The Bangko Sentral ng Pilipinas (BSP) may have to cut interest rates next month to help address the economic risks posed by the recent resurgence of COVID-19 infections that led to the reimposition of strict lockdowns in certain parts of the country, London-based think tank Capital Economics said.
In a report on Friday, Capital Economics Asia economist Alex Holmes noted that most Southeast Asian countries were already showing signs that the worst was over in their respective Delta strain outbreaks.
For instance, coronavirus cases in Indonesia, Malaysia and Thailand had declined, such that these countries were now looking at easing their lockdown restrictions, Holmes said.
But the Philippines seems to be “heading in the opposite direction,” Holmes said.
“Cases [in the Philippines] are rising rapidly and are well past their previous April peak. The test positivity rate (a marker of how many cases are going undetected) has risen to 25 percent, from 10 percent in early July,” he noted.
“The worsening virus situation is another reason to expect the central bank there to resume its easing cycle at its September meeting,” referring to the next scheduled meeting of the BSP on the monetary policy stance on Sept. 23.
In its last meeting on Aug. 12, the BSP’s Monetary Board kept the key policy rate steady at a record-low 2 percent.
The BSP had nonetheless cautioned that the reimposed stringent quarantine measures in August “could pose a risk to the ongoing economic recovery.”
Also, the BSP had pointed to upside risks to inflation amid more expensive global commodities, coupled with a weak peso.
Across Southeast Asia, except Malaysia and Singapore, “vaccine coverage remains low,” Holmes said.
“As such, reopening is likely to be slow and bumpy, as the risk of large new outbreaks remains. We suspect virus disruption will last well into 2022 in most places,” he said.
Last Thursday, Socioeconomic Planning Secretary Karl Kendrick Chua conceded to legislators that the threat posed by the more infectious Delta variant of COVID-19 might further delay the Philippines’ return to pre-pandemic output to early 2023 instead of late 2022.