Singapore-based Oversea-Chinese Banking Corp. Ltd. (OCBC) sees the Bangko Sentral ng Pilipinas (BSP) likely keeping its 4.5-percent key interest rate unchanged through 2026, despite the risk that the flood-control corruption controversy could continue to weigh on the economy.

“Our base case is for the BSP to remain on hold in 2026,” OCBC wrote in a commentary published last month. This reinforces the central bank’s latest signal that the monetary policy easing cycle is approaching its end.

While it sees growth potentially underperforming—especially in the first half of the year—the Singaporean bank maintained its forecast that local output would expand by 5.5 percent, settling at the midpoint of the downgraded government growth target of five to six percent.

It further expects the economy to remain steady at this rate through 2027.

Economic growth in 2025 fell to 4.4 percent as the country’s gross domestic product (GDP) expansion slumped in the second half of the year amid the eruption of the flood-control scandal and the consequent loss of consumer and business confidence.

In 2025, the Philippines’ growth trailed that of Indonesia (five percent), Singapore (five percent), and Malaysia (4.9 percent), but remained ahead of Thailand (two percent).

By 2026 and 2027, the Philippines’ projected growth suggests it will outpace most of its neighbors, including Indonesia (up to five percent), Malaysia (up to 4.2 percent), Singapore (up to 2.5 percent), and Thailand (two percent).

BSP Governor Eli M. Remolona Jr. earlier said the central bank is revisiting its rosier output growth assumptions for 2026 following the “worse than anticipated” moderation in the fourth quarter of 2025, when growth slowed to three percent.

Remolona said he expects the Philippine economy to gradually recover from the bruises inflicted by the flood-control mess. He has projected growth to settle at 5.4 percent in 2026, accelerating to around six percent in 2027.

While OCBC expects a “challenging” rebound in 2026, it added that “the risks are skewed to the downside as public sector spending will likely remain weak in the first half of 2026, with expenditures continuing to be scrutinized following the corruption scandals in 2025.”

Infrastructure spending plummeted in November 2025 as the Marcos Jr. administration curtailed funding releases for public works projects amid an intensifying crackdown on corruption in flood control programs.

Government outlays for infrastructure and capital projects sank 45.2 percent to ₱48 billion in November from ₱87.6 billion during the same month in 2024. This marked a deepening trend of fiscal restraint as the Department of Public Works and Highways (DPWH) faced heightened scrutiny over allegations of graft.

OCBC noted that should output growth continue to fall short of target, the BSP could trim another 25 basis points (bps) from the current rate. However, more than growth, the BSP has said it is mainly looking at price movements when deliberating its next policy move.

Inflation saw a sharp decline in 2025, dropping to 1.7 percent from 3.2 percent in 2024. This fell below the government’s two- to four-percent annual target band in the medium term. OCBC expects this trend to reverse over the next two years, with inflation rising to 2.5 percent in 2026 and three percent in 2027.