Philippine central bank turns dovish

Industrial production had been softening for several months even before entering negative territory in March, as our first chart shows. Meanwhile, our second visualization shows how the nation's factories still haven't returned to pre-pandemic capacity utilization. Donald Trump's tariffs won't help these trends in the short term, either (though the Philippines was hit by smaller levies than other ASEAN nations).

Turning to the banking system, loan growth has picked up. However, this has been skewed toward credit card and consumption-driven lending rather than productive investment, raising concerns about its sustainability. Bad-debt levels at Philippine banks remain relatively elevated.

We conclude by examining price increases and the nation's currency, showing how the Bangko Sentral ng Pilipinas has considerable room to support growth and export competitiveness with rate cuts.

Both headline and core inflation measures are trending towards the lower bound of the 2%-4% target range set by the BSP. Imported inflation has been kept under control as the peso keeps rising against the dollar, regardless of Trump's moves.