Market & Mainstreet
Budget Deficit Nearly Doubles to P161B as ADB Steps in With a $1.5B Crisis Loan
The Daily Scan – September 25, 2026 (Fri)
The national government’s budget deficit nearly doubled to P161.3 billion in August, mostly from settling PhilHealth’s overdue arrears. Hours later, the ADB approved a $1.5 billion crisis loan to help fund the government’s fuel, fare, and food subsidy program. September inflation may already be reaccelerating toward 6.5%, according to one bank economist, ending four months of easing. All of this landed the same day US Treasury yields hit their highest level since 2007 on hawkish Fed bets, and oil extended its rally to a second day. The PSEi fell to its lowest close in about 10 months, and the peso weakened as a result. In Washington, Trump and Xi wrapped their summit with warm words, an extended tariff truce, and few concrete deals.
| USD to PHP | August budget gap | PSEi |
| P62.735 | P161.3B | 5,730.02, down 1.12% |
SECTION 1 · Philippines
● Budget deficit nearly doubles to P161.3 billion, driven by PhilHealth arrears
WHAT HAPPENED
The national government’s budget deficit widened 90.2% to P161.3 billion in August, from P84.8 billion a year earlier, the Bureau of the Treasury reported. Nearly P58.6 billion of the spending increase went to settling PhilHealth’s arrears for indigents, senior citizens, and point-of-service patients. Revenue collections slipped 1.85% to P346 billion as nontax revenues fell 35.6%. Year to date, the deficit reached P1.05 trillion, still within the P1.66 trillion full-year program.
UNCERTAIN
Reyes Tacandong & Co. senior adviser Jonathan Ravelas described the wider gap as part of a deliberate government push to sustain growth through spending, rather than a sign of fiscal distress. Whether that holds depends on how the rest of the year’s collections perform.
WHY IT MATTERS
A one-time debt settlement drove most of this spike, but it lands in the same week the government also needed a $1.5 billion outside loan to fund its crisis response. The timing matters more than the headline number alone.
RISK
Revenue collections are slipping even as spending needs keep rising, a combination that’s hard to sustain for long.
OPPORTUNITY
The deficit remains within the government’s own full-year program, so this isn’t yet a break from the plan.
NEXT MOVE
If you work with government contracts or receivables, this is a reminder that payment timing can be uneven. Build a buffer for delayed settlements rather than assuming on-schedule payment.
● ADB approves $1.5 billion to help fund fuel, fare, and food relief
WHAT HAPPENED
The Asian Development Bank approved a $1.5 billion loan to help the Philippine government fund its Unified Package for Livelihoods, Industry, Food, and Transport (UPLIFT) program, which covers fare discounts, fuel and fertilizer subsidies, medical packages, and cash assistance for households, drivers, farmers, and fisherfolk hit by the Middle East conflict. The loan matches the ADB’s largest ever to the Philippines, extended during the pandemic in 2020.
UNCERTAIN
A separate report noted the ADB previously estimated the Philippines could face a $7 billion financing gap from its crisis response measures, meaning this $1.5 billion is a partial, not complete, solution. An additional $1 billion from the AIIB is reportedly also in preparation.
WHY IT MATTERS
This financing helps explain why the government could absorb August’s wider deficit without immediately cutting subsidy programs. It’s borrowed breathing room, not new revenue.
RISK
This is debt, not free money. It adds to the government’s obligations even as it eases near-term pressure.
OPPORTUNITY
Confirmed funding for UPLIFT means fuel and fare subsidies are more likely to continue through the rest of the crisis.
NEXT MOVE
If your customers or workers rely on fare or fuel subsidies, this financing is a signal those programs have funding secured for now. Don’t assume they’ll lapse without further news.
● PSEi falls to its lowest close in about 10 months
WHAT HAPPENED
The PSEi fell 65.12 points, or 1.12%, to close at 5,730.02 on Thursday, its lowest finish since Nov. 14, 2025, and a fifth straight losing session. The peso weakened 14.5 centavos to P62.73. Five of six sectoral indices declined by more than 1%, with mining and oil the hardest hit, down 3.79%. The drop follows Wednesday’s S&P and ADB growth forecast downgrades, plus rising oil prices and growth concerns. The PSEi has now slumped about 5.5% from its Sept. 11 close.
UNCERTAIN
The Philippine economy grew just 2.3% in the second quarter, bringing first-half growth to around 2.6%, well below official targets. How much further the index falls likely depends on whether growth data or the Middle East situation improves first.
WHY IT MATTERS
Five straight losing sessions, compounding this week’s growth downgrades, is the clearest sign yet that investor sentiment on the domestic economy has turned decisively cautious.
RISK
A nearly 5.5% slide in under two weeks reflects more than a single bad news cycle. It’s a sustained repricing.
OPPORTUNITY
Lower valuations can be an entry point for investors with a long horizon and the stomach for continued volatility.
NEXT MOVE
If you hold equities tied to mining, oil, or industrials, expect continued swings. This is not the week to make a large allocation decision on sentiment alone.
● September inflation may reaccelerate to 6.5%, ending four months of easing
WHAT HAPPENED
UnionBank chief economist Ruben Carlo Asuncion estimates September inflation accelerated to 6.5% year on year, up from August’s 6.1%, in a LinkedIn post. If accurate, this would be the fastest pace in four months, ending a streak of easing that began in May, and the seventh straight month inflation has exceeded the BSP’s 3% target. Asuncion cited renewed fuel and food price pressure. The Philippine Statistics Authority releases the official figure on Oct. 6.
UNCERTAIN
This is one economist’s estimate, not the official print. Actual data could land above or below 6.5% once released next month.
WHY IT MATTERS
This directly reinforces the forecast from earlier this week that the BSP could hike rates again in October. A reaccelerating inflation print would make that more likely, not less.
RISK
If September inflation does come in near 6.5%, expect louder calls for a BSP rate hike, and higher loan costs to follow.
OPPORTUNITY
The official number isn’t out until Oct. 6, which gives you nearly two weeks to prepare before it’s confirmed either way.
NEXT MOVE
Mark Oct. 6 on your calendar. If you’re planning a loan application or pricing decision this quarter, treat a BSP hike as the likely scenario rather than the exception.
SECTION 2 · Worth Knowing
● Oil extends its rally to $106.60 despite reports of a possible Hormuz deal
WHAT HAPPENED
Brent crude gained 3.4% to close at $106.60 a barrel Thursday, its second straight daily rise, even as a senior Iranian official told Reuters the most realistic path forward is for Tehran to allow navigation through the Strait of Hormuz in exchange for the US ending its naval blockade. Prices pulled back from an intraday peak above $108 once the report emerged. This mirrors a similar approach both sides agreed to in a June memorandum that later collapsed into renewed fighting.
UNCERTAIN
It’s unclear what would be different this time from the June agreement that fell apart. Markets treated the report as a reason to trim gains, not reverse them entirely.
WHY IT MATTERS
Oil is now two full sessions into a rally that erased last week’s decline entirely. The pattern this month has been swift reversals in both directions, making any single day’s price a poor guide to where things land next week.
RISK
A failed deal, similar to June’s, would remove the one factor currently capping oil’s rise.
OPPORTUNITY
The fact that both sides are discussing a specific mechanism again, even an imperfect one, is more than existed a week ago.
NEXT MOVE
Continue budgeting for elevated fuel costs through next Tuesday’s price cycle. Nothing this week has pointed toward meaningful relief yet.
● Trump and Xi meet with warm words, an extended truce, but no major deals
WHAT HAPPENED
Trump and Xi held their formal White House summit Thursday, a day after their teams confirmed a two-month extension of the US-China tariff truce to mid-January. No comprehensive deals on tariffs, rare earths, or agricultural purchases were announced at the summit itself. Both leaders issued statements emphasizing cooperation, with Xi calling for the two countries to avoid a “Thucydides trap” and Trump touting a “truly great friendship.”
UNCERTAIN
US officials said rare earth deliveries from China were still falling short of commitments made in May. Analysts widely expected a light summit going in, calling it underwhelming but functionally useful for maintaining stability.
WHY IT MATTERS
The extension gives the current, lower tariff environment more runway, which matters for Asian supply chains generally. But the substantive disputes, rare earths, technology, and Taiwan, remain exactly where they were before the summit.
RISK
Pushing the central questions into the next round of talks means the underlying uncertainty hasn’t actually been resolved, just postponed.
OPPORTUNITY
A calm, low-drama summit, even without deliverables, reduces the odds of a surprise escalation in the near term.
NEXT MOVE
Keep your planning horizon at the new mid-January deadline rather than expecting a durable resolution. Revisit if either side signals movement on rare earths specifically.
● US Treasury yields hit their highest level since 2007 on hawkish Fed bets
WHAT HAPPENED
The 10-year US Treasury yield climbed above 5.2% Thursday, its highest since July 2007, while the 30-year yield touched levels last seen in 2004. Stronger than expected US economic data, hawkish comments from Federal Reserve officials, and elevated oil prices all contributed. Traders are now pricing in a more than 75% chance the Fed hikes rates again at its October meeting, up sharply from prior expectations.
UNCERTAIN
A fixed income strategist quoted by CNBC noted the rise in yields can no longer be attributed simply to fiscal deficit concerns, suggesting multiple pressures are now compounding at once rather than one dominant cause.
WHY IT MATTERS
This is the specific “hawkish Fed bets” that BusinessWorld cited as a direct driver of Thursday’s peso weakness. When US yields rise this sharply, capital tends to flow toward dollar assets, pressuring currencies like the peso.
RISK
A widening rate gap between the US and the Philippines adds further pressure on the peso and could push the BSP toward matching hikes.
OPPORTUNITY
Higher US yields can also mean better returns for Philippine institutions or individuals holding dollar-denominated assets.
NEXT MOVE
If you’re watching the peso for an import order or dollar purchase, treat this as a reason it could weaken further before it strengthens. Don’t wait for a dip that may not come this month.
SECTION 3 · THE OPPORTUNITY BEHIND THE NEWS
Rates are rising on both sides of the Pacific at once. That’s rarely a coincidence worth waiting out.
Look at what converged in a single day. US Treasury yields hit their highest level since 2007 on hawkish Fed bets. Locally, one economist’s estimate has September inflation reaccelerating to 6.5%, which strengthens the case for a BSP hike in October. Both point the same direction: borrowing is about to get more expensive, not less, on both sides of the Pacific simultaneously.
This isn’t a one-off news cycle. It’s two central banks converging toward the same conclusion from different starting points, US strength and PH inflation, at nearly the same time. When that kind of alignment happens, it tends to move markets and lending rates together rather than in isolation.
The opportunity is narrow but concrete: if a loan, credit line, or major purchase financed on credit is on your radar for Q4, the cost of waiting is no longer theoretical. Both the Fed and the BSP now have a real, current-week reason to hike again in October. Locking in terms now, before either confirms it, is the only lever you actually control here.
SECTION 4 · FOUNDER’S LESSON
A rescue loan buys you time. It doesn’t do the work for you.
The ADB’s $1.5 billion crisis loan is genuinely useful. It funds real subsidies for real households and keeps a strained budget from breaking under this year’s pressures. But read the fine print of the coverage: the ADB itself had previously estimated the Philippines faces a $7 billion financing gap from its crisis response. This loan covers about a fifth of that.
That’s not a criticism of the loan. It’s an accurate description of what financing does in a crisis: it buys runway, not a solution. The underlying problem, in this case a war-driven spike in fuel and food costs that the government can’t control, is still there the day after the money arrives.
Founders do the same math wrong all the time when they raise a round or take on debt. The relief is real and the pressure genuinely eases. But if the plan stops at “we got the funding,” the business is just further along the same trajectory that made the funding necessary. The loan or the raise should buy you time to fix the actual problem, not stand in for having fixed it.
SECTION 5 · ONE REAL SIGNAL
Three unrelated stories just pointed the same direction. That’s when a signal becomes real.
A single data point is noise. A trend across unrelated sources is a signal. Today gave us three, from three different fronts, all converging on the same conclusion within about 24 hours.
| 5.2%+ | 75%+ | 6.5% |
| The 10-year US Treasury yield’s Thursday level, highest since July 2007 | Market-implied odds of another Fed rate hike in October, per CME FedWatch | One economist’s estimate for September PH inflation, versus August’s 6.1% |
The three fronts: US bond markets are pricing in a near-certain Fed hike in October on strong economic data and persistent inflation. A Philippine bank economist independently estimates local inflation is reaccelerating for the same underlying reason, fuel and food costs tied to the same Middle East conflict. And the PSEi, reacting to both, just posted its fifth straight losing session and its lowest close in about 10 months.
Our read: these three stories didn’t originate from the same source, but they’re describing the same root cause from three different vantage points. Elevated oil is now flowing through US inflation data, Philippine inflation estimates, and Philippine equity sentiment simultaneously. When three independent measures move together like this, it’s a stronger signal than any one of them alone, and it’s a more reliable basis for planning than headline-chasing on a single story.
What to watch next: the official PH September inflation print on Oct. 6, and whether the Fed’s October meeting delivers the hike markets are now pricing in.
Summarized in our own words with links to every source. We don’t reproduce full articles or bypass paywalls. Interpretation is labeled as such and kept separate from reported fact.
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