Singapore-based DBS Bank Ltd. expects the Bangko Sentral ng Pilipinas (BSP) to deliver deeper cuts to its key borrowing rate, bringing it down to four percent by the first half of 2025, as the economy’s lackluster performance is likely to cast a long shadow into 2026.

In a Jan. 27 report, DBS slashed its full-year 2025 gross domestic product (GDP) growth forecast to 4.7 percent from a previous estimate of 5.3 percent—both of which still fall short of the government’s target of at least 5.5 percent.

Citing a combination of domestic and external headwinds, the Singaporean lender expects the economic slowdown seen in the third quarter to persist through the remainder of 2025, penciling in only a marginal pickup to 4.2-percent growth in the fourth quarter from the revised 3.9 percent during the July-to-September period, a separate Jan. 23 report showed.

DBS pointed to the impact of destructive typhoons, corruption issues tied to flood control projects, a slump in government spending, and the effects of United States (US) tariffs.

“The impact of these developments is expected to spill over into 2026, marked by slower disbursements toward public infrastructure projects, accompanied by cautious private sector commitments,” DBS senior economists Han Teng Chua and Radhika Rao wrote in a commentary.

DBS anticipates a modest pickup in GDP growth to five percent this year, but such a pace is expected to plateau through 2027. Similarly, the policy easing cycle that began in August 2024 is projected to remain unchanged through 2027, with the policy rate at four percent.

“Our baseline projection is for one more [25-basis-point (bp)] cut beyond February to the neutral rate of four percent to address downside risks to growth,” DBS said. The BSP’s first monetary policy meeting in 2026 is scheduled for Feb. 19.

For the lender, the BSP’s “dovish” tone—compounded by downside risks to growth and a negative output gap, or the difference between the economy’s potential and actual output—would likely prompt the policy-setting Monetary Board (MB) to keep the door ajar for further easing.

Meanwhile, dovish signals are expected to put pressure on the peso, prompting the central bank to likely intervene in the foreign exchange (forex) market to prevent further currency weakness from stoking inflation. Recent data show the peso has regained some ground against the US dollar after recent slumps.

DBS also warned that the government’s spending plans “might be deferred by the ongoing corruption scandal and related allegations.”

Infrastructure spending plunged by 40 percent in October to ₱65.9 billion from ₱110 billion a year earlier. For the first 10 months of 2025, total capital outlays fell by 13.7 percent to ₱943 billion, a contraction of roughly ₱149.4 billion from the ₱1.09 trillion recorded in the same period in 2024.

Other foreign financial institutions have also priced in an underperforming Philippine economy in 2025.

For its part, Dutch financial giant ING said it expects GDP growth to barely improve to 4.1 percent in the fourth quarter.

“This would reflect a deeper decline in government spending and further weakness in consumption, as indicated by softer retail sales and slowing credit growth during the quarter,” ING said.