The anticipated further reduction in interest rates will support this year's robust Philippine economic expansion, according to the think tank Capital Economics.

"We expect growth to remain relatively strong in 2025, helped by policy loosening from the central bank," Capital Economics senior economist Gareth Leather and assistant economist Harry Chambers said in a Feb. 26 report.

The think tank expects gross domestic product (GDP) to grow by six percent this year, at the lower end of the government's more ambitious target range and faster than last year's disappointing 5.6 percent.

The Philippines' economic growth for this year is seen by Capital Economics to be among the fastest in emerging Asia, after its forecasted 7.1 percent for Vietnam and 6.5 percent for Bangladesh.

While the Bangko Sentral ng Pilipinas (BSP) paused from monetary policy easing this month mainly due to global uncertainties, Governor Eli M. Remolona Jr. has signaled to cut the key interest rate by at least 50 basis points (bps) this year, from the current 5.75 percent.

But Capital Economics is standing pat with its forecast that the BSP will slash borrowing rates by 100 bps to end 2025 with an overnight rate of 4.75 percent.

"We expect them [the BSP] to resume their easing cycle soon," it said. The next decision of the BSP's Monetary Board on the policy stance will be in April.

The think tank has also forecasted the central bank to maintain the policy rate at the projected end-2025 level throughout 2026.

"Inflation in the Philippines fell slightly in January and sits comfortably within the BSP's two- to four-percent target range. We expect inflation to stay within target this year," Capital Economics said.

It earlier estimated headline inflation in the country to average 3.2 percent this year, similar to last year's rate of increase in prices of basic goods and services.