Central banks in emerging markets, including the Bangko Sentral ng Pilipinas (BSP), will likely take a measured approach to monetary policy next year as global trade dynamics shift, according to S&P Global Ratings.

The credit grader said in a Dec. 17 report that its outlook for emerging market policy rates remains unchanged despite the United States (US) Federal Reserve’s decision this month to lower borrowing costs.

The Fed last week reduced its key interest rate by 25 basis points to a range of 3.5 percent to 3.75 percent to support employment and stabilize inflation at its two percent target.

In Manila, the BSP followed suit with its fifth rate cut of the year, lowering the benchmark rate to 4.5 percent from 4.75 percent. The move follows a sharp slowdown in the Philippine economy, which saw growth slump to four percent in the third quarter.

The country’s economy, as measured by the gross domestic product (GDP), expanded by an average of five percent over the first nine months of 2025, hampered in part by concerns over flood-control governance.

Since beginning its easing cycle in August 2024, the BSP has slashed borrowing costs by a cumulative 200 basis points from a peak of 6.5 percent. However, the aggressive easing has yet to fully stimulate the credit market.

“Despite significant monetary policy easing this year, credit growth in EM Asia is below trend,” S&P Global said.

Domestic lending data reflects this sluggishness. Loans from universal and commercial banks grew 10.3 percent in October, slowing from 10.5 percent in September and marking the weakest pace in 16 months. The slowdown persisted even as liquidity in the financial system expanded significantly.

BSP Governor Eli Remolona Jr. said the latest quarter-point reduction is intended to revive an economy struggling with a spending slump and dampened investor confidence.

The central bank has previously noted that the impact of rate cuts typically takes at least a year to fully filter through to the real economy.

S&P Global projects Philippine GDP will grow 4.8 percent this year, missing the government’s target of 5.5 percent to 6.5 percent. The ratings agency expects a recovery to 5.7 percent in 2026, with growth accelerating to 6.5 percent in 2027 and 2028.

While the Philippines is expected to gain momentum, S&P Global warned of a “modest slowdown” for emerging markets broadly in 2026 following a stronger-than-expected 2025.

The firm noted that trade performance will increasingly diverge, with tech and AI exporters in Asia outperforming while non-AI exporters face headwinds from higher US tariffs.