MANILA – Fragile economic situation in the Philippines due to the pandemic is expected to be the reason for the Bangko Sentral ng Pilipinas (BSP) to keep rates steady at record-low 2 percent to date.
In its Asia Pacific Economic Preview issued on Monday, Moody’s Analytics forecasts unchanged policy decisions from the BSP’s policy-making Monetary Board (MB) during its rate-setting meeting on Thursday.
“The near-term prospects remain worrisome for the Philippines as the country copes with an intense domestic outbreak of Covid-19 (coronavirus disease 2019), which has necessitated the extension of restrictions in the capital city and nearby provinces until the end of June,” it said.
The report added that “although the central bank has responded to the crisis with rate cuts and substantial liquidity easing measures, it is expected to retain ammunition for now and delay further action until restrictions are eased and sectors can respond to new stimulus.”
The BSP slashed key rates by a total of 200 basis points in 2020 in a bid to help buoy the domestic economy from the virus-induced pandemic.
Economists said the central bank has carried bulk of the weight in ensuring that the domestic economy remains afloat amidst the global challenges.
Last year, the economy contracted by 9.5 percent but authorities are confident of a recovery this year, with the target set between 6-7 percent.
Since dipping to its decade low of 17 percent in the second quarter of 2020, during which the strictest level of movement restriction -- the enhanced community quarantine (ECQ) -- was implemented, the economy has posted improvements in outputs.
In the first quarter of 2021, the domestic economy, as measured by gross domestic product (GDP), posted another improvement after contracting by 4.3 percent, better than the previous quarter’s -8.3 percent print.
BSP Governor Benjamin Diokno has repeatedly indicated monetary authorities’ intention to keep the central bank’s key rates steady to further support domestic activity and boost economic recovery this year. (PNA)
