ANALYSTS agree US President Donald Trump’s tariff policy will have negligible impact on the Philippines’ gross domestic product (GDP) growth, with one of them describing the country as a “relatively safe haven” amid the ongoing globe trade war.
Switzerland’s UBS Investment Bank retained its 5.9 percent GDP forecast for the Philippines this year as its economist said this country “may be considered a relatively safe haven in the face of the ongoing trade war and global recessionary risks.”
New York-based Moody’s Analytics also maintained its 5.9 percent GDP forecast for the Philippines, though with a warning for exporters of a possible drop in US demand.
Analysts at the University of Asia and the Pacific (UA&P) see 2025 GDP settling slightly lower at 6 percent, instead of its previous growth forecast of 6.1 percent, based on the “uncertainty surrounding Trump’s tariffs.”
Domestic-oriented
UBS economists see significant downside growth both globally and across the region. But they assert that the impact of a tariff contagion and its accompanying recessionary risks will have a low impact on the Philippines compared with its regional peers “as the risks appear to be comparatively smaller given the domestic-oriented nature of the economy.”
On April 2, the Trump administration unveiled a 10 percent baseline tariff on America’s trading partners, as well as higher ‘reciprocal tariffs’ on selected countries.
For the Philippines, the reciprocal tariff was pegged at 17 percent, the second lowest in Asean after Singapore’s 10 percent.
The “overall view of the Philippine market remains positive,” Grace Lim, Senior Asean and Asia Economist of UBS, said.
“This market may be considered a relatively safe haven in the face of the ongoing trade war and global recessionary risks,” she said, adding that her group’s “expectation of three more rate cuts this year and low inflation could be a boon to this market,” Lim added.
Inflation, BSP yield rates
UBS also pegged its full-year inflation forecast for the Philippines at 2.9 percent, or at mid-point of the government’s full-year target between 2 and 4 percent.
In terms of trade in goods with the US, the Philippines is one of the least exposed in Southeast Asia, Lim said, adding that it could have at most a 2 percent impact on the country’s GDP.
The Philippines’ total trade-to-GDP ratio is at 66 percent, showing that the country would still be exposed, but Lim pointed out that a greater impact could only materialize if a broader global slowdown were to take place.
Overall, UBS expects the Bangko Sentral ng Pilipinas (BSP) to lower its policy rates three more times in the second half of the 2025, which is roughly in line with the US Fed’s interest rate cuts the rest of the year.
UA&P also expects the BSP to cut its policy rates by another 25 basis points in June regardless of what the Fed does.
“While the peso will keep a slight appreciation bias until May, the BSP move and its efforts to rebuild dollar reserves should reverse the situation in June,” UA&P added.
Supply chain disruption
Choon Hong Chua, senior director at Moody’s, said the US tariffs has sparked global conversations about a possible supply chain disruption, and as a consequence, higher consumer product prices.
Moody’s last month lowered its Philippine growth forecast to 5.9 percent this year from 6 percent, taking into account the global uncertainty as a result of Trump’s trade policies.
While the US-led trade war is expected to have little impact on the Philippine economy, external conditions would weigh on domestic growth.
“Exporters in the Asia-Pacific region will bear the brunt of the recent developments as they now face increased costs and uncertainty in bringing their products to the US market,” Chua said.
“They could face a decline in US demand, loss of competitive edge and shrinking market share should they increase consumer costs to cushion the impact of tariffs,” he said.
In that scenario, Chua said exporters who are unable to pivot swiftly to new markets would have to grapple with “immense pressure” related to revenue.
For companies that also serve Asia and Europe, diminished access to the US market could trigger “a domino effect on supply chain disruptions and destabilize businesses,” Chua added.
Price downtrend
The plunge in crude oil prices amid expectations of a global economic slowdown will definitely have a positive effect on inflation, UA&P said in its latest edition of “The Market Call.”
The report also noted an abundant supply of crude and lower international rice prices prompted UA&P to forecast inflation at 2.2 percent on average in the next two quarters.
