The Philippine economy is expected to rebound in the second half of the year, according to the Bangko Sentral ng Pilipinas (BSP). The central bank believes that the country's gross domestic product (GDP) will grow over 3% in the latter half of 2026 as the government ramps up spending.
BSP Governor Eli M. Remolona, Jr. stated that despite a potential rate hike, the economy can still manage. He noted that a 25-basis-point (bp) rate hike is small and nominal, and if inflation is deducted from that, it is still low.
The economy experienced a slowdown in the first quarter, with GDP growth dropping to 2.8% from 3% in the previous quarter and 5.4% a year ago, primarily due to energy shocks and the lingering effects of last year's flood control scandal.
The Development Budget Coordination Committee (DBCC) has already lowered its growth target this year to 3.5-4.5% from 5-6% previously, citing tepid public spending. However, BSP Governor Remolona expressed optimism that the economy will recover strongly in the second half of the year.
Government spending has been slow, growing by only 4.81% year on year to P2.6 trillion from P2.48 trillion a year ago. The DBCC has set a P6.46-trillion disbursement program for this year, and the BSP chief emphasized the need for the government to be more disciplined in its spending to support economic recovery.
The central bank capped its easing cycle in April to raise key borrowing costs for the first time in over two years amid emerging price pressures from the energy crisis. BSP Governor Remolona stated that they are banking on fiscal policy to support growth while focusing on containing inflation risks.
Despite the sluggish economy, the BSP delivered its second straight 25-bp hike to bring the benchmark rate to 4.75% as it flagged broadening spillover effects of elevated oil prices. The central bank sees inflation settling above its target over the next three years at 6.4% in 2026, 4.5% in 2027, and 3.1% in 2028.
The Monetary Board is scheduled to hold three more policy reviews this year on Aug. 27, Oct. 22, and Dec. 17. The BSP's decisions will closely monitor the economy's progress and inflation rates to ensure a stable and robust economy.
