The coast isn't clear yet for domestic inflation, as Singapore-based United Overseas Bank (UOB) sees looming United States (US) tariffs as a global price risk for an economy like the Philippines, which imports the bulk of the goods it consumes.
US tariffs remain an inflation risk for Philippines — UOB
Published May 7, 2025 11:04 am
"The US reciprocal tariffs after the 90-day pause ends on July 9 and potential imposition of sector-specific tariffs (including semiconductor) under the Section 232 by the Trump administration in due course will be wildcards to the Philippines' inflation outlook in the near term," UOB economist Loke Siew Ting said in a May 6 report.
"This is in view of the country's net importer position of many goods and the broad secondary inflationary effects from the trade war, if it escalates," UOB added.
This is despite the fall in headline inflation to an over five-year low of 1.4 percent in April, which pushed UOB to also lower its full-year forecast to two percent from 2.8 percent previously.
"It also indicates that our previous expectation of inflation rebounding back to above two percent will now be pushed backward to the fourth quarter of 2025 from the third quarter," the bank said.
"The ongoing non-monetary intervention by the national government, falling global oil prices, and a sustained appreciation in the Philippine peso will be key factors supporting a more moderate inflation outlook ahead, amid lingering uncertainty around the global trade and tariff policy," it explained.
For UOB, the slower-than-expected inflation rates posted during the past three months "provide a strong justification for the BSP [Bangko Sentral ng Pilipinas] to continue loosening its monetary policy stance this year."
"Policymakers will also assess the domestic growth momentum based on the first-quarter GDP [gross domestic product] report (to be released on Thursday, May 8) and new developments of global trade and tariff policy before making any rate decision at the next monetary policy meeting on June 19," it noted.
"The recent strengthening of the Philippine peso also gives the BSP more leeway to maneuver the policy rates," the bank added.
As such, UOB still expects the BSP to cut key interest rates by 25 bps each next month, as well as in the third and fourth quarters, to bring the policy rate down to 4.75 percent by year-end from 5.5 percent at present.
Separately, MUFG Global Markets Research senior currency analyst Lloyd Chan said in a May 7 report that subdued price pressures in the Philippines and Thailand "[bolster] the case for more rate cuts" by their respective central banks.