Economy projected to grow by 6% as inflation eases

The Philippine economy is projected to grow by six percent in 2025, supported by moderating inflation and a more accommodative monetary stance, according to a forecast released by Standard Chartered Bank.

In a virtual briefing, StanChart economist and FX analyst Jonathan Koh said the bank’s 6.0 percent gross domestic product (GDP) growth estimate sits at the midpoint of the government’s official 5.5 to 6.5 percent target range.

“Growth at six percent is still possible for the year as the base effect is actually low,” Koh said. He added that steady private consumption is expected to contribute about four percentage points to the overall growth figure.

The bank estimates that second-quarter GDP expanded by 5.9 percent, faster than the 5.4 percent posted in the first quarter. Koh said the acceleration was despite some normalization in import activity after an election-related surge.

“Even if Q2 isn’t particularly strong, the base effects will help lift second-half growth above six percent,” he said.

On the inflation front, StanChart forecasts headline inflation to average 1.8 percent for the full year—well below the Bangko Sentral ng Pilipinas’ (BSP) 2.0 to 4.0 percent target band. The subdued outlook, the bank said, gives the BSP flexibility to reduce interest rates further.

Koh said the BSP could deliver a total of 75 basis points in rate cuts this year through three 25-basis-point reductions scheduled for August, October, and December. This would lower the policy rate to 4.5 percent from the current 5.25 percent.

“I’m a little bit more aggressive than consensus,” he said. “Growth is below potential and inflation is easing. That gives BSP space to cut.”

Koh cited declining prices of food, oil, and services such as rent and dining out as key contributors to the downward trend in inflation. He also noted falling global rice prices could help contain food inflation in the coming months.

However, the economist cautioned that any sharp depreciation of the peso against the US dollar could increase imported inflation and delay further rate cuts. Additional upside risks include potential electricity rate adjustments or wage hikes, although he said both appear limited for now.

In terms of investments and financial conditions, Koh said lower rates could support credit growth. Still, he noted that uncertainties both globally and domestically continue to weigh on business confidence.

The bank expects the peso to end 2025 at 57.50 against the US dollar, recovering from expected short-term weakness in the third quarter. Koh said seasonal remittances and an improved bond supply environment should help strengthen the currency later in the year.

Despite this, he acknowledged structural challenges remain. “The wide trade deficit and weak services exports continue to be headwinds to peso stability,” he said.