Amid tariff war-saturated global uncertainty and rising domestic prices, the potential for an inflation surge weighs heavily on the central bank's contemplated April 10 interest rate reduction.
Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. said in an interview with Bloomberg TV that the central bank remains in an easing cycle, hinting that a 25 basis point (bp) cut at the April 10 policy meeting stands a “good chance.”
Remolona said the BSP is “looking at somewhat more upside risk than downside risk” regarding inflation. February’s inflation rate was the slowest in five months, below the BSP’s 2.2 to 3 percent forecast.
He noted that rice prices are “no longer a risk” to inflation. “But there are factors like electricity rates and transportation rates that threaten to raise inflation.”
On a global scene, Remolona said the biggest external factor influencing the local economy would be the “befuddling uncertainty that we’re facing.”
Although adding a disclaimer to the degree, Remolona said the looming tariff war between trade giants would likely cause a spike in price increases, consequently dragging the economic expansion.
The Philippine economy is domestically driven, and the central bank chief said that the Philippines “consumes too much” relative to China, which is now looking to stimulate domestic consumption.
Alongside this, Remolona noted that the country saves “too little. So we're moving in the direction of higher quality investment.”
He said monetary policy—which the BSP unexpectedly paused in February—will “encourage more investment if it succeeds in stabilizing the economy at levels that are close to full capacity.”
“But other than that, there’s not much monetary policy can do with respect to sustained investment,” Remolona further said.
The country’s gross domestic product (GDP) stagnated at 5.6 percent growth in 2024 after a steep drop in the fourth quarter of the year.
As for the country’s investment trend, 2024 posted a sharp decline in the balance of payments (BOP) surplus. Taking off from this, the BSP projects this surplus to shift to a deficit this year and widen further next year.
This deficit would be attributed to a wider current account shortfall due to higher trade deficits and weaker revenues from services.