Manila says it is organising the withdrawal of troops from Iraq after threats made to a Philippine hostage.
People in the Philippines are awaiting news of Mr de la Cruz
Militants said they would behead Angelo de la Cruz unless troops left by 20 July, a month earlier than planned.
A statement from the Philippine government said the number of its military personnel had already gone down from 51 to 43.
Both the US and Australia have expressed disappointment at Manila's purported plans to withdraw its forces.
Although the Philippine military presence in Iraq has been small, the country has been a staunch ally in the Bush administration's war on terrorism.
COALITION TROOPS IN IRAQ
US - 118,000
UK - 8,300
Italy - 2,800
Poland - 2,350
Ukraine - 1,550
Netherlands - 1,300
Australia - 850
Romania - 700
South Korea - 700
Japan - 500
"The Department of Foreign Affairs is co-ordinating with the defence ministry for the withdrawal of troops," the Philippine government said in a statement on Wednesday.
"The headcount of the Philippine troops now in Baghdad is down from 51 to 43," the statement quoted Foreign Minister Delia Albert as saying.
But the BBC's correspondent in Manila, John McLean, points out that a government statement issued five days ago, before Manila announced it was pulling out troops, also said the Philippine contingent consisted of just 43 people.
Over the past few days, President Gloria Arroyo's administration has given ambiguous and conflicting signals to the kidnappers.
Their demand has put the Philippine government in an awkward dilemma - to save Mr de la Cruz or maintaining its close alliance with Washington.
'Alive and well'
Roy Cimatu, Manila's special envoy for the Middle East,
said the hostage had been reported "alive and well" by officials negotiating for his release.
"There's no risk of execution of Angelo de la Cruz," Mr Cimatu added, although it was unclear how he obtained this information.
Truck driver Mr de la Cruz, a 46-year-old father of eight, was kidnapped on 7 July.
His captors called on Manila to withdraw its peacekeeping troops by 20 July - one month ahead of their scheduled departure date.
At the weekend, the government said it would not give in to the militants' demands.
Mr de la Cruz was working as a truck driver in Iraq when he was captured
But on Monday, Deputy Foreign Minister Rafael Seguis told al-Jazeera television that the troops would leave "swiftly, in the time it takes to carry out the necessary preparation for their return to the Philippines".
A number of other countries have expressed concern at the signal the Philippines withdrawal would send to militant groups in Iraq.
"Our policy is not to negotiate or provide benefits to terrorists," said US State Department spokesman Richard Boucher.
"We think that can send a wrong signal, and that's why we're disappointed to see statements like this."
Australia joined the US in criticising Manila's decision.
"Countries cannot give into the demands of terrorists, because we would all pay the price," said a statement from the office of Foreign Minister Alexander Downer.
Mr Downer telephoned the Philippines ambassador in Canberra to express his concerns.