By Katherine K. Chan, A reporter
BANGKO SENTRAL ng Pilipinas (BSP) may extend its easing cycle this year to provide more support to the Philippine economy as ongoing uncertainty continues to test consumers and businesses.confidence, analysts say.
“Against this backdrop of soft demand, high prices, and persistent confidence issues, the door remains open to further capital cuts,” ING Think’s Regional Head of Research for Asia-Pacific Deepali Bhargava commented.
This happened even after BSP Governor Eli M. Remolona, Jr. he said the future policy path is now uncertain as they see that the reduction of monetary policy may not be enough to grow the economy.
In its first annual policy review, the central bank last week cut its key interest rate by 25 basis points (bps) to a three-year low of 4.25%.
The sixth straight cut brought the total reduction to 225 bps since then It will be released in August 2024.
However, Mr. Remolona has previously left the door open to support continued growth through monetary policy as long as inflation remains under control.
By 2025, Philippine economic growth has slowed to 4.4% post-pandemic after it posted a 3% expansion in the last quarter of the year, as weak confidence continues to hold back investment, consumption and government spending amid the chaos of flood control.
This was below the BSP’s estimate of 4.6% for the full year and resulted in the country missing its growth targets for the third consecutive year.
Mr. Remolona said they expect confidence to recover in a few months as current data points to improving market sentiment, noting that their next policy decision will depend on how quickly confidence is restored.
Still, the BSP sees the Philippines’ gross domestic product (GDP) growth falling below the government’s target of 5%-6% this year as it lowered its forecast to 4.6% from 5.4% previously.
By 2027, it expects GDP to grow by 5.9%, lower than its previous estimate of 6.3%.
GROWING CONCERNS
Continued abuses by the government may further reduce spending and household and business confidence, Ms. Bhargava said.
“The latest data (for the fourth quarter) shows that soft government spending has turned into a persistent drag, not only affecting spending but also business and household confidence,” he said.
“We expect this pressure to continue through at least the first half of 2026, given ongoing investigations and unresolved political uncertainty that continue to dampen sentiment.”
Government spending fell for four consecutive months, after it fell 9.61% year-on-year to P498.3 billion in November, the latest Treasury data showed.
Ms. Bhargava also noted that real rates remained high as the central bank cut rates for the sixth time in a row.
“Real rates are still up around 2.25% even after today’s rate cuts, as recent rates have been around 2%,” he said. “This keeps financial conditions tighter than what appears to be economic strength right now.”
Maybank economists Azril Rosli and Suhaimi Ilias similarly see the BSP delivering another final 25-bp rate this year to help the economy improve following its poor performance last year.
“The Philippine economy grew at its weakest pace in five years in 2025 at 4.4% (2024: 5.7%), below the official national growth target of 5.5-6.5%,” they said in the analysis. “As a result, we still see room for a 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 cut its key policy rate to 4%, especially after the central bank deviated from its sentiment of “nearing the end of the easing cycle”.
“The BSP has again sounded bullish by removing the line that the end of the easing cycle is near. We reiterate our forecast that the BSP will cut again by 25 bps in April,” they said in a note.
The Monetary Board will hold its next rate-setting meeting on April 23.
