Tweaks on rates, peso good way to blunt tariff impact By Cai U. Ordinario
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F the government wants to blunt the impact of Trump’s higher tariffs, an economist recommended that the country adopt an “inclusive growth policy” that involves lowering interest rates and depreciating the peso. University of Asia and the Pacific (UA&P) economist Victor A. Abola said in a recent midyear economic briefing that these can help spur economic growth, with lower interest rates benefitting businesses and a depreciating peso helping household consumption
and local industries. Abola said lowering interest rates to around 3 percent is already warranted as inflation is low and this can boost reserves. A weaker peso could make imports more expensive but will benefit local producers. “BSP [Bangko Sentral ng Pilipinas] has to reduce sharply its policy rates from 5.25 percent to 4 percent and then to 3 percent eventually. That’s where we were a bit prior to the Covid. Because there’s no inflation in sight, imports from China will be diverted to the country, but also we need to protect our local producers,” Abola said.
“Keeping our exchange rate low, or what we call, we say it is overvalued. Why overvalued? Because my Peso can buy more goods, more important goods. If it were at P65, let’s say, certain things will not be more affordable. We’ll shift [to] local goods. Not only our exporters, by the way, it’s also domestic production,” he explained. High interest rates, he said, have also been instrumental in the slowdown of the country’s GDP as well as employment data. Abola said employment generation has been flat between January and May 2025 this year. A weaker currency, Abola said,
will also help build up the country’s Gross International Reserves not by borrowing, but by buying dollars. This will also allow the country to replace foreign debt with local debt.
Boxing fight
THE imposition of a 19-percent tariff rate on Philippine goods entering the United States market was similar to boxer Manny Pacquiao’s latest fight where the result was a draw, according to one expert. Global Source Partners Country Analyst Diwa Guinigundo said just like Pacquaio, the government See “Tweaks,” A2
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By Reine Juvierre S. Alberto
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HE government’s fiscal gap expanded to P765.5 billion in the first semester, above the P760.7-billion ceiling, as spending surged ahead of revenue growth. According to the latest data from the Bureau of the Treasury (BTr), the budget deficit widened by 24.69 percent to P765.5 billion in the first half of the year from P613.9 billion in the same period last year. This comes after government expenditures reached P3.025 trillion and outpaced revenue collections at P2.260 trillion. On one hand, revenues grew by 5.15 percent from P2.149 trillion a year ago. However, this slightly fell short of hitting the P2.260-trillion target for the period by 0.89 percent. The Bureau of Internal Revenue (BIR) collected P1.554 trillion in the first half of the year, up by 14.11 percent from last year’s P1.362 trillion. The growth was driven mainly by increases in corporate income tax, value-added tax, personal income tax, excise tax collections on tobacco and electronic cigarettes, as well as higher percentage taxes from banks and financial institutions. See “Fiscal,” A2
A HOME LOST TO HABAGAT Gerundio Digo, 25, returns to the ruins of his home along Santa Cecilia Street in Barangay Maly, San Mateo, Rizal, on Thursday, July 24, 2025. His house, built beside a creek, was torn apart by rampaging floodwaters at the height of Tuesday’s flash floods, driven by the enhanced Habagat (Southwest Monsoon). The monsoon was intensified by Typhoon Emong (international name: Co-May), which strengthened as it hovered west of Dagupan City. PAGASA also reported the formation of a tropical depression outside Philippine waters, which may enter the country as “Fabian.” NONOY LACZA
PINOYS’ OUT-OF-POCKET SPEND FOR HEALTH UP BY 11.8%—PSA
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ILIPINOS’ out-of-pocket (OOP) payments to finance their health needs posted double-digit growth and breached the P600-billion level in 2024, according to the latest data from the Philippine Statistics Authority (PSA). Based on the Philippine National Health Accounts (PNHA), household’s OOPs amounted to P615.16 billion in 2024, a growth of 11.8 percent from the P550.08 billion recorded in 2023. The growth of the OOP was even faster than Household Final Consumption Expendi-
ture which grew 8.2 percent to P20.14 trillion in 2024 from P18.6 trillion recorded in 2023. “The Government schemes and compulsory contributory health care financing schemes had the highest contribution among the health care financing schemes in 2024, with 44.7 percent share to the Current Health Expenditure [CHE],” PSA said. “This was followed by Household out-of-pocket payment with 42.7-percent share, and Voluntary health care payment schemes with 12.6 percent,” it added. See “Pinoy’s,” A9
PHL Q3 outlook steady amid headwinds By Malou Talosig-Bartolome
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S global markets adjust to sweeping US tariffs and shifting monetary dynamics, the Philippines remains one of Asia’s more resilient economies, according to Singapore-based global asset manager Eastspring Investments. “Our base case of high tariffs, high uncertainty, and slower US growth implies that Asia will see slower growth but also lower interest rates and stronger currencies,” Eastspring said in its May 2025 Mid-year Outlook report. It expects Asean countries to face varied outcomes. Trade-dependent nations like Vietnam, Malaysia, Singapore, and Thailand are likely
to slow 0.5 percent –2 percent due to weaker exports. “Indonesia and the Philippines stand out as likely to be least affected and we expect Philippines GDP growth to sustain at 5.6 percent this year,” it said.
Dollar dynamics: Double-edged sword
EASTSPRING also released its Quarter 3 Outlook Report, warning that the US dollar may weaken by 4 percent to 10 percemt over the next year, driven by slower US growth, rising debt, and potential Federal Reserve rate cuts. While this could strengthen Asian currencies—including the Philippine peso—it may also reduce export competitiveness and
complicate monetary policy decisions.
China: Stimulus vs. headwinds
CHINA faces a 1-percent GDP drag from tariffs, but is countering with fiscal stimulus worth up to 2 percent of GDP, alongside targeted lending and rate cuts. Despite these efforts, Eastspring cautions that “the turnaround in China’s economy is not yet conclusive,” citing persistent deflationary pressures and cautious consumer sentiment.
India: Structural strength
INDIA emerges as a regional bright spot. With only 2.2 percent of GDP tied to US exports, it is well-positioned
to benefit from supply chain shifts and potential trade deals. Eastspring expects 6.3-percent growth in 2025, supported by falling inflation and room for 5075bps rate cuts. However, the report notes that “active management will be key” due to stretched valuations and earnings uncertainty. Risks for investors to monitor · Indirect tariff spillovers via regional supply chains · Currency appreciation and its impact on exports · Inflation volatility from global commodity swings · Geopolitical stress affecting capital flows and sentiment Strategic positioning for Q3 See “PHL,” A2
PESO EXCHANGE RATES n US 56.9270 n JAPAN 0.3887 n UK 77.3239 n HK 7.2531 n CHINA 7.9566 n SINGAPORE 44.5996 n AUSTRALIA 37.5434 n EU 67.0088 n KOREA 0.0414 n SAUDI ARABIA 15.1741 Source: BSP (July 24, 2025)