Philippine Economy Positioned for Potential Rate Hikes, BSP Chief Says

The Philippine economy is reportedly resilient enough to absorb additional interest rate hikes if inflationary pressures necessitate such measures, according to Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. In a recent briefing, Remolona noted that the real interest rate remains negative, with inflation reaching 6.8 percent as of May, exceeding the current policy rate of 4.75 percent.

Remolona stated that the BSP's Monetary Board has already implemented two rate increases this year, the latest being a 25-basis-point hike last month. When questioned about the potential for further increases, he emphasized that future decisions would not rely solely on inflation figures. "Our formula doesn’t only take inflation into account. It also includes growth," he explained.

“Our formula doesn’t only take inflation into account. It also includes growth.”Eli Remolona Jr., Governor, Bangko Sentral ng Pilipinas

Looking ahead, Remolona expressed optimism about economic growth accelerating in the latter half of 2026, attributing earlier sluggishness—recorded at a below-target 2.8 percent in the first quarter—primarily to restrained public spending. This restraint stemmed from heightened scrutiny over flood-control projects. He remarked, "The problem this year is the government spending," but indicated that a catch-up spending program should facilitate the restoration of public expenditure levels.

“The problem this year is the government spending.”Eli Remolona Jr., Governor, Bangko Sentral ng Pilipinas

Moreover, Remolona anticipates that economic growth will surpass 3.0 percent in the second half of the year, bolstered by the country’s robust economic fundamentals, which he believes will enhance investor confidence and benefit ordinary Filipinos. "We have good fundamentals in place. So we can build on that," he stated, emphasizing the need to sustain growth and address issues of inequality and poverty.

In a related briefing, Socioeconomic Planning Secretary Arsenio Balisacan projected that the economy must grow by 3.7 percent in the upcoming quarters to meet the lower end of the revised 2026 growth target range of 3.5 percent. Balisacan noted, "For the three quarters, for us to achieve the 3.5 target for the year, the average for the last three quarters must be 3.7 percent." He further elaborated that to reach a more ambitious goal of 4.5 percent, the average growth for the last three quarters would need to be 5.07 percent.

“For the three quarters, for us to achieve the 3.5 target for the year, the average for the last three quarters must be 3.7 percent.”Arsenio Balisacan, Secretary, Socioeconomic Planning

The interagency Development Budget Coordination Committee recently adjusted the 2026 growth target to a range of 3.5-4.5 percent, down from the previous estimate of 5.0-6.0 percent. However, the committee aims for a more robust annual growth of 5.0-6.0 percent from 2027 to 2030.