PHP: Energy shock risks and BSP stance – DBS

DBS Group Research economist Radhika Rao discusses how the Philippines’ declaration of a national energy emergency in response to Middle East supply risks could affect inflation, growth and the Philippines Peso (PHP). She notes pressure on onshore markets, record Peso weakness and underperforming equities, and expects the central bank of the Philippines, Bangko Sentral ng Pilipinas (BSP) to maintain an extended pause, removing a previously projected rate cut from DBS’s baseline forecast.

Energy emergency weighs on Peso outlook

"Before the Middle east conflict, official growth forecasts had already been cut to 4.6% for 2026 and 5.9% in 2027 (vs 5.4% and 6.3% earlier), as graft-related investigations and slower public disbursements had dampened the outlook despite the 225bp cuts in benchmark rates."

"Philippines declared a national energy emergency on Wednesday to counter risks posed by Middle east conflict and consequent disruption to supplies."

"Onshore financial markets have already been under pressure this month, with the peso (depreciated to a record low) and equity markets amongst the regional underperformers on month-to-date basis."

"The BSP will be wary of lowering rates further in this environment, preferring to stay on an extended pause."

"We remove the last rate cut in our baseline forecast."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)