Malaysia-based Maybank Investment Banking Group stands in a more dovish position on the Bangko Sentral ng Pilipinas’ (BSP) still-ongoing policy easing, pricing in a deeper cut to four percent in 2026 amid a graft-crippled economy and tame inflation.

Maybank economist Azril Rosli told a virtual press briefing on Tuesday, Jan. 20, that he expects the BSP to continue its interest rate easing cycle with an additional two quarter-point reductions—one each semester—to bring the benchmark rate to four percent from the current 4.5 percent.

This comes against the backdrop of a gross domestic product (GDP) growth slump expected to persist in the near term, and consumer prices remaining well-contained. Previously expecting growth to clock in within higher targets, Maybank has now shifted to a more bearish tone.

Rosli massively lowered his 2025 growth assumption to 4.8 percent from 5.6 percent. Similarly, he sees Philippine output expansion slumping in 2026 to 4.9 percent from his previous forecast of 5.8 percent.

While the lender anticipates output growth to pick up in 2027, it would still fall short of the government’s lowered goal of 5.5 to 6.5 percent.

Kervin Sisayan, head of equity research at Maybank Securities Philippines, said that the Marcos Jr. administration’s introduction of its “big bold reforms” would likely have a negligible immediate impact on the lender’s 2026 growth assumptions, as “we’re still waiting for some of the concrete plans.”

As such, Maybank’s below-five-percent growth forecast for this year may not be revised. Sisayan argued that the “big bold reforms” will have an impact, but for longer-term growth.

Rosli stressed that achieving the upper end of the downscaled output growth goal for 2026—five to six percent—“will likely require swift and effective execution, rather than just policy announcements.”

Under these reforms, Rosli expects clearer policy guidance, more predictable regulations, and better collaboration between government and businesses, which is seen as boosting stalled private investments and speeding up project execution.

“These [reforms] could certainly help, particularly in infrastructure, energy, and other strategic industries, while also providing a meaningful boost to domestic demand in the second half of the year,” said Rosli.

Regarding his expected policy move from the BSP, Rosli said a deeper easing reflects the need for the monetary authorities to balance supporting the slowing economic growth, “with maintaining vigilance on emerging risks from the external trade outlook, as well as geopolitical tensions and tariff-related uncertainties.”

Inflation, meanwhile, is expected to gradually pick up to 2.2 percent in 2026 following a below-target 1.7-percent average in 2025. Maybank’s 2026 forecast, if realized, would bring the inflation rate back to the target band of two to four percent on the back of a fading base effect and stabilization of utility-related costs.

Flood control

Maybank believes the flood control fiasco has a “limited” impact on the domestic market and economy.

For one, the Philippines “has strong institutional processes, and impeachment proceedings follow a clear constitutional framework, helping to limit uncertainty and prevent policy disruptions,” Rosli said. “From an economic perspective, policy continuity remains intact.”

He explained that macroeconomic priorities such as inflation control, fiscal management, and infrastructure are guided by established institutions and medium-term plans rather than short-term politics.

As such, investor sentiment is expected to stay focused on fundamentals, supported by resilient domestic demand, stable inflation, and improving monetary conditions that cushion against temporary political uncertainties.

Even as the flood control saga continues to stretch further, the economist believes it will eventually be settled, fading in long-term development. It could put less pressure on the economy if the government succeeds in cleaning up the mess.

Interestingly, Maybank believes BSP easing could be a boon to the Philippine peso, with the local currency expected to hold steady against the United States (US) dollar. It expects the peso to trade at ₱58 per US dollar in the first quarter, despite the local currency’s recent slump.

Maybank even sees the peso appreciating to ₱57.5 per US dollar in the second quarter, before slipping back to the ₱59:$1 territory in the third quarter and closing the year at ₱59.5 against the greenback.

Rosli said that the persisting trade deficit could be blamed on a weakening peso, as it supports domestic demand for the US dollar.