Bangko Sentral ng Pilipinas policy outlook shifts amid weak GDP growth

Analysts are revising their outlook for the Bangko Sentral ng Pilipinas (BSP) following weak second-quarter economic growth. The Philippines' GDP grew by only 2.3% in the three months through June, marking its weakest quarterly expansion in 16 years excluding the pandemic period.

Standard Chartered has shifted its forecast, now expecting the BSP to keep its policy rate unchanged at the August 27 meeting rather than implementing a 25bps hike. The bank also lowered its 2026 GDP growth forecast to 3.5% and reduced its inflation expectations. It anticipates rate cuts in 2027 once inflation falls below 4%.

Economists from Pantheon Macroeconomics suggest that the disappointing growth and trending downward in headline inflation may prompt the Monetary Board to pause rate increases to avoid straining the economy. Conversely, Nomura economists maintain that the rate-hiking cycle is not over, forecasting another half-percentage-point of increases this year through August and October.