The Bangko Sentral ng Pilipinas (BSP) is expected to deliver one more rate hike this year, according to S&P Global Ratings. This forecast implies just one more 25-basis-point rate hike this year.
The BSP raised its policy rate by 25 bps to 4.75% on June 18, its second rate hike this year. With three regular policy meetings left this year, there is still room for further monetary tightening.
S&P Global Ratings Senior Economist for Asia Pacific believes that modest further tightening is on the cards. The Philippines will end the calendar year at a 5% interest rate, according to the forecast.
The high interest rate, coupled with a roughly normal inflation level of around 3%, could weigh on domestic demand. This could trigger a downward revision to S&P's medium-term growth projection.
S&P has cut its growth projections for the Philippines to 4.1% this year from 5.8% previously. This is within the recently revised 3.5%-4.5% growth projections of the Development Budget Coordination Committee.
The Philippine GDP is expected to pick up to 6.2% in 2028 before easing slightly to 6.1% in 2029, according to S&P. A slowdown in private consumption and public infrastructure spending, as well as the energy shock, drove the lower growth forecasts for the Philippines.
However, S&P remains optimistic about the Philippines' long-term growth prospects. The country's favorable demographics, supply chain advantages, and special economic zone investment will support private investment and drive growth.
The BSP's tightening cycle could cushion the peso's weakening, despite the dollar gaining support from hawkish US Federal Reserve expectations. The scope for further weakness could be moderated should the BSP extend policy tightening.
The peso has depreciated to P61-per-dollar levels since the start of the war. However, the local unit gained 12 centavos to close at P61.17 a dollar from Friday's finish. The peso has depreciated by P2.38 or 3.89% from its P58.79 finish on Dec. 29, 2025.
Asian currencies will be pressured by the Fed's hawkish pivot. Expectations for a US rate hike in October amid sticky inflation and resilient labor market conditions will boost the dollar's strength.
