THE BANGKO SENTRAL ng Pilipinas (BSP) has opened its door to a more aggressive monetary policy path to curb inflation as persistent shocks stemming from the Middle East conflict continue to feed into consumer prices.

In an exclusive interview on One News鈥� Money Talks with Cathy Yang on Thursday, BSP Governor Eli M. Remolona, Jr. said the Monetary Board is considering a second straight rate hike before its June 18 meeting.

Asked about the likelihood of off-cycle tightening, Mr. Remolona said: 鈥淚 wouldn鈥檛 say likely. We鈥檙e considering it.鈥�

However, the central bank chief noted that they may also wait until the May inflation report comes out on June 5 before delivering the next monetary policy decision.

鈥淭hat鈥檚 very close to the next scheduled policy meeting. So, at this point, it鈥檚 a toss-up whether we do an off-cycle or we just wait for the regular meeting, which is not that far away anyway,鈥� Mr. Remolona said.

Mr. Remolona also acknowledged the emerging stagflation risks, with slowing economic growth and accelerating inflation, but said the BSP is banking on fiscal policy to help the economy recover as it seeks to maximize its monetary policy tools for inflation-targeting.

The BSP reversed its policy path at its April 23 meeting, starting a new tightening cycle as it delivered its first 25-basis-point increase in over two years to bring the key policy rate to 4.5%.

Central bank officials have said that their latest move was aimed at preventing broader second-round effects of inflation, keeping inflation expectations anchored and steering it back to their target as the prolonged Middle East war dimmed the growth outlook.听

However, despite the preemptive rate hike last month, inflation has accelerated faster than expected, raising the risk that the BSP could fall behind the curve, according to Mr. Remolona.

鈥淥rdinarily, a supply shock, you would look through it because it would go away and then you鈥檙e back to where you are. But now this is a big supply shock and it鈥檚 a persistent supply shock,鈥� he said. 鈥淪o, we have to react and we have to react aggressively, I think, in this kind of situation. That鈥檚 why we raised rates early.鈥�

Inflation has breached the BSP鈥檚 2%-4% target and monthly forecasts since the war erupted in late February.

In April, rising costs of food and utilities amid elevated oil prices drove the headline print to an over three-year high of 7.2% from 4.1% in March and 1.4% last year. This was past the BSP鈥檚 5.6%-6.4% estimate for the month.

Asked if they are now behind the curve, Mr. Remolona said: 鈥淭here鈥檚 a risk that we are. It depends on whether the supply shock persists.鈥�

He noted that they fell short of anticipating the rapid impact of the oil supply shock on other items in the consumer basket such as fertilizer and rice, as the cost of those items typically takes time to rise.

Mr. Remolona said the BSP is closely monitoring transport fares, which he said were 鈥渁djusted very quickly,鈥� as well as faster inflation for the bottom 30% of households.

The central bank governor also noted that the slowdown in consumer spending has helped ease inflation but added that they do not want to address increasing price pressures that way.

鈥淭he slowdown in consumer spending helps lower inflation. We don鈥檛 want to lower inflation that way. We want consumer spending to resume and then it鈥檚 our job to keep inflation low,鈥� Mr. Remolona said, adding that they expect consumer spending to recover.

The central bank projects inflation to hover above 5% for most of the year to average 6.3%, faster than its 5.1% forecast before the war. By 2027, it expects inflation to cool down to 4.3%.

The central bank, according to Mr. Remolona, also remains 鈥渁ctive as usual鈥� in the foreign exchange market to smoothen out sharp swings amid recent episodes of the peso plunging to back-to-back historic lows.

The local unit closed at its historic low level of P61.75 against the dollar for two straight trading days this week as lingering market uncertainty from the still-waging war in the Middle East prompted safe-haven demand for the greenback.

However, it gained 15.90 centavos on Thursday to close at P61.581 per dollar from its P61.74 finish on Wednesday.

GROWTH PROJECTIONS for the Philippines are likely to be revised downward again as the prolonged conflict in the Middle East continues to weigh on economic activity, according to Asian Development Bank (ADB) Country Director for the Philippines Andrew Jeffries.

鈥淲hen we did the Asian Development Outlook in very early April, it had several scenarios including more downside scenarios, but the main scenario was based on what I would call an early stabilization scenario,鈥� he told 大象传媒 in an interview.

鈥淪o that was envisioning if this crisis got resolved and things went back to normal within a few months. That obviously has not happened,鈥� he added.

In April, the Philippine-based multilateral lender cut its Philippine gross domestic product (GDP) growth forecast to 4.4% from 5.3% previously projected in December.

The revised forecast falls below the government鈥檚 5-6% GDP growth target for 2026 and matches the country鈥檚 growth pace last year.

For 2027, the ADB expects the Philippine economy to expand by 5.5%, at the low end of the government鈥檚 5.5-6.5% target range.

On April 29, the ADB downgraded its growth outlook and raised inflation forecasts for developing Asia and the Pacific, reflecting the impact of the conflict. The lender now expects the region to grow by 4.7% in 2026 and 4.8% in 2027, lower than its earlier 5.1% forecast for both years.

Meanwhile, regional inflation is projected to accelerate to 5.2% this year and 4.1% next year from the earlier forecasts of 3.6% and 3.4%, respectively.

Mr. Jeffries said inflation in the region could rise as high as 7.4% this year under a severe downside scenario.

鈥淣ow, the Philippines is being disproportionately negatively affected compared to other countries. In the Philippines we just saw 7.2% (inflation) recently, so the Philippines is unfortunately experiencing that kind of much more downside quicker because of the vulnerability,鈥� he said.

鈥淛ust given the new numbers that have come out for the quarter that showed lower figure GDP, I guess we will be anticipating lower projections in July, given current trends,鈥� he added.

The Philippine economy expanded by 2.8% in the first quarter, slower than the previous quarter鈥檚 3% growth, reflecting the lingering effects of last year鈥檚 corruption scandal and soaring oil prices triggered by the Middle East conflict.

Meanwhile, headline inflation accelerated to 7.2% in April, exceeding the Bangko Sentral ng Pilipinas鈥� (BSP) 5.6%-6.4% forecast and 2%-4% target range.

WEAKER PESO
Jesus Felipe, a professor at Carlos L. Tiu School of Economics at the De La Salle University (DLSU), said the continued depreciation of the peso will further strain the economy.

鈥淭he problem is the type of economy that we have is a very weak economy鈥� It is an economy that has problems really sustaining production capacity,鈥� he told Money Talks with Cathy Yang on One News on Thursday.

鈥淚n the end, what is going to happen is that in the short run, at the very least, the current account deficit is going to deteriorate,鈥� he added.

Mr. Felipe said he expects the peso to weaken to P63.5 against the dollar by August.

The peso closed at a record low of P61.75 per dollar on Tuesday, unchanged from Monday鈥檚 finish.

While a weaker peso may benefit exporters, Mr. Felipe said this, coupled with soaring fuel prices, would mean more expensive imports which immediately feeds into inflation and lower real incomes.

He said the Philippines should use the crisis as an opportunity to diversify the economy and increase the value-added component of local manufacturing.

The DLSU May economic report projected Philippine GDP growth at 3.11% in 2026, well below the government鈥檚 5-6% target.

It also projected growth at 3.93% in 2027 and 5.71% in 2028, both below the government鈥檚 targets of 5.5-6.5% and 6-7%, respectively.

鈥淔or the time being, it鈥檚 a question of uncertainty. This is not really a deep crisis. We鈥檙e not into that. It鈥檚 not that growth is negative,鈥� he said.

Mr. Felipe said the uncertainty stems from a combination of peso depreciation and last year鈥檚 corruption scandal.

鈥淓verybody鈥檚 simply waiting to see what happens. So, consumption is really subdued and investment is really subdued… The recovery will start happening in 2028. It鈥檚 very, very important to notice that even with the recovery, we will not reach the targets that the government has been, during this administration, announcing, which is to grow 6.5% to 8%,鈥� he added.

Mr. Felipe said the government should implement reforms aimed at strengthening local firms and improving export competitiveness. He also cited the need for stronger fiscal policy support to improve productivity.

Without structural reforms, the Philippine economy will remain vulnerable to future crises, he added.

鈥淚f the government doesn鈥檛 do anything toward the long term, a couple of decades, even up to 2050, what we will see is what we call鈥� a weak economy that will be shaken by the next crisis, be it domestic or international,鈥� he added.

Separately, Bank of America Global Research said higher oil prices could significantly widen the country鈥檚 current account deficit.

鈥淥il prices around $90-$100 range would translate into roughly 1-1.3% widening of the current account deficit to 4%,鈥� it said.

鈥淲e have previously argued that a sustainable current account deficit for the Philippines is 2-2.5% of GDP which can be financed via foreign direct investment in government funding flows,鈥� it added.

Bank of America (BofA) said a current account deficit nearing 4% would increase reliance on the BSP鈥檚 intervention to limit depreciation pressures on the peso.

It also warned that persistently high oil prices could worsen the country鈥檚 fiscal position as the government rolls out measures to cushion the impact of inflation.

However, BofA said stronger intervention in the foreign exchange market would be difficult to sustain and could raise concerns over the adequacy of foreign exchange reserves.

The bank expects the peso to weaken to P63 per dollar in the second quarter and to P64 per dollar by yearend amid elevated oil prices.

鈥淎n oil price spike remains the key external risk for the Philippines. Domestically, political uncertainty may weigh on public spending, sentiment and growth,鈥� it added.

Under SEC Memorandum Circular No. 17, a broker director may serve a maximum cumulative period of 10 years in the same exchange, whether cumulative or intermittent.

The circular was signed by SEC Chairperson Francisco Ed. Lim on May 21.

鈥淪trong institutions require regular renewal, independent oversight, and broader representation,鈥� Mr. Lim said in a statement on Thursday.

鈥淏y setting reasonable term limits for broker directors, the SEC seeks to strengthen market governance, mitigate potential conflicts of interest, level the playing field among the different categories of directors in exchanges, and align our regulatory framework with internationally recognized standards, while ensuring a fair and orderly transition,鈥� he added.

The SEC said the measure is aligned with principles of the International Organization of Securities Commissions, which promote fair representation in the governance of self-regulatory organizations such as exchanges.

Under the circular, a broker director that has served for five cumulative years will be required to undergo a one-year cooling-off period before becoming eligible for re-election.

The five-year term and 10-year term maximum period is reckoned up to the date of the next annual stockholders鈥� meeting, following the fifth or 10^th cumulative annual election.

A broker director鈥檚 service of more than six months in a year will be counted as one full year for purposes of computing the five-year term and 10-year maximum cumulative service under the circular.

Following the cooling-off period, the re-elected broker director can serve a fresh term of up to five cumulative years.

The SEC circular also provides for a two-year transition period for incumbent broker directors, allowing them to complete their current terms and remain eligible for the next two annual elections.

Covered exchanges that exceed the maximum cumulative term limit for broker directors will be subject to penalties, including a P1-million fine per broker director per year and a P30,000 monthly penalty for each month that the violation continues.

Third or succeeding offense for the same violation will be subject to suspension or revocation of the exchange鈥檚 secondary or primary license.

The new directive would affect several long-serving broker directors at the Philippine Stock Exchange, including Ma. Vivian Yuchengco (28 years), Eddie T. Gobing (25 years), and Wilson L. Sy (12 years).

The SEC鈥檚 term limit proposal had previously drawn opposition from individuals, including Ms. Yuchengco, who argued that it would be 鈥渨rong,鈥� noting that brokers are also shareholders of the PSE.

Certain business groups expressed support for the changes, saying these would promote board renewal and investor confidence, and committed to working with regulators and stakeholders to help develop a fair capital market.

The SEC circular will take effect 15 days after its full publication in the Official Gazette or in at least two newspapers of general circulation. 鈥� Alexandria Grace C. Magno

THE PHILIPPINE financial system鈥檚 total resources rose to P37.45 trillion in the first quarter of 2026 as the sector鈥檚 assets ballooned despite headwinds stemming from the Middle East war, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

As of March, banks and nonbank financial institutions鈥� combined resources grew by 8.61% to P37.45 trillion from P34.481 trillion in the same period last year.

Month on month, it edged up by 1.38% from P36.941 trillion previously.

These include funds and assets such as deposits, capital, and bonds or debt securities, but exclude resources from the central bank.听 听

Banks alone held P31.103 trillion worth of resources during the period, climbing by 9.19% from the P28.485 trillion seen a year earlier.

Broken down, universal and commercial banks鈥� resources rose by 8.41% year on year to P28.871 trillion at end-March from P26.631 trillion previously. This was the bulk of the sector鈥檚 resources in the first quarter.听

Resources of thrift banks also jumped by 25.17% to P1.478 trillion at end-March from P1.181 trillion in the comparable year-ago period, while digital banks had 44.82% more resources at end-March with P188.7 billion from P130.3 billion in the prior year.

Meanwhile, resources held by rural and cooperative banks stood at P565 billion as of end-December last year, 4.01% higher than the P543.2 billion seen in the first quarter of 2025. There were no data for rural and cooperative banks as of end-March this year.

Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said the higher resources as of end-March came as banks and nonbank financial institutions鈥� balance sheets remained sound amid the Middle East conflict, with lending activity and deposit inflows likewise boosting their holdings.听 听

鈥淭he increase underscores the resilience of the domestic financial system, which remains well-positioned to intermediate funds despite external headwinds such as the ongoing Middle East conflict,鈥� he said in a Viber message.听

Separate central bank data showed that lenders鈥� assets hit an all-time high of P30.336 trillion as of end-March, the first full month of the Middle East war. This was up by 9.77% year on year from P27.644 trillion.

Banks鈥� loan growth likewise hit its fastest pace in seven months in March, as lending to businesses and consumers climbed 10.7% to P14.603 trillion from P13.192 trillion a year ago.

Higher investment holdings and continued savings may have helped sustain the sector鈥檚 resource growth despite economic woes during the period, said John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies.

鈥�(This) reflects continued expansion in bank lending, deposit growth, and investment holdings, indicating that the financial system remains liquid and broadly resilient despite a more challenging macroeconomic environment,鈥� he noted.

The latest available BSP data also showed nonbanks held P6.347 trillion in resources as of end-2025. This reflects a 7.26% climb from the P5.917-trillion resources logged at end-2024.

Nonbanks include investment houses, finance companies, security dealers, pawnshops, and lending companies.

Institutions such as nonstock savings and loan associations, credit card companies, private insurance firms, the Social Security System, and the Government Service Insurance System are also considered nonbank financial firms.

In the coming months, analysts noted that tighter financial conditions amid lingering economic uncertainties could dampen the growth of the financial sector鈥檚 resources.

鈥淟ooking ahead, while resources are expected to continue expanding, the pace of growth may moderate amid tighter financial conditions, elevated inflation, and softer economic momentum,鈥� Mr. Asuncion said.

鈥淜ey factors to watch include BSP policy direction, liquidity conditions, risk sentiment, and the strength of domestic demand, which will collectively shape the trajectory of financial system resources in the coming months,鈥� he added.

The industry should also strive to maintain healthy asset quality and credit conditions, especially as economic risks continue to weigh on them, according to Mr. Rivera.

In the first four months of the year, the combined value of InstaPay and PESONet transfers amounted to P10.388 trillion, up 45.38% from the P7.145 trillion seen in the year-ago period.

Meanwhile, more users turned cashless as the volume of transactions made through the two payment gateways more than tripled (225.1%) year on year to 2.721 billion as of April from 837.118 million previously.

Broken down, the value of InstaPay transactions jumped by 62.71% to P5.093 trillion from P3.13 trillion a year ago.

This came as the clearing house recorded a surge in the volume of transactions during the period, which soared by 234.95% to 2.68 billion from 799.971 million in the prior year.

On the other hand, transfers done via PESONet stood at a total value of P5.295 trillion at end-April, 31.88% higher than the P4.015 trillion posted in the same period last year.

The volume of PESONet transactions also went up by an annual 12.89% to 41.938 million in the four-month period from 37.148 million previously.

InstaPay and PESONet are automated clearing houses under the central bank鈥檚 National Retail Payment System framework.

InstaPay is a real-time, low-value electronic fund transfer facility for transactions up to P50,000 and is mostly used for remittances and e-commerce.

Meanwhile, PESONet is mainly used for high-value transactions and may be considered as an electronic alternative to paper-based checks.

As of April, there are 94 InstaPay participants, most of which are nonbank electronic money issuers. PESONet has a total of 124 participants, with the bulk being universal and commercial banks.

The BSP wants digital payments to make up 60%-70% of the total volume of retail payments by 2028 in line with the Philippine Development Plan.

In 2024, online payments made up 57.4% of the volume and 59% of the value of the country鈥檚 total monthly retail transactions, according to the BSP鈥檚 2024 Status of Digital Payments in the Philippines report. 鈥� Katherine K. Chan

The currency closed at P61.581 versus the dollar, gaining 15.9 centavos from its P61.74 finish on Wednesday, according to Bankers Association of the Philippines data posted on its website.

The local unit opened Thursday鈥檚 session sharply stronger at P61.50 per dollar. Its intraday best was at P61.45 against the greenback, while its weakest showing was at P61.665.

Dollars traded increased to $1.58 billion from $1.54 billion in the previous session.

鈥淭he peso appreciated after US President [Donald J.] Trump hinted about an impending end to the US-Iran conflict following his favorable remarks on the Iranian authorities in relation to their diplomatic talks,鈥� a trader said in an e-mail.

The currency was also supported by the downward correction in global crude oil prices following Mr. Trump鈥檚 remarks, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Friday, the trader said the peso could continue to strengthen amid market optimism over an eventual resumption of oil trade along the Strait of Hormuz.

The trader sees the peso moving between P61.45 and P61.70 against the dollar on Friday, while Mr. Ricafort expects it to move between P61.45 and P61.65.

The US dollar firmed on Thursday but stayed below a six-week peak as hopes that Washington was nearing a deal with Tehran to end the war in the Middle East capped further rises, Reuters reported.

Mr. Trump on Wednesday said negotiations with Tehran were in the final stages, while also warning of further attacks if Iran does not agree to a deal.

The dollar, often a safe haven for investors, firmed 0.1% against the yen to 楼159.060 after falling for the first time in eight sessions against the yen on Wednesday.

Bank of Japan policy board member Junko Koeda added a measure of support for the yen with hawkish comments on Thursday, saying in a speech that the central bank needs to continue to raise rates with underlying inflation already around a 2% target.

The euro was 0.2% down at $1.160050, after dipping on Wednesday to its weakest level since April 7 at $1.1583 before bouncing back.

The dollar index, which measures the currency against the euro, yen and four other rivals, rose 0.2% to 99.295, down from a peak of 99.472 on Wednesday, the strongest level since April 7.

鈥淭he 鈥榮afe haven鈥� flows reversed because of positive news about the Iran war,鈥� wrote Joseph Capurso, head of FX at Commonwealth Bank of Australia, in a client note.

At the same time, 鈥渨hile the US has domestic political incentives to seek peace, we would not be surprised if President Trump chooses military escalation to gain leverage in negotiations,鈥� he said.

Market focus has been on the potential inflationary impact of higher energy prices as the Strait of Hormuz remains largely closed to shipping.

In a note, Commerzbank FX analysts said many central banks may label the inflation shock as transitory should the Strait open in the next few days, but this would be incorrect as it does not take into account loss of purchasing power.

鈥淐onsequently, currencies are likely to benefit in countries where the central bank is slower to speak of transitory price spikes but may nevertheless tighten monetary policy,鈥� they wrote.

Notes from the Federal Reserve鈥檚 April meeting, published on Wednesday, revealed officials鈥� intensifying concerns about inflation, with a growing number open to the possibility that they may need to raise interest rates.

Elsewhere, the Australian dollar declined following a surprise rise in the unemployment rate to the highest since 2021, which reduced the case for higher interest rates.

Bitcoin softened a fraction to around $77,603.16. 鈥� Aaron Michael C. Sy with Reuters

The Philippine Stock Exchange index (PSEi) rose by 0.46% or 27.3 points to close at 5,920.70 on Thursday, while the broader all shares index fell by 0.12% or 4.03 points to end at 3,335.85.

鈥淭he local market ended higher after four straight days of decline as selective bargain hunting emerged among investors. However, market participants still looked to remain engaged in short-term positions amid cautious sentiment. Gains were trimmed in the afternoon session as selling pressure resurfaced, limiting the market鈥檚 upside,鈥� Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

鈥淭he local market rose taking cues from Wall Street鈥檚 rally overnight. US President Donald J. Trump鈥檚 statement saying that the US and Iran are already on the final stages of negotiation sparked hopes that a peace deal would be coming soon,鈥� Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message.

Iran said on Thursday it was reviewing Washington鈥檚 latest position on ending the war after Mr. Trump suggested he was prepared to wait a few days to 鈥済et the right answers鈥� from Tehran but warned of renewed attacks if it did not agree to a deal, Reuters reported.

Six weeks since a fragile ceasefire came into force, talks to end the war have shown little progress, while soaring oil prices have raised concern over inflation and the impact on the global economy.

Iran submitted its latest offer to the US this week. Tehran鈥檚 descriptions suggest it largely repeats terms Mr. Trump previously rejected, including demands for control of the Strait of Hormuz, compensation for war damage, lifting of sanctions, release of frozen assets and the withdrawal of US troops.

Back home, most sector counters closed higher on Thursday. Services jumped by 1.22% or 36.68 points to 3,027.05; mining and oil increased by 0.56% or 99.86 points to 17,658.63; holding firms went up by 0.41% or 17.99 points to 4,390.3; property climbed by 0.2% or 3.89 points to 1,915.02; and financials rose by 0.2% or 3.51 points to 1,762.14.

Meanwhile, industrials fell by 0.61% or 52.61 points to 8,524.78.

Decliners beat advancers, 99 to 69, while 65 names were unchanged.

鈥淏ank of the Philippine Islands was the day鈥檚 index leader, climbing 2.76% to P89.50. Monde Nissin Corp. was the main index laggard, falling 3.66% to P6.84,鈥� Mr. Tantiangco said.

Value turnover went up to P6.58 billion on Thursday with 1.03 billion shares traded from the P5.67 billion with 1.24 billion issues that changed hands on Wednesday.

Net foreign selling increased to P190.76 million from P115.32 million in the previous session. 鈥� Alexandria Grace C. Magno with Reuters

THE PHILIPPINE government should maximize public-private partnerships (PPP) to help narrow the country鈥檚 infrastructure gap while easing fiscal pressure from rising debt levels, the Asian Development Bank (ADB) said.

Despite the government鈥檚 infrastructure catch-up programs, gaps remain as rapid urbanization and economic growth continue to drive demand, ADB Country Director for the Philippines Andrew Jeffries told 大象传媒 on Wednesday.

鈥淭here is an infrastructure gap in the Philippines鈥� The population of Metro Manila has grown so much over a few decades, so investment in urban transport needs to catch up,鈥� he said.

Mr. Jeffries said both the current administration鈥檚 鈥淏uild Better More鈥� program and the previous administration鈥檚 鈥淏uild Build Build鈥� initiative were aimed at addressing years of underinvestment.

鈥淎s the Philippines grows, population-wise, gross domestic product (GDP)-wise, transport needs to keep growing as well,鈥� he said.

鈥淎nd with what鈥檚 happening now with diesel fuel prices and all, alternatives for public transport become part of that longer-term solution,鈥� he added.

However, Mr. Jeffries said infrastructure catch-up efforts are facing challenges from fiscal pressures and budget constraints.

鈥淭he government is keeping a very close eye on public debt levels, so how to bring the private sector into some of these investments as opposed to just government budget and borrowing, I know, is very important to this government,鈥� he said.

The country鈥檚 debt-to-GDP ratio reached 65.2% in the first quarter, the highest level since 2005. This comes as the National Government鈥檚 outstanding debt climbed by 1.8% to P18.49 trillion as of end-March from P18.16 trillion at the end of February.

Mr. Jeffries said that bringing in private investment ensures that 鈥減ublic debt levels can be maintained or reduced over time as opposed to that being the only funding source.鈥�

鈥淭here is a lot of private infrastructure already in this country. And the key is how to make sure it鈥檚 done well so that the government and the people are getting the best value for money,鈥� he added.

According to the PPP Center, the PPP pipeline as of May 19 consists of 250 projects valued at P3.13 trillion.听 The railway sector accounted for P1.97 trillion of the project pipeline, followed by land transport (P277.26 billion) and property development (P221.46 billion).

TRANSPORT PROJECTS
Meanwhile, Mr. Jeffries said transport projects will continue to account for a significant share of ADB鈥檚 financing portfolio in the Philippines in the near term.

The multilateral lender鈥檚 portfolio of projects under construction and implementation in the Philippines is valued at $12.5 billion.

鈥淥ur transport portfolio exceeds $7 billion, so that鈥檚 obviously a nice large percentage of our overall portfolio in the Philippines,鈥� he said.

鈥淭hat is really because of some extremely large projects we are funding鈥� From a dollar point of view, transport is clearly our largest in our portfolio here in the Philippines,鈥� he added.

These projects include the North-South Commuter Railway, Bataan-Cavite Interlink Bridge, Laguna Lakeshore Road Network Project, and Davao Public Transport Modernization Project.

Asked if ADB is considering additional transport projects, Mr. Jeffries said that 鈥渂ecause they (the projects) are so large and it takes considerable time, we鈥檙e funding those in time-sliced tranches.鈥�

鈥淪o, we have a robust pipeline going forward, just seeing those projects through to completion… We are focusing a lot on implementing what we already have,鈥� he added.

Mr. Jeffries said the government is exploring ways to attract more private investment into the transport sector amid fiscal pressures stemming from the Middle East crisis.

鈥淲ith the fiscal issues with this Middle East crisis and so on, the government is also looking actually at how to bring more private sector investment into this sector,鈥� he said.

鈥淪o, we don鈥檛 have new big projects specifically in our pipeline at this time,鈥� he added.

Mr. Jeffries said transport projects are likely to remain a major part of ADB鈥檚 Philippine portfolio over the next few years as the government prioritizes completing existing projects.

鈥淚 think that proportion will stay more or less the same for the next few years, especially now that the government is very worried about the trade-offs and the fiscal and the public debt levels,鈥� he said.

鈥淭hey want to focus on implementation and reaching completion of what is already ongoing because until they are done and in operation, they are not benefiting the people,鈥� he added.

FINANCING GAP
The infrastructure and investment gap is not unique to the Philippines. In its Asian Transport 2035 Outlook, the Asian Transport Observatory (ATO) said annual investment demand for transport infrastructure in Asia and the Pacific is expected to more than triple over the next decade.

鈥淎nnual investment needs across all transport modes will climb from roughly $800 billion per year during 2000-2025 to approximately $2.6 trillion per year between 2025 and 2035,鈥� the ATO said.

鈥淭hat is equivalent to 2.3% of LMIC (lower- and middle-income countries鈥�) GDP per year,鈥� it added, referring to those in Asia and the Pacific.

However, the ATO said the projection remains conservative as it only reflects current trends and existing project pipelines.

鈥淎ctual needs, accounting for the full cost of the energy transition, the climate adaptation backlog, and the SDG (Sustainable Development Goals) access deficit, are likely to be considerably higher,鈥� it added.

Despite this, the ATO said the region still faces a large financing gap.

鈥淒evelopment banks can do things commercial investors cannot 鈥� blend concessional and market-rate lending, absorb early project risk, and attach technical assistance to pipelines that would otherwise stall at the feasibility stage,鈥� it said.

鈥淏ut there is a limit to what external finance can do. The long-run answer to Asia鈥檚 transport financing gap is stronger revenue systems and public finance reform. We are not just facing an infrastructure gap, but also an investment and governance gap,鈥� it added.

SINGAPORE 鈥� Soaring fuel and fertilizer costs linked to the Middle East conflict, coupled with drier-than-usual conditions, are putting increasing pressure on domestic rice production and threatening the Philippines鈥� food security, according to the International Rice Research Institute (IRRI).

鈥淩ising fuel and fertilizer costs driven by Middle East tensions, along with the emerging threat of El Ni帽o, weigh heavily on agricultural production and rice farmers,鈥� IRRI Director-General Yvonne Pinto told 大象传媒 on the sidelines of the Philanthropy Asia Summit on Tuesday.

鈥淭he prospects for food security in the Philippines in two, three years from now are going to be much worse, unless we support and enable farmers to generate income from the rice they are producing,鈥� she said.

Filipino farmers are now grappling with rising costs and unstable supply of fuel and fertilizer, which are essential to rice production, Ms. Pinto said.

The closure of the Strait of Hormuz has affected global supply of fertilizer and caused prices to spike. The Middle East is a hub for fertilizer production. In particular, the supply of urea from the world鈥檚 largest production facility in Qatar has been stopped due to the conflict.

For instance, the cost of urea, a nitrogen-based fertilizer, is 33% higher today, she noted.

Urea (prilled) prices averaged P2,607.42 per 50-kilogram (kg) bag between May 11 and May 15, significantly higher than the P1,686.03 per 50-kg bag in the same period last year, according to data from the Fertilizer and Pesticide Authority.听

鈥淪o, these geopolitical tensions really escalate the costs,鈥� Ms. Pinto said. 鈥淲hat the government may have to do is provide safety nets to farmers so that they can afford them.鈥�

Before the Iran war, the Philippine Department of Agriculture (DA) projected palay (unmilled rice) output to reach 20.28 million metric tons (MT) this year, under favorable weather conditions. This has been lowered to 19.87 million MT due to the Middle East conflict and the looming El Ni帽o.

Ms. Pinto said the El Ni帽o phenomenon threatens to disrupt the country鈥檚 rice production in the next few months.

The Philippine Atmospheric, Geophysical and Astronomical Services Administration recently warned of the possibility of a moderate to severe dry spell from June until early next year.听 听

The DA also estimated that agricultural output could be slashed by as much as 30% under a 鈥淪uper El Ni帽o鈥� scenario.

In 2024, total damage to agriculture due to El Ni帽o reached P15.3 billion, affecting 333,195 farmers and fisherfolk nationwide.

Ms. Pinto said there is a need to focus on reducing labor costs for rice production through better seed distribution, mechanization, and fertilizer supply.

In the medium and long terms, she called for capacity-building for fertilizer production and nature-based solutions like composting to improve affordability for farmers.

鈥淥ur analysis tells us we only need to raise yields by one ton per hectare,鈥� Ms. Pinto said. 鈥淔rom all of the strategies I mentioned, it is achievable.鈥�

She also emphasized better coordination between national and local governments to ensure farmers benefit from agricultural policies.

The country鈥檚 rice self-sufficiency ratio, which measures the capacity of local production, dropped to 71.7% in 2024, according to the Philippine Statistics Authority. The ratio was the lowest in 37 years, or since the data series began in 1988.

With the Philippines facing another El Ni帽o this year, farmers should have increased access to early warning systems, alternative wetting and drying solutions, and irrigation equipment, Ms. Pinto said.

鈥淭hese shocks are going to continue, so we鈥檝e got to develop architecture that supports farmers to stay in farming to enable the Philippines to be food secure,鈥� Ms. Pinto said.听 听

For the past 65 years, IRRI has worked closely with the Philippine government through science-based innovations to help reduce hunger and poverty through rice. Headquartered in Laguna, the organization promotes sustainable agricultural production, improved nutrition, and stronger livelihoods for farmers.

Sharon O. Monta帽er, ERC鈥檚 director for market operations service, said the extension of the suspension will depend on the status of the GEA-All fund.

鈥淪o next month, we鈥檙e going to assess again if there are (enough) funds. If we see that there鈥檚 still difficulty in the payment of the bills, or electricity rates are quite high compared with previous months, and if there is sufficient balance in the fund to suspend, we can extend the suspension,鈥� she told reporters on the sidelines of the 大象传媒 Economic Forum on May 18.

Earlier this month, the ERC ordered to temporarily halt the collection of GEA-All from May to June to ease the financial burden on consumers amid rising inflation and global economic pressures.

GEA-All is a uniform charge amounting to P0.0371 per kilowatt-hour (kWh) that is passed on to on-grid consumers. It is a separate line item in the bills of consumers that started in January 2026.

The amount collected is used to fund the incentives of new renewable energy (RE) projects being awarded under the green energy auction program (GEAP).

As of May 5, GEA-All Fund maintains a balance of approximately P466.49 million, which is sufficient to cover the projected payment requirements of eligible RE developers during the suspension period, according to the ERC.

鈥淚f the crisis extends again, then, definitely, the commission will look into that (extension of the suspension) as it has always been one of the tools to relieve customers,鈥� Ms. Monta帽er said.

Meanwhile, Ms. Monta帽er said the ERC is not looking to suspend the feed-in tariff allowance (FIT-All). She noted there are no excess funds as the funds are only enough to cover payments to RE developers.

鈥淭here鈥檚 no sufficient buffer for FIT-All. It鈥檚 only enough to pay for the RE developers,鈥� she said.

FIT-All is another RE charge amounting to P0.2011 per kWh that is separate from GEA-All which is being paid by consumers to support emerging RE technologies.

Nic Satur, Jr., chief advocate officer of consumer group Partners for Affordable and Reliable Energy, argued that GEA-All should be permanently removed, as consumers have been shouldering expensive power rates.

鈥淚 believe that GEA-All has no legal basis and it should not be collected from consumers,鈥� Mr. Satur told 大象传媒. 鈥淲e support our move towards clean energy but not at the expense of consumers.鈥�

Mr. Satur said that consumers have suffered 鈥渓ong hours of brownout, expensive electricity rate and poor service鈥� but are continuously burdened by pass-through charges, including GEA-All and FIT-All.

The crisis in the Middle East has pushed global oil prices higher, increasing power generation costs in the Philippines and driving up electricity rates.

To provide relief to consumers, the regulator directed distribution utilities to suspend electricity service disconnections and to implement staggered or deferred payment schemes.

The suspension covers unpaid electricity bills for both residential and nonresidential consumers covering the May-to-July billing periods.

Customers with a monthly consumption not exceeding 200 kWh may defer payment of their bills and settle them on a staggered basis over three months from receipt of the bill. 鈥� Sheldeen Joy Talavera

The currency closed at P61.74 a dollar, gaining a centavo from Tuesday鈥檚 record-low finish of P61.75, according to Bankers Association of the Philippines data posted on its website.

The local unit opened Wednesday鈥檚 session stronger at P61.73 per dollar. It traded within a narrow range as its intraday best was at just P61.67 against the greenback, while its weakest showing was at P61.75.

Dollars traded rose to $1.54 billion from $1.21 billion in the previous session.

The peso rose a tad as the market was on wait-and-see mode about developments in the Middle East, a trader said by phone.

鈥楳arket players traded generally cautiously awaiting FOMC (Federal Open Market Committee) meeting minutes that will be released overnight,鈥� the trader added.

The peso was broadly steady following the downward correction in global crude oil prices, Rizal Commercial Banking Corp, Chief Economist Michael L. Ricafort said in a Viber message.

He added that the central bank may have intervened during the session again to support the currency.

For Thursday, the trader said the peso may stay rangebound between P61.50 and P61.75 amid a lack of leads, while Mr. Ricafort sees it ranging from P61.55 to P61.75.

The US dollar hit a six-week high on Wednesday as investors came to terms with the possible need for higher interest rates to tackle inflation resulting from the Iran war, Reuters reported.

The uncertainty over when the conflict may end has fanned inflation fears and triggered a global bond sell-off, with the yield on the US 30-year Treasury bond hitting its highest level since 2007.

President Donald J. Trump said the United States may need to strike Iran again but suggested Tehran wants a deal to end the war that has all but closed the key Strait of Hormuz, sending energy prices soaring and roiling markets.

The dollar index, which tracks the currency against six peers, rose 0.1% to its highest since April 7 at 99.47. The index is up more than 1.3% in May due to safe-haven demand and markets pricing in chances of the Federal Reserve hiking interest rates by the end of the year.

Brent crude futures were down 1.1% to $110 per barrel, but remained more than 50% higher than in late February before the war began. 鈥� Aaron Michael C. Sy with Reuters

The Philippine Stock Exchange index (PSEi) slipped by 0.05% or 3.4 points to close at 5,893.40, while the broader all shares index fell by 0.22% or 7.67 points to end at 3,339.88.

This was the PSEi鈥檚 lowest finish in nearly three weeks or since it closed at 5,833.64 on April 30.

鈥淭he local market ended flat as investors stayed cautious after President Marcos flagged risks of stagflation amid lingering economic pressures. Concerns over higher oil prices caused by global supply chain disruptions continued to weigh on sentiment, raising worries about sustained inflation and slower growth,鈥� Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

鈥淭he local market鈥檚 sideways movement ended in the negative territory, taking cues from Wall Street鈥檚 overnight decline. This comes following the rise in the US long term treasury yields. Lingering concerns including the elevated global oil prices, weak local currency, and stagflation risks also weighed on investor sentiment,鈥� Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message.

President Ferdinand R. Marcos, Jr. on Monday said the country could face stagflation due to the prolonged Iran conflict as it slows economic growth and pushes up inflation.

Headline inflation quickened to a near three-year high of 7.2% in April from 4.1% in March due to soaring fuel prices. This was the fastest print since 7.6% in March 2023.

Meanwhile, gross domestic product (GDP) grew by just 2.8% in the first quarter, slowing from the 5.4% expansion in the same quarter last year and the revised 3% GDP growth in the fourth quarter of 2025. The government blamed the slump on the economic fallout from a corruption scandal and the situation in the Middle East.

Sectoral indices closed mixed on Wednesday. Services rose by 0.32% or 9.72 points to 2,990.37; property increased by 0.17% or 3.36 points to 1,911.13; and holding firms went up by 0.09% or 4.05 points to 4,372.31.

Meanwhile, industrials declined by 0.79% or 68.70 points to 8,577.39; financials dropped by 0.56% or 9.99 points to 1,758.63; and mining and oil went down by 0.32% or 58.04 points to 17,558.77.

Decliners outnumbered advancers, 111 to 74, while 59 names were unchanged.

鈥淎yala Land, Inc. was the day鈥檚 top index gainer, climbing 1.76% to P15. ACEN Corp. was the main index laggard, falling 4.62% to P3.10,鈥� Mr. Tantiangco said.

Value turnover went up to P5.67 billion on Wednesday with 1.24 billion shares traded from the P5.36 billion with 1.21 billion issues that changed hands on Tuesday.

鈥淭rading remained subdued as investors held back ahead of clearer policy direction and upcoming economic data,鈥� Mr. Limlingan said.

Net foreign selling decreased to P115.32 million from P680.04 million in the previous session. 鈥� Alexandria Grace C. Magno

STEADY INFLOWS from remittances and the services sector despite emerging external pressures helped narrow the Philippines鈥� balance of payments (BoP) gap to a three-month low in April, Bangko Sentral ng Pilipinas (BSP) data showed.

Based on central bank data released on Tuesday, the country鈥檚 BoP gap narrowed to $2.124 billion last month from the $2.637-billion deficit in March and $2.558-billion shortfall in April last year.

This was the narrowest deficit recorded since the $373 million seen in January. It also marked the sixth consecutive month that the country鈥檚 BoP position settled at a shortfall.

In the four months to April, the Philippines鈥� BoP deficit widened to $7.411 billion from $5.516 billion in the same period a year ago.

BoP refers to the country鈥檚 economic transactions with other nations. A deficit shows that the country spent more than it received, while a surplus indicates more funds entered the country.

Stable dollar inflows from remittances and business process outsourcing, slightly better capital flows and softer import bill may have helped narrow the country鈥檚 BoP deficit in April, Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said via Viber.

However, Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said the wider four-month deficit was likely due to lingering external pressures considering the country鈥檚 large trade gap.

鈥淭he narrower BoP deficit in April reflects some normalization after earlier outflows, but the wider year-to-date gap highlights persistent external pressures, particularly from the country鈥檚 large trade deficit amid strong import demand and softer exports,鈥� he said in a Viber message.

鈥淲hile remittances and services continue to provide support, these have not been enough to offset the current account shortfall, with capital flows remaining sensitive to global conditions,鈥� Mr. Asuncion added.

Separate BSP data showed remittances from Filipinos abroad rose by 2.3% year on year to $2.874 billion in March, the highest in two months.

Latest available data showed the country鈥檚 trade-in-goods deficit widened to a six-month high of $4.512 billion in March from $4.015 billion in February and $4.509 billion a year ago.

DOLLAR RESERVES
Meanwhile, revised BSP data showed the Philippines鈥� dollar reserves fell to its lowest level in over a year, which analysts said was likely due to the central bank鈥檚 recent intervention in the foreign exchange market.

As of end-April, the country had $104.328 billion in gross international reserves (GIR), slightly higher than the $104.128 billion earlier reported.

However, it was still a 2.16% decline from the $106.636-billion foreign reserves in March and a 0.93% dip from the $105.308 billion in April 2025.

The end-April tally was the lowest GIR level in 15 months or since the $103.271 billion logged in January last year.

鈥淭he decline in GIR indicates that the BSP may have used part of its reserves to smooth peso volatility and meet external obligations,鈥� John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in a Viber message.

The central bank earlier said it remains present in the foreign exchange market to prevent sharp swings that could stoke inflation as the Middle East war continues to weigh on the currency.

On Tuesday, the peso closed at P61.75 against the dollar, unchanged from its record-low finish on Monday, Bankers Association of the Philippines data showed.

Still, according to the BSP, the country鈥檚 latest GIR level 鈥減rovides a robust external liquidity buffer.鈥�

The end-April reserves translated to 6.9 months鈥� worth of imports of goods and payments of services and primary income, exceeding the three-month standard.

It can also cover about 3.8 times the country鈥檚 short-term external debt based on residual maturity.

GIR comprises foreign-denominated securities, foreign exchange, and other assets such as gold. It enables a country to finance imports and foreign debts, maintain the stability of its currency, and safeguard itself against global economic disruptions.

For Mr. Ravelas, the country鈥檚 BoP position will likely remain in a deficit in the coming months considering the economy鈥檚 heavy reliance on imports.

鈥淭he key message here is not elimination, but manageability 鈥� our external position remains 鈥榙eficit but resilient,鈥� supported by strong fundamentals like remittances, services exports, and adequate reserves,鈥� he added. 鈥淪o, going forward, it鈥檚 about watching global conditions and capital flows closely, while ensuring we sustain these stable sources of FX (foreign exchange).鈥�

SM Investments Corp. Group Economist Robert Dan J. Roces likewise projects a continued deficit in the near term as 鈥渉igh oil prices, elevated global uncertainty, and a still-strong dollar continue to pressure the trade balance and keep demand for dollars firm.鈥�

However, the deficit may be 鈥渟maller and more manageable鈥� as the country continues to hold ample GIR and due to steady flows from remittances and services exports, he added.

鈥淭he BoP may stay in deficit in the near term, though a smaller and more manageable one,鈥� Mr. Roces said. 鈥淭he good news is that the country still has ample buffers through GIR, steady remittances, and recurring inflows from services exports, which help prevent external pressures from becoming destabilizing.鈥�

The central bank expects the country鈥檚 BoP position to end at a $7.8-billion deficit or -1.5% of its gross domestic product (GDP) this year, wider than the $5.661-billion gap or -1.2% of GDP in 2025.

It also projects the GIR level to reach $111 billion by yearend, higher than the $110.8 billion recorded last year.

THE PHILIPPINE PESO will likely remain the weakest Asian currency despite further monetary policy tightening by the central bank as the economy remains vulnerable to volatile global oil prices amid the ongoing Middle East war, analysts said.

This as the peso on Tuesday closed at the record-low level of P61.75 versus the greenback, the same finish logged on Monday, Bankers Association of the Philippines data showed.

In a report published late on Monday, ING Think economists noted that the impact of oil price swings on the local unit could offset the expected support of additional policy rate hikes by the Bangko Sentral ng Pilipinas (BSP). (See related story)

鈥淲e continue to expect a frontloaded but measured tightening cycle, worth 75 bps (basis points) in 2026,鈥� said ING Regional Head of Research for Asia Pacific Deepali Bhargava, Senior Economist for South Korea and Japan Min Joo Kang, and Chief Economist for Greater China Lynn Song.

鈥淲hile this could provide some near-term support to the PHP (Philippine peso), the currency鈥檚 trajectory will remain closely tied to oil price dynamics,鈥� they added.

A separate report from MUFG Bank, Ltd. on Tuesday showed that the peso suffered the sharpest depreciation among currencies in emerging markets in Asia since the Middle East war erupted on Feb. 28.

Based on the report penned by MUFG Senior Currency Analyst Michael Wan, the local unit declined by 6.6% against the dollar from Feb. 28 to May 18.

This was followed by the Indian rupee, which went down by 5.6%, Indonesian rupiah (5%), Thai baht (4.8%), South Korean won (4%), Malaysian ringgit (2.1%), Japanese yen (1.8%), Singapore dollar (1.1%), Vietnamese dong (1.1%), and Taiwan dollar (1%).

The peso has traded around the P60- to P61-a-dollar handle for about a month or since late April, even plunging to back-to-back historic lows versus the greenback.

This came even after markets anticipated some relief for the peso following the BSP鈥檚 move to lift the benchmark borrowing cost during its April 23 meeting.

The key interest rate now stands at 4.5% after the Monetary Board delivered its first 25-bp hike last month as it sought to temper second-round price effects and keep inflation expectations anchored amid rising risks from the energy crisis.

ING analysts said the BSP may deliver its second-straight hike at its June 18 review as inflation risks prove more urgent than growth concerns.

鈥淭he latest data points suggest inflation risks are now outweighing growth concerns,鈥� they said. 鈥淚n this context, we do not see the weak GDP (gross domestic product) print deterring Bangko Sentral ng Pilipinas from hiking in June.鈥�

Inflation breached the central bank鈥檚 2%-4% target and market projections for the second month in a row as soaring oil prices spilled over to other key commodities.

In April, high food and utility prices amid still elevated energy costs led the headline print to accelerate to an over three-year high of 7.2%.

On the other hand, the economy faltered in the first quarter, with growth easing to 2.8% from 3% in the previous quarter and 5.4% a year ago as oil shocks added to the lingering effects of last year鈥檚 flood control mess.

For ING analysts, however, the economy could remain under pressure amid growing political uncertainty surrounding Vice-President Sara Duterte-Carpio鈥檚 impeachment.

鈥淗igher political uncertainty with the impeachment of the vice-president can further push out reforms and growth recovery,鈥� Ms. Bhargava, Ms. Kang, and Mr. Song said.

Meanwhile, Metropolitan Bank and Trust Co. (Metrobank) also sees further BSP tightening as still elevated oil prices and uncertainties over Iran and the US鈥� peace talks are expected to stoke inflation in the coming months.

鈥淢etrobank still sees elevated risk and volatility in the near term while a peace deal has not been struck,鈥� it said in a note on Monday. 鈥淥il prices are poised to stay high, as global supply remains constricted due to the war鈥檚 impact on Middle East oil facilities. Consequently, domestic inflation is expected to quicken in the coming months.鈥�

However, it noted that increased demand for the US dollar will continue to drag the peso, with global dollar flows, not domestic factors, likely driving foreign exchange movements.

Still, the peso鈥檚 depreciation may be capped at P62 against the dollar, according to the bank.

鈥淯SD/PHP strategy remains range-bound with a slight USD-positive bias, as strong dollar fundamentals and steady corporate demand continue to support the pair, particularly on dips,鈥� Metrobank said.

鈥淗owever, the upside remains capped near the P61.75-P62.00 resistance zone due to strong supply and positioning. The pair is likely to remain driven by external USD flows rather than domestic catalysts, reinforcing a tactical trading approach,鈥� it added.

On the other hand, ING said global oil prices potentially averaging around $100 per barrel in the quarter will continue to weigh on the country鈥檚 current account deficit.

The BSP earlier said the Philippines may see a wider current account gap of $20.3 billion or -4% of GDP this year as the Middle East war could strain the country鈥檚 external position.

In 2025, the country had a current account deficit of $16.291 billion or -3.3% of GDP.

鈥淲e were able to keep food prices stable, but supplies are feeling the pinch,鈥� Mr. Marcos said during a roundtable discussion with Japanese media in Malaca帽ang on Monday. A video and transcript were provided to Palace reporters.

Mr. Marcos said some producers and suppliers had sought government permission to increase the prices of 鈥渘on-critical鈥� food products.

The Philippines, which relies heavily on imported fuel, has been hit hard by the ongoing Iran conflict. This has prompted the government to declare a year-long energy emergency amid threats to oil supply and rising inflation.

鈥淭o the economy, the concern that we have is the concern about stagflation鈥� so this is what we have been trying to control,鈥� Mr. Marcos said.

Stagflation refers to a period of weak economic growth combined with persistently high inflation.

Some analysts have earlier flagged stagflation risks after inflation quickened to a near three-year high of 7.2% in April from 4.1% in March due to soaring gas prices. This was the fastest headline print since the 7.6% seen in March 2023, and also well-above the central bank鈥檚 5.6%-6.4% estimate for the month.听 听

In the first quarter, gross domestic product (GDP) grew by 2.8%, slowing from the 5.4% expansion in the same quarter last year and the revised 3% GDP growth in the fourth quarter of 2025.

The President said the government will make efforts to slow down rising food costs. Last week, he imposed a P50 price cap on rice.

Mr. Marcos added that public spending has been accelerated to support growth, following earlier delays in budget execution this year.

鈥淧ublic spending has been accelerated so that the GDP (gross domestic product) growth is still being assisted. We had a delay in public spending in the beginning of this year, basically in the first quarter,鈥� he added, according to a separate statement from his office.

Mr. Marcos remains optimistic that public spending will fuel economic growth within the next quarter and next year.

鈥淟uckily, I suppose, or at least we are still continuing to see marked interest in investment in the Philippines,鈥� he said.

鈥淧erhaps this is because of the policies that we adopted, the incentives that we have put out for investors. So, slowly, we can see the way through this, where we will recover through this.鈥�

Mr. Marcos said spending is increasingly being directed toward 鈥渄irect spending鈥� to ensure that assistance is felt more immediately by households, including subsidies and transport-related fuel discounts.

He also said the government is seeking ways to encourage investment and support for micro, small and medium enterprises.

鈥淟et us keep the economic machine running… Let us continue to invest,鈥� he said. 鈥淲e have a total economic mandate that, as much as possible, let us find that money wherever and in other places, such as in the government鈥檚 operating expenses.鈥�

Meanwhile, the Philippines is already in a 鈥渟tagflationary episode,鈥� according to Leonardo A. Lanzona, Jr., an economics professor at the Ateneo de Manila University.

鈥淔or a high-growth economy like the Philippines, sub-4% GDP expansion already constitutes stagflationary conditions 鈥� the Philippines is experiencing a combination of slowing, very weak/stagnant GDP growth and high and rising inflation, placing the Bangko Sentral ng Pilipinas (BSP) in an unenviable position,鈥� he said via Facebook Messenger.

Whether this stagflationary episode is sustained would depend on 鈥渨hether the oil shock proves durable (high probability) and whether fiscal catch-up (in infrastructure) materializes (uncertain, given the Department of Public Works and Highways鈥� track record),鈥� Mr. Lanzona said.

He noted that downgraded growth forecasts by several firms could put Philippine economic growth on track for its weakest performance in 18 years outside of the pandemic period.

鈥淭he Marcos signal on food price relief for nonessential items is almost certainly a political pressure valve, not a structural fix 鈥� and risks entrenching expectations that the government will accommodate rather than absorb the shock,鈥� he said. 鈥� C.M.A. Hufana

THE IMPEACHMENT proceedings against Vice-President Sara Duterte-Carpio have raised the possibility of further instability and political violence in the country, according to an assessment by a unit of Fitch Solutions.

鈥淧ublic impeachment hearings against VP Sara Duterte have sharply increased Social Polarization and Government Risks by intensifying the Marcos-Duterte power struggle, with the potential for further instability and political violence if she is removed from contention for the 2028 presidency,鈥� GeoQuant said in a report released on Tuesday.

The Senate on Monday convened as an impeachment court for the trial of Ms. Duterte who faces charges of corruption, misuse of public funds, betrayal of public trust, and an alleged plot to assassinate President Ferdinand R. Marcos, Jr.

Ms. Duterte鈥檚 trial is expected to start by the first week of June.

GeoQuant noted that social polarization risk and government risk began to increase when the House Committee on Justice began hearings on the impeachment complaint against Ms. Duterte on March 25.

鈥淭he case pits two of the country鈥檚 most powerful political families against one another, Marcos and Duterte, who ran as a team in the 2022 general elections but have fallen out over differing constituency and policy agendas,鈥� it said.

鈥淲ith Marcos鈥� tenure up in May 2028, Duterte is his likely successor, but impeachment would prohibit her from running. Marcos claims not to be behind the investigation, but his allies control the House of Representatives and her removal from the field of potential candidates would allow Marcos to find an ally as successor.鈥�

If convicted, Ms. Duterte would be barred from running for public office.

鈥淓xpect both Government and Social Polarization Risks to continue to rise as long as the process continues, with the potential for political violence rising [if] Duterte is sidelined,鈥� GeoQuant said.

Hansley A. Juliano, a political science lecturer at the Ateneo de Manila University, said political polarization ratings typically rise when rival political camps become sharply divided, and businesses begin seeing risks to operational continuity.

鈥淚t鈥檚 bad for business because usually, shifts in regimes or non-peaceful transitions mean business continuity is compromised or insurances/preparations kick in, which impact operational costs,鈥� he said via Facebook Messenger, adding that firms often face higher insurance and contingency costs during periods of instability.

Mr. Juliano noted the recent turmoil in the Senate likely contributed to concerns flagged by GeoQuant, pointing to leadership upheavals and controversy surrounding efforts to shield Senator Ronald 鈥淏ato鈥� M. dela Rosa from accountability.

Mr. Juliano said the unfolding events bear similarities to the political tensions that preceded the impeachment trial of former President Joseph Ejercito Estrada and the subsequent EDSA Dos and Tres (EDSA II and III) protests.

鈥淲hether it ends the same, we have yet to see,鈥� he said. 鈥淏ut it looks unstable nonetheless.鈥�

POLITICAL CIRCUS
Meanwhile, businesses are hoping for an end to the political turmoil hounding the Senate, saying stability is needed to help firms thrive and support faster economic growth, according to Association of Southeast Asian Nations (ASEAN) Business Advisory Council Chairman Jose Ma. 鈥淛oey鈥� A. Concepcion III.

鈥淭he Philippines has to continue to get its GDP (gross domestic product) going higher,鈥� he told 大象传媒 on the sidelines of the 大象传媒 Economic Forum on Monday.

鈥淔or that to happen, the business sector must be doing well. Hopefully our legislators will support this and that the circus happening there will end,鈥� he added.

Mr. Concepcion said that as the Philippines is the chair of the ASEAN this year, there is a responsibility to present the country favorably to foreign investors.

鈥淲e have to be able to present a more pleasant picture to our foreign investors. It is very important because Philippines hosting the ASEAN only happens once every 10 to 12 years,鈥� he said.

鈥淪o, we are putting every effort, especially from the private sector, to ensure that many investors, business owners from all over the world, will come to the Philippines,鈥� he added.

Mr. Concepcion said the goal is to show that the Philippines is open for business.

鈥淲e need Congress and our legislators to bring things back to normal from their point,鈥� he said. 鈥淲e hope they will be able to really help create an open economy.鈥�

鈥淚f you look at very successful countries in ASEAN, they are very focused and they are always straight to the point,鈥� he added.

Aside from political uncertainty, Mr. Concepcion said businesses are also dealing with the impact of the Middle East conflict.

鈥淏ut let us remain optimistic. One good sign is that it comes when we are the host of ASEAN and when all the leaders come here, the rest of the world will see what the Philippines is all about,鈥� he added.

The currency ended at its record low of P61.75, unchanged from Monday鈥檚 finish, according to Bankers Association of the Philippines data posted on its website.

The local unit opened Tuesday鈥檚 session stronger at P61.60 per dollar. Its intraday best was at P61.55 against the greenback, while its low was its closing value of P61.75.

Dollars traded rose to $1.21 billion from $1.001 billion in the previous session.

The peso was steady as it was supported by possible intervention from the Bangko Sentral ng Pilipinas (BSP), Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The BSP has said that it intervenes in the foreign exchange market to prevent sharp swings but does not have a target level for the currency.

鈥淭he peso closed unchanged amid lingering uncertainty over a potential US-Iran deal,鈥� a trader said in a Viber message.

For Wednesday, the trader said the peso could recover against the greenback on potential profit taking.

The trader sees the local unit moving between 61.50 and 61.75 per dollar on Wednesday, while Mr. Ricafort expects it to range from P61.60 to P61.80. 鈥� A.M.C. Sy

The Philippine Stock Exchange index (PSEi) dropped by 0.75% or 44.72 points to close at 5,896.80, while the broader all shares index fell by 0.19% or 6.58 points to end at 3,347.55.

This was the PSEi鈥檚 worst finish in over two weeks or since it closed at 5,833.64 on April 30.

鈥淓levated global oil prices, with Brent crude testing the $110-per-barrel level, and the peso鈥檚 weak position, testing record lows, weighed on the local bourse,鈥� Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message.

鈥淭he local bourse ended below 5,900 level as trading activity remained thin amid persistent uncertainty over economic conditions, elevated oil prices, and the maintained depreciation of the local currency. Investor sentiment stayed cautious, with market participants largely adopting a wait-and-see stance due to concerns over inflationary pressures and their impact on the broader economy,鈥� Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message. 鈥淎s a result, subdued participation kept overall market volume muted throughout the session.鈥�

Oil prices fell on Tuesday, with global benchmark Brent crude dropping 1.5%, after US President Donald J. Trump said he had paused a planned attack on Iran to allow for negotiations to end the war in the Middle East, Reuters reported.

Mr. Trump posted on social media on Monday that he was holding off a military attack on Iran scheduled for Tuesday while efforts to reach a deal continued, adding that the US was ready to resume attacking if a deal is not reached.

Brent futures for July were down $1.73 or 1.5% at $110.37 a barrel at 0825 GMT, while US West Texas Intermediate crude for June delivery, which expires on Tuesday, slipped 63 cents or 0.6% to $108.03. The more active July contract fell 82 cents or 0.8% to $103.56. In the previous session, the benchmarks hit their highest 鈥媗evels since May 5 and April 30.

Meanwhile, the peso closed unchanged at its record low of P61.75 per dollar on Tuesday, data from the Bankers Association of the Philippines showed.

All sectoral indices closed in the red. Property slid by 1.33% or 25.73 points to 1,907.77; industrials sank by 0.91% or 79.60 points to 8,646.09; financials dropped by 0.62% or 11.10 points to 1,768.62; services fell by 0.51% or 15.54 points to 2,980.65; holding firms retreated by 0.41% or 18.38 points to 4,368.26; and mining and oil slipped by 0.07% or 12.52 points to 17,616.81.

Decliners outnumbered advancers, 107 to 63, while 74 names were unchanged.

Value turnover rose to P5.36 billion on Tuesday with 1.21 billion shares traded from the P4.05 billion with 572.41 million issues that changed hands on Monday.

Net foreign selling increased to P680.04 million from P225.76 million in the previous session. 鈥� Alexandria Grace C. Magno with Reuters

THE PHILIPPINES lost about P141 billion in government revenue to illicit tobacco trade in 2024 and 2025, with illegal vape products emerging as a major source of tax leakages, according to a report by the EU-ASEAN Business Council (EU-ABC) and Euromonitor International Ltd.

The Philippines posted the third-highest revenue loss among six Southeast Asian countries covered by the study, after Indonesia and Malaysia, according to the report released on Monday.

Philippine government revenue losses reached about $2.46 billion during the two-year period, composed of about $2.06 billion from illicit cigarettes and $400 million from illegal e-vapor products.

鈥淭he continued rise in illicit tobacco trade in ASEAN (Association of Southeast Asian Nations) and the broader Asia-Pacific region signals displacement of the legitimate market, while amplifying challenges for regulation, enforcement and diminishing fiscal contribution,鈥� the council said in the 43-page report.

The study covered the Philippines, Indonesia, Malaysia, Singapore, Thailand and Vietnam, collectively referred to as ASEAN-6. It assessed the scale of illicit trade involving cigarettes and e-vapors, including contraband, counterfeit, illicit whites, untaxed products and unbranded tobacco.

Among the countries surveyed, the Philippines posted the highest revenue loss tied to illicit e-vapes. It also had the highest incidence of illegal vape products among markets where e-vapors are legal.

The report estimated that 85.6% of e-vapes sold in the Philippines last year were illicit products.

Meanwhile, illicit cigarettes accounted for 25.3% of the local market, significantly higher than the ASEAN-6 average of 16.1%.

Across Southeast Asia, governments were estimated to have lost a combined $13.07 billion in revenues in 2024 and 2025 due to illicit tobacco trade.

The report expects the illicit tobacco market in ASEAN-6 to expand further, with illicit trade incidence expected to rise to 27.8% by 2028 from 23.6% in 2025.

Researchers warned that the growth of illicit tobacco trade could weaken government revenues, hurt legitimate businesses and increase risks to consumers.

This affects government revenues and social welfare programs, drives down the profitability of legal businesses, supports illicit activities in the markets and poses health risks to consumers, EU-ABC said.

EU-ABC Executive Director Chris Humphrey said illicit tobacco trade diverts money away from the formal economy and reduces the region鈥檚 attractiveness to investors.

鈥淗ere in the Philippines, the National Calamity Fund could easily be funded if we could stop the illicit trade in tobacco and [collect the proper taxes] from it,鈥� he separately told a news briefing

He added that the problem extends beyond the tobacco industry because widespread illicit trade creates unfair competition and discourages investment across sectors.

鈥淚t diminishes the region鈥檚 attractiveness for investments not just in tobacco, [but]鈥� in other sectors as well,鈥� he said.

鈥楪OOD ENFORCEMENT鈥�
Firdaus Muhamad, head of consulting for the Asia-Pacific region at Euromonitor, said rising tobacco taxes, affordability pressures and widening price gaps between legal and illicit products continue to fuel demand for illegal products.

鈥淭he common trap in this story that we鈥檙e telling is affordability pressures,鈥� he told the briefing. 鈥淎nnual tax increases and the legal-illicit price gap create room for some illicit products to compete.鈥�

He added that illicit operators could still raise prices while remaining cheaper than legal products, allowing illegal sellers to preserve or even expand profit margins.

The EU-ABC estimated illicit tobacco operators in the Philippines earned about $2.2 billion from illegal trade in 2024 and 2025.

To address the problem, Mr. Humphrey called for stronger regional coordination, especially among ASEAN countries with porous land borders.

He said governments should strengthen cooperation on Customs enforcement and improve digital track-and-trace systems to better monitor tobacco products across borders.

Filomeno S. Sta. Ana III, coordinator of Action for Economic Reforms, said stronger enforcement remains the most effective way to combat illicit trade.

鈥淭he key measure is good enforcement,鈥� he said by telephone, noting that the Bureau of Internal Revenue, Bureau of Customs and local governments should continue intensifying anti-smuggling operations.

The report also noted that outright bans on e-cigarettes and vape products have not eliminated illicit trade in countries where such restrictions are imposed.

Mr. Sta. Ana noted that while bans could reduce legal sales, they could also expand underground markets if enforcement remains weak.

1 of 2

By Justine Irish D. Tabile, Senior Reporter

THE PHILIPPINES鈥� ambition to become Southeast Asia鈥檚 next economic growth engine depends on the private sector鈥檚 ability to invest, expand and innovate with confidence, the World Bank (WB) said.

The message today is this: better jobs and prosperity for Filipinos require better conditions for firms to invest, grow, upgrade and become ASEAN鈥檚 (Association of Southeast Asian Nations) next growth engine,鈥� Zafer Mustafao臒lu, World Bank country director for the Philippines, told the 大象传媒 Economic Forum on Monday.

He warned that the US-Israel war on Iran, which has pushed up oil prices, is slowing economic activity and lifting inflation pressures.

The Philippine economy grew by a weaker-than-expected 2.8% in the first quarter, as surging oil prices and the lingering fallout from past domestic scandals weighed on activity.

Inflation accelerated to 7.2% in April, above the Philippine central bank鈥檚 forecast and target for a second straight month.

Mr. Mustafao臒lu in his keynote said investment weakness is the key concern because it signals fewer expansions, upgrades and productivity improvements that ultimately limit job creation.

Gross capital formation contracted 3.3% in the first quarter, reversing a 4.5% gain a year earlier but improving from the previous quarter鈥檚 decline.

大象传媒 President and Chief Executive Officer Miguel G. Belmonte said the Philippines鈥� ASEAN chairmanship highlights both opportunity and the need to address domestic competitiveness gaps.

鈥淎SEAN has no shortage of frameworks and roadmaps, from economic blueprints to sector-specific agreements,鈥� he told the forum. 鈥淭he region has outlined its vision to become one of the world鈥檚 biggest economic blocs by the end of the decade.鈥�

He said ASEAN integration goals are well defined, but the Philippines must fix infrastructure bottlenecks and productivity constraints to benefit fully.

Jamil Paolo S. Francisco, executive director of the Asian Institute of Management – Rizalino S. Navarro Center for Competitiveness, said the Philippines has stagnated in global rankings despite earlier gains.

He said productivity gaps remain wide, with the country producing significantly less output per worker compared with regional peers such as Thailand.

鈥淐ompetitiveness can be tricky because it鈥檚 a race,鈥� he pointed out. 鈥淒evelopment is a marathon, not a sprint. But here鈥檚 the thing 鈥� in this marathon, we are getting left behind.鈥�

Anthony Oundjian, Boston Consulting Group Philippines managing director, said the Philippines lags behind its ASEAN peers in terms of output.

鈥淓ven though we have the demographics and the consumer market, we really lack scale in productivity per worker,鈥� he said. 鈥淲e are at around one-fourth of Thailand鈥檚 productivity per worker.鈥�

He added that predictability in policy implementation is critical for long-term investment decisions.

Grab Philippines Managing Director Ronald Roda said fragmented local requirements slow business expansion across cities and municipalities nationwide.

Mr. Mustafao臒lu said the Philippines could still attract more foreign investment and move up the artificial intelligence (AI) value chain if reforms accelerate.

He said delays in permits, port congestion and complex paperwork continue to raise costs and discourage firms from expanding.

He urged reforms in business registration, border management and trade agreements to improve competitiveness and reduce transaction costs.

He said business registration in the Philippines takes about 78 days versus one day in Singapore and two in Malaysia.

He also said inefficient border processes act like a hidden tariff that raises costs and slows global supply chain integration.

He added that maximizing free trade agreements could boost productivity through cheaper inputs and stronger competition.

鈥淭he country already has a foothold,鈥� Mr. Mustafao臒lu said. 鈥淭hrough semiconductors and intermediate inputs, the Philippines is already connected to the hardware side of AI. But the country is not yet capturing the full opportunity.鈥�

He said the Philippines must move beyond assembly operations into higher value-added activities such as design support, testing and AI-enabled services to remain competitive in the region.

THE MIDDLE EAST WAR is rippling through Asian labor markets, cutting overseas deployments from the Philippines, weakening remittances and adding inflation pressure at home, the International Labour Organization (ILO) said.

鈥淭he Philippines illustrates the risks for labor-sending economies,鈥� the Geneva-based agency said in a report released on Monday, after thousands of Filipino workers were repatriated from Gulf countries and overseas deployments dropped amid transport disruptions and weaker regional hiring.

It said close to 5,000 Filipino workers were repatriated from Gulf countries between early March and late April, while deployments to the region fell sharply compared with a year earlier.

Migrant worker outflows to the Gulf dropped to about 16,000 in March from more than 72,000 a year earlier, a decline of roughly 78%, according to the ILO report.

The ILO said the war is no longer confined to the Middle East, as higher oil prices, disrupted shipping routes and weaker business confidence feed inflation and labor market stress across Asia and the Pacific.

It estimated hours worked in the region could fall by 0.7% this year and 1.5% in 2027 under an oil shock scenario tied to a sharp rise in crude prices.

Real labor income in Asia and the Pacific may decline by 1.5% this year and 4.3% next year, equivalent to hundreds of billions of dollars in lost purchasing power, the ILO said.

The unemployment rate in the region could rise by 0.2 percentage point (ppt) this year and 0.8 ppt in 2027.

For the Philippines, the risks extend beyond overseas employment as remittances, a key driver of consumption, begin to soften.

The ILO said remittance inflows to the Philippines slipped from earlier months, raising concern that prolonged Gulf disruptions could weigh on household spending and growth.

Inflation accelerated to 7.2% in April from 4.1% in March, the fastest in more than three years and exceeding the central bank鈥檚 2%-4% target, as higher energy and transport costs fed through the economy.

The ILO said higher prices increase pressure on household purchasing power as overseas income weakens.

It added that if sustained, these trends could weigh on domestic demand and labor markets in the Philippines.

The agency said Asia鈥檚 exposure is broad because many economies depend on imported fuel and Gulf-linked migration and trade.

About 22% of workers in the region are in high-exposure sectors including agriculture, manufacturing, construction and transport services.

Transport services were among the most vulnerable industries globally, with more than half of workers in high-exposure roles due to fuel reliance.

Manufacturing and construction also face rising costs and weaker demand as energy prices remain elevated.

The ILO said informal workers are likely to bear a disproportionate share of the shock due to weak income protection.

In Asia and the Pacific, about 24% of informal workers are in high-exposure activities compared with 17% of formal workers.

Labor migration is a key transmission channel for the crisis in South and Southeast Asia, the ILO said.

Early evidence from the Philippines and other South Asian countries shows sharp declines in Gulf deployments and rising repatriations.

Globally, the ILO warned that the conflict could erase the equivalent of millions of full-time jobs this year and in 2027 if oil prices stay elevated.

Real labor income worldwide could decline sharply, the ILO added, reflecting higher energy costs and weaker demand.

Benjamin B. Velasco, an assistant professor at the University of the Philippines Diliman School of Labor and Industrial Relations, said the impact might be temporary and unlikely to fundamentally alter migration patterns.

鈥淭he Gulf states are wealthy and have labor supply deficits so will be needing migrant workers in the foreseeable future,鈥� he said via Facebook Messenger.

Migration to the Middle East has remained resilient for decades despite wars and recessions, he pointed out.

The ILO said governments across Asia are rolling out emergency measures including subsidies, tax relief and migrant worker assistance.

The Philippines has introduced repatriation support, monitoring systems and reintegration programs for returning workers.

The ILO warned fiscal constraints might limit support if the conflict persists and energy prices remain high.

THE PHILIPPINES should accelerate artificial intelligence (AI) adoption by upgrading infrastructure and boosting regulation, as slow uptake could prevent the country from fully capturing productivity gains, government and industry leaders said.

Information and Communications Technology Secretary Henry Rhoel R. Aguda said AI governance should balance innovation with safeguards, stressing that trust is central to wider adoption.

鈥淎I governance can鈥檛 be about choosing between innovation and protection,鈥� he said at the 大象传媒 Economic Forum on Monday. 鈥淲e need both. And what we really need to protect is trust. Because without trust, adoption slows down, and the benefits won鈥檛 reach the people who need them most.鈥�

Mr. Aguda said his agency is prioritizing data protection and cybersecurity as AI tools become more embedded in business and public services, while also increasing the sophistication of cyberthreats.

鈥淎I is not coming; it鈥檚 already here,鈥� he said. 鈥淚t鈥檚 already part of how we work, learn and deliver services.鈥�

Deloitte Philippines Country Head Ramon Chito Ramos said AI adoption among companies is expanding, but human capability gaps are slowing effective use.

鈥淭here are big changes that need to be done on the human side,鈥� he told the forum. 鈥淎doption is surprisingly slow, but the pace of change is not,鈥� he added, noting that organizations struggle most with workforce readiness.

He said the country must upgrade digital infrastructure to support AI workloads, noting that policy progress has not been matched by execution speed.

Philippine companies could unlock as much as P2.8 trillion in economic value by 2030 through generative AI adoption, according to global tech advisory firm Access Partnership.

鈥淲e鈥檙e definitely behind and it鈥檚 something we need to recognize,鈥� Mr. Ramos said. 鈥淲e have progressed around governance and policy. AI infrastructure is our focus now.鈥�

Mr. Aguda said data center capacity in the Philippines is expected to reach about 1.5 gigawatts by 2028, supporting increased AI processing demand and cloud-based services.

UNEVEN READINESS
Jonathan Cristobal, director of Globe Business, the enterprise arm of Globe Telecom, Inc., said AI adoption among companies is broadly positive, but uneven readiness remains a key constraint.

鈥淎doption rates have been good, but readiness remains uneven,鈥� he said. 鈥淚nfrastructure, workforce capability remains challenged, together with governance and digital maturity. All of these continue to vary organization per organization.鈥�

He said companies are increasingly willing to integrate AI into operations but struggle with execution and scaling strategies. He also called for stronger incentives to encourage early adoption.

鈥淥ne thing really is the incentivization of companies 鈥� tax incentives where possible, especially for companies who are owning upskilling and training,鈥� he told 大象传媒 on the forum sidelines. 鈥淭he government should incentivize retraining.鈥�

United Nations Development Programme Philippines economist Mohamed Shahudh said AI adoption challenges are compounded by high internet costs, limited digital literacy and fragmented governance.

He said the Philippines should address widening gaps between technological capability and vulnerability across people, the economy and institutions.

鈥淎I鈥檚 benefits to humanity will be realized through a much more complex interaction of two widening gaps: capability and vulnerability; across three pillars of human development: people, economy and governance,鈥� he said.

He added that a unified policy framework is needed to clarify institutional roles, as businesses seek clearer guidance on implementation responsibilities.

Mel Migrino, country head of software firm Gogolook Philippines, said public-private partnerships (PPP) could help accelerate adoption, especially as companies independently develop AI systems and cybersecurity frameworks.

鈥淭he technology and cybersecurity industry is oversaturated,鈥� she said. 鈥淚t is ironic to see that there are cybersecurity attacks. We are in a transition phase, but still vulnerable. There is still a lot of work to do. We鈥檙e lagging behind ASEAN-5. It鈥檚 good to infuse PPPs.鈥�

She said AI鈥檚 impact depends on how governments, companies and workers manage risks alongside productivity gains.

Mr. Aguda said the Department of Informaiton and Communications Technology (DICT) is developing principle-based and flexible regulation to keep pace with rapid technological change.

鈥淎t the DICT, our view is simple: rules must be principle-based and flexible,鈥� he said. 鈥淭echnology moves too fast for rigid regulation.鈥�

鈥淭hat鈥檚 why we are strengthening our national AI strategy roadmap, embedding ethics, transparency, accountability, and human oversight into how AI is used in the country,鈥� he added.

The currency edged down by 2.9 centavos to close at P61.75 a dollar from P61.721 on Friday, according to Bankers Association of the Philippines data posted on its website.

Year to date, the peso has depreciated by P2.96 or 4.79% from its P58.79 finish on Dec. 29, 2025.

The local unit opened the session slightly stronger at P61.69 per dollar and climbed to a high of P61.64 against the greenback. Meanwhile, it closed at its intraday low.

Dollars traded went down to $1 billion from $1.199 billion in the previous session.

The peso sank to a new historic low due to higher US retail sales data and elevated global crude oil prices, the first trader said by phone.

The market remains watchful of domestic political developments, although external factors were the main drivers for the peso鈥檚 latest slide, the first trader said.

The peso was mainly dragged down by oil-related dollar demand 鈥渁nd a market that is becoming more sensitive to domestic uncertainty,鈥� a second trader said in a Viber message.

鈥淭he peso is starting to trade less on valuation and more on sentiment,鈥� the second trader said. 鈥淎t these levels, positioning and momentum also matter, which can exaggerate moves in thin liquidity.鈥�

The Senate convened as an impeachment court on Monday that could decide the future of Vice-President Sara Duterte-Carpio, with a heated battle between two rival political camps set to be front and center in the trial, Reuters reported. It comes against a turbulent political backdrop, just days after chaos and a shootout in the upper house and a potentially decisive change in its leadership, both stemming from the re-emergence from hiding of a pro-Duterte senator wanted by the International Criminal Court.

Meanwhile, the dollar dipped against a range of major currencies on Monday, but held near last week鈥檚 highs, as fresh tensions in the Middle East pushed up global bond yields.

The dollar index was a touch softer at 99.12, having posted its strongest weekly performance in three months last week.

Oil prices climbed on Monday, with Brent crude futures rising more than 1% to over $110 a barrel, after a nuclear power plant in the United Arab Emirates came under attack and efforts to end the US-Israeli war on Iran appear to have stalled.

Demand for the greenback was also supported by expectations of rate hikes from the Federal Reserve, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Further denting risk appetite, a global bond rout deepened on Monday as rising energy prices fanned inflation fears and stoked wagers on rate hikes from global central banks.

Markets are now pricing in a more than 50% chance that the Fed would raise rates by December, according to the CME FedWatch tool.

For Tuesday, the first trader sees the peso moving between P61.45 and P61.75 per dollar, while Mr. Ricafort expects it to range from P61.60 to P61.80.

The second trader said the peso could reach the P62 level in the near term, but sharp swings in both directions are likely. 鈥� Aaron Michael C. Sy with Reuters

The Philippine Stock Exchange index (PSEi) dropped by 0.59% or 35.25 points to close at 5,941.52, while the broader all shares index fell by 0.51% or 17.28 points to end at 3,354.13.

This was the PSEi鈥檚 lowest finish since it closed at 5,898.08 on May 5.

鈥淭he local market dropped further as worries over the Middle East conflict take center stage again following US President Donald J. Trump鈥檚 latest threats towards Iran saying the country should get moving or face consequences,鈥� Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message.

鈥淭he PSEi ended lower as buying interest stayed muted, with investors waiting for clearer market catalysts. Market sentiment remained fragile amid continued increases in global crude prices,鈥� Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

Asian share markets were on the skids on Monday as fresh drone attacks in the Gulf shoved oil prices and bond yields higher, Reuters reported.

A drone strike caused a fire at a nuclear power plant in the United Arab Emirates, while Saudi Arabia reported intercepting three drones, as Mr. Trump warned that Iran must act 鈥渇ast鈥� to reach a deal.

Meanwhile, the vital Strait of Hormuz remains closed to all but a trickle of shipping as Tehran tries to formalize its control of the waterway that during normal times carries 20% of the world鈥檚 oil trade.

Brent was trading up 1.9% at $111.34 a barrel, while US crude climbed 2.2% to $107.72 a barrel. Crucially, futures for September climbed above $100 and December hit a contract high as markets braced for protracted shortages.

鈥淭he local currency also stayed weak against the US dollar, adding to cautious positioning,鈥� Mr. Limlingan said.

The peso inched down by 2.9 centavos to close at a new all-time low of P61.75 against the dollar on Monday, data from the Bankers Association of the Philippines showed.

Most sectoral indices closed lower on Monday. Mining and oil slid by 3.43% or 626.71 points to 17,629.33; financials sank by 1.04% or 18.75 points to 1,779.72; holding firms dropped by 0.73% or 32.45 points to 4,386.64; industrials fell by 0.5% or 44.33 points to 8,725.69; and services went down by 0.47% or 14.24 points to 2,996.19.

Meanwhile, property rose by 0.18% or 3.61 points to 1,933.50.

Decliners outnumbered advancers, 117 to 65, while 68 names were unchanged.

Value turnover fell to P4.05 billion on Monday with 572.41 million shares traded from the P6.32 billion with 592.04 million issues that changed hands on Friday.

Net foreign selling increased to P225.76 million from P195.41 million the previous session. 鈥� Alexandria Grace C. Magno with Reuters

THE PHILIPPINE BANKING sector鈥檚 nonperforming loan (NPL) ratio declined in March, data from the Bangko Sentral ng Pilipinas (BSP) showed, reflecting borrowers鈥� strong repayment capacity despite the Middle East war.

Based on the latest central bank data, banks鈥� bad loan ratio improved to 3.29% in March from 3.33% in February.

This was the lowest ratio since 3.07% in December last year and was also down from 3.3% in March 2025.

鈥淭he slight easing in the NPL ratio to 3.29% in March likely reflects a mix of stronger loan growth, residual borrower resilience, and regulatory flexibility, rather than a fundamental improvement in asset quality 鈥� suggesting that households and firms are still broadly current on their obligations despite the Middle East conflict,鈥� Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said via Viber.

Borrowers鈥� steady repayments despite external risks and banks鈥� preemptive move to tighten their credit standards and restructure loans helped protect their asset quality, said Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co.

鈥淚t鈥檚 a marginal but positive move,鈥� he said in a Viber message. 鈥淏orrowers are still paying 鈥� helped by steady jobs and manageable cash flows. Banks鈥� earlier prudence (tight lending, restructuring) is also cushioning asset quality.鈥�

鈥淪o far, resilience is holding. External shocks haven鈥檛 derailed repayment behavior yet. The domestic economy remains the anchor.鈥�

The lower NPL ratio for the month came even as banks鈥� nonperforming loans edged up by 2.69% to P568.554 billion as of March from P553.678 billion in February.

Year on year, soured loans jumped by 10.16% from P516.116 billion at end-March 2025.

Loans are considered nonperforming once they are unpaid for at least 90 days after the due date and deemed to be risky assets since borrowers are unlikely to pay.

At end-March, Philippine banks had a total loan book of P17.263 trillion, growing by 3.97% from P16.603 trillion a month prior and by 10.44% from P15.631 trillion in the same period last year.

Meanwhile, their past due loans increased by 2.87% to P736.181 billion from P715.658 billion as of February and by 13.9% from P646.368 billion a year earlier.

Banks鈥� past due loan ratio improved month on month to 4.26% from 4.31% but worsened from 4.14% in March 2025.听 听

Restructured loans reached P338.39 billion as of end-March, rising by 0.89% from P335.392 billion as of February and by 8.64% from P311.485 billion in the previous year.

These accounted for just 1.96% of the sector鈥檚 total loan portfolio during the period, lower than the 2.02% seen in February and 1.99% last year.

On the other hand, banks鈥� loan loss reserves slipped by 0.01% month on month to P519.46 billion as of March from P519.525 billion. However, this was 5.89% higher than the P490.564 billion in the comparable year-ago period.

This was equivalent to 3.01% of their total loan book, lower than 3.13% in February and 3.14% in the same month in 2025.

BSP data also showed that banks鈥� NPL coverage ratio, which gauges the allowance for potential losses due to bad loans, slipped to 91.37% in March from 93.83% a month earlier and 95.05% a year ago.

Mr. Asuncion said banks鈥� soured loans are likely to stay manageable, but the economic fallout from the Middle East conflict could test borrowers鈥� ability to repay their debt.

鈥�(T)his resilience may prove temporary, as the transmission of higher oil prices, inflation, and tighter financial conditions typically lags, which could gradually erode repayment capacity, particularly among MSMEs (micro, small, and medium enterprises) and retail borrowers,鈥� he said.

鈥淎s such, while NPLs may remain relatively contained in the near term, risks are tilted to the upside, with a stabilization or mild uptick more likely in the coming months should external shocks persist and begin to weigh more meaningfully on incomes, consumption, and business margins.鈥�

Mr. Ravelas also said that the NPL ratio could be steady or slightly higher in the coming months, as the US-Iran war could lead to a higher-for-longer interest rate environment, sticky inflation due to rising global oil prices, and continued peso depreciation amid the lack of a peace deal.

He added that the outlook remains fragile as risks continue to build.

The central bank last month began its tightening cycle, raising its policy rate by 25 basis points to 4.5% in a move to contain second-round price effects and keep inflation expectations anchored amid the energy crisis.

BSP Governor Eli M. Remolona, Jr. earlier said they could continue delivering modest rate hikes to steer inflation back to their 2%-4% tolerance band.

The Monetary Board will hold its next policy meeting on June 18.

The Philippines imports over 90% of its oil from the Middle East and is also a heavy net importer of food, making it highly vulnerable to global price shocks.

In April, headline inflation accelerated to 7.2% in April from 4.1% a month earlier, the fastest since March 2023, as the crisis pushed up prices of food and utilities. This is well above the central bank鈥檚 2%-4% goal.

Gross domestic product growth also slowed to a new post-pandemic low of 2.8% in the first quarter as the fallout from a corruption scandal and soaring oil prices dampened economic activity.

The conflict has also hit financial markets, with the peso now trading at the P60-per-dollar level versus its P58.79 finish at end-2025. On Friday, it plunged to a new record low of P61.721 against the greenback.

INFRASTRUCTURE SPENDING slumped by 48% year on year in March due to lower disbursements and tighter processes in the wake of a corruption scandal involving government projects.

In its latest National Government (NG) disbursement report, the Department of Budget and Management (DBM) said spending on infrastructure and other capital outlays fell to P59.1 billion in March from P113.5 billion in the same month in 2025.

Month on month, infrastructure spending also declined by 11.1% from P66.4 billion in February.

鈥淭he decline was largely attributed to the lower disbursement performance of the Department of Public Works and Highways (DPWH) amid the ongoing completion of carry-over projects and implementation of the current year鈥檚 budget,鈥� the DBM said.

鈥淭he adoption of stricter validation process for billing claims to ensure project quality and value for money also continued to affect the department鈥檚 spending outturn.鈥�

However, the implementation of capital outlay projects under the Revised Armed Forces of the Philippines Modernization Program of the Department of National Defense helped temper the spending decline in March, it said.

For the first quarter, infrastructure spending plunged by 43.5% to P147.8 billion from P261.8 billion a year ago. This accounted for just 11.6% of the government鈥檚 full-year program.

Under the 2026 Budget of Expenditures and Sources of Financing, NG cash disbursements for infrastructure and other capital outlays are expected to reach P1.27 trillion this year. This excludes infrastructure subsidies and equities to government-owned and -controlled corporations as well as infrastructure transfers to local government units.

The DBM attributed the first-quarter decline to base effects from the frontloading of projects ahead of the election ban seen during the same period in 2025, the ongoing completion of prior-year obligations, and stricter validation and processing of billing claims.

It said it expects infrastructure spending to pick up in the second quarter as agencies begin obligating funds from allotments released in earlier months.

鈥淚nfrastructure departments are, likewise, expected to take advantage of the summer season to expedite construction activities,鈥� it said.

鈥淭his will hopefully build up spending momentum and help the recovery of infrastructure spending towards the second half of the year.鈥�

CORRUPTION MESS
Slower infrastructure spending early this year reflects unresolved governance issues and the increasingly corruption-driven nature of the Philippine growth model, said Jose Enrique 鈥淪onny鈥� A. Africa, executive director of think tank IBON Foundation.

鈥淭he infrastructure spending slowdown is a direct result of the bureaucratic chilling effect of the flood control and pork barrel corruption scandals last year,鈥� he said in a Viber message.

鈥淎gencies and lawmakers, who shouldn鈥檛 even have a role in spending decisions, are much more cautious out of fear of heightened scrutiny over procurement, project quality, and contractor relationships.鈥�

The country was embroiled in a corruption scandal last year linking government officials, lawmakers, and contractors to substandard or nonexistent flood control projects. The controversy slowed government spending and dampened investor and consumer sentiment, which was reflected in the below-target gross domestic product (GDP) growth figures recorded starting in the second half of 2025.

The slump has persisted as lingering effects of the graft mess were compounded by soaring oil prices due to the Middle East war, causing the economy to expand by just 2.8% in the first quarter. This was slower than the 5.4% growth in the same quarter last year and 3% in the fourth quarter of 2025.

Mr. Africa added that 鈥渞ising political temperature鈥� may be contributing to project implementation delays as the administration could be using its control over infrastructure budgets to paralyze its political opposition.

鈥淭his corruption- and patronage-driven distortion of the budget process is also being aggravated by fiscal pressures rapidly bubbling to the surface,鈥� he said. 鈥淣G debt has already risen to 65.2% of GDP in the first quarter of the year, which is approaching the highest in 20 years, when it hit 65.7% in 2005.鈥�

Still, Mr. Africa said he expects spending to rebound this second quarter.

鈥淣onetheless, there is little reason to expect that infrastructure spending will be strong or sustainable enough to substantially boost aggregate growth, which has been in structural slowdown since 2017.鈥�

The government may also be forced to reallocate its resources towards fuel subsidies and other social assistance to respond to the oil shock, he added.

鈥淚f so, infrastructure spending may be squeezed not only by corruption-related paralysis but also by a reprioritization under emerging conditions of geopolitical and oil market instability.鈥�

Ser Percival K. Pe帽a-Reyes, a senior research fellow at the Ateneo Center for Economic Research and Development, said the sharp decline in infrastructure disbursements could be attributed to base effects, project completion timing, and implementation delays.

鈥淭he outlook for Philippine infrastructure spending in the second quarter of 2026 is for a gradual recovery, but still relatively weak overall,鈥� he said via Facebook Messenger.

鈥淓conomists generally expect a stronger pickup in the second half of 2026, rather than an immediate rebound in the second quarter. This is because governance reforms and tighter anti-corruption controls following the flood control controversy have slowed project approvals and payments.鈥�

However, if spending does not rebound, this could weigh on the economy鈥檚 prospects as public construction is among the country鈥檚 key growth drivers.

鈥淓conomists have warned that if infrastructure disbursements remain depressed through the second quarter, quarterly GDP growth could undershoot the government target, unless consumption and exports compensate for the weakness,鈥� he said.

鈥淎t the same time, some analysts note that stricter project screening and anti-corruption checks may temporarily slow growth but could improve spending efficiency and project quality over the longer term.鈥�

鈥淭he BSP鈥檚 imperative is to stay 鈥榓head of the curve鈥� by keeping inflation expectations anchored and preventing spillover inflationary impacts on other core expenditure categories that would be even more damaging to medium-term growth,鈥� Eugene Lee, associate director and economist for ASEAN and Australia at Hong Kong-based investment bank CLSA, told 大象传媒 on Friday.

Mr. Lee, also a former senior economist at the Monetary Authority of Singapore, sees Philippine inflation leveling off at around 8% under their best-case scenario, where a gradual deescalation in the conflict keeps global oil prices at an average of $100-$110 per barrel.

However, if the war drags on and tensions reignite, the headline print could surge to around 10%, he said. 鈥淭he worst-case scenario sees the ceasefire failing to hold, leading to a re-escalation of the conflict and a continued blockade of traffic through the Straits of Hormuz for two to three more months. This exhausts alternative sources of oil reserves and prices could reach $120-130 per barrel.鈥�

鈥淥ur expectation of BSP鈥檚 tightening cycle depends on how the conflict unfolds. In the best-case scenario, we expect three more rate hikes to 5.25%. In the worst-case scenario, we expect the policy rate to rise to 6%,鈥� Mr. Lee said.

Philippine inflation has quickened rapidly since the Middle East war erupted in late February, printing at 4.1% in March to breach the BSP鈥檚 2%-4% tolerance band. It further accelerated to an over three-year high of 7.2% in April as high global oil prices drove up costs of food and utilities in the country.

In response, the Monetary Board on April 23 delivered its first hike in over two years, raising the policy rate by 25 basis points (bps) to 4.5% as a preemptive measure to temper the spillover effects of rising oil prices and ensure inflation expectations remain anchored.

BSP Governor Eli M. Remolona, Jr. has also left the door open to further tightening via a succession of modest hikes to help combat surging prices

Mr. Lee said the central bank has room to tighten by 75 bps to 150 bps more, adding that the next rate increase could come even before the Monetary Board鈥檚 next scheduled review on June 18, depending on the developments of the Middle East conflict.

鈥淭he odds of an inter-meeting rate hike are high. During the past policy briefing, the BSP used the term 鈥榤easured鈥� to reference 25-bp rate hikes and said that the impact of smaller 25-bp hikes was less detrimental to growth than a 50-bp hike. If inflation continues to surprise on the upside and the BSP sees a need for 50-bp hikes at the subsequent policy meeting in June, it could opt to break it into two 25-bp hikes in May and June,鈥� he said.

鈥淲hile the economic backdrop is weak, there is really nothing that the BSP can do to stimulate the economy in the short run. Given that the risks are skewed towards higher inflation, it is better to worry about inflation first, and growth later.鈥�

The Philippine economy grew by just 2.8% in the first quarter versus 3% in the previous quarter and 5.4% a year ago. This is well below the government鈥檚 5%-6% goal.

Mr. Lee added that the peso could breach the P62-a-dollar mark in the near term due to lingering risk-off sentiment as the oil crisis widens the country鈥檚 trade deficit through higher import costs.

鈥淭ightening monetary policy strengthens the peso modestly but may not be able to offset the depreciation factors.鈥�

The peso fell to a fresh all-time low of P61.721 against the dollar on Friday. 鈥� Katherine K. Chan

THE PHILIPPINES dropped by four spots to rank 59^th out of 133 countries in a good governance index after recording low scores for key indicators like leadership and foresight, global influence, and reputation.

In the 2026 Chandler Good Government Index (CGGI) by the Chandler Institute of Governance (CIG), the Philippines scored 0.533 to place 59^th. This was slightly higher than last year鈥檚 score of 0.523, which led it to rank 55^th out of 120 countries.

Singapore topped this year鈥檚 index, followed by Norway, Denmark, Finland, and Sweden.

Among East and Southeast Asian countries, the Philippines was behind Singapore, South Korea (16^th place), Japan (17^th), China (39^th), Malaysia (40^th), Indonesia (48^th), Vietnam (49^th), and Thailand (58^th). Meanwhile, it was ahead of Mongolia (71^st), Cambodia (91^st), and Laos (98^th).

The bottom five countries were Lebanon, Sierra Leone, the Democratic Republic of Congo, Chad, and Venezuela.

The CGGI assesses a country鈥檚 governance capabilities and public sector effectiveness by using equally weighted indicators categorized into seven pillars.

Countries are scored for each pillar, with one as the highest and zero as the lowest.

The Philippines鈥� score for leadership and foresight improved to 0.45 from 0.41 last year, while that for robust laws and policies also went up to 0.51 from 0.49.

For the 鈥渉elping people rise鈥� pillar, it scored 0.64, edging up from 0.63 last year. The Philippines鈥� score for global influence and reputation also increased slightly to 0.36 from 0.35 last year.

Meanwhile, the country鈥檚 scores were unchanged for three pillars: financial stewardship (0.64), strong institutions (0.51), and attractive marketplace (0.5).

Under the leadership and foresight pillar, the Philippines scored 0.72 for adaptability, 0.63 for long-term vision, 0.33 for innovation, 0.33 for strategic prioritization, and 0.25 for ethical leadership.

For strong institutions, the Philippines scored the lowest on implementation (0.17). Meanwhile, it got 0.47 for coordination, 0.60 for quality of bureaucracy, and 0.80 for data capability.

Under global influence and reputation, the country recorded a score of 0.49 for international trade, 0.45 for nation brand, 0.29 for international diplomacy, and 0.20 for passport strength.

On robust laws and policies, the Philippines was graded 0.63 for transparency, 0.55 for regulatory governance, 0.47 for quality of judiciary, and 0.38 for rule of law.

Meanwhile, it scored 0.81 for spending efficiency, 0.74 for government debt, 0.74 for country risk premium, and 0.25 for country budget surplus under the financial stewardship pillar.

For maintaining an attractive marketplace, the Philippines鈥� score was at 0.56 for stable business regulations, 0.59 for attracting investments, 0.55 for logistics competence, and 0.30 for property rights.

Lastly, under the 鈥渉elping people rise鈥� pillar, it scored below one for all indicators, namely, price stability (0.97), gender gap (0.89), satisfaction with public services (0.79), employment (0.76), education (0.74), health (0.63), income distribution (0.63), personal safety (0.58), non-discrimination (0.23), and environmental performance (0.17).

The CIG said the Philippines is among the Asia-Pacific economies expected to benefit from its relatively young population, noting the need to create more jobs and boost productivity to unlock its growth potential.

Across the region, the report said climate change risks are more pronounced and threaten the growth of key sectors like agriculture, fisheries, and tourism.

The United States鈥� uncertain trade policies and rising protectionism also weigh on key export markets in the Asia-Pacific, including the Philippines, but this could be partly cushioned by intra-Asian trade and new agreements, it said.

Ranjit Singh Rye, an assistant professor at the University of the Philippines, said the index shows existing bottlenecks in the country鈥檚 bureaucracy.

鈥淲e have the laws and policies in place, but the gap between policy on paper and implementation on the ground remains our greatest hurdle,鈥� he said in a Viber message.

He said the Philippines鈥� 0.36 score for global influence and reputation is a 鈥渞ed flag鈥� for investors.

鈥淚t suggests that despite our economic potential, the international community still perceives significant risks regarding our rule of law and long-term stability.鈥�

The decline in the Philippines鈥� good government ranking could also mean that state-led reforms have not translated to lasting gains for Filipinos, said Emy Ruth D. Gianan, an economics professor at the Polytechnic University of the Philippines.

She noted that the Philippines ranked low in indicators like ethical leadership (92^nd), rule of law (90^th), implementation (120^th), budget surplus (95^th), property rights (106^th), passport strength (100^th), environmental performance (114^th), and non-discrimination (102^nd).

鈥淭his could mean that over time, the reforms we planted before have been reversed, especially those after the pandemic lockdown, or have not taken full effect since they do not translate to long-term positive change,鈥� she said in a Facebook Messenger chat.

Filomeno S. Sta. Ana III, coordinator of Action for Economic Reforms, said the Philippines鈥� latest ranking in the CGGI is 鈥渘ot surprising鈥� amid last year鈥檚 corruption scandal.

鈥淭his is driven by the massive corruption that happened, the political weaponization of institutions, the policy drift and incoherence, the worsening debt, and the growth slowdown,鈥� he said in a Viber message.

THE PESO could weaken further and test the P62-a-dollar level this week as the unresolved US-Israel war on Iran continues to boost demand for the greenback and drive oil prices higher, while political tensions at home weigh on sentiment.

The local unit closed at a fresh record low of P61.721 a dollar on Friday, weakening by 8.1 centavos from Thursday鈥檚 P61.64 finish, based on Bankers Association of the Philippines data posted in its website.

Its intraday low of P61.73 was also near the previous all-time low of P61.75 recorded on April 30. Week on week, the peso declined by P1.108.

Since the start of the year, the currency has depreciated by 4.75% or P2.93.

A trader said the peso weakened on rising oil prices and stronger US retail data, which supported the dollar.

Reuters reported that the dollar strengthened for a fifth straight session on Friday and was on track for its biggest weekly gain in two months as investors increasingly expected the US Federal Reserve to keep rates elevated or possibly tighten further.

The benchmark 10-year US Treasury yield climbed to its highest level in a year as inflation concerns persisted amid supply disruptions linked to the Middle East war.

The dollar index, which measures the greenback against a basket of currencies, rose to 99.27.

Meanwhile, global oil prices surged further after renewed tensions surrounding the Strait of Hormuz dampened hopes for a ceasefire between the US and Iran.

West Texas Intermediate crude rose above $105 per barrel, while Brent crude climbed past $109.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said local political turmoil also weighed on the peso.

The Senate is set to convene as an impeachment court for the trial of Vice-President Sara Duterte-Carpio following moves in the House of Representatives to remove her from office.

Political tensions also intensified after Senator Ronald 鈥淏ato鈥� M. dela Rosa resurfaced after months in hiding over a possible arrest tied to the International Criminal Court investigation.

The trader expects the peso to test the P62 level this week as the prolonged Middle East war and disruptions in the Strait of Hormuz continue to support higher oil prices and the dollar.

The trader expects the peso to move at P61.50 to P62 a dollar this week, while Mr. Ricafort sees it ranging from P61.40 to P61.90.

PHILIPPINE STOCKS may remain under pressure this week as investors lock in gains from the market鈥檚 recent rally amid lingering geopolitical tensions, inflation concerns and domestic political noise.

Selective bargain-hunting in heavyweight stocks and resilient earnings from some listed companies helped the market end slightly higher last week despite cautious sentiment, online brokerage 2TradeAsia.com said.

鈥淭he PSEi managed a slim 15-point gain as selective bargain-hunting in index heavyweights and pockets of earnings resilience offset cautious sentiment from mixed corporate results, global uncertainty and lingering geopolitical risks,鈥� it said in a note.

The Philippine Stock Exchange index (PSEi) shed 0.63% or 38.26 points on Friday to close at 5,976.77, while the broader all-share index dropped 0.65% or 22.16 points to 3,371.41.

Week on week the benchmark index still posted a modest gain of 15.8 points.

Japhet Louis O. Tantiangco, research manager at Philstocks Financial, Inc., said investor confidence remained weak despite the market鈥檚 gains over the past two weeks.

鈥淭he local market has shown positive momentum in the past two weeks amid bargain-hunting with support from foreign funds,鈥� he said in a Viber message. 鈥淗owever, overall trading was tepid, reflecting weak investor confidence amid macroeconomic and political concerns.鈥�

Mr. Tantiangco said the market could retreat this week as investors take profits while concerns over inflation and the Iran war continue to weigh on sentiment.

鈥淭he Middle East conflict has been ongoing for more than one-and-a-half months already with no deal in sight,鈥� he said.

He noted that elevated oil prices could continue to fuel inflation concerns and keep investors cautious, especially as Brent crude remains near the $100-per-barrel level.

Mr. Tantiangco also said the peso鈥檚 continued weakness against the dollar might add to inflation risks and dampen foreign investor appetite for Philippine assets.

鈥淭he peso has gone back below the 61-per-dollar level. The local currency鈥檚 weak position poses upside risks to the Philippines鈥� inflation rate,鈥� he said.

He added that political tensions in the Senate could distract attention from economic issues and hurt market sentiment.

鈥淲ith the market seen to have a bearish bias, investors are advised to maintain caution with their trades,鈥� he said.

Mr. Tantiangco noted that the PSEi has yet to sustain a move above the 6,000 level despite recent gains, showing that the level remains a strong resistance area.

He placed immediate support at the 10-day exponential moving average, with major support seen at 5,800.

2TradeAsia.com placed immediate resistance at 6,050 and secondary resistance at 6,300.