Amid slower economic growth and muted inflation, another 25-basis-point (bp) reduction in the key interest rate to 4.5 percent from the current 4.75 percent is widely expected next week, according to Dutch financial giant ING.

“Recent GDP [gross domestic product] numbers raise concerns that soft government spending could become a longer-term drag, weighing not only on fiscal outlays but also on business and private-sector sentiment,” ING Asia-Pacific research head Deepali Bhargava and greater China chief economist Lynn Song said in a Dec. 5 report.

To recall, third-quarter GDP growth fell to a 4.5-year low of four percent in the aftermath of the flood-control scandal, which tempered spending on public goods and services amid a corruption probe.

“While agriculture and private consumption are likely to rebound in the fourth quarter, investment and public spending may remain muted, keeping overall growth subdued,” ING said.

Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio M. Balisacan earlier this week conceded that the full-year GDP growth target of 5.5 to 6.5 percent can no longer be achieved, as fourth-quarter expansion would need to reach as high as seven percent.

Balisacan, the country’s chief economist, said maintaining the end-September average growth of five percent until year-end would be doable on the back of a Christmas holiday spending boost.

But ING has a more pessimistic view, slashing its 2025 growth forecast for the Philippines to 4.7 percent from 5.2 percent previously.

“This strengthens our call for a 25-bp rate cut by the Bangko Sentral ng Pilipinas (BSP) on Thursday,” said ING.

The Monetary Board (MB), the BSP’s highest policy-setting body, will tackle key interest rates when it meets on Dec. 11, its last monetary policy decision for 2025.

The Philippine Statistics Authority (PSA) reported on Friday, Dec. 5, that headline inflation eased to 1.5 percent in November, bringing the 11-month average to 1.6 percent, below the BSP’s two- to four-percent target range of year-on-year price hikes deemed conducive to economic growth.