Amid global recession risks, Philippines ‘a relatively safe haven’

MANILA, Philippines —  The Philippine economy remains one of the most resilient in the region amid escalating global recessionary risks and heightened trade tensions, according to banks.

Bank of the Philippine Islands president and CEO Jose Teodoro Limcaoco said the country remains relatively insulated from global recession risks due to its strong domestic consumption and controlled inflation.

While global uncertainties, particularly the threat of a recession, should not be ignored, Limcaoco noted that the Philippines is in a better position than many of its peers.

The Philippines may even find opportunities amid the broad tariff policies, given its comparatively favorable exposure.

“Our economy is primarily a service economy and it is consumption-driven, making our country in some ways better positioned to weather the negative impacts of the new trade restrictions,” Limcaoco said.

While institutional investments could feel some impact from global trade tensions, Limcaoco said the bank’s non-institutional portfolio is likely to remain resilient throughout the year.

“Philippine banks should also continue to do well through this as domestic inflation remains well under control thanks to food prices remaining relatively low,” he added.

In its latest economic outlook, UBS maintained a positive stance on the Philippines, citing minimal exposure to global trade disruptions and the likelihood of further monetary policy easing.

“We maintain our view that the Philippines’ direct and indirect exposure to trade and global GDP (gross domestic product) growth remains negligible,” Grace Lim, senior ASEAN and Asia economist at UBS, said.

“This market may be considered a relatively safe haven in the face of the ongoing trade war and global recessionary risks,” Lim said.

The optimism comes as the Trump administration announced sweeping trade measures, including a 10-percent minimum tariff on most of the United States’ trading partners. Among the 29 countries subject to reciprocal tariffs, the Philippines faces a 17-percent tariff, which is the second lowest in ASEAN after Singapore.

While UBS economists project a global growth drag of 50 to 100 basis points and a 30 to 120-basis-point hit across Asia due to trade tensions, they expect the Philippines to be one of the least affected, with only a 30-basis-point downside. That resilience is largely due to the domestic-oriented structure of the economy.

The Philippines’ goods exports to the US account for just two percent of GDP, making it one of the least exposed in the region.

However, UBS noted that the country’s overall trade-to-GDP ratio remains significant at around 66 percent, suggesting vulnerability in the event of a broader global slowdown.

Low inflation and further rate cuts are also seen as tailwinds. UBS forecasts the Bangko Sentral ng Pilipinas (BSP) to slash rates three more times this year — in August, October and December. This would mirror the US Federal Reserve’s projected path.

Inflation is expected to remain low at 2.4 percent, providing ample space for monetary easing.

Meanwhile, Moody’s senior director Choon Hong Chua warned that the wider Asia-Pacific region might feel more of the strain from rising trade barriers.

He noted that US tariffs are fueling concerns over global supply chain disruptions and potential increases in consumer prices.

Exporters in the region are now grappling with higher costs and heightened uncertainty as they bring goods to the US market.

“Exporters could face a decline in US demand, loss of competitive edge, and shrinking market share should they increase consumer costs to cushion the impact of tariffs,” he said.

To manage these risks, Chua emphasized the importance of improving supply chain visibility and agility.

“Businesses that adapt quickly to changing trade landscapes and mitigate risks will better navigate uncertain times,” he said.