‘RRR cut won’t boost economy’

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December 4, 2025 | 12:00am

MANILA, Philippines —   The economy is likely to face a tepid expansion next year, with growth seen settling in the mid-four percent range as weak investor sentiment and government spending cuts weigh on activity, according to the Bangko Sentral ng Pilipinas.

BSP Governor Eli Remolona Jr. said the central bank expects 2025 growth to land “maybe between four and five percent,” noting that the projection aligns with forecasts from the International Monetary Fund and private analysts.

“It looks like growth will fall in 2025, with a slight recovery in 2026, and then a stronger recovery by 2027,” Remolona told reporters.

“Part of the decline in 2025 is because the government also cut its spending in order to review the flood control projects and other projects. But the main reason is probably the loss of confidence by investors,” he said.

Meanwhile, a reduction in banks’ reserve requirement ratio (RRR) is also under consideration, although Remolona tempered expectations.

“Yeah, it’s on the table. It’s already very low, so a further cut won’t do that much (to growth). It’s already at five percent, so when you go from five percent to, say, two percent, that’s not a lot when it comes to the reserve requirement. But still, it might help,” Remolona said.

While the BSP’s long-term vision is to eventually bring the RRR to zero, Remolona said the timing remains uncertain.

“At present, we still have too much liquidity in the system. A cut in the reserve requirement will add to that liquidity. So we want to absorb the liquidity before we (cut),” he noted.

Earlier in March, the BSP lowered the RRR for big banks by 200 basis points to five percent from seven percent. The RRR for digital banks was likewise slashed by 150 basis points to 2.5 percent from four percent.

The level of deposits mid-sized or thrift banks are required to keep with the BSP was also lowered by 100 basis points to zero percent from one percent.

Despite the projected slower growth, the BSP chief pointed to signs of improving sentiment.

“The stock market has recovered, so that kind of shows that confidence is coming back. S&P Global Ratings reaffirmed our positive outlook, which means we’re still on track for an upgrade in our ratings,” Remolona added.

Asked whether the weaker outlook has increased the likelihood of a policy rate cut this month, Remolona acknowledged that the odds have risen but stressed that “it’s not assured.”

He declined to comment directly on how the latest growth figures affect the December decision.

The Philippine economy grew by just four percent in the third quarter, slower than the previous quarter’s 5.5 percent expansion and the 5.2-percent growth posted in the third quarter last year.

It marked the lowest growth since the 3.8-percent contraction in the first quarter of 2021 during the COVID-19 pandemic.

Remolona also confirmed that Finance Secretary Frederick Go is set to join the Monetary Board starting January, replacing now-Executive Secretary Ralph Recto on the seven-member panel.

The governor also said President Marcos raised concerns about the ongoing slowdown during their recent meeting, but he recognized the opportunity to pursue reforms.

“He understood that there’s a lack of confidence. And I think he understood that it’s a crisis that we shouldn’t let go to waste. So the crisis is an opportunity for better governance,” Remolona said.