BSP rate cut: Growth drivers will defy risks

The Bangko Sentral ng Pilipinas’ (BSP) decision to trim its key policy rate by 25 basis points to five percent, the lowest in nearly three years, has been met with cautious optimism from both regulators and the business community, with signals that further action may still be on the table should economic weakness persist.

BSP Governor Eli Remolona said the Monetary Board’s latest move has placed rates in what he described as a “sweet spot” for both inflation and growth, but stressed that future decisions would depend heavily on incoming data.

“If the numbers stay the way they are, then we won’t need another rate cut. But there are signs of weakness, for example, the Purchasing Managers Index, which indicates some softness. If that weakness materializes, then there’s room for one more rate cut,” Remolona explained.

The governor noted that global trade risks — particularly higher US tariffs and other geopolitical frictions — remain the primary external threats, even as domestic demand has shown resilience.

He added that while supply-side shocks, such as higher electricity rates and food prices, are beyond the BSP’s direct control, monetary policy can mitigate their spillover effects. Inflation, meanwhile, is projected to remain below 2 percent for the rest of 2025, before edging up to 3.3 percent in 2026 and 3.4 percent in 2027.

On the corporate front, conglomerates are seeing opportunities from both the rate cut and broader economic fundamentals. Frederic DyBuncio, president and CEO of SM Investments Corporation (SMIC), said the lower cost of money adds to a favorable backdrop of cooling inflation and more vigorous consumer activity.

“Inflation is down. Unemployment is also down to about 3.7 percent, which means that people have disposable income. The Philippines is a very consumer-driven economy, and as the economy continues to grow about 5.5 to 6 percent, each of those spending will benefit the whole SM Group’s businesses,” DyBuncio said.

Broader expansion push

SMIC, whose core businesses span retail, property, and banking, is also betting on provincial expansion, logistics, and renewable energy as the next growth frontiers.

DyBuncio cited rising demand in provincial areas fueled by outsourcing jobs and growing disposable income, alongside new opportunities in data centers and clean energy.

“The data center business is just starting in the Philippines. One of the major issues is power cost, but as renewable energy grows, we can be more competitive in attracting hyperscalers. At the same time, our geothermal assets position us well to contribute to sustainability targets,” he added.

DyBuncio also emphasized the importance of infrastructure and foreign investment in sustaining the country’s growth momentum, particularly in unlocking its tourism potential.

While the BSP keeps the door open for another policy adjustment, both monetary authorities and business leaders agree that the balance between global headwinds and domestic resilience will shape the economy’s trajectory in the months ahead.

“It’s going to depend on the data, as usual,” Remolona said when asked about the likelihood of one more cut this year.