Economists expect the Bangko Sentral ng Pilipinas (BSP) to resume easing policy rates this year to spur economic growth within the 5.5 percent to 6.5 percent target over the decade.

The outlook came after inflation slowed to 1.8 percent from 2.1 percent in February due to cheaper food and transport prices, according to data from the Philippine Statistics Authority.

The March level was also better than the BSP’s minimum target of 2 percent.

Union Bank of the Philippines chief economist Carlo Asuncion said the lower lender benchmarks, along with likely slower inflation rates, should boost household consumption.

Asuncion projects the BSP to ease its policy by 25 basis points to 5.5 percent on 10 April as inflation rates stabilize close to 2 percent.

“Heightened global trade uncertainties that have intensified with the rollout of the US reciprocal tariffs aggravate the risks to our local growth outlook since domestic demand is not as robust,” he said.

“If the BSP will not cut soon, we face prospects of prolonged high real interest rates that could further dampen production and investments,” Asuncion continued.

With the BSP policy rate of 5.75 percent, household consumption in the fourth quarter of last year slowed to 4.7 percent from 5.2 percent in the third quarter, according to national statistics.

As a result, economic growth last year crawled to 5.7 percent from 5.6 percent in 2023 and was lower than the government target of 6 percent.

As the BSP continues to implement the same policy rate, banks also moderated lending of production loans to firms at 11.2 percent in February from 11.8 percent in January.

Asuncion said inflation rates could remain low throughout the year, averaging at 2.2 percent or better than his previous estimate of 2.5 percent.

Given Trump’s high tariffs, he expects overall prices to peak at 2.6 percent from September to November.

For next year, Asuncion forecasts nearly 3 percent in average inflation.

Global bank Citi projects the BSP to cut rates further in August and December toward 5 percent. Citi also reduced inflation outlook to 2.2 percent this year from 2.6 percent but maintained 3.2 percent for next year.

Citi economist for Thailand and the Philippines Nalin Chutchotitham said the low inflation rates will be driven by higher volumes and prices of imports, including electronics, from other countries that will be avoiding the US tariffs.

“These could even put Philippines in a more advantageous position, exports have lagged ASEAN peers and missed out on the electronics upcycle, owing to a legacy product mix and import substitution amongst customers in China,” she said.

Growth to be sustained

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the country’s economic growth might stabilize within 5.5 to 6.5 percent in the next five to 10 years.

He said the big population of the young labor force should support robust consumption and attract foreign investments.

“The majority of the population of more than 113 million who are aged 15 and older have been working since 2015. This is among the fastest among the growing economies in ASEAN,” Ricafort said.

The economist added that the demand for workers in renewable energy and electric vehicles should help grow the economy.

“There is a resurgence in mining activities, especially for green minerals used in the global supply chain for batteries, electric vehicles, and renewable power,” Ricafort said.

To secure faster economic growth, he said the government and the private sector must closely collaborate to encourage more Filipinos to participate in industries related to STEM (Science, Technology, Engineering, Mathematics).

“More students need to take STEM courses to adapt to technological advancements, such as artificial intelligence,” Ricafort said.