Tariff concerns to cap Q1 GDP growth at 6%

UA&P study

MANILA, Philippines —  The Philippine economy likely grew by six percent in the first quarter, slightly lower than earlier projected, amid uncertainties triggered by the tariffs imposed by the United States on its trading partners, according to the University of Asia and the Pacific.

UA&P said in its Market Call Capital Markets Research for April 2025 that it trimmed its first quarter gross domestic product (GDP) forecast by 0.2 percentage point to six percent.

“Uncertainty surrounding (US President Donald) Trump’s tariffs have mildly lowered our Q1 2025 GDP forecast to six percent,” UA&P said.

The forecast is faster than the 5.9-percent growth posted in the first quarter last year and 5.3-percent expansion in the previous quarter.

In February, Trump signed a memo for the conduct of a review to determine reciprocal tariffs to be imposed on imports from other countries.

The reciprocal tariffs plan was unveiled on April 2, imposing a 10-percent baseline tax on imports from all countries and higher rates for others including the Philippines, which have trade surpluses with the US.

In particular, a 17-percent tariff was imposed by the US on goods coming from the Philippines.

Hours after the tariffs came into effect on April 9, Trump announced a 90-day pause on the reciprocal tariffs except those imposed on China, and lowered the tariffs to 10 percent to give time for countries to negotiate with the US.

UA&P said economic growth in the first quarter was supported by robust infrastructure spending and easing inflation.

However, it said the strong infrastructure spending in the first quarter is expected to taper off in the second quarter due to election-related restrictions.

Inflation in March eased to 1.8 percent, its lowest level in almost five years due mainly to the slower upticks in food prices. This brought the average inflation in the first quarter to 2.2 percent, within the government’s target of two to four percent.

Citing the decline in crude oil prices amid an expected global economic slowdown and abundant supply, as well as lower international rice prices, UA&P said it expects inflation to also average 2.2 percent in the second and third quarters.

“Thus, we expect Bangko Sentral ng Pilipinas (BSP) to cut its policy rates by another 25 basis points in June regardless of what the Fed does,” UA&P said.

At its April 10 policy meeting, the BSP resumed its easing cycle by trimming the benchmark interest rate by 25 basis points to 5.50 percent.

UA&P expects inflation to average 2.3 percent this year, within the BSP’s two to four percent target range.

“With rice prices continuing to fall and crude oil prices crashing into bear territory, the likelihood of an inflation reprise has diminished further,” UA&P said.

It also said it does not see much pressure from the US tariffs on Philippine imports, especially since China will have to look for other markets to sell its products.

“What may prove more worrisome is if Chinese products price out local products by exporting to other ASEAN countries with which it has a zero-tariff regime,” UA&P said.

The Philippine Statistics Authority will announce the first quarter economic performance on May 8.