Remolona outlines BSP's economic outlook and policy transmission reforms
Bangko Sentral ng Pilipinas Governor Eli M Remolona outlined the economic outlook for the Philippines, highlighting achieved price stability but stalled growth. He also detailed the central bank's initiatives to enhance monetary policy transmission mechanisms.
Philippines' economy: Inflation eases, growth falters
BSP Governor Eli M Remolona presented a mixed economic outlook for the Philippines.
Inflation, which peaked at 8.7 percent in January 2023, has significantly declined to around 1 percent and is projected to hover around the 3 percent target over the next two years.
This achievement in price stability is particularly beneficial for lower-income households.
However, economic growth has stalled, with the adjusted rate for 2025 estimated at 4.7 percent, a decline attributed to a loss of confidence impacting consumption and public infrastructure spending.
Despite this, tentative signs of returning confidence are observed in supply chain manager surveys, declining government bond yields (10-year yield at 5.95 percent in February 2026), and a recovering stock market index.
The BSP projects a return to normal by the second half of 2026.
Financial resilience and policy toolkit upgrades
Governor Remolona highlighted the robust state of financial stability, noting banks' very high capital and liquidity buffers.
The Philippines also maintains ample exchange reserves, totaling US$112.5 billion, sufficient to cover eight months of imports.
He detailed efforts to enhance monetary policy transmission, particularly reforming the money market.
The central bank is facilitating a shift from the FX swap market to the more efficient repurchase (repo) market.
The Global Master Repurchase Agreement (GMRA) contract, introduced last year, has successfully encouraged banks to engage in repo transactions, with the repo market now approaching the size of the FX swap market.
This aims to create a more efficient money market.
Targeted reforms for a stronger toolkit
The speech reveals a central bank actively addressing structural issues in its financial markets to improve policy transmission.
While the economic outlook presents challenges, the focus on market infrastructure reforms suggests a pragmatic, long-term strategy.
These efforts, if successful, could significantly enhance the BSP's ability to manage future economic shocks and ensure price stability.