The Bangko Sentral ng Pilipinas (BSP) expects inflation to remain manageable in December 2025, even as foreign currency lending activity shows signs of moderation amid shifting economic conditions.
In its latest month-ahead forecast, the BSP projected December inflation to settle within the 1.2 to 2.0 percent range, reflecting a balance between seasonal price pressures and easing energy costs.
Upward inflation risks are expected to stem from higher prices of major food items, driven by lingering adverse weather conditions and stronger demand during the holiday season. The central bank also flagged potential pressure from higher liquefied petroleum gas (LPG) and gasoline prices, which could feed into transport and household costs.
These factors, however, could be partly offset by lower electricity rates in Meralco-serviced areas, as well as declining kerosene and diesel prices, helping temper overall price increases. The BSP noted that movements in global oil prices, domestic supply conditions, and weather-related disruptions remain key variables influencing near-term inflation.
“The BSP will continue to monitor domestic and international developments affecting the outlook for inflation and growth,” the central bank said in a press release, reiterating its data-dependent approach to monetary policy. The BSP added that it remains ready to adjust its policy stance should inflationary risks materially shift.
FCDU loans fall as foreign borrowing softens — BSP
The inflation outlook comes as foreign currency deposit unit (FCDU) loans declined by 5.0 percent quarter-on-quarter in the third quarter of 2025, reflecting softer demand for foreign currency borrowing amid cautious business sentiment and evolving global financial conditions.
Data from the BSP showed that outstanding FCDU loans fell to US$15.13 billion as of end-September, down by US$802.09 million from US$15.93 billion in the previous quarter. On a year-on-year basis, FCDU lending dipped by 3.9 percent, pointing to a gradual pullback in foreign currency exposure.
Of the total outstanding loans, US$9.59 billion, or 63.4 percent, were extended to Philippine-based borrowers, while the remainder went to non-residents.
Major domestic borrowers included merchandise and service exporters at US$2.51 billion or 26.2 percent, followed by towing, tanker, trucking, forwarding, and personal services firms at US$2.05 billion or 21.4 percent, and power generation companies at US$1.71 billion or 17.8 percent.
Most FCDU loans remained medium- to long-term, with maturities exceeding one year accounting for 79.8 percent of the total, slightly higher than the 79.0 percent recorded in the previous quarter, suggesting that borrowers continue to favor longer-dated funding despite reduced loan volumes.
During the reference period, banks recorded US$9.77 billion in new FCDU loans, while US$10.56 billion in repayments were made, contributing to the overall decline in outstanding balances.
Despite the contraction in lending, foreign currency deposits continued to grow, rising by 5.7 percent year-on-year to US$60.73 billion from US$57.46 billion, indicating sustained inflows, strong depositor confidence, and ample foreign currency liquidity in the banking system.
FCDU loans — foreign currency-denominated loans extended by BSP-authorized banks — are typically used to support activities requiring foreign exchange, including imports, export-oriented businesses, and other cross-border transactions.
Most loans were medium- to long-term, with maturities over one year. These accounted for 79.8 percent of the total, higher than the 79.0 percent in the previous quarter.
As of end-September 2025, outstanding loans reflected US$9.77 billion in new loans and US$10.56 billion in loan payments made during the reference quarter.
Year-on-year, FCDU loans dipped by 3.9 percent. The decrease came despite the 5.7 percent growth in deposits in foreign currencies, which reached US$60.73 billion from US$57.46 billion.
Taken together, the data point to a period of contained inflation pressures and cautious foreign currency borrowing, as the central bank keeps a close watch on evolving price dynamics, global market developments, and domestic financial conditions heading into 2026.