quarter of 2023.<\/span><\/p>\n BMI anticipates private consumption to grow by 5% in 2025.<\/p>\n \u201cApproximately 40% of remittances originate from the US, where President Donald Trump has tightened immigration rules and imposed a 1% tax on remittances. As a result, remittances are likely to continue hindering consumption growth in the forthcoming months, diminishing the positive impacts of relaxed monetary policy,\u201d BMI remarked. <\/span><\/p>\n The Bangko Sentral ng Pilipinas (BSP) projects cash remittances from OFWs to increase by 2.8% this year and by 3% in 2026.<\/p>\n The US will commence enforcing a 1% excise tax on cash remittances from the US to recipients abroad starting January 1, 2026.<\/p>\n BMI maintained its GDP forecast at 5.4% for this year, but revised its 2026 projection down to 5.2% from 6.2% due to slower remittances and tariff instability.<\/p>\n \u201cConsequently, we preserve our somewhat pessimistic projection for fixed investment to grow by 4.5% in 2025, significantly below the 12.4% recorded from 2015 to 2019,\u201d it added.<\/p>\n Nomura Global Markets Research noted GDP growth is likely to decelerate to 5.2% in the latter half, but retained its full-year forecast at 5.3%.<\/p>\n \u201cWe believe private investment spending will be more restrained, as businesses adopt a more cautious approach given escalating global trade policy uncertainty and an increasingly demanding operating climate,\u201d Nomura indicated.<\/p>\n \u201cIn this context, we foresee goods export growth slowing due to the repercussions of US tariffs but recognize rising challenges particularly from sector-specific tariffs on semiconductors in the upcoming quarters.\u201d<\/p>\n Last week, Mr. Trump disclosed intentions to impose tariffs on semiconductors imported to the US while offering exemptions to companies manufacturing domestically or committing to do so, according to Reuters.<\/p>\n Meanwhile, Chinabank Research anticipates growth \u201cto remain moderate\u201d as external prospects may continue to be subdued, considering ongoing uncertainties and rapidly evolving global policies. <\/span><\/p>\n \u201cLooking ahead, the primary risk to growth will be focused on external trade as intense policy uncertainty and heightened tariffs impair global economic performance,\u201d it stated in a policy note on Thursday. <\/span><\/p>\n On the demand side, Chinabank foresees government expenditures to likely continue accelerating for the remainder of the year.<\/p>\n \u201cWe may witness a recovery in the upcoming quarters as the government amplifies delayed projects and as the effects of interest rate reductions become more apparent.\u201d<\/p>\n Nomura anticipates the BSP to reduce its policy rate by 25 bps during its August 28 meeting and by an additional 25 bps in October.<\/p>\n
\n<\/b>Analysts suggested that diminishing remittances from overseas Filipino workers (OFWs) might negatively impact consumer spending in the latter half.<\/p>\n