December BSP cut almost certain after Q3 GDP miss

THE BANGKO SENTRAL ng Pilipinas (BSP) is almost sure to deliver a fifth straight cut next month as the third-quarter gross domestic product (GDP) data showed the need for economic stimulus.

- Katherine K. Chan

“The soft inflation backdrop and weak third-quarter GDP print strengthens the case for reducing borrowing costs further to support domestic demand,” Moody’s Analytics Assistant Director and Economist Sarah Tan said in an email. “We expect a 25-basis-point (bp) cut in December.”

Ms. Tan said the weak growth seen last quarter was worrying as the slowdown came from sectors that typically drive expansion, like household consumption.

“Consumers remained cautious despite easing inflation and lower borrowing costs, suggesting that wage gains have not kept pace with price pressures in recent years, and that recent weather disruptions have encouraged households to build precautionary savings,” she said.

“The third-quarter GDP disappointment suggests BSP will need to move in December, regardless of any potential Federal Reserve moves,” Nicholas Antonio T. Mapa, chief economist at Metropolitan Bank & Trust Co., said in a Viber message “The below consensus print indicates that growth has been in need of support for some time.”

He said the BSP will likely lower benchmark borrowing costs by just 25 bps next month “given its preference for baby steps.”

Philippine GDP grew at an over four-year low of 4% in the third quarter, the government reported last week. This was sharply slower than the 5.5% expansion in the second quarter and the 5.2% clip in the same quarter in 2024.

This was also significantly lower than the 5.3% median estimate in a BusinessWorld poll of 18 analysts and economists.

Officials attributed the weakness to increased cautiousness in government spending amid a corruption scandal involving state infrastructure projects, which they said also affected consumer and investor confidence.