The central bank on Tuesday (May 5) said it has space to roll out additional measures to support the Philippine economy thanks to a benign price environment highlighted by the April inflation rate that came in at 2.2 percent—its lowest level in five months.
In a statement, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the latest consumer price index was within the forecast range of 1.9-2.7 percent, and is consistent with the BSP’s prevailing assessment that inflation will be “benign over the policy horizon due to the adverse impact of the coronavirus pandemic on the domestic and global economy.”
As such, the BSP chief reiterated his “support for urgent and carefully coordinated measures with other government authorities to ease the spillover effects of the pandemic on people and firms, with a view towards preventing any long lasting economic and social damage.”
“In addition to the monetary policy actions that have been announced, the BSP stands ready to deploy any available measures in its toolkit as we continue to assess the impact of coronavirus pandemic on the domestic economy,” Diokno said.
The central bank’s latest baseline forecasts indicate that inflation could settle at the low-end of the government’s target range of 3 percent, plus or minus 1 percentage point, specifically at 2 percent for 2020 and 2.5 percent for 2021.
“Meanwhile, the domestic economy will likely follow a U-shaped recovery path,” said Diokno, who earlier noted that the Philippines will likely experience an economic contraction this year, punctuated by a recession spanning the second and third quarters.
“Growth is expected to bounce back to its potential output growth in 2021 supported by the measures under the government’s recovery plan,” he said.
In response to the ongoing coronavirus pandemic, regulators have so far cut policy rates by 125 basis points and the reserve requirements of financial institutions by 200 basis points.
It has also extended banks a set of relief measures meant to be passed on to their borrowers in the form of cheaper loans as well as forbearance for existing credit that may fall into distress due to the weakened economic activity.
The central bank has also extended a P300-billion loan to the national government by buying bonds issued by the Bureau of the Treasury and scooped up other debt instruments from the local debt market.