Inflation may pick up again in coming months

Headline inflation could pick up again in the remaining months after hitting a near six-year low in July but still remain within target, which would still give way to further policy easing by the Bangko Sentral ng Pilipinas (BSP).

“Looking ahead, we think July inflation is the floor of the Philippines’ inflation outlook,” HSBC Global Research economist for ASEAN Aris D. Dacanay said in a report.

“Headline inflation is likely to accelerate in the months ahead as the base effects of the rice tariff rate cut in 2024 fade,” he added.

Nomura Global Markets Research analysts Euben Paracuelles and Nabila Amani said that inflation could rise close to 2% in the coming months.

“We maintain our forecast for CPI (consumer price index) inflation to average 1.8% in 2025, penciling in a gradual climb towards 2% by yearend, in part due to low base effects and the impact of weather disruptions that are still likely to materialize in the near term,” they said in a report.

Headline inflation sharply eased to a near six-year low of 0.9% in July from 1.4% in June and 4.4% a year ago, the Philippine Statistics Authority (PSA) reported on Tuesday.

It also marked the fifth straight month that inflation settled below the central bank’s 2-4% target range.

“Still, our full-year forecast remains below BSP’s 2-4% target, reflecting a combination of factors, including a still-negative output gap and an economy facing downside risks,” Nomura said.

For the first seven months of the year, inflation averaged 1.7%. This was a tad higher than the central bank’s 1.6% forecast for 2025.

“This implies pass-through effects from easing supply-side drivers are likely to accentuate the impact; we still see low crude oil prices and the government maintaining supply-side measures to keep food prices, particularly rice prices, low,” Nomura said.

Meanwhile, Mr. Dacanay flagged risks to watch out for, including proposed changes to rice policies. 

President Ferdinand R. Marcos, Jr. announced on Wednesday a 60-day suspension of rice imports, effective Sept. 1, to protect local farmers amid declining farmgate prices. The government is also still discussing the possibility of raising tariffs on rice imports.

“We have written previously that curbing the supply of rice risks stoking inflation by 1.2 to 1.4 percentage points (ppts),” Mr. Dacanay said.

Despite the likelihood of inflation picking up in the months to come, the BSP can still continue its rate-cutting cycle.

“Will this derail the BSP’s easing cycle? We do not think so since we expect inflation to peak at around 2.9% year on year in the second quarter of 2026. This implies that inflation will still be well within the BSP’s 2-4% target range,” Mr. Dacanay said.

BSP Governor Eli M. Remolona, Jr. told Bloomberg on Tuesday that they can deliver two more 25-basis-point (bp) cuts this year and potentially continue its easing cycle until next year.

The central bank has lowered borrowing costs by a total of 125 bps since it began easing in August last year, bringing the policy rate to 5.25% when it last reduced rates in June.

“Nonetheless, the soft inflation numbers will likely give the central bank more confidence that it can proceed with its easing cycle with or without the Fed,” Mr. Dacanay said.

“Our baseline scenario is for the BSP to pause its easing cycle during the August rate-setting meeting, but the soft inflation outlook increases the risk of a rate cut,” he said.

Second-quarter gross domestic product (GDP) data, scheduled to be released today (Aug. 7), will also support further rate cuts.

“Any soft GDP figure will likely strengthen the conviction of the BSP of loosening the monetary reins without the Fed or deepening its monetary easing cycle throughout the year,” Mr. Dacanay added.

For its part, HSBC expects the benchmark to end at 5% by yearend.

“But since the US tariff rate on the Philippines was less favorable than expected, the risk of a deeper easing cycle by the BSP is increasing,” Mr. Dacanay said.

Meanwhile, Nomura projects the Monetary Board to deliver a 25-bp cut at the Aug. 28 meeting, followed by another 25 bps in October.

“This would take the policy rate to 4.75%, which we think puts BSP’s monetary stance slightly below its estimate of neutral. BSP continues to emphasize its assessment of the inflation outlook as the main driver of policy decisions,” it added

Source: Business World

IMF raises to 5.9% its 2026 Philippine economic growth forecast

The International Monetary Fund (IMF) has revised upward its 2026 Philippine economic growth forecast.

In its recent World Economic Outlook (WEO) report, the IMF said it expects the Philippine economy to grow by 5.9 percent next year, slightly higher than its previous projection of 5.8 percent.

For this year, the IMF forecasts the country’s gross domestic product to grow by 5.5 percent, which settles within the government’s 5.5 percent to 6.5 percent target.

Earlier this year, the IMF said the Philippine economy remains resilient despite external challenges and heightened policy uncertainty.

“The Philippine economy holds significant potential with a sizable demographic dividend and abundant natural resources. The government has been undertaking reforms to reduce infrastructure, health and education gaps, promote foreign direct investment, and diversify the country’s export markets,” IMF Mission Chief Elif Saxegaard earlier said.

“These reforms should be complemented by strengthening social protection programs, promoting digitalization, and increasing resilience to climate shocks and natural disasters.”

Source: Inquirer

S&P hikes PHL growth forecasts until 2027

S&P Global Ratings expects the Philippines to be the second fastest-growing economy until 2027, as it raised its growth projections.

In its Economic Outlook for Asia-Pacific, S&P Global Ratings said Philippine gross domestic product (GDP) will likely expand by 5.9% this year from 5.7% previously.

For 2026, it expects Philippine GDP to grow by 6% from 5.9% previously.

S&P Global Ratings now projects Philippine GDP growth at 6.6% in 2027 from 6.4% previously.

Based on S&P’s latest projections, the Philippines and Vietnam will post the second-fastest expansion in Asia-Pacific this year until 2027.

India is expected to lead the region, as its GDP is projected to grow by 6.5% this year, 6.7% in 2026 and 7% in 2027.

For 2028, S&P Global Ratings said Philippine GDP will likely expand by 6.5%, the third-fastest in the region after India (6.8%) and Vietnam (6.6%).

“(The) upward revision from our forecasts published in May was driven by the sharp reduction of bilateral tariffs between the US and China, which came after the pause in the country-specific ‘reciprocal’ tariffs by the US. These somewhat reduced the downsides around global trade and growth,” S&P Global Ratings Senior Lead Economist Vincent Conti said.

US President Donald J. Trump announced higher reciprocal tariffs on most of the country’s trading partners, with Philippine goods facing the second-lowest rate in Southeast Asia at 17%.

However, the reciprocal tariffs have been paused for 90 days until July. A baseline 10% tariff remains in place.

“We nevertheless expect global trade uncertainty to be substantially higher than before January, and that would in turn provide a key headwind for investment in the Philippines,” Mr. Conti added.

S&P Global Market Intelligence Principal Economist Harumi Taguchi said the direct impact of the US tariffs on the Philippine economy is still “relatively smaller” compared with other Asia-Pacific economies.

“The magnitude of impact, including the indirect impact, depends on these scenarios. In any case, this tariff will slow global economic growth and disrupt the supply chain,” she said on Money Talks with Cathy Yang on One News.

Meanwhile, S&P Global Ratings sees the Philippines’ benchmark rate ending at 5% this year, which implies another 25-basis-point (bp) cut by the central bank this year.

“With inflation not a major risk, more focus on growth risks and external factors unlikely to significantly constrain monetary policy easing, we expect Asia-Pacific central banks to continue to cut policy rates,” it said in a report.

Last week, the Bangko Sentral ng Pilipinas (BSP) reduced the target reverse repurchase rate by 25 bps to 5.25% from 5.5% amid a moderating inflation outlook and weaker growth.

The Monetary Board’s remaining policy meetings this year are scheduled for Aug. 28, Oct. 9, and Dec. 11.

S&P Global also expects Philippine inflation to average 2.3% this year, within the 2-4% target. It also projects inflation to settle at 3.2% in 2026, 3.3% in 2027 and 3% in 2028.

The BSP forecasts inflation to average 1.6% this year, 3.4% in 2026 and 3.3% in 2027.

Source: Business World