Accommodating Growth Weakness: Balancing Support and Prudence

PHILIPPINES - In Brief 11 Nov 2025 by Diwa Guinigundo

---

The Philippine economy slowed markedly in the third quarter of 2025, expanding by only 4.0%, down from 5.5% in the previous quarter and 5.2% a year ago—well below the government’s full-year target of 5.5–6.5%. This clear growth deceleration, coupled with steady headline inflation at 1.7% in both September and October, strengthens the case for the Bangko Sentral ng Pilipinas (BSP) to sustain a monetary accommodation stance through late 2025 and possibly into early 2026.Yet, the inflation picture is more nuanced. While headline inflation—which captures both volatile (food and energy) and non-volatile items—has trended downward from 2.3% in October 2024 to 1.7% in October 2025, core inflation tells a different story. Though slightly easing to 2.5% from September’s 2.6%, it remains higher than 2.4% a year earlier and has stayed relatively firm in recent months, averaging 2.7% since August. This persistence reflects sustained price pressures in housing, utilities, communication, clothing and footwear, and personal care, even as food and fuel prices moderated with higher imports of grains and meat. Regional data reveal that inflation in the National Capital Region (NCR) quickened due to higher housing, water, and fuel costs, alongside rising service prices. Nonetheless, inflation for the full year 2025 is expected to remain within the BSP’s 2–4% target band, given the subdued 1.7% average for the first ten months. Seasonal holiday spending and remittance-driven demand could nudge prices up, but any uptick may be tempered by available monetary policy space—possibly leaving room for another rate cut. Still, caution is warranted. Mounting domestic political uncertainties, notab...