BSP

BSP data show June cash remittances rose just 1.7% year-on-year — the weakest growth since February 2022 — as analysts point to Middle East geopolitical uncertainty and elevated living costs abroad, even as inflation at home stayed above target for a fourth straight month.

Government economists say a 32.4% collapse in public construction — tied to agencies' reluctance to approve projects after the flood-control corruption scandal — cost the economy roughly a percentage point of growth in the second quarter, pushing the debt-to-GDP ratio to 66%, its highest since 2004.

The Philippine Statistics Authority's July reading, released August 5, marks a third consecutive month of cooling prices after inflation hit a three-year high in April, but the year-to-date average of 5.0% remains well above the government's 2%-4% target band.

The Bangko Sentral ng Pilipinas raised its key policy rate by 25 basis points to 4.75% on June 18, citing "strong inflationary pressures" from high global oil and fertilizer prices tied to the Middle East conflict — and raised its 2026 inflation forecast to 6.4% — as the benchmark PSEi slipped to 6,135.35 the next day on expectations of higher yields.

Philippine headline inflation slowed to 6.8% in May from a three-year high of 7.2% in April, but it remains far above the central bank's 2–4% target as the US–Iran war keeps oil prices elevated, the peso trades near record lows, and the OECD warns the BSP may have to keep tightening — a squeeze with direct consequences for household budgets and the cost of government borrowing.

In a newly published book, the Bangko Sentral ng Pilipinas says a weak industrial base, underdeveloped agriculture and heavy import dependence are eroding the buffers — remittances and BPO exports — that have long masked the country's persistent goods trade deficit, even as the current account gap narrowed to $16.3 billion in 2025.

Foreign direct investment net inflows climbed 26% year-on-year to $611 million in March, BSP data show, lifted by equity, reinvested earnings and debt instruments from Japan, the US and Singapore — but the figure was the lowest in two months and follows a year in which FDI slumped to a five-year low, underscoring how fragile investor confidence remains amid geopolitical and domestic political turmoil.

Fitch Ratings has cut its outlook on Philippine banks to "deteriorating" from "neutral" and S&P Global Ratings expects lenders to absorb credit losses of about 1% to 1.2% of total loans, as the country's heavy reliance on Gulf oil leaves its banking system exposed to a drawn-out US-Iran conflict — with bad loans already at their highest ratio since August 2025.

The Philippine Statistics Authority reported on June 5 that headline inflation slowed to 6.8% in May 2026 — lower than the BSP's forecast range of 7.1% to 7.9% and down from April's 7.2% — driven by a sharp deceleration in transport and fuel prices, though the five-month average of 4.5% remains above the government's 2–4% target band and food inflation persists at 5.8%.

Even after headline inflation cooled to 6.8% in May, banks including Deutsche Bank, HSBC, Maybank and Nomura expect the Bangko Sentral ng Pilipinas to keep tightening at its June 18 meeting — because core inflation hit 4.1%, its fastest since December 2023, signaling that the oil-shock price surge is broadening into the rest of the economy.