‘More interest rate cuts loom on weak GDP, low inflation’

Analysts expect the Bangko Sentral ng Pilipinas (BSP) to deliver another round of policy rate cuts in December following the sharper-than-expected slowdown in economic growth and sustained low inflation.

- Keisha Ta-asan

Nomura analysts Euben Paracuelles and Yiru Chen said the slump in third-quarter gross domestic product (GDP) growth to four percent year-on-year from 5.5 percent in the previous quarter supports expectations of a BSP rate cut at its next policy meeting.

“We still expect BSP to cut by 25 basis points in December and in the first quarter, taking the policy rate to 4.25 percent,” Paracuelles and Chen said. “But we see a risk that it could deliver more in 2026.”

They said the economy’s loss of momentum reflects the impact of the corruption scandal that has dragged public spending and dampened consumer demand.

Public sector construction fell by 26.2 percent in the third quarter, while government consumption slowed to 5.8 percent from 8.7 percent. Household spending growth, likewise, eased to four percent from 5.5 percent.

Nomura noted that the fallout from the graft controversy “not only impacts growth via significant fiscal tightening but also generates negative spillovers on other components of domestic demand.”