By Katherine K. Chan, Reporter
THE PHILIPPINE ECONOMY can still absorb one other rate hike as growth is anticipated to rebound within the second half of the yr, the Bangko Sentral ng Pilipinas (BSP) said.
BSP Governor Eli M. Remolona, Jr. said he hopes the country’s gross domestic product (GDP) will grow over 3% within the latter half of 2026 as the federal government ramps up spending.
Chatting with reporters on the sidelines of an event on Monday, he noted that the economy can still manage if the BSP extends its tightening cycle to deliver one other 25-basis-point (bp) rate hike.
Asked if the economy can still handle one other rate hike, the BSP chief said in a combination of Filipino and English: “It will possibly, because 25 bps is small. It’s nominal”
“In the event you deduct inflation from that, it’s still low,” he added.
Nevertheless, Mr. Remolona didn’t answer when asked how much space they still have for extra 25-bp increases.
In the primary quarter, the Philippine GDP growth slowed to 2.8% from 3% within the previous quarter and 5.4% a yr ago, amid the Middle East war-driven energy shocks and lingering effects of last yr’s flood control scandal.
The Development Budget Coordination Committee (DBCC) has already lowered its growth goal this yr to three.5-4.5% from 5-6% previously.
Mr. Remolona noted that the economy remains to be grappling with tepid public spending resulting from the flood control mess fallout.
“The issue this yr is there was an absence of presidency spending. So, we expect to recuperate strongly within the second half of the yr. Due to flood control (scandal) they became strict with spending. But that is perhaps okay by the second half,” he added.
As of May, government spending grew by 4.81% yr on yr to P2.6 trillion from P2.48 trillion a yr ago. The DBCC has set a P6.46-trillion disbursement program for this yr.
Mr. Remolona said the federal government must be more disciplined in spending to assist the economy recuperate within the July-to-December period.
“The catch-up plan is to start out spending what we should always have been doing, what we should always have been spending if not for the flood control,” he said.
The BSP chief said there needs to be a rebound in the federal government spending within the second semester.
Despite the sluggish economy, the central bank capped its easing cycle in April to lift key borrowing costs for the primary time in over two years amid emerging price pressures from the energy crisis.
Mr. Remolona said the Monetary Board’s decision got here as they’re banking on fiscal policy to support growth while they concentrate on containing inflation risks.
Last month, the BSP delivered its second straight 25-bp hike to bring the benchmark rate to 4.75% because it flagged broadening spillover effects of elevated oil prices.
Mr. Remolona at the moment said they still have numerous space to tighten but will likely follow 25-bp hikes unless second-order price effects worsen further.
In May, headline inflation eased to six.8% from the over three-year high of seven.2% in April, bringing the five-month average to 4.5%.
For June, a BusinessWorld poll of 18 analysts showed the headline print likely continued to breach the BSP’s 2%-4% goal because it yielded a median forecast of 6.6%.
The central bank sees inflation settling above its goal over the following three years at 6.4% in 2026, 4.5% in 2027, and three.1% in 2028.
The Monetary Board is scheduled to carry three more policy reviews this yr on Aug. 27, Oct. 22, and Dec. 17.