BSP to reassess view on economic rebound after weak GDP data

DUMAGUETE CITY — The Bangko Sentral ng Pilipinas (BSP) is withholding judgment on a potential economic rebound in the second half of 2026 following the release of weaker-than-expected gross domestic product (GDP) growth figures last year.

Speaking to reporters on Sunday, BSP Governor Eli M. Remolona Jr. said the central bank is reassessing its earlier outlook for a possible bounceback later this year, reiterating its data-driven approach to policy decisions.

“We expected growth to recover by the second half of 2026. We’re looking to revise that. I hope not downwards,” Remolona said.

“We are still analyzing Q4, why we were wrong for Q4,” he added.

Below target

The Philippine Statistics Authority (PSA) reported that full-year GDP growth for 2025 settled at 4.4 percent, significantly below the government’s 5.5 to 6.5 percent target range.

Remolona said BSP data at the time pointed to 4.6 percent growth for the year, citing weakened investor confidence and a contraction in public infrastructure spending following the floodgate corruption scandal.

Fourth-quarter GDP growth likewise fell sharply to 3.0 percent, down from 3.9 percent in the previous quarter. The PSA noted that a steep pullback in government construction spending weighed heavily on output, with construction activity contracting 42 percent year on year in the fourth quarter, contributing an estimated 1.1 percentage-point drag on GDP.

Optimism

In early December last year, Remolona previously expressed optimism about an economic rebound in the middle of 2026.

“I think we all agree that for 2025, growth will be slow. We think maybe 4 percent, between 4 percent and 5 percent, but the recovery should start by 2026, maybe middle of 2026, and then we should be back on track by 2027,” Remolona said.

On Sunday, Remolona confirmed that the slowdown was largely driven by the decline in public sector investment, adding that BSP data showed relatively resilient private sector performance despite reduced government spending amid ongoing investigations into anomalous flood control projects.

“When we look at all this information, what happened in Q4 was primarily a public sector slowdown in activity,” he said.

“And what we realize is that some or a lot of the indicators that we use are able to capture private sector activity. And if you parse through the GDP data, private sector, there’s some slowdown but not as bad,” he added.

Another rate cut possible

Asked about the possibility of another rate cut at the Monetary Board’s 19 February meeting, Remolona said the option remains open.

“Pwede [It’s possible],” he said. Remolona added the BSP is now closely examining whether the recent slowdown stems from demand-side or supply-side factors.

“Our tools operate on the demand side. Our tools don’t do anything on the supply side, so we have to analyze things very, very carefully,” he said.

The PSA is set to release January inflation data on Thursday, 5 February. Inflation remained below target in 2025, averaging 1.7 percent for the year. The BSP said on Friday that January inflation is expected to fall within the 1.4 to 2.2 percent range.

Subdued inflation gives the Monetary Board room to consider further easing, as lower interest rates can inject liquidity into the economy and stimulate demand.

“If we can help on the demand side and still keep inflation low, then of course we’ll help. Of course we’ll help, but it takes a lot of analysis,” Remolona added.