By the staff
The Bangko Sentral ng Pilipinas is reassessing its policy stance after economic growth slowed sharply in the third quarter, adding that any potential interest-rate cuts will be gradual and limited in size.
BSP Governor Eli Remolona Jr. said the BSP is analyzing whether the softer output was driven by a pullback in demand or disruptions on the supply side.
The economy expanded 4% in the July to September period, its weakest since 2021 and well below the previous quarter’s 5.5%.
The downturn was attributed to weakened confidence amid a flood-control scandal and weather disruptions that hit production. Growth for the first nine months averaged 5%, short of the government’s 5.5% to 6.5% goal for 2025.
Asked whether the softer GDP print made the BSP more inclined to cut borrowing costs, Remolona said any easing would remain conservative. “We are still taking baby steps,” he said, adding rate cuts would be capped. “Up to 25 bps only. This isn’t a hard-landing scenario.”
He added that a reduction at the central bank’s Dec. 11 meeting is “possible.”
Remolona said the earlier 2024 GDP figure appeared overstated because a component of investment “did not actually materialize,” partly due to the flood-control corruption scandal. He said last year’s growth would need to be revised slightly lower, while the latest 4$ reading may be raised “a little” through overall expansion would remain subdued.
The BSP is also reviewing whether to modify the 5% reserve requirement ratio.
On the currency, Remolona said the recent slide in the peso has not raised alarm within the central bank. He confirmed BSP intervened “just a little” to keep the market orderly. “We don’t have a target (for the peso),” he said. “We’re not worried,” Remolona said.
He also downplayed inflation risks from recent typhoons. “There will be an impact, but typhoons are mainly a supply-side issue,” he said.
Despite the weakened economic indicators, Remolona said the central bank would take a measured approach as it weighs easing options, balancing support for growth with inflation risks and financial stability.
