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The House of Representatives on Monday passed on final reading the proposed PHP 6.793-trillion national budget for 2026, concluding 62 days of deliberations marked by heightened scrutiny over a widening corruption scandal involving flood control projects.

Majority or 287 congressmen approved the revised budget bill that rechanneled the bulk of funding from numerous flood control projects under the Public Works department to priority sectors such as education, in a move aimed at strengthening human capital development.

Twelve congressmen voted against the measure, while two opted to abstain from voting.

“This budget cycle is unprecedented,” Nueva Ecija Rep. Mikaela Angela B. Suansing, who heads the House Appropriations Committee, told the floor. “We needed to navigate through complexities while implementing sweeping reforms in long-standing budget processes and traditions.”

Lawmakers deliberated on House Bill No. 4058 or the 2026 General Appropriations Act against the backdrop of the multibillion-peso flood control controversy, drawing in closer-than-normal scrutiny amid calls to make the budget process more transparent.

The 2026 spending plan, which was 7.4% higher than this year’s national budget, saw a select committee of lawmakers redirecting PHP 201.1 billion or 78.86% of the PHP 255 billion worth of funding originally intended for flood control infrastructure primarily towards education, food and healthcare sectors.

The House sub-committee on Budget Amendments Review last week finalized a PHP 56.6-billion increase in education sector funding under the proposed budget, bringing total allocations to a record PHP 1.28 trillion, Ms. Suansing said.

This includes a hike in allocation for the Education department’s new classroom funding by PHP 35.09 billion. “[This] will translate to around 25,200 new and rehabilitated classrooms,” said Ms. Suansing.

The sub-panel rechanneled about PHP 90.7 billion to the health sector, with the bulk of the funding going to the Philippine Health Insurance Corp. (PhilHealth) subsidy at PHP 60 billion, following last year’s controversy over the government’s pullout of funds from the state health insurer.

It also raised total health allocations by 28.3% to PHP 411.2 billion from the PHP 320.5 billion initially proposed by the Budget department. This includes a PHP 26.73-billion increase for medical assistance to indigent Filipinos.

Lawmakers increased agriculture sector funding by 22.46% to PHP 292.94 billion next year, as they sought to boost food security and improve programs aimed at helping local producers.

Changes include increased funding for the Agriculture department’s farm-to-market road projects by PHP 16.78 billion under the spending plan. Congressmen also raised allocations for financial aid to farmers to PHP 10 billion from the initial PHP 7 billion, which will benefit 1.43 million farmers, Ms. Suansing said.

Lawmakers also included a PHP 10-billion hike for the Labor department’s displaced-worker program, increasing it by 88.2% to PHP 22.14 billion next year.

Unprogrammed funds

At the same time, the lower chamber scrapped PHP 35 billion in unprogrammed appropriations intended for infrastructure programs, leaving only PHP 45 billion out of the PHP 80 billion originally allocated under the budget bill. This is under the bill’s Strengthening Assistance for Government Infrastructure and Social Programs.

“Congress has removed infrastructure from the list of allowable uses for unprogrammed appropriations… a move aimed at preventing potential misuse of these funds,” said Ms. Suansing.

She said foreign-funded infrastructure projects would only be eligible for standby funding, since the government must provide counterpart funding to support them.

“We cannot remove unprogrammed funding under foreign assisted projects because we cannot turn on our agreements at the international level,” she added.

Congressmen also adopted a proposal last week by Deputy Minority Leader and Mamamayang Liberal Rep. Leila M. de Lima to reduce Vice-President Sara Duterte-Carpio’s budget to PHP 733.2 million from the initial PHP 902 million, mirroring a cut made during last year’s deliberations.

“It seems that the rechanneling of the PHP 255 billion only reinforced ‘pork barrel’ politics,” AJ A. Montesa, an advisor at budget watchdog People’s Budget Coalition, said in a Viber message before the spending plan’s approval.

Mr. Montesa said the prioritization of funding for the government’s assistance programs for indigent Filipinos indicates that lawmakers are still intent on perpetuating patronage politics.

“While these programs are branded as ‘assistance’ for people in need, we must also confront the fact that they are largely driven by patronage and clientelism,” Mr. Montesa said.

“Congress should prioritize programs which are rules-based and rights-based, not those which are subject to the discretion of lawmakers and local politicians… these only serve to further entrench poverty and inequality,” he added.

While the reallocations signal a shift towards human capital development and are “commendable in principle,” much depends on whether the funds are spent efficiently and free from corruption, John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in a Viber message.

IBON Foundation Executive Director Jose Enrique “Sonny” A. Africa said the spending plan fails to provide sufficient funding for critical sectors, warning that it falls short of addressing economic challenges amid slowing growth.

“The budgets for education, health, housing and social protection are hyped as big, but are still very far below what the poor and middle-class need,” Mr. Africa said in a Viber message before the budget bill’s approval. “Agriculture, and especially small Filipino firms, are also left far behind.”

The government is targeting economic growth of 5.5-6.5% this year and 6-7% in 2026.

President Ferdinand R. Marcos, Jr.’s allies in the lower chamber likely moved to boost funding in education, health and agriculture as the government sought to ease discontent over the scandal involving infrastructure spending, said Arjan P. Aguirre, who teaches political science at the Ateneo de Manila University.

“These moves are just meant to ease the tension, meant to please the already disgruntled people,” he said in a Facebook messenger chat.

The budget bill still needs the Senate’s approval before heading to the bicameral conference committee, where conflicting provisions of both House and Senate versions will be reconciled. Once the final budget bill is ratified by Congress, it will be transmitted to Malacañang for signing by the President.

Majority Leader and Ilocos Norte Rep. Ferdinand Alexander “Sandro” A. Marcos III said the lower chamber will act on a proposal seeking to open the bicameral conference committee talks on the proposed budget to the public “as soon as possible.”

“Given the fact that the House has been prioritizing… the passage of the budget, we will make sure that once the… House has more time, we will be able to address the said resolution,” he told the House floor.

Budget watchdogs have urged lawmakers to open the joint congressional committee to public scrutiny, as the traditionally closed-door process has kept people in the dark about last-minute changes to the national budget. — Kenneth Christiane L. Basilio, Reporter

The Bangko Sentral ng Pilipinas (BSP) will likely deliver three more rate cuts until 2026 to support the economy amid an anticipated slowdown, Fitch Solutions’ unit BMI said.

“(T)he BSP is poised to frontload easing to support the economy,” BMI said in an Oct. 10 note. “As such, we now expect BSP to cut by 25 basis points (bps) at its final meeting in 2025 in December to 4.5% and by another 50 bps in 2026.”

The Monetary Board on Thursday delivered a surprise 25-bp cut, bringing the target reserve repurchase rate to 4.75%, the lowest in over three years.

BSP Governor Eli M. Remolona, Jr. had said weakening business sentiment and investor confidence amid the ongoing flood control corruption scandal led to the Monetary Board’s decision.

BMI said it expects the Philippine economy to grow by 5.4% this year, before slowing to 5.2% in 2026, citing weak business sentiment due to the corruption mess and trade uncertainty.

This is below the government’s 5.5-6.5% gross domestic product (GDP) growth target for this year and the 6-7% goal for 2026.

“Our 5.2% growth forecast for 2026 is well below the government’s target of 6-7%. For one, the US-Philippines trade deal, which leaves 19% tariffs on Philippine goods in exchange for none on American ones, will weigh on the trade balance in 2026,” BMI said.

“For another, business confidence is likely to remain weak amid graft concerns and unpredictable US trade policy.”

BMI said its projection of 50-bp rate cuts in 2026 “may seem a meek response to what will be two consecutive years of growth underperforming the pre-pandemic trend.” This would bring the policy rate to 4% in 2026.

“However, we note that the BSP has already cut interest rates by a total of 175 bps since the current easing cycle began in (August) 2024,” it said. “We therefore expect the BSP to ease at a more measured pace while allowing more time for the easing thus far to feed through.”

Mr. Remolona had also given clear signals that the BSP’s policy easing could continue in December and until next year. 

“Risks to our forecast are skewed towards further rate cuts in 2026. Further unravelling of the corruption scandal across other infrastructure projects beyond flood control projects could dampen business sentiment and widen the output gap,” BMI said.

“With inflation expectations remaining well-anchored, the BSP could prioritize the economy and implement more policy rate cuts in 2026.”

BMI expects inflation to end at 1.6% this year, slightly below the central bank’s 1.7% forecast.

For 2026, BMI sees inflation picking up to 3.5%, faster than the 3.1% projected by the BSP.

Meanwhile, BMI said the central bank has ample reserves to defend the peso, which saw a weak performance after the surprise cut on Thursday.

“The BSP has sufficient reserves to defend the currency,” BMI said.

Gross international reserves jumped to an 11-month high of USD 108.805 billion at end-September, from USD 107.1 billion in August. It is also equivalent to 7.3 months’ worth of imports of goods and payments of services and primary income, well above the three-month standard.

“Besides, there probably will not be more selling pressure on the peso due to a 25-bp cut in December,” it added, referring to the Monetary Board’s Dec. 11 meeting.

Last week, Mr. Remolona said they will only defend the local currency if its depreciation becomes inflationary.

The Philippine peso on Monday closed at PHP 58.245 versus the US dollar, slipping by half a centavo from its PHP 58.24 finish on Friday, Bankers Association of the Philippines data showed. — K.K.Chan

The Bangko ng Pilipinas (BSP) is expected to deliver two more 25-basis-point (bp) cuts until early next year following the central bank chief’s dovish comments, analysts said.

This came after the Monetary Board last week unexpectedly trimmed the key policy rate by 25 bps to a three-year low of 4.75%, a move that BSP Governor Eli M. Remolona, Jr. attributed to weakening business sentiment amid the widening flood control corruption mess.   

“We never bought into Mr. Remolona’s talk of a ‘sweet spot’ in August and, with corporate sentiment going from underwhelming to outright miserable, we reckon more monetary easing is in the pipeline until early next year,” Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco and Asia Economist Meekita Gupta said in a report.

“We still see a 25-bp cut in December and we’ve added an additional reduction in (the first quarter next year), taking the TRR (target reverse repurchase) rate to a terminal of 4.25%,” they added.

If realized, the policy rate of 4.25% would be the lowest in over three years or since August 2022 and would match the rate in September 2022.

Mr. Remolona had also signaled at least two more cuts at its December meeting and by next year, noting the BSP now sees the neutral nominal policy rate to be closer to 4% than their earlier projection of 5%. 

“BSP’s tone was decisively more dovish by suggesting that it sees scope for a more accommodative stance and that the output gap may be larger,” Nomura Global Markets Research analysts Euben Paracuelles and Yiru Chen said in a note.

Nomura likewise expects the BSP to bring borrowing costs to a terminal rate of 4.25% by the first quarter next year, but noted that they see “risks of more cuts next year if adverse scenarios play out.”

Meanwhile, Bank of the Philippine Islands (BPI) and MUFG Global Markets Research see the central bank’s policy easing potentially stretching until the first half of 2026.

“Further easing could be supported by several factors, including expectations that the (United States) Federal Reserve will also deliver additional rate cuts amid a more dovish composition of the FOMC (Federal Open Market Committee) once Chair (Jerome) Powell steps down in May 2026,” BPI Lead Economist Emilio S. Neri, Jr. said in a note.

Slower Philippine economic growth amid growing concerns over public infrastructure spending and disinflationary risks from China’s potential dumping could likewise give the BSP more room to cut, he added.

Last week, the Trade department warned China, which is facing high US tariff rates, might start diverting its goods to the Philippines. This move could lead to foregone revenues and slower inflation.

Mr. Neri expects the BSP to end its current easing cycle once the policy rate hits 4% next year.

“However, such aggressive easing could prove to be an overshoot, raising the risk of a sharp policy reversal later on once inflation accelerates,” he said.

“The possible continuation of BSP rate cuts could drive a rally in government bonds, led by the short end of the yield curve,” he added.

Meanwhile, MUFG Senior Currency Analyst Michael Wan said the central bank might also bring its reserve requirement ratio (RRR) to 4% from 5% by 2026. 

The BSP last reduced the RRR in February by 200 bps to 5%. RRR refers to the portion of a bank’s deposits held as reserves and cannot be lent out and is used to manage the banking system’s liquidity.

MUFG also noted that the Philippine central bank governor’s sentiments in the latest meeting reflect “somewhat less support” for the peso.

Mr. Remolona on Thursday said they will only defend the peso if it depreciates sharply to a point that it could become inflationary.

“For the PHP, these changes in forecasts imply somewhat less support for PHP from (a foreign exchange) perspective, but what will also matter for FX (foreign exchange) is the extent of growth slowdown, and also the resultant impact on key flow dynamics such as the current account deficit, FDI (foreign direct investment) inflows, and to a smaller extent portfolio flows,” MUFG’s Mr. Wan said. — Katherine K. Chan

Right-of-way (RoW) bottlenecks are stalling the rollout of official development assistance (ODA)-funded infrastructure projects, Asian Development Bank (ADB) Philippine Country Director Andrew Jeffries said.

“The problems that are ongoing — right of way, land acquisition and the like, are problems faced globally, that’s not a unique problem in the Philippines,” Mr. Jeffries told BusinessWorld on the sidelines of an event on Oct. 6.

He cited densely populated areas such as the Clark region through Metro Manila to Laguna, where the ADB-funded Malolos-Clark Railway, part of the North-South Commuter Railway (NSCR), is located.

“The government in particular is very adamant that progress be made quickly, and they’re anxious to show tangible results during this administration. We’re working hard with them to make sure that happens,” Mr. Jeffries said.

The acquisition of RoW from landowners for National Government infrastructure projects is mostly hampered by disputes over property valuation.

Department of Transporation (DoTr) Acting Secretary Giovanni Z. Lopez said the newly signed Accelerated and Reformed Right-of-Way Act (ARROW) as a key tool in resolving land acquisition issues. 

The agency also expanded its workforce, tightened coordination with the local government units for RoW acquisition.

“On the issue of right of way, I think we have to disabuse our mind that to consider right of way as parallel activity, it must be considered as the first priority when it comes to project implementation,” he said in a separate Philippine Development Forum panel on Oct. 6.

Republic Act No. 12289 or the ARROW law, which was recently signed by President Ferdinand R. Marcos, Jr., sought to streamline the land acquisition process to ensure the faster construction of key infrastructure.

This measure amended the existing law on government access or expropriation of land for infrastructure projects by clarifying provisions on subterranean or underground rights-of-way.

It covers roads, bridges, power and water pipelines, telecommunications facilities, airports, seaports, and irrigation projects, among others.

Mr. Lopez said it already resolved 75% of right-of-way issues for the Metro Manila Subway and expected to complete 95% by end-2025. The bulk of the project is funded by the ADB.

Nigel Paul C. Villarete, a senior adviser on public-private partnerships at the technical advisory group Libra Konsult, Inc., said the law will allow the government to streamline RoW acquisition process and speed up project implementation.

“The Accelerated and Reformed Right-of-Way Act surely helped in facilitating for faster and easier project implementation, but it retains restraints called for by the upholding of private rights,” he told BusinessWorld in a Viber message over the weekend.

Mr. Villarete said many land owners will resist but national interests should be upheld over private ones.

“Until we can amend our existing RoW law, our ODA will always be hampered by that,” Mr. Villarete said.

In the 2024 ODA Portfolio Review Report, the Department of Economy, Planning, and Development (DEPDev) also flagged the right of way acquisition issues along with procurement delays project design misalignment as among the ongoing challenges faced by implementing agencies.

The ADB was the second-biggest development partner of the Philippines, with USD 11.05 billion worth of 59 loans and grants, behind Japan at USD 13.32 billion.

ADB projects

In the same interview, Mr. Jeffries said the ADB is working on extending more support in Mindanao as it is funding connectivity infrastructure projects such as North-South Commuter Railway, Bataan-Cavite Interlink Bridge, and Laguna Bay transport.

“Going forward, we have further financing for some of these same large projects, but we are working on more support in Mindanao. We have projects in the design stage for more connectivity in Mindanao,” he said.

The ADB is also looking at getting the board’s approval for support for the insurance sector and improving the business environment with technology.

“We have a support program for the insurance industry, which is much lower penetration in the Philippines compared to a lot of ASEAN (Association of Southeast Asian Nations) neighbors, and there’s a lot of elements to that,” the ADB official said.

“Insurance companies, you know, people pay them premiums to insure health or other life or other kinds of risks. Insurance companies need to invest that money, and in a lot of countries it’s a source of funding for infrastructure,” he added.

ADB approval for the PHP 400-million Insurance Reform Program Subprogram 1 project is still pending. The Insurance Commission is the implementing agency. — Aubrey Rose A. Inosante, Reporter

The Bangko Sentral ng Pilipinas (BSP) unexpectedly slashed its policy rate by 25 basis points (bps) for a fourth straight meeting on Thursday, citing a weakened economic outlook and declining investor confidence amid a widening corruption scandal. 

The Monetary Board reduced the target reverse repurchase rate by 25 bps to 4.75%, the lowest in three years or since September 2022.

Rates on the overnight deposit and lending facilities were also lowered by 25 bps each to 4.25% and 5.25%, respectively.

“The Monetary Board… noted that the outlook for domestic economic growth has weakened. This outlook reflects in part the impact on business confidence of governance concerns about public infrastructure spending,” it said in a statement.

The rate cut came as a surprise as most analysts expected a pause in monetary easing. Only six out of 16 analysts polled by BusinessWorld last week predicted a 25-bp cut.

The central bank has now lowered borrowing costs by a total of 175 bps since it began its easing cycle in August 2024.

After the BSP’s announcement, the peso fell by 28.5 centavos to close at PHP 58.235 versus the dollar on Thursday from its PHP 57.95 finish on Wednesday, Bankers Association of the Philippines data showed.

The Philippine Stock Exchange index fell by 0.67% to close at 6,057.40 on Thursday.

“This decision reflects our latest economic conditions as well as judicious adjustments to our model. These adjustments reflect the new importance of business sentiment in light of the issues related to government infrastructure spending,” BSP Governor Eli M. Remolona, Jr. said during a briefing.

A corruption probe into anomalous infrastructure projects has embroiled government officials, including lawmakers, the Public Works department and contractors. They are accused of pocketing millions of pesos in government funds meant for flood control projects, prompting widespread anger among citizens.

Mr. Remolona said the corruption scandal has weakened business sentiment and in turn, weighed on the economic growth outlook in the near term.

“Governance concerns on public infrastructure spending have weighed on business sentiment. The stock market has declined, and there are now fewer companies with expansion plans,” Mr. Remolona said.

“We need a credible resolution to this issue.”

The BSP kept its gross domestic product (GDP) growth forecast for this year at 5.5%. If realized, GDP would be at the lower end of the government’s 5.5-6.5% growth target.

It expects economic growth to pick up to 6% in 2026, at the low end of the government’s 6-7% goal.

BSP Deputy Governor Zeno Ronald R. Abenoja noted that there is a “greater probability” that the country’s economic growth will fall short of the target.

“There could be some adjustments later on, but we want to better understand how the National Government and the business community respond as this crisis evolves,” he said.

Mr. Remolona said investments not going where they are supposed to go has caused the economy to underperform, leading to a wider-than-expected output gap.

“As the extent of the issues related to infrastructure spending became clear, our estimates of the output gap needed to be recalibrated. We now think the gap is wider than we thought,” he said. “All in all, we see more scope for a more accommodative policy… We have more wiggle room than before.”

Asked if developments in the country now outweigh external factors, Mr. Remolona said: “The external factors are still there. They’re still affecting our outlook. But I do think that these governance issues are a bigger factor for now.”

The Monetary Board also noted indications of “moderating demand” that reflect “lingering uncertainty from the external environment.”

More rate cuts

Meanwhile, Mr. Remolona said there could be another rate cut at the next policy meeting in December, adding it is possible there could be further easing next year.

“The favorable inflation outlook and moderating domestic demand provide room to further support economic activity,” the BSP said.

Mr. Remolona said that the nominal rate could settle between 4% and 5%.

The central bank also said inflation remains “quite benign,” but potentially higher electricity rates and increased tariffs on rice imports pose limited inflationary pressures.

It lowered its inflation projections for next year to 3.1% from 3.3% and for 2027 to 2.8% from 3.4%.

Inflation picked up to a six-month high of 1.7% in September due to costlier vegetables and fuel, but was still below the 2-4% target. This brought the nine-month average to 1.7%.

Analysts expect the Monetary Board to deliver another 25-bp cut in December to bring the rate to 4.5% by yearend.

Nicholas Antonio T. Mapa, chief economist at Metropolitan Bank and & Trust Co., said in a Viber message that the latest cut reflects BSP’s efforts to support “moderating economic growth momentum” ahead of the third-quarter GDP report.

“Given the rather dovish statement, we retain our (December) rate cut call with (the BSP) possibly taking rates to 4.5% by end 2025. The focus is growth while inflation dynamics allow them to work back aggressive rate cuts from the post pandemic,” he added.

Third-quarter GDP data will be released on Nov. 7.

“Our core view now is that the Board will cut again at the next meeting, to a terminal level of 4.5%, given its decidedly more dovish October statement,” Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said.

ANZ Research said the subdued growth and inflation outlook gives the BSP room to deliver two more 25-bp cuts until the first quarter next year to bring the key policy rate to 4.25%.

“A tighter fiscal policy is not desirable at this stage of the business cycle when prospects for other growth drivers including exports and household consumption are also not robust,” ANZ economist Arindam Chakraborty and Chief Economist Sanjay Mathur said in a report.

Meanwhile, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., noted that the latest rate cut brings the differential rate between the BSP and the US Federal Reserve to 50 bps, its narrowest yet.

The Federal Reserve’s current policy rate stands at the 4-4.25% range.

Mr. Ricafort likewise expects another 25-bp cut on Dec. 11, “essentially matching the total of (50 bps) additional Fed rate cuts for the rest of 2025 to maintain healthy interest rate differentials as well.” — Katherine K. Chan

The ASEAN+3 Macroeconomic Research Office (AMRO) maintained its Philippine growth projections for this year and next year, despite global trade uncertainties.

In its latest ASEAN+3 Regional Economic Outlook, AMRO said it sees the Philippine economy growing by 5.6% this year and 5.5% in 2026, unchanged from its July estimates.

If realized, the Philippines would be the second-fastest growing economy in the region until 2026, behind Vietnam which is seen to grow by 7.5% this year and 6.4% next year.

While the AMRO’s projection for 2025 was within the National Government’s 5.5-6.5% target but below the 6-7% goal for 2026.

AMRO Group Head and Lead Economist Runchana Pongsaparn said the Philippine gross domestic product (GDP) growth projection for 2025 and 2026 are slower than the 5.7% expansion in 2024.

“It’s partly because of the weaker export, just like in other countries in the region, where we expect that the impact of the US (United States) tariff is going to kick in towards the end of the year and next year,” she said in an online briefing on Thursday.

Since August, Philippine goods entering the US have been slapped with a 19% levy, the same rate imposed on the country’s neighbors Indonesia, Cambodia, Malaysia and Thailand.

Ms. Pongsaparn said they expect Philippine consumption to grow steadily on the back of slower inflation, a robust labor market and remittances.

Asked if the growing corruption scandal would have an impact on growth, Ms. Pongsaparn said the impact would be minimal if it is “short-lived.”

“In terms of the scandal, I think we would have to see to what extent it’s actually going to affect the wider economy because if the event is short-lived and then it does not severely affect the investment sentiment, then that could be contained and may not affect the growth forecast materially. So, we still wait and see the overall impact,” she said.

On the other hand, AMRO Chief Economist Dong He said public spending as well as public and private investments should shield the economy from risks surrounding climate and services exports.

“The Philippines, because of its geography, is quite exposed to climate risks,” he said. “So, infrastructure really has to be strengthened. Some of these issues with flooding have to do with the infrastructure.”

Mr. He also said that the Philippines should continue upskilling its workforce, especially in the age of artificial intelligence (AI).

“The Philippines is a very service-oriented economy… But look, in the age of AI, how do we operate these services? So, that would also require upskilling of human resources in terms of public investment and also private sector investment,” he said.

The think tank upwardly revised its growth outlook for the ASEAN+3 region to 4.1% this year from its earlier projection of 3.8%. It also raised its 2026 growth projection to 3.8% from 3.6% previously.

ASEAN+3 comprises the Association of Southeast Asian Nations (ASEAN) members plus China — including Hong Kong — Japan and South Korea.

AMRO said the better outlook came amid the region’s “robust first-half performance and stronger-than-expected export momentum.”

It also raised its GDP forecast for the ASEAN region to 4.6% this year from 4.4%; and 4.3% in 2026 from 4.2% previously.

However, AMRO noted that more protectionist policies, slower growth in major economies, more volatile global financial markets, and higher global commodity prices pose risks to the region’s economic growth.

It also said governments in the ASEAN+3 region should use a monetary-fiscal-macroprudential policy mix to support growth and be prompt in addressing potential risks from structural changes in the market.

AMRO added that it should also “deepen regional financial cooperation to help reduce vulnerabilities stemming from heavy resilience on the US dollar.”

Meanwhile, AMRO’s Philippine inflation estimates for 2025 and 2026 were also unchanged at 1.8% and 3.2%, respectively.

These are slightly higher than the Bangko Sentral ng Pilipinas’ forecast of 1.7% for this year and 3.3% for 2026.

For ASEAN+3, inflation is projected to average 1% in 2025 and 1.1% in 2026. For ASEAN alone, inflation is seen to settle at 2.5% this year and 2.8% next year.

“Well-calibrated policy mixes and strong fundamentals — including robust banking systems, deepening financial markets, ample foreign reserves, and available policy space — have provided critical buffers,” it said.

The think tank said the region’s inflation outlook provides central banks with room to be more accommodative in its monetary policy to support growth. — Katherine K. Chan