If trade shocks are left unchecked, they could potentially inflict greater damage on Philippine growth, compromising the country’s significant progress in recent years, according to a top official of the Bangko Sentral ng Pilipinas (BSP).

“In particular, trade shocks affect the capital stock of developing economies. Left unchecked, they can slow growth trajectories and erode decades of hard-won progress,” Zeno Ronald R. Abenoja, BSP deputy governor for the monetary and economics sector (MES), said during a policy forum on navigating United States (US)-imposed reciprocal tariffs.

“Today, unprecedented policy shocks are fueling a befuddling kind of uncertainty,” Abenoja said.

About two months after US President Donald Trump slapped a 17-percent reciprocal tariff on Philippine exports, local leaders are still in negotiations with the US.

“Monetary policy alone cannot fully shield the economy from the repercussions of these shocks,” Abenoja said.

BSP Governor Eli M. Remolona Jr. had said that “unfortunately,” monetary policy does not have the tools for those trade shocks. He earlier warned that trade shocks are more damaging than supply shocks, which monetary policy is not equipped to address.

Meanwhile, “broader, coordinated strategies would indeed help,” Abenoja noted. “Fortunately, the Philippine economy is now well-positioned to manage inflation.”

April inflation stood at 1.4 percent, the slowest in over five years, or since November 2019. It also fell within the lower end of the BSP’s forecast range of 1.3 percent to 2.1 percent.

Abenoja stressed that the softer inflation “gives us extra degrees of freedom to ease monetary policy, which in turn can support growth.”

To date, the central bank has reduced key borrowing costs by a total of 100 basis points (bps) to 5.5 percent from 6.5 percent before the easing cycle started in August last year. Remolona said last week that the BSP could cut further “maybe” by two more cuts. If realized, the key interest rate would settle at five percent this year.

The local economy accelerated by 5.4 percent in the first quarter of 2025, almost stagnant compared to the 5.3-percent growth posted in the fourth quarter of 2024, according to the Philippine Statistics Authority (PSA). The government blamed this sluggish growth on the 19.9-percent decline in net exports.

“The BSP stands ready to do what is necessary to keep inflation steady and maintain the country's macroeconomic stability,” Abenoja said.