WEAK business and consumer confidence could blunt the impact of further interest rate cuts on Philippine economic growth, ANZ Research said.
“We are not certain at this stage whether growth in the Philippines will inflect for the better anytime soon,” it said in a commentary on Tuesday.
ANZ Research expects the Bangko Sentral ng Pilipinas to deliver one final 25-basis-point cut in its policy rate to support economic growth, which slumped to 4.4 percent last year from 5.7 percent in 2024.
However, it cautioned that weak confidence among businesses and consumers due to a massive corruption scandal may limit the effectiveness of easing to stimulate growth.
“We expect Bangko Sentral ng Pilipinas (BSP) to lower its policy rate by a final 25 bp, but weak confidence may restrict its impact,” ANZ said, adding that “a more expansionary fiscal stance is critical in the present environment.”
It noted that issues surrounding public infrastructure projects had led to a sharp slowdown in government capital spending and undermined confidence across the economy. The governance issues have not only delayed infrastructure outlays but have also dampened the willingness of companies to invest and households to spend.
Gross domestic product (GDP) growth slowed to 3.9 percent in the third quarter and 3.0 percent in the last three months of 2025 as the flood control scandal led to government spending cutbacks and weighed heavily on the economy.
Data from the Philippine Statistics Authority (PSA) showed that a contraction in capital formation worsened to 10.9 percent in the fourth quarter from 2.8 percent three months earlier. The full-year result was a 2.1-percent drop from 7.7-percent growth in 2024.
ANZ Research pointed out that fewer corporations were planning to increase investment while households had turned increasingly pessimistic about their economic prospects over the next 12 months.
It also noted that consumer confidence had fallen to levels even lower than those seen during the pandemic, highlighting the depth of concern among households.
The BSP’s latest Consumer Expectations Survey put the overall confidence index at -22.2 for the October-December period, down from -9.8 percent in the third quarter. It was also the lowest quarterly result since the -24.0 seen in the fourth quarter of 2021.
The central bank said the main reasons for the decline were “graft and corruption concerns, higher inflation, lower household income and unfavorable weather conditions, and other natural calamities.”
This loss of confidence has begun to show up clearly in economic data, with ANZ Research saying that GDP figures for the third and fourth quarters of 2025 reflected weaker contributions from both private consumption and private investment.
“We do not know how quickly public infrastructure spending can be revived,” it said. “As such, the emphasis on infrastructure spending is nascent, having been implemented from 2020.”
It recalled that the last major restructuring of public finances in 2001 resulted in a prolonged period of low and stagnant public spending, raising concerns that a similar outcome could occur if governance issues were not resolved swiftly.
“It is not clear whether this will be the case or a faster resolution of governance issues will occur,” ANZ Research said.
