Further easing seen amid growth woes

By Katherine K. Chan, Reporter

THE BANGKO SENTRAL ng Pilipinas (BSP) may extend its easing cycle this year to provide the Philippine economy with more support as lingering uncertainty continues to test consumer and business confidence, analysts said.   

“Against this backdrop of softer demand, elevated real rates, and lingering confidence issues, the door remains open for additional monetary easing,” ING Think Regional Head of Research for Asia-Pacific Deepali Bhargava said in a commentary.

This came even after BSP Governor Eli M. Remolona, Jr. said the policy path ahead is now less certain as they deemed that monetary policy easing may be insufficient to boost economic growth.

At its first policy review of the year, the central bank last week trimmed the key interest rate by 25 basis points (bps) to an over three-year low of 4.25%.

The sixth straight cut brought its total reductions to 225 bps since it began easing in August 2024. 

However, Mr. Remolona earlier left the door open to supporting growth further through monetary policy as long as inflation remains manageable.

In 2025, Philippine economic growth slumped to a post-pandemic low of 4.4% after it posted a 3% expansion in the final quarter of the year, as weak confidence continued to stall investments, consumption and government spending amid the flood control mess. 

This was below the BSP’s 4.6% full-year projection and led the country to miss its growth targets for a third straight year.

Mr. Remolona has said that they expect confidence to recover in a few months as current data point to improving market sentiment, noting that their next policy decision will hinge on how fast confidence will be regained.

Still, the BSP sees Philippine gross domestic product (GDP) growth settling below the government’s 5%-6% target this year as it slashed its projection to 4.6% from 5.4% previously.

For 2027, it expects the GDP to expand by 5.9%, also lower than its earlier estimate of 6.3%.

GROWTH CONCERNS
Continued government underspending may continue to dampen both fiscal outlays as well as household and business confidence, Ms. Bhargava said.

“The latest (fourth-quarter) data show that soft government spending has become a more persistent drag, weighing not only on fiscal outlays but also on business and household confidence,” she said.

“We expect this pressure to persist at least through the first half of 2026, given ongoing investigations and unresolved political uncertainty that continue to dampen sentiment.”

Government spending has fallen for four consecutive months, after it declined by 9.61% year on year to P498.3 billion in November, latest Treasury data showed.

Ms. Bhargava also noted that real rates remain high even as the central bank has eased for a sixth time in a row.

“Real rates remain elevated at around 2.25% even after today’s rate cut, with the latest inflation print at roughly 2%,” she said. “This keeps monetary conditions tighter than what current economic momentum seems able to absorb.”

Maybank economists Azril Rosli and Suhaimi Ilias likewise see the BSP delivering one more final 25-bp cut this year to help the economy rebound following its underperformance last year.

“The Philippine economy grew at its weakest pace in five years in 2025 at 4.4% (2024: 5.7%), undershooting the official national target of 5.5-6.5% growth,” they said in a commentary. “In view of this, we still see room for one final 25-bp cut this year to 4%.”

Meanwhile, Nomura Global Markets Research Chief ASEAN Economist Euben Paracuelles and Research Analyst Yiru Chen maintained their view that the BSP will bring its key policy rate further down to 4%, especially after the central bank veered away from its “nearing the end of the easing cycle” sentiment.

“BSP also sounded dovish by removing the line that the end of the easing cycle is near. We reiterate our forecast that BSP will cut again by 25 bps in April,” they said in a note.

The Monetary Board is set to hold its next rate-setting meeting on April 23.