Inflation to pick up until early 2026

Philippine inflation is projected to accelerate until the first semester of 2026 but will likely remain within the 2-4% target, the Bangko Sentral ng Pilipinas (BSP) said.

“That increase in the fourth quarter of 2025 and also the first half of 2026 is driven or could be driven mainly by statistical effects, as well as some of the anticipated adjustments of some of the utilities that we have seen,” BSP Deputy Governor Zeno Ronald R. Abenoja said during the BSP-ADB (Asian Development Bank) ASEAN (Association of Southeast Asian Nations) Economic Outlook seminar on Tuesday.

However, he said inflation may moderate from the second half of 2026 as global oil prices are projected to stabilize.

“After that, we think that the relatively stable oil prices in the international markets would help contain inflation pressures moving forward,” he added.

The BSP forecasts inflation to average 1.7% this year, before picking up to 3.1% in 2026. It sees inflation easing to 2.8% in 2027.

The ADB projects Philippine inflation to settle at 1.8% in 2025 and 3.2% in 2026.

“Overall, inflation continued to be relatively muted. And it’s not within the target; it’s below the target range so far for 2025,” Mr. Abenoja said.

For the first nine months, headline inflation averaged 1.7%. A BusinessWorld poll of 17 analysts yielded a median estimate of 1.8% for the consumer price index in October, within the central bank’s 1.4-2.2% forecast. The October inflation data will be released on Wednesday, Nov. 5.

Mr. Abenoja noted that the BSP’s inflation forecasts account for the monetary policy decisions aimed at managing inflation pressures.

Since August 2024, the central bank has lowered borrowing costs by a total of 175 basis points, bringing the policy rate to 4.75%.

“Although headline inflation could be up because of some supply-side shocks, the underlying pressures have started to come down, and that has been one of the factors that was considered in shifting to a more accommodative stance,” Mr. Abenoja said.

BSP Governor Eli M. Remolona, Jr. has remained dovish, signaling at least two more rate cuts until next year as they now see the nominal rate closer to 4%.

The Monetary Board will hold its last policy-setting meeting this year on Dec. 11.

Economic growth

On the other hand, ADB Regional Lead Economist James P. Villafuerte said the National Government’s higher budget allocation for infrastructure could help drive economic growth.

“In the Philippines, our main instrument for stimulus is actually the increased national budget of around 5% allocated for infrastructure,” he said.

The 2026 Budget of Expenditures and Sources showed that the government’s infrastructure spending program for next year is set at P1.51 trillion or 5.3% of the gross domestic product (GDP).

“Social services in the Philippines have also received substantial support, such as funding for education, healthcare, and social programs like the 4Ps (Pantawid Pamilyang Pilipino Program) and also the new Walang Gutom food voucher initiative by President Marcos,” Mr. Villafuerte added.

The ADB projects Philippine GDP growth at 5.6% this year, within the government’s 5.5-6.5% goal. This also positions the Philippines to be the second-fastest economy in the region, after Vietnam which is projected to grow by 6.7% this year.

Mr. Villafuerte said Vietnam and the Philippines are the “industrial and trade powerhouses” in ASEAN.

For 2026, the ABD expects the Philippine economy to grow by 5.7%, lower than the government’s 6-7% target. Still, the Philippines is likely to be the second-fastest in the region behind Vietnam’s 6%.

Meanwhile, the BSP said the Philippine banking system’s solid performance remains one of the economy’s buffers against global trade woes and financial market volatility. 

“The banking system, if you look at the balance sheet, [banks] continue to be solid, they continue to expand… Overall, the Philippine banking system continues to be effective and they’re supportive of domestic economic activity,” Mr. Abenoja said.

However, he noted that the government still has to employ the proper policy mix to manage emerging domestic and global headwinds. 

“The environment continues to be challenging. The sand dunes continued to shift if you look around in our policy environment,” Mr. Abenoja said. “And at this time, we have to rely on robust policy frameworks to make sure that we remain vigilant and agile (and that) we are well informed.” — Katherine K. Chan