Eli M Remolona: Speech - Rotary Club of Manila 16th Weekly Membership Meeting
•February 5, 2026
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Companies Mentioned
Why It Matters
The data signals macro‑economic stability in the Philippines despite a near‑term growth dip, reassuring investors and guiding policy decisions across the region.
Key Takeaways
- •Inflation at 1.8% headline, 1.1% bottom 30%.
- •Banks' capital adequacy 16.4%, liquidity 180%.
- •Reserves $110.9bn, covering seven months of imports.
- •2025 growth forecast 4.6%, down from 5.7%.
- •December policy rate cut; easing cycle nearing end.
Pulse Analysis
The Philippines’ recent macroeconomic report underscores a rare combination of low inflation and robust financial buffers. Headline inflation at 1.8%—well below the regional average—reflects effective price‑stabilisation measures, while the bottom‑30% inflation rate of 1.1% indicates that the most vulnerable households are feeling the relief. Such price stability provides a fertile ground for consumer spending and helps anchor inflation expectations, a key determinant of monetary‑policy credibility.
Equally noteworthy is the health of the banking system and the country’s reserve position. Capital adequacy ratios sit at 16.4%, far exceeding the 10% Basel III minimum, and liquidity coverage stands at 180% of the required threshold. These figures, coupled with $110.9 billion in international reserves—equivalent to seven months of import cover and four times short‑term debt—give the central bank ample room to absorb external shocks and support credit flow without jeopardising solvency. The strong balance sheets also reduce the likelihood of a banking‑sector crisis, which can amplify economic downturns.
Growth, however, is the weak spot. The BSP now projects 4.6% GDP expansion for 2025, a downgrade from the earlier 5.7% outlook, before modestly recovering to 5.6% in 2026 and 6.3% in 2027. The slowdown follows a loss of confidence triggered by a flood‑control scandal and reflected in a dip in PMI and equity indices. A December rate cut aims to stimulate demand, but the easing cycle is nearing its end, limiting policy levers. Investors should monitor sentiment indicators and the pace of the recovery, as the Philippines still outperforms most ASEAN peers except Vietnam, positioning it as a relatively resilient market in a volatile global environment.
Eli M Remolona: Speech - Rotary Club of Manila 16th Weekly Membership Meeting
Speech by Mr Eli M Remolona, Jr., Governor of Bangko Sentral ng Pilipinas (BSP), at the Rotary Club of Manila 16th Weekly Membership Meeting, Manila, 8 January 2026.
Happy New Year. It is always a great privilege to be invited to this gathering of Rotary Club of Makati West and Manila.
What I will do is basically tell the same story that Past Vice President Joel Valdes has told, but I will assign some numbers to that story.
I will talk about good news, and then I will talk about bad news. Although I would say the bad news is not that bad.
Good news
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Inflation – Inflation is down. We have managed to tame inflation over the past two years. Not only is inflation down, it is even lower for the bottom 30 percent of households.
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The blue line (headline inflation) is 1.8 % as of a few days ago for December.
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The red line (inflation for the bottom 30 percent) is 1.1 %.
These are pretty low inflation rates, although we project that inflation will start to rise over the next year or so.
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Banking system – Our banking system is in good shape.
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Capital adequacy: the international standard is at least 10 %; our banks are at 16.4 %.
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Liquidity: the international standard is 100 %; our banks are at 180 %.
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International reserves – As of today we hold US $110.9 billion of international reserves, which is more than seven months of imports (the usual standard is three months). We are also at four times our short‑term debt; the international standard is 100 % of short‑term debt, so we are at 400 %.
Bad news
Our growth has slowed. For 2025 we now expect 4.6 % growth for the whole year, down from the 5.7 % we had projected before the flood‑control scandal. The loss of confidence began in the third quarter of 2025. We do expect some recovery in 2026, with growth around 5.6 %. These projections are broadly in line with those of the IMF, Bloomberg and the World Bank, though we believe our model is more sophisticated because it incorporates investor sentiment.
Looking ahead, we think we can manage 6.3 % growth in 2027. Even with the slowdown, our numbers for 2025 and 2026 are better than those of our regional neighbours—Indonesia, Malaysia and Thailand. Only Vietnam is doing better.
Sentiment indicators
We monitor several indicators of sentiment and feed them into our models, which have been tested historically. One key indicator is the Purchasing Managers’ Index (PMI). In the United States the equivalent is the ISM number. The PMI fell in July, hit a bottom about a month ago, and has now started to rise again.
Another indicator is the stock‑exchange index, which fell after the crisis but is now showing some recovery, suggesting renewed hope.
Policy response
We reduced the policy rate in the December meeting to compensate for the loss of confidence. This is an effort to influence the demand side; we have no tools for the supply side. We are close to the end of the easing cycle, and there is only so much we can do to restore confidence.
That is my story. I would welcome a few questions.
The views expressed in this speech are those of the speaker and do not necessarily reflect those of the BIS.
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