BSP urged to move to prop up economy

Monetary authorities may have to resort to policy easing by the middle of next year to address concerns over economic growth amid persistent weakness overseas.

British bank HSBC said that while most observers had been content on blaming the slowing global growth on China, economic conditions in major economies remained weak.

“Look closely, and it turns out that developed markets’ imports haven’t been anywhere near as robust and relatively upbeat local demand data would suggest,” HSBC economist Frederic Neumann said in a note to clients.

“HSBC said retail spending in the US has been robust and the dollar has been strong but these have not translated into stronger inbound shipments.”

“European Union imports in volume terms are also slowing,” he said. “Don’t just blame China for the world’s growth malaise.”

Amid weak global conditions, HSBC said the Philippines’ own expansion might stay muted until next year, despite the onset of election spending that normally props up the economy.

For 2015, HSBC said it was seeing the Philippines growing by 5.5 percent. A slight acceleration in economic growth to 5.6 percent is expected for 2016. Both projections are below government targets.

Gross domestic product (GDP) rose by 5.6 percent in the first half of 2015, faster than the January to March year-on-year expansion of 5 percent.

Last week, the Bangko Sentral ng Pilipinas (BSP) kept interest rates on hold, as widely expected. Benchmark rates have been steady since September of last year.

In a statement, BSP Governor Amando M. Tetangco Jr. said domestic demand in the Philippines remained robust, supported by buoyant business and consumer sentiment, as well as the availability of ample liquidity in the system. This reduces the need for more accommodative policy settings, he said.

The BSP, however, remains wary of risks to its inflation outlook. Keeping prices stable, which preserves consumers’ purchasing power, is the BSP’s main mandate.

Officials said inflation in 2015 is expected to average below the central bank’s target of 2 to 4 percent, before returning within range by 2016 and 2017.