The Bangko Sentral ng Pilipinas could begin implementing monetary policy easing as early as December this year, according to analysis presented by a leading economist during a recent market briefing.
Economic Recovery Expected in 2026
Nicholas Mapa, chief economist and markets strategist at Metrobank, outlined during the bank's 2025 Market Movers series that the Philippines should anticipate a steeper yield curve and improved economic momentum by 2026. The event, which carried the theme "Trump, Tariffs, and the Terminal Rate: The New Global Order," brought together the bank's private wealth and corporate clients.
Mapa identified five key themes shaping the country's medium-term economic outlook. He projected that revived public construction projects combined with the delayed impact of monetary easing will serve as the foundation for a growth rebound next year.
While the current "fiscal freeze" - referring to the significant slowdown in government spending - continues to restrict near-term economic expansion, the economist noted that capital formation and investment activity show promising signs of recovery in 2026. This anticipated revival is expected to support stronger gross domestic product growth.
Inflation and Monetary Policy Outlook
After falling below the BSP's target range in 2024, inflation is forecast to climb back toward the upper limit of the two to four percent range by mid-2026. Mapa attributed this expected uptick to several factors including base effects, increasing global commodity prices, and potential tariff-related pressures originating from the United States.
Despite this projected increase, full-year inflation for 2026 is still anticipated to remain within the central bank's target range.
Mapa expects the BSP to maintain a dovish policy stance even as inflation approaches the four percent level, suggesting the central bank will prioritize supporting weak economic growth over aggressive inflation containment.
The central bank has already implemented substantial monetary easing throughout 2025, cutting a total of 175 basis points from its peak policy rate of 6.50 percent across five meetings. These reductions have brought benchmark rates down to 4.75 percent as of the October 9 meeting.
Financial Market and Currency Projections
With monetary easing already underway, the Philippine yield curve is expected to steepen significantly. Short-term interest rates are likely to decline further in anticipation of additional BSP rate cuts, while long-term yields may rise as the government shifts its borrowing toward 10-year maturities and inflation gradually increases.
Mapa also highlighted continuing pressure on the Philippine peso through 2026 and extending into 2027. Although a weaker US dollar could persist amid the Federal Reserve's own easing cycle, he noted that the Philippines' widening current account deficit will continue to exert downward pressure on the local currency.
"These factors together define the contours of the Philippines' economic landscape as we move toward 2026," Mapa concluded during his presentation. The briefing featured collaboration with Fitch-owned research firms CreditSights and BMI, which provided global macro and credit insights to complement the local economic analysis.
