Weaker economic growth calls for more easing

A widening negative output gap could justify further monetary policy easing, the Bangko Sentral ng Pilipinas (BSP) said following the Philippine economy's weaker-than-anticipated gross domestic product (GDP) growth in the fourth quarter of 2024.

- By KEISHA TA-ASAN

"Right now, we have a kind of a negative output gap. We're growing at a little bit below capacity, and we need to assess whether the (GDP) number widens that gap," BSP Governor Eli Remolona Jr. told reporters on the sidelines of the BSP's 2025 Media Information Session yesterday.

The output gap, which measures the difference between actual and potential economic output, remains a key consideration for monetary policy. A negative gap suggests that the economy is underperforming, which could support the case for interest rate cuts, Remolona said.

"If the gap is widening, if it becomes more negative, then it would call for more easing," Remolona said. "But not by itself — we have to look at where inflation is and our position relative to the so-called Goldilocks rate."

When asked about the possibility of a rate cut on Feb. 13, Remolona confirmed it is under consideration: "It's on the table."