MANILA, Philippines—The Bangko Sentral ng Pilipinas said it would not cut policy rates despite the anemic performance of the economy in the third quarter.
According to BSP Deputy Governor Diwa Guinigundo, existing interest rates are still low and supportive of growth of the economy. The fact that the economy still did not expand as expected meant that the other growth factors were the ones missing, he said.
“The growth performance was disappointing. [However,] I don’t think at this point that monetary easing is imperative because domestic credit remains strong and interest rates continue to be low,” Guinigundo said.
The central bank official said that the country needed much more job-generating investments from the private sector to further boost overall income, and these would require higher public and private spending on infrastructure.
“We need to show that the Philippines is truly a good investment destination with higher levels of public and private spending on infrastructure and people,” Guinigundo said.
The government reported on Monday that the economy, measured in terms of gross domestic product (GDP), grew by 3.2 percent in the third quarter from a year ago.
This brought the average growth in the first three quarters to 3.6 percent, making the economy off-track to meet the full-year target of between 4.5 and 5.5 percent.
National Economic and Development Authority (NEDA) Director General Cayetano Paderanga acknowledged that the full-year growth target might no longer be attainable.
Romulo Virola, secretary general of the National Statistical Coordination Board, said infrastructure investments have remained anemic, largely a reason why growth has been sluggish.
“On the demand side, consumer spending bolstered growth but construction continued to suffer from the much-delayed implementation of the Public-Private Partnership (PPP) Program,” Virola said in a statement.
Under the PPP program, the government invites private firms to invest in key public infrastructure projects. The intention is to develop the country’s infrastructure despite lack of resources of the government.
The program was launched in late 2010 but infrastructure projects under it have yet to be implemented.
Meanwhile, BSP Governor Amando Tetangco Jr. said the central bank has been mindful of the performance of the economy in implementing monetary policy.
The Monetary Board of the BSP is set to meet on December 1 to decide on monetary-policy settings.
Tetangco has signaled the central bank’s intention to keep interest rates steady to continue supporting growth of the economy. The BSP considers existing interest rates still low enough to encourage people to secure banks loans, which support consumption and investments.
The BSP’s overnight borrowing and lending rates, which influence commercial interest rates, stand at 4.5 percent for overnight borrowing and 6.5 percent for overnight lending.