Asia Macro Strategy Notes: What we heard in Manila...

Research evidence excerpt

Asia Macro Strategy Notes: What we heard in Manila...

18 May 2026

Asia Macro Strategy Notes

vulnerable groups. Their concern for broad-based tax cuts stems from

the usually regressive nature of such measures.

• At the same time, in case revenues do undershoot – an increasingly likely

outcome – the government intends to continue down its fiscal

consolidation pathway, but to do so by tapping additional revenue

sources such as increased dividends from GOCCs – as was also done

during previous crises.

Monetary policy will remain on a tightening course

• Broad consensus onshore is for additional policy rate hikes from the BSP.

Most observers expect 50bp at the next meeting, with some probability

for an earlier off cycle meeting as well.

• There remains considerable divergence on terminal, though. In this

context, it is important to remember that household borrowing,

particularly mortgages, is very low. In short, the actual transmission to

the real economy is not only just lagged, but its effect on households,

which contribute ~70% of GDP, is also limited.

• Instead, rate hikes work to; (1) contain inflation expectations; and (2) limit

peso depreciation by increasing the cost of carry.

Peso a function of oil

• Peso positioning remains long USDs and corporate USD holdings have

continued to build. Observers – and we – agree this could continue so

long as the Middle East blockade sustains.

• We estimate positioning at over $5bn – an unwind of which should yield

~2.5% move lower in USD/PHP as and when it unfolds. At the same time,

this positioning is not yet at historical extremes.

A menu of options to fix bond liquidity

• Authorities pointed out that both the BSP and BoTr have been constantly

in the markets to try and support proper functioning. Clearly more needs