‘If you’re manufacturing and exporting to the US, and there’s a threat of a tariff hike, you don’t want to build up too much inventory ahead of that.’
The economy is expected to weather the many headwinds this year due to the very strong domestic consumption sector, according to ATR Asset Management head of macroeconomics and sustainability research Jomar Lacson.
Photograph courtesy of Jomar Lacson/fb
Jomar Lacson is not one to sugarcoat the facts. As head of macroeconomics and sustainability research at ATR Asset Management, he recognizes the economy’s strengths — but he’s also paying close attention to the cracks in the foundation.
In a rapidly shifting global landscape, he is pushing for urgent, strategic reforms to keep the country on course.
“Right now, we have a strong domestic economy,” Lacson said in an interview on Straight Talk, Daily Tribune’s online show.
“But we can’t afford to be complacent. The external sector is facing real pressure, and if we don’t tackle our fiscal and trade deficits head-on, we risk losing our momentum.”
Philippine exports are struggling, and the problem extends beyond the US market. “It’s not just the US; it’s other parts like China.
“So we know China still has many economic challenges,” Lacson pointed out.
Trade uncertainties, potential tariff hikes, and slowing global demand are dragging down export growth, particularly in the electronics sector — one of the country’s key economic drivers.
Lacson warned that these uncertainties have led to a slowdown in manufacturing and production.
“If you’re manufacturing and exporting to the US, and there’s a threat of a tariff hike, you don’t want to build up too much inventory ahead of that. You have to make sure that you keep inventory moderate so that if the tariff does come, you don’t have too much of a problem with being overstocked,” he explained.
Caution among exporters has resulted in lower production levels, affecting the entire supply chain and contributing to the broader economic slowdown.
Despite external headwinds, the resilience of domestic consumption remains a crucial pillar of economic stability.
“The good thing for us, I think, is we have a very strong domestic sector for consumption. And I think that’s what investors tend to realize,” Lacson said. Filipinos continue to spend, keeping the economy afloat even as external markets struggle.
However, consumer spending alone cannot offset the country’s structural challenges.
The Philippines is operating with both a trade deficit and a fiscal deficit, putting pressure on long-term economic sustainability.
“We have a fast-trade deficit and we have a fiscal deficit. Any regulation, any new regulation that can help us increase our revenues and bring down our fiscal deficit, or at least ensure the, maybe even the auxiliary so we have a specific target to anybody for our deficit to GDP, so if we can bring it down faster actually that helps the markets,” he said.
Stronger fiscal policies and regulatory reforms are necessary to stabilize the economy and ensure long-term growth.
Debt remains a pressing issue. The Philippines borrowed heavily during the pandemic, and those obligations are now due for repayment. “One of the reasons why our deficit has been high is because of interest costs,” Lacson explained. With global interest rates expected to decline in the coming years, the government has an opportunity to refinance and ease the burden.
“The strategy there is really to slowly refinance that,” he said, emphasizing that while lower rates are on the horizon, the process will be gradual.
The country’s debt-to-GDP ratio, currently around 60 percent, remains a critical indicator of financial stability. “The concern is when we have a 70 percent debt-to-GDP ratio, that’s trouble. But right now, we’re able to maintain about 60,” he said. While the situation is under control for now, maintaining fiscal discipline is essential to prevent it from escalating.
Market watchers are closely monitoring the peso’s movements.
“The peso-dollar rate is top of mind for the markets,” Lacson said. The currency is currently fluctuating around 57 to the dollar, with expectations that it will stabilize in the latter half of the year.
Much of the volatility is tied to US Federal Reserve decisions, but Lacson remains optimistic that as global interest rates decline in 2025, capital inflows into emerging markets like the Philippines will help strengthen the peso.
The country’s foreign exchange reserves provide an additional layer of protection. “The good thing though, and I think not to what should be central, is that our GIR is a leech at a high of $112 billion,” he said. This financial cushion ensures the economy can weather short-term currency fluctuations.
The Philippines has strengths, but vulnerabilities remain. The government cannot rely solely on consumer spending to sustain growth. Addressing trade imbalances, managing debt responsibly, and implementing forward-thinking policies are critical.
“The main external risks are the main concerns of the market and the economy,” he said. “Once we clear that phase wherein we now have more clarity, then this is the plan so that should now translate to recovery.”
The economy has the potential to stay on track, but only if leaders take bold, decisive action today.
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