BSP: Clearer evidence of economic recovery needed, interest rates must stay low

MANILA, Philippines — The central bank said on Tuesday, Nov. 9 that interest would remain low — despite stronger-than-expected third-quarter growth figures announced by the government — until it saw clearer evidence of the economic recovery.

In a statement following the release of the latest gross domestic product figures, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the agency “will continue to be patient with its accommodative monetary policy to support the full recovery of the economy. the economy “.

The BSP has come under increasing pressure in recent weeks from critics to raise its policy interest rate, currently at a historically low 2% for its overnight borrowing rate, due to inflation stubbornly high.

However, the lower than expected inflation rate for October, combined with stronger economic growth data, could give the BSP the opportunity to maintain its loose monetary policy until early next year.

“Faster growth could give Governor Diokno the opportunity to adjust rates in the first half of 2022,” said Nicholas Mapa, senior economist at ING Bank Manila.

The BSP chief said the growth rate for the third quarter – which was higher than BSP’s forecast of 6.2% – “increases the likelihood that the revised growth projection of 4-5% in 2021 will be exceeded.”

“Growth was broad except for agriculture which contracted largely due to severe weather disturbances,” Diokno said.

Household spending rose 7.3%, investment in fixed assets jumped 16% and government spending rose 13.6%.

While net trade was negative as imports outpaced exports, the 13.2% increase in imports “should be viewed in a positive light as a leading indicator of more robust economic activity in the short term”, did he declare.

On the production side, the service sector, which accounts for about 60 percent of GDP, rebounded 8.2 percent, and the industrial sector grew by 7.9 percent.


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