Faster growth boosts BSP interest rate cuts

While Philippine gross domestic product (GDP) growth showed relative strength in the second quarter, private-sector economists believe it is not strong enough to prevent the Bangko Sentral ng Pilipinas (BSP) from further reducing interest rates, as inflation is expected to remain soft and growth stagnant throughout 2025.

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“We do not think that the relative strength in [last Thursday’s] GDP growth data will deter the BSP from cutting rates further, as CPI [consumer price index] inflation remains on a strong downward trajectory,” Deepali Bhargava, regional head of research at ING Asia-Pacific, said in an Aug. 7 commentary.

Data from the Philippine Statistics Authority (PSA) showed that the Philippine economy expanded by 5.5 percent in this year’s April-to-June period, one-percentage-point (ppt) slower than the 6.5 percent recorded in the same period last year.

While this pace was significantly slower than last year’s, it remains higher than the first quarter’s 5.4-percent growth. This four-quarter-high economic growth also hit the lower end of the government's lowered growth target of 5.5 to 6.5 percent.