Philippines needs lower US tariffs

Attracting foreign investments that can help fuel economic growth for the Philippines could face headwinds if the Philippines is not able to successfully negotiate a lower tariff rate from the US.

This was the assessment of HSBC’s chief executive officer Sandeep Uppal during his presentation at the recent EJAP Economic Forum held at the BSP Complex last Monday, Aug. 11, where he warned that “without the relative advantage of a lower tariff rate, economic growth will face headwinds and it will also be harder to attracts FDIs.”

The US had initially announced a 20 percent tariff on the country. But following a state visit by President Marcos and his economic team, the tariff was reduced by only one percentage point to 19 percent.

It was also initially understood that the semiconductor exports would continue to be exempt from tariffs under an existing trade agreement.

Unfortunately, social media announcements from the US government indicated another change in the tariff treatment for semiconductor imports to the US, with a steep 100 percent tariff.

Special Assistant to President Marcos for investments and economic affairs, Secretary Frederick Go, admitted that they are also surprised by the new tariff announcement on semiconductors, and would thus continue to talk with the US Trade Representative.

Uppal agrees that “Philippine authorities should continue to negotiate with the US in the hope of decreasing the tariff rate further. Without the relative advantage of a lower tariff rate, the Philippines will likely rely on its old (but effective) playbook of maintaining a robust reform narrative to attract investments and technologies from abroad.”

Mr. Uppal, in his presentation, acknowledged that the Philippines has a high growth economy that is currently the fastest in the Association of Southeast Asian Nations or ASEAN, with a forecast growth of 5.4 percent for this year and a potential growth rate of 5.8 percent next year that could be the No. 1 GDP growth rate in ASEAN by 2026.

Based on HSBC’s Asia Economics Q3 2025 data, the Philippines’ gross domestic saving (as a percentage of GDP) is forecast at 19.9 percent for this year, rising to 20.8 percent for 2026.

Investment growth for this year is forecast at 4.5 percent, but is projected to increase significantly to 7.7 percent in 2026. Projected net foreign direct investments for this year is $7.7 billion, potentially increasing to $8.7 billion in 2026.

Inflation for this year is forecast at a manageable 1.8 percent, but is expected to pick up to 2.7 percent by next year.

According to Uppal, the Philippines has a young and growing population which currently stands at 116 million, with a literacy rate of 97 percent and a median age of 25.

The country’s investment grade sovereign rating is BBB+ per S&P, and Baa2 based on Moody’s rating.

Philippine imports-driven trade, HSBC noted, are largely led by electronics.

Uppal cited moves by the Philippine government to liberalize the local economy, with enhancements extended to foreign businesses looking to invest in the country by allowing up to 100 percent foreign ownership, a lower minimum paid-up capital requirement for foreign investors, and substantially increased tax incentives.

The CREATE More law, Uppal added, has also enhanced the ease of doing business in the Philippines, alongside the green lanes for strategic investments.

The promising sectors, Uppal cited, are in infrastructure (with strong government support to aggressive PPP infra expansion), renewable energy (with a robust regulatory framework to support RE as the country aims to increase the RE mix to 50 percent by 2040), the consumer and retail sector (which is a high consumption economy driven by a young dynamic population), services (with a growing IT-BPO, hospitality, health care and other services-oriented industries), and new economies such as e-commerce, digital payments, artificial intelligence and machine learning.

DBP: Invest in RTB

Development Bank of the Philippines (DBP) president and chief executive officer Michael de Jesus is appealing to the public to invest in the Bureau of Treasury’s (BTr) latest retail Treasury bonds (RTBs) and take an active part in the national government’s efforts to raise funds for its priority development programs.

According to De Jesus, for a minimum amount of P5,000, investors can earn as much as six percent per annum, payable quarterly in the next five years, much higher than what typical deposits and other investment products pay in the market.

De Jesus pointed out that that investing in the RTBs presents an excellent opportunity for ordinary Filipinos to grow their hard-earned savings as it is an accessible and low-risk instrument that offers steady returns, aside from directly contributing to the realization of the development agenda of the Marcos administration.

DBP is the 10th largest bank in the country in terms of assets and provides credit support to four priority sectors of the economy – infrastructure and logistics, micro, small and medium enterprises, the environment, and social services and community development.

RTBs form part of the national government’s program to liberalize access by ordinary Filipinos to government securities.

The latest RTB issuance is BTr’s 31st tranche and marks the first time that small-denominated government securities are available for purchase through an electronic wallet such as G-Cash.

DBP is one of the joint lead issue managers of the RTB-31, with eight other financial firms tapped as issue managers. The RTBs is on offer to all Filipinos during the public offer period that runs until today.

The RTB-31, De Jesus explained, would support the funding requirements of the national government -- particularly for the high-impact and essential sectors of agriculture, education, infrastructure, and health care.

Interested investors may directly inquire at any DBP branch, or by purchasing through the online ordering facility available at the BTr website (www.treasury.gov.ph).

“The RTBs will also enable our countrymen to directly participate in nation-building as every peso they invest will help fuel the country’s march to sustainable and inclusive development,” De Jesus said.