BSP projects Q4 growth to sink to 3.8%

Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. said gross domestic product (GDP) growth will likely contract to 3.8 percent in the fourth quarter of 2025 — a further slowdown from the third quarter’s 4.0 percent and a steep drop from the 5.3 percent recorded in 2024.

In an ambush interview Thursday at BSP headquarters in Manila, Remolona said the latest central bank data points to weaker fourth-quarter GDP amid the lingering effects of the flood control scandal.

“I believe our estimate is around 3.8 [percent],” he told reporters in Filipino.

The statement comes a day after the central bank announced a 25-basis-point cut to the Target Reverse Repurchase Rate (RRP), a key policy tool that influences market liquidity by allowing the BSP to buy securities from banks with an agreement to sell them back later.

Remolona said during Thursday’s press briefing that fourth-quarter growth was “weaker than expected,” a view he reaffirmed today with the release of a clearer figure.

“As you know, growth slowed more than expected, to 4 percent in the third quarter. Sentiment remains weak due to the corruption issue, as we can gauge from various sentiment indices. However, we expect a recovery in 2026 and 2027, partly due to previous rate cuts,” he added.

The 4.0 percent GDP result — the slowest since 2011 excluding the pandemic years — has been widely attributed to a sharp pullback in public construction tied to the flood control scandal and governance concerns facing the Marcos administration. Public infrastructure investment contracted by 26.2 percent in the third quarter, shaving about 1.3 percentage points from GDP.

To help counter weak demand, the Monetary Board has cut the RRP eight times since August 2024, totaling 200 basis points of easing. The policy rate now stands at 4.5 percent.

Remolona said Thursday that the BSP may be nearing the end of its easing cycle, noting that monetary policy typically takes one to two years to fully transmit its effects. However, when asked today whether another cut is possible at the Monetary Board’s next meeting in February 2026, he did not rule it out, stressing that future moves will depend on incoming data.

“Yesterday’s cut was due to a weakening economy and reduced demand, so our goal is to supplement demand,” he said in Filipino.

“However, if we [decide to cut by another] 50 [basis points] off-cycle, it will worsen the loss of confidence,” he added, warning that such a move could be interpreted as “desperate” by investors and further dampen market sentiment.

Remolona said the BSP will closely study the data in the coming months, and any follow-through easing would occur only during the Monetary Board’s February meeting.