PH expects to benefit from China rate cut

Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. INQUIRER FILE PHOTO

Beijing’s interest rate cut late last week, meant to arrest the recent economic slowdown in China, may push investors’ cash into emerging markets with strong fundamentals like the Philippines, the Bangko Sentral ng Pilipinas (BSP) said.

BSP Governor Amando M. Tetangco Jr. said continued reforms in China would help alleviate global jitters over economic prospects for the developing world.

“In the near term, we may see some rebalancing of flows toward US assets as well as emerging market economies that have strong macro fundamentals,” he told reporters Monday.

“We will continue to monitor developments to see if there is need to adjust the stance of policy,” Tetangco said.

Last Friday, People’s Bank of China (PBOC), China’s central bank, slashed its key policy rates by a quarter of a percentage point. Reserve requirements were also reduced.

The twin moves follow an “ultra-dovish” stance recently taken by the European Central Bank, which forced investors to “fret the true health of the Chinese economy,” BPI economist Nicholas Mapa said in a note.

Apart from providing a boost to economic activity, China’s decision also aims to help the country transition away from relying heavily on exports to drive expansion.

Tetangco said China’s moves would help ease fears of an abrupt growth slowdown in Asia’s largest economy. “These should be good for global market confidence.”

In the third quarter of 2015, China’s economy grew by 6.9 percent, the slowest since 2009. Despite the deceleration, its gross domestic product (GDP) was still above most analysts’ expectations.

China’s economic slowdown has been a major source of concern for global investors, and these jitters have spilled over to smaller economies like the Philippines.

Last year, China accounted for about 14 percent of global GDP, up from just 4 percent 2000.