Inflation to remain above BSP target until 2027 – Citi

MANILA, Philippines — Citi expects Philippine inflation to remain above the central bank’s target through the end of 2027, keeping interest rates elevated even as the economy struggles with slowing growth.

Citi chief Asia economist Johanna Chua said inflation is projected to average 5.9 percent next year before easing to 4.3 percent by December 2027, still above the Bangko Sentral ng Pilipinas (BSP)’s two- to four-percent target.

The bank expects inflation to remain at 7.8 percent by end-2026, matching the October reading, before moderating to the three-percent range in 2028.

Chua said price pressures remain widespread, with more than 75 percent of the components of the consumer price index recording inflation above four percent.

“So, unfortunately, this is why the BSP has to stay hawkish,” she said during a media briefing yesterday, referring to the need to maintain a restrictive monetary policy stance.

Citi maintained its forecast that the BSP would raise its benchmark interest rate by another 25 basis points in December, followed by a similar increase in early 2027, bringing the policy rate to six percent.

The bank expects monetary easing to begin in early 2028, although Chua said rate cuts could come sooner if global financial conditions improve.

The outlook comes as the Philippine economy slowed further in the third quarter, expanding by just 2.1 percent, well below Citi’s 3.8-percent forecast.

Chua said the disappointing gross domestic product (GDP) performance, which measures the total value of goods and services produced in the economy, would prompt Citi to revise its growth projections.

“I’m sure we’re going to have to make a revision,” she said, although the bank has yet to finalize its updated forecasts.

Citi previously projected a Philippine economic growth of 5.8 percent in 2027, assuming a recovery in public and private investment.

Chua said the government would need to strengthen public spending to support economic activity, particularly as higher interest rates constrain domestic demand.

Citi Philippines CEO and banking head Paul Favila said delays in government spending have compounded economic weakness, with agencies becoming hesitant to release funds amid corruption investigations.

Favila warned that prolonged spending delays could further weaken economic activity, underscoring the need to accelerate the implementation of productive public investments.