THE ASEAN+3 Macroeconomic Research Office (AMRO) trimmed its Philippine economic growth forecast for this year and in 2025, amid slowing external demand.

In its latest update, AMRO sees Philippine gross domestic product (GDP) expanding by 6.1% this year, slightly lower than the 6.3% in the April report.

Despite the downgrade, this is still faster than the 5.5% GDP growth in 2023, and within the government’s 6-7% target for this year.

“We have shaved down the growth for not just the Philippines but many of the countries in the region. The recovery in the external sector was weaker than expected,” AMRO Chief Economist Hoe Ee Khor said in a virtual briefing on Tuesday.

“We may revise (the forecast) upward in the second half if the data shows that the economy (grows) more strongly,” Mr. Khor said.

AMRO also downgraded its GDP growth forecast for 2025 to 6.3% from 6.5% in the previous report. This is within the government’s 6.5-7.5% goal for next year.

Mr. Khor said Philippine growth has been weakened by gaps in infrastructure.

“I think the government is very conscious of that and is trying to fill the gap. Unfortunately, fiscal space has been used up to some extent during the pandemic,” he said.

The Philippine government aims to spend P1.47 trillion on infrastructure this year. The Marcos administration has committed to maintaining high investments in infrastructure or around 5-6% of GDP from 2024 to 2025.

To complement domestic savings, the Philippines still has “a moderate business space” to attract more foreign investments. However, its economy remains one of the most restrictive in the region, Mr. Khor said.

“We think the policy measures by the government will continue to attract more investment, and also with the improvement in infrastructure gap, will help to lift the (Philippines’) growth potential,” he said.

Also, AMRO lowered its inflation forecast for the Philippines to 3.3% for this year from 3.6% in the April report. It raised its inflation projection to 3.1% for 2025 from 2.9% previously.

AMRO said the BSP may maintain a tight monetary policy until a downward trend in inflation is sustained.

Despite this, the Philippines is still projected to be the second-fastest growing economy among Association of Southeast Asian Nations (ASEAN) members this year, behind only Vietnam (6.3%).

Philippine growth is expected to be ahead of Cambodia (5.6%), Indonesia (5.2%), Malaysia (4.7%), Laos (4.5%), Brunei (4%), Thailand (2.7%), Singapore (2.4%), and Myanmar (1.8%).

AMRO sees the ASEAN+3 region, which includes China, Hong Kong, Japan and South Korea, expanding by 4.4% this year and 4.3% in 2025.

The ASEAN region is projected to grow by 4.8% this year and next year.

“External trade is set to return to positive territory this year, which will supplement strong domestic consumption and the continuing recovery in tourism,” AMRO said in the report.

AMRO said the global economy is expected to continue stabilizing next year, and monetary easing is seen to resume in major economies.

The think tank lowered its inflation forecast for ASEAN+3 (excluding Laos and Myanmar) to 2.1% for this year from 2.5% previously “due to softer-than-expected food prices in several economies and lower imported inflation.”

“Higher cost pressures could emerge in 2025 as economic momentum gains traction, but these are unlikely to trigger a large spike in ASEAN+3 inflation under the baseline scenario,” it said.

AMRO said the overall balance of risks to the outlook has improved since April, but several risks such as a spike in commodity and shipping prices and tighter-than-expected US monetary policy.

Other risks include a sharp slowdown in the US and Europe, weaker growth in China, and possible adverse spillovers from the US presidential election.

“The bad news is that the region’s outlook next year could be significantly affected by the outcome of the US elections. The good news is, the region has weathered similar shocks before,” Mr. Khor said.

The US presidential elections will be held on Nov. 5.

Also, AMRO said geopolitical tensions are becoming “more pertinent” for ASEAN+3 economies.

“The threat of geoeconomic fragmentation continues to rear its head as more economies announce trade controls or protectionist measures, following recent US tariff action against China. The ongoing shifts in global trade — including longer supply chains — can exacerbate the negative impact of these trade frictions, especially for ASEAN+3 economies, which are highly integrated in global trade,” AMRO said. — Beatriz Marie D. Cruz

THE PHILIPPINES will likely post the second-fastest growth in Asia this year and in 2025, the International Monetary Fund (IMF) said.

In its latest World Economic Outlook report, the IMF maintained its gross domestic product (GDP) growth forecast for the Philippines at 6% this year and 6.2% in 2025.

If realized, the Philippine economic growth would be the second fastest among selected Asian economies, after India’s 7.5% GDP growth forecast.

The Philippines’ growth forecast for 2024 is faster than China (5%), Indonesia (5%), Malaysia (4.4%), Kazakhstan (3.5%), and Iran (3.3%), the IMF said.

It would also surpass Thailand (2.9%), Egypt (2.7%), Korea (2.5%), Pakistan (2%), Saudi Arabia (1.7%), and Japan (0.7%).

“Asia’s emerging market economies remain the main engine for the global economy,” Pierre-Olivier Gourinchas, economic counsellor and the director of research of the IMF, said in a statement.

The IMF maintained its global growth projection at 3.2% in 2024 and 3.3% in 2025, “broadly unchanged” from the previous report’s forecasts.

The IMF cut the United States growth forecast to 2.6% this year, but kept the growth estimate at 1.9% for 2025.

“The forecast for growth in emerging market and developing economies is revised upward; the projected increase is powered by stronger activity in Asia, particularly China and India,” it said.

The IMF raised its forecasts for emerging market and developing Asia, which is seen to grow by 5.4% this year and by 5.1% in 2025.

The growth projection for China was also raised to 5% for this year, “primarily on account of a rebound in private consumption and strong exports in the first quarter.” China’s growth is expected to slow to 4.5% next year, and “to continue to decelerate over the medium term to 3.3% by 2029, because of headwinds from aging and slowing productivity growth.”

However, “prospects for the next five years remain weak, largely because of waning momentum in emerging Asia,” IMF said.

The IMF said risks to the outlook “remain balanced” although upside risks to inflation “stem from a lack of progress on services disinflation and price pressures emanating from renewed trade or geopolitical tensions.”

“The risk of elevated inflation has raised the prospects of higher-for-even-longer interest rates, which in turn increases external, fiscal, and financial risks,” it said.

“Prolonged dollar appreciation arising from rate disparities could disrupt capital flows and impede planned monetary policy easing, which could adversely impact growth. Persistently high interest rates could raise borrowing costs further and affect financial stability if fiscal improvements do not offset higher real rates amid lower potential growth.”

During its last policy meeting, the US Federal Reserve left interest rates unchanged at 5.25%-to-5.5%. Fresh projections from policy makers showed them dialing back expectations for rate cuts this year from three to just one, Reuters reported. — BMDC

By Beatriz Marie D. Cruz, Reporter

THE BUREAU of Internal Revenue (BIR) on Monday started collecting a withholding tax on online platforms and sellers.

At the same time, the BIR extended the transition period for digital financial service providers by another 90 days to mid-October.

BIR Commissioner Romeo D. Lumagui, Jr. said in a statement that electronic marketplace operators started imposing the withholding tax against sellers and merchants on July 15.

“We have already extended this by 90 days. No further extensions will be given,” he said.

A withholding tax is not a new form of tax, but an advance payment collected from the total income tax liability of an online seller.

Under Revenue Regulations (RR) No. 16-2023, a withholding tax of 1% will be imposed on one-half of the gross remittances by e-marketplace operators and digital financial service providers to the sellers or merchants for the goods and services paid or sold through their platforms or facilities.

In April, the BIR extended the transition period for another 90 days, or until July 14, in response to the request of the private sector.

This regulation covers marketplaces for online shopping, food delivery platforms, platforms to book lodging accommodations, and other similar online service or product marketplaces.

“The BIR aims to level the playing field between brick-and-mortar stores, which are regularly complying with their tax obligations, and online marketplaces,” Mr. Lumagui said.

“Whether their business is operated online or through physical stores, sellers and merchants have to pay their taxes.”

However, the BIR clarified that the tax will not be imposed if the annual total gross remittances to an online seller for the past taxable year has not exceeded P500,000; if the cumulative gross remittances to an online seller in a taxable year has not yet exceeded P500,000 or if the seller is duly exempt from or subject to a lower income tax rate pursuant to any existing law or treaty.

Eleanor L. Roque, tax principal of P&A Grant Thornton, said the BIR’s move would help capture the appropriate taxes from the online marketplace.

“If there is a discrepancy in the gross transactions and amount of withholding taxes, the online sellers will be asked to explain or reconcile the difference. This is the same process when the BIR audits any taxpayer,” she said in a Viber message.

Meanwhile, the BIR issued a circular that extended the transition period for digital financial service providers to comply with the withholding tax by another 90 days or until Oct. 12.

The transition period was supposed to have ended on July 14.

BIR said the extension was meant “to provide additional time to the digital financial services providers to finally complete their respective system adjustments for compliance with the requirements of Revenue Regulations 16-2023.”

The digital economy’s annual contribution to the country’s economic output fell as its growth slowed down in 2023.

In 2023, the digital economy’s share to the country’s gross domestic product (GDP) went down to 8.4% from 8.6% in 2022. This was its lowest share to GDP since 2018.

In terms of gross value added, the digital sector grew by 7.7% to P2.05 trillion last year from the P1.9 trillion recorded in 2022.

The country’s digital economy is projected to reach up to $150 billion by 2030, according to a 2023 report by Google, Temasek Holdings and Bain & Company.