By Katherine K. Chan, A reporter
THE PHILIPPINE ECONOMY can still received another rate hike as growth is expected to pick up again in the second half of the year, said the Bangko Sentral ng Pilipinas (BSP).
BSP Governor Eli M. Remolona, Jr. he said he hopes the gross domestic product (GDP) will grow to more than 3% in the last half of 2026 as the government increases spending.
Speaking to reporters on the sidelines of Monday’s event, he noted that the economy can still manage if the BSP extends its tightening cycle to deliver another 25-basis-point (bp) rate hike.
Asked if the economy can still withstand the rate hike, the BSP official said in a mixture of Filipino and English: “It’s possible, because 25 bps is small.
“If you take inflation out of that, it’s still low,” he added.
However, Mr. Remolona did not respond when asked how much room they still have for an additional 25-bp increase.
In the first quarter, the Philippines’ GDP growth slowed to 2.8% from 3% in the previous quarter and 5.4% last year, amid a war-driven energy shock and the lingering effects of last year’s flood control scandal.
The Development Budget Coordination Committee (DBCC) has already lowered its growth target for this year to 3.5-4.5% from 5-6% previously.
Mr. Remolona noted that the economy is still facing tight public spending due to flood control issues.
“The problem this year was the lack of money in the government. Therefore, we expect a strong recovery in the second half of the year. Because of the flood control (scandal) they are strict in spending money. But that might be fine in the second half,” he added.
As of May, government spending grew by 4.81% year-on-year to P2.6 trillion from P2.48 trillion last year. The DBCC has set a P6.46-trillion disbursement plan this year.
Mr. Remolona said the government should behave appropriately to help the economy develop in the period from July to December.
“The catch plan is that we start using what we should have been doing, what we should have spent if not flood control,” he said.
The BSP official said there should be a doubling of government expenditure in the second semester.
Despite the economic slowdown, the central bank ended its easing cycle in April to raise key borrowing costs for the first time in more than two years amid price pressures from the energy crisis.
Mr. Remolona said the Monetary Board’s decision came as they are using monetary policy to support growth while focusing on containing the risks of inflation.
Last month, the BSP introduced its second consecutive 25-bp rate hike to bring the benchmark rate to 4.75% as it flagged the effects of rising oil prices.
Mr. Remolona at the time said they still have a lot of room to tighten but will stick to a 25-bp hike unlessthe effects of the order price are even worse.
In May, headline inflation eased to 6.8% from a three-year high of 7.2% in April, bringing the five-month average to 4.5%.
In June, a BusinessWorld a survey of 18 analysts indicated that the headline may have continued to breach the BSP’s 2%-4% target as it yielded a median forecast of 6.6%.
The central bank sees inflation falling above its targets over the next three years to 6.4% in 2026, 4.5% in 2027, and 3.1% in 2028.
The Monetary Board is scheduled to hold three more policy reviews this year on Aug. 27, Oct. 22, and Dec. 17.
