Nomura: BSP likely to stay dovish
The Bangko Sentral ng Pilipinas (BSP) is expected to stay dovish for longer, with Nomura warning that a widening flood control corruption scandal could cast a shadow over the country’s growth prospects.
In a note to clients, economists Euben Paracuelles and Nabila Amani of Nomura said the BSP would likely extend its easing cycle into next year, with a possible rate cut in December and in the first quarter of 2026 that would bring the benchmark rate down to 4.25 percent.
The economists said the central bank may be forced to act as the corruption probe deepens, potentially curbing government spending and delaying public projects.
“Based on patterns from past episodes, our scenario analysis shows that even under a mild case—where public capital disbursements slow only modestly as agencies grow more cautious—the impact on growth could still be significant in the near term,” Paracuelles and Amani wrote.
They warned that the fallout could be “quite severe” under more adverse scenarios, particularly if the scandal disrupts fiscal planning or delays passage of the 2026 national budget, now under deliberation in Congress.
Nomura’s caution added to growing concerns that the unfolding probe, centered on alleged misuse of funds in flood control projects, could drag confidence and complicate the Marcos administration’s infrastructure push.
Infra spending
The government aims to keep infrastructure investment at 5 to 6 percent of gross domestic product—spending seen as crucial to meeting the Marcos administration’s 5.5- to 6.5-percent growth target this year.
At its meeting this month, the Monetary Board voted to cut the benchmark interest rate by a quarter point to 4.75 percent, citing the need to shore up business confidence bruised by a deepening investigation into dubious flood control projects.
Governor Eli Remolona Jr. had said the “sweet spot” for the policy rate was now between 4 and 5 percent, adding that the central bank still had room to ease further—possibly as soon as December.
Remolona also previously said that the economic slowdown expected from the fallout of the flood control corruption scandal may prove to be “short-lived,” lasting only two to three quarters. The economy may “more than catch up” with lost momentum by 2027, he added.
Nomura expected the economy to grow by 5.3 percent this year and 5.6 percent in 2026, well below the official targets.
“A sharper global growth slowdown and a slower resolution of the corruption controversy that prolongs weak public sector spending pose downside risks to growth,” Paracuelles and Amani said.
