The Bangko Sentral ng Pilipinas (BSP) still has policy space to cut interest rates to allow the economy to rebound from weaker growth, the International Monetary Fund (IMF) said.
In its Regional Economic Outlook for Asia and Pacific report released Wednesday, the IMF said that in the Philippines, India, South Korea and Thailand, countries “where inflation pressures are subdued, and growth is slowing, accommodative monetary policy is desirable.”
The Washington-based multilateral lender earlier slashed its 2019 gross domestic product growth forecast for the Philippines to 5.7 percent mainly due to disappointing economic expansion of 5.5 percent during the first half.
The IMF’s growth projection for the Philippines was below the government’s target range of 6-7 percent for 2019 as well as lower than the actual expansion of 6.2 percent in 2018—the slowest in three years amid last year’s elevated inflation.
Last year, the BSP hiked the policy rate by a total of 175 basis points (bps) to 4.75 percent as inflation hit a 10-year high of 5.2 percent amid higher excise slapped on consumption under the Tax Reform for Acceleration and Inclusion (TRAIN) Act, skyrocketing global oil prices and domestic food supply bottlenecks, especially of rice.
The IMF nonetheless sees headline inflation this year settling at 2.5 percent, or within the government target range of 2-4 percent, before the rate of increase in prices of basic commodities further slows to 2.3 percent next year.
So far this year, the BSP already reduced interest rates by 75 bps amid easing inflation, which averaged 2.8 percent as of September.
BSP Governor Benjamin E. Diokno this month said there would be no more interest rate cut left for this year.