BSP: Economy to rebound by 2nd half

By Katherine K. Chan, Reporter

THE PHILIPPINE ECONOMY is on track to bounce back this year as business confidence has begun to improve, Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. said.

“It looks like it’s (confidence) beginning to come back,” the central bank chief said during a Management Association of the Philippines (MAP) event on Wednesday held in Taguig City. “Not as fast as we would like, but it’s coming back.”

“In our projections, we think that we’ll be back to normal by the second half of 2026,” he added.

Mr. Remolona noted that the loss of confidence amid the graft scandal stalled the country’s economic growth in the second half of 2025.

In the fourth quarter of 2025, the Philippine gross domestic product (GDP) grew by 3%, its slowest in 14 years (excluding the pandemic), as investments and spending slowed amid the flood control controversy.

This brought full-year economic growth to a post-pandemic low of 4.4%, undershooting the BSP’s 4.6% forecast and the government’s 5.5%-6.5% target.

However, recent indicators, such as the S&P Global Manufacturing Purchasing Managers’ Index (PMI) and the Philippine Stock Exchange index (PSEi), have signaled that business confidence is slowly returning and the economy may be on the way to recovery.

Latest data showed that the Philippines’ manufacturing PMI rose to a nine-month high of 52.9 in January from 50.2 in December.

The PSEi rose to a near seven-month high on Wednesday, even soaring above the 6,500 line during the session. The PSEi went up by 0.37% or 24.22 points to close at 6,498.82, its best finish in almost seven months or since it closed at 6,525.04 on July 14, 2025.

For 2026, the central bank projects GDP to expand by 5.4%.

However, Mr. Remolona said they are reviewing a potential revision to their growth forecast.

Speaking to reporters on the sidelines of the MAP event, Mr. Remolona said the revival of confidence, alongside inflation falling back to target, may have narrowed the central bank’s easing space.

Asked if the BSP can still afford to cut rates anew to support the economy, Mr. Remolona said: “It’s conceivable. Again, it’s based on the data. We have to review the data.”

The benchmark interest rate currently stands at 4.5%, the lowest in over three years.

The Monetary Board has so far delivered 200 basis points (bps) in cuts since it began its easing cycle in August 2024, including five straight 25-bp reductions last year.

Mr. Remolona noted that stabilizing inflation remains their priority in deciding on the monetary policy path.

“If we can maintain price stability, that will help with confidence,” he said.

In January, headline inflation came in at 2%, marking its comeback to the BSP’s 2%-4% target for the first time in nearly a year.

INFLATION
Meanwhile, BSP Deputy Governor Zeno Ronald R. Abenoja said headline inflation may approach the 3% mark in the coming months before potentially breaching it by the second half of the year.

“If you look at the inflation path in our MPR (monetary policy report), it will move gradually close to 3% and then possibly a little above 3% by (the) second half,” he told reporters on the sidelines of the same event. “But after that, it will move closer to 3% again and then stabilize around that area.”

Mr. Remolona noted that he doesn’t mind inflation undershooting their target but said that an above-3% print worries him more.

The BSP expects headline inflation to average 3.2% by yearend, before easing to 3% in 2027.