The Bangko Sentral ng Pilipinas will consider bigger interest rate reduction this year to support the economy amid the impact of the coronavirus disease that already affected the transport and tourism sector.
BSP Governor Benjamin Diokno said in a news briefing that further rate cuts could happen, aside from his earlier commitment of 50-basis-point reduction for 2020.
“As you know, I committed to 50 basis points this year. We are down by 25 basis points, so we still have 25 basis points. We have a lot of monetary space and fiscal space, so if things deteriorate much beyond what we have originally forecasted, we might consider additional cuts in reserve requirement or in the interest rate or policy rate,” Diokno said.
“But when that will happen, of course that will depend on our assessment of the situation and the conditions,” Diokno said.
Diokno said that on the planned RRR cut, the BSP would look at how much liquidity the financial system could absorb. He said, however, “that is not our priority at the moment.”
Analysts and economists earlier said the spread of the COVID-19 could prompt central banks in the region to cut interest rates to boost economic growth.
The interagency Development Budget Coordination Committee earlier projected a 6.5 percent to 7.5 percent GDP growth this year, faster than the 5.9-percent expansion in 2019.
The Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, cut the benchmark interest rates by 25 basis points to 3.75 percent on Feb. 6, taking into account the continuing benign inflation environment.
The interest rates on the overnight lending and deposit facilities were also cut to 4.25 percent and 3.25 percent, respectively.
Diokno said the Philippines would be among the least affected by developments in the region.
“The country has low participation in the global trade and in global value chain in comparison to other Asean countries,” Diokno said.
“Amid uncertain external environment, it is imperative for the government to sustain the reforms that form the backbone of long-term sustainable development,” he said.
He said these reforms should include investing heavily in high-quality infrastructure, developing human capital, improving labor productivity, creating a favorable business environment and fostering an integrated trade and investment policy.
He also said the full implementation of the country’s export strategy and policies in the Philippine Development Plan and Philippine Export Development Plan should be relentlessly pursued.
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