The Philippines’ central bank will keep weighing a feeble growth outlook against gradually rising inflation to set monetary policy in a balancing act that could bring an end to its easing cycle soon, Deputy Governor Zeno Abenoja said on Friday. “Inflation has the greatest weight in the policy discussions at the Monetary Board,” he told the Reuters Global Markets Forum.
“For the next two years, inflation will gradually go up, approaching the midpoint of the target, and that’s one reason why we think … monetary policy easing could be nearing its end,” Abenoja said, noting that near- and medium-term inflation are manageable.
In December, annual inflation rose at its fastest pace in nine months, while monthly inflation registered the sharpest increase since September 2023. Still, average inflation for 2025 stood at 1.7 percent, the slowest since 2016.
Bangko Sentral ng Pilipinas (BSP) targets inflation in the range of 2 percent-4 percent over the medium term.Economic momentum, meanwhile, weakened sharply in the third quarter, when growth slowed to 4.0 percent year-on-year, missing an estimate of 5.2 percent and down from 5.5 percent in the second quarter, as a corruption scandal linked to government infrastructure projects dented consumer and investor confidence.
Fourth-quarter GDP data is scheduled for release on January 29.
“What is key right now is the uncertainty in the economic momentum that we are seeing,” Abenoja said, as third-quarter weakness might spill over into the first few months of 2026. He was, however, hopeful for a better growth number for the second-half of 2026, and even greater momentum in 2027.
Growth in 2025 is forecast to ease to 4.6 percent, below the government’s 5.5 percent-6.5 percent target, compared with 5.7 percent last year. BSP projects 2026 growth in the 5 percent-6 percent range, and at 5.5 percent-6.5 percent for 2027.
The central bank cut its policy rate for five straight meetings last year, bringing its benchmark rate to a three-year low of 4.5 percent. Its next monetary policy meeting is scheduled for February 19. The government’s 2026 budget provides for spending to be kept under control to ensure taxpayer money is used responsibly, even as an earlier BSP forecast sees the country’s 2025 current account deficit at $15.5 billion, or 3.2 percent of GDP, slightly narrower than October’s forecast.
“The current account is mainly a reflection of still improving investment ratios, to fill in the infrastructure gap, and to increase productivity (and) potential output moving forward,” Abenoja said, adding that the Philippines needs more investments and external financing.
“Fiscal consolidation continues, but probably not as steep as or as fast as previously envisioned, given all the external developments,” he added.
Abenoja also reiterated the BSP’s position that it will not defend the currency as the economics don’t warrant it. The peso has been hovering around its all-time low of 59.362 per dollar, hit in December, underperforming many of its emerging Asian peers in 2025 amid dollar weakness.
“We have to recognize certain periods where you can have big demand for dollars … It’s a healthy environment,” he said. “But we’re looking for those episodes that would have asymmetric effects on inflation.”
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