The 5.5 percent economic growth rate reported by the Philippines for the second quarter comes in line with ING Bank’s forecast, keeping expectations in place for policy rate cuts by the central bank as early as this month.
ING Bank, however, noted persistent disinflation and softening domestic momentum, saying they could be pointing to weaknesses at home: capital formation nearly halved to 0.7 percent year-on-year, while government spending slowed sharply, contributing only 1.5 percent to growth.
“We don’t believe that the relative strength in today’s data will deter the BSP from cutting rates in August,” ING said in a note released after the PSA report. “CPI inflation remains firmly below the target.”
Export front-loading, not factories
Net exports swung back to a positive contribution of 0.1 percent after dragging GDP by 2 percent in the first quarter, driven by a 14 percent surge in goods exports ahead of global tariff deadlines.
Imports rose by just 2.7 percent, suggesting exporters were front-loading shipments, particularly electronics, manufactured goods and gold.
Despite a strong Purchasing Managers’ Index for most of 2025, domestic manufacturing output lagged at 2.7 percent.
“The disconnect suggests that re-exports—not local production—may be fueling the export spike,” ING said.
Agriculture posted a rare 7 percent gain, thanks to record harvests, while the services sector also grew about 7 percent, led by professional and business services.
Rate path unchanged
With inflation easing to 0.9 percent in June and remaining well below BSP’s 2-4 percent target, ING maintains its forecast of two 25-basis-point rate cuts—one this month and another in the fourth quarter.
ING expects the benchmark interest rate to settle at 4.75 percent by year-end, citing “a lower-than-expected inflation trajectory and downside risks to domestic growth.”
Rice prices have so far remained contained despite erratic weather, and the BSP’s firmer stance on foreign exchange intervention is seen helping mitigate imported inflation.
“While inflation may tick up in the coming months, it will likely remain subdued,” ING noted.
The bank said it expects export momentum to fade in the second half, while infrastructure delivery and household consumption will be key swing factors for full-year growth. — The Malaya Business News Desk
