DOF: UMIC status still a plus in loans financing By Reine Juvierre S. Alberto
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HE Philippines’s clinching of upper-middle-income country (UMIC) status should improve its standing with lenders and eventually translate into cheaper financing for most of the government’s borrowings, according to Finance Secretary Frederick D. Go. Speaking to reporters on Tuesday, Go said the Philippines has become “more creditworthy” with its UMIC status upgrade. “The country can now borrow at lower rates,” he said, adding
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that this would apply to the bulk, or about 70 to 80 percent, of the government’s borrowing, which is sourced domestically. Go said the focus should not be on the possible loss of concessional loans, as these only make up half of the 20 to 30 percent of the government’s foreign borrowing. Concessional loans are only granted to developing countries to provide affordable financing for critical infrastructure and come with a grant element. He reasoned that any increase in concessional loan costs will likely be offset by lower borrowing costs, improving overall financing costs.
But if the Philippines maintained its UMIC status after three years, then the concessional loans would be more costly by about 10 to 20 basis points, he added. “There’s nothing to be worried about, at least in the near term, because we have to maintain our upper-middle-income classification for at least three years before any change happens,” Go said. “We’re not going to lose any grants. We’re not going to borrow at more expensive rates for the next three years.” Go likewise pushed back against concerns that lenders would stop extending concessional financ-
ing, as the government continues to sign financial and development cooperation agreements, recently with Denmark and Spain. “As Secretary of Finance, nobody has ever told me they’re going to stop. Nobody has ever said they’re going to stop dealing with us. There’s no such thing,” he said. While becoming UMIC could lower interest rates, Go said lenders will also take into account GDP growth, fiscal deficit, reforms and investment climate. Investors should also be “happy” that the Philippines moved up in income classification and that See “DOF,” A2
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‘TOO EARLY TO REJOICE OVER EASING INFLATION’ www.businessmirror.com.ph
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Wednesday, July 8, 2026 Vol. 21 No. 267
P25.00 nationwide | 2 sections 24 pages | 7 DAYS A WEEK
By Justine Xyrah Garcia & Andrea E. San Juan
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HILE headline inflation eased for a second straight month in June, economists warned that the fight against rising prices is far from over as underlying inflationary pressures continue to build.
Data released by the Philippine Statistics Authority (PSA) on Tuesday showed headline inflation slowed to 6.4 percent in June from 6.8 percent in May. The moderation was primarily driven by slower transport inflation, which eased to 12.8 percent from
16.2 percent a month earlier. The pace of price increases also slowed for food and non-alcoholic beverages to 5.2 percent from 5.7 percent, as well as furnishings, household equipment and routine household maintenance to 3.7 percent from 3.9 percent. See “Inflation,” A2
STALLED MANY TIMES, GRAND CENTRAL STATION RUSHED
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HE Marcos administration has moved to advance the long-delayed Unified Grand Central Station after the Economy and Development (ED) Council approved changes to the Light Rail Transit Line 1 (LRT-1) South Extension Project needed to support the facility’s operations. Approved during the Council’s 10th meeting on Tuesday, the variation order covers station completion works, viaduct construction, railway systems, signaling and the integration of the Automatic Fare Collection System.
The Department of Economy, Planning, and Development (DepDev) said the works needed for the station’s interim operations are targeted for completion by March 2028. The Common Station will connect LRT-1, MRT-3, MRT-7, and will eventually link to the Metro Manila Subway. Designed to accommodate up to 1.5 million passengers a day, it is expected to become the country’s largest rail interchange. “This is a key step toward an integrated transport system See “Grand central,” A2
EYE OF THE STORM Vice President Sara Duterte is mobbed by members of the media as she arrives at the Senate on Tuesday, ahead of the second day of her impeachment trial. Acting on the advice of her defense team, Duterte limited her remarks to a single sentence, declaring: “In this bloodbath and bludgeoning, I will be bloodied but unbowed.” She did not appear before the Impeachment Court during the day’s proceedings, opting instead to meet with her lawyers while senator-judges heard arguments on the four articles of impeachment against her. Impeachment stories in A4 Nation. ROY DOMINGO
Wage-price spirals seen to spur ‘high alert’ for BSP By Andrea E. San Juan @andreasanjuan
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EYES ON INDAY Leandra Rivera, deputy for hazard monitoring of the Quezon City Disaster Risk Reduction and Management Office (QCDRRMO), monitors the projected track of Typhoon Bavi on Tuesday. Forecasters said the system is expected to enter the Philippine Area of Responsibility later Tuesday or early Wednesday, when it will be given the local name Inday. While Bavi is not expected to make landfall in the Philippines, it is forecast to enhance the southwest monsoon, bringing widespread rains over parts of the country from Thursday to Sunday. NONOY LACZA
AGE-PRICE spirals may prompt the Bangko Sentral ng Pilipinas (BSP) to stay on “high alert” even after inflation eased for two straight months, as the spillover effects of the wage hike to core inflation may be significant, economists said. Following the release of the inflation print for June which showed that inflation eased for the second straight month, at 6.4 percent, HSBC Senior Asean Economist Aris Dacanay explained in a report on Tuesday that second-order effects may now be the “main point of focus” after the Metro Manila wage board decided to hike minimum wages in the capital by P85 to P780 a day to help reduce the burden of higher living costs. “By itself, we don’t think the minimum wage hike will lift inflation significantly since it only affects a small portion of the country’s total workforce,” Dacanay said. However, historically, he pointed out that the wage board in Metro Manila sets a “precedent” for the wage boards of other regions. “If the wage boards of the Philippines’s
other regions also decide to hike wages by double-digits, the spillover effects of the wage hike to core inflation may be significant,” added Dacanay. For monetary policymakers, the HSBC Senior Asean Economist emphasized that spillover effects “carry importance,” especially given the fact that core inflation continues to rise. Core inflation in June accelerated to 4.4 percent from 4.1 percent in the previous month. This is the second straight month that core inflation breached the upper end of the central bank’s target band. Data from the Philippine Statistics Authority (PSA) also showed that the 4.4-percent core inflation in June was the highest in 30 months or since November 2023. “Due to the upside surprise in wage hikes, we expect the BSP to stay on a hiking path for the rest of 2026 despite inflation being below expectations over the past two months. We expect the BSP to increase rates to 5.50 percent by the end of the year,” Dacanay said. Meanwhile, Citi economists Wei Zheng Kit and Helmi Arman pointed out that the Monetary Board should hit the brakes at its October
rate-setting meeting amid a “below-trend” economy. “The July minimum wage hike and associated wage-price spiral risk, deferred electricity and food price pass-throughs, and persistent peso weakness all point to upside inflation risk that will likely be hard for the BSP to ignore,” the Citi economists noted. Kit and Arman pointed out that the BSP has historically been “vigilant” toward wage-price spirals, and the current episode which they deemed an “unusually large” wage adjustment following an “unusually large inflation shock”—is “precisely the dynamic that will keep the Monetary Board on high alert.” According to the Citi economists, stronger minimum wage hikes in the Philippines have historically followed elevated inflation episodes to keep real wage growth positive. Despite this, Citi economists said a further 25-basis-points hike appears likely at the Monetary Board’s meeting on August 27, with October “the earliest window for a pause.” An October pause, they explained, requires a combination of lower oil prices delivering a “material” downward revision to BSP’s fore-
casts and/or downside surprises in growth and activity data that would suggest a continuation of below trend growth. Explaining the need to hit the brakes, Kit and Arman said limited fiscal support available to a below-trend economy cautions against “overly” aggressive tightening. “The updated staff projections at the next forecast round are therefore a critical signpost,” the Citi economists said. In an earlier interview with reporters, BSP Governor Eli M. Remolona Jr. said the inflationary pressure of the recent wage hike may be significant. He, however, emphasized that the “sensitivities” of the recent wage adjustment may have to be further looked into. “It [wage hike] is significant but I don’t know the sensitivities. We still have to see. We’ll have to do the numbers. This is unusual,” the central bank chief told reporters on Friday. The BSP earlier told this newspaper that the approved wage hike will be considered at the Monetary Board’s upcoming rate-setting meeting in August, together with other incoming economic data.
PESO EXCHANGE RATES n US 61.5160 n JAPAN 0.3796 n UK 82.3884 n HK 7.8442 n CHINA 9.0566 n SINGAPORE 47.6241 n AUSTRALIA 42.7844 n EU 70.4174 n KOREA 0.0402 n SAUDI ARABIA 16.3829 Source: BSP (July 7, 2026)