UPSIDE price risks remain a concern, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said, flagging inflation above the midpoint of the 2.0- to 4.0-percent target range as a “worry.”
“For me, I don’t mind too much if inflation falls below 3 percent or if it falls to 2 percent, falls to 1.5 percent; it’s OK for me,” the central bank chief told reporters on Wednesday.
“I worry more when it goes up beyond 3 percent.”
Inflation snapped a 10-month below-target run in January, rising to 2.0 percent from 1.8 percent at the end of last year.
Core inflation, which excludes select food and energy items, also picked up to 2.8 percent from 2.4 percent.
Remolona said the headline rate was expected to average 3.2 percent this year before falling to 3.0 percent next year.
BSP Deputy Governor Zeno Abenoja said inflation was expected to gradually approach 3.0 percent and could rise slightly above that in the second half of 2026 before easing back toward 3.0 percent and stabilizing around that level.
“I think what the governor is saying, [is that] the target is really 3 percent,” he said.
“There’s a threshold, and then personally, he’s thinking that it would be better to have it a little bit lower than the 3.0 percent rather than be on the upside,” Abenoja added.
Remolona reiterated the BSP position that the outlook for inflation remained benign and that expectations were well anchored.
“If we succeed with inflation, it should help growth,” he said. “[G]rowth has stalled, but recovery seems to be on its way.”
Gross domestic product (GDP) growth markedly slowed to 4.4 percent last year from 5.7 percent in 2025, missing the government target for a third straight year.
The slump has been traced to a massive flood control scandal that led to government spending cutbacks and weighed on consumer and business sentiment.
“The risk remains whether some kind of transfer of capital comes back or not, and I think it will,” Remolona noted.
“The government is beginning to make some progress in governance reforms. And so if that continues, we should have confidence back this year, sometime this year.”
Growth, Remolona said, had “stalled mainly because of a loss of confidence, especially in the second half of 2025... consumption of big-ticket items fell... investment also fell.”
A contraction in capital formation worsened to 10.9 percent in the fourth quarter from the 2.8-percent fall three months earlier. The full-year result was a 2.1-percent drop from 7.7-percent growth in 2024.
If not for the flood control scandal, Remolona said 2025 growth could have been at 4.7 percent at least — still below the 5.5 to 6.5 percent target.
Abenoja said GDP growth could be better this year as “interest rates have been coming down. Inflation has been low for some time, so it should eventually affect consumption and probably a little bit of investments.”
“As the governor said, confidence was a factor last quarter. There could be some early signs that confidence is coming back,” he added.
The BSP, which flagged a weaker economic growth outlook during its last two policy meetings, is expected to again cut key interest next week to shore up the economy.
HSBC Global Research economist Aris Dacanay last week said that while a Feb. 19 cut was likely, January’s inflation rise — particularly that for core inflation — “has made the path to further rate cuts tougher.”
