Bangko Sentral ng Pilipinas. (File photo / Philippine Daily Inquirer)
MANILA -An expected quarter-on-quarter contraction of Philippine gross domestic product in the third quarter, the second in a row, will pose a challenge to the Bangko Sentral ng Pilipinas (BSP) position that policy rate cuts are “off the table” in the remainder of this year.
Pantheon Macroeconomics said in a research note that the Philippines was in the middle of a shallow technical recession and has penciled in a 0.2-percent decrease in output comparing the July-September quarter to the April-June period.
The United Kingdom-based think tank expects such a readout to follow a 0.9-percent contraction in the second quarter compared to the first quarter this year.
READ: PH GDP growth slowed to 4.3% in Q2 2023
The Philippine Statistics Authority is scheduled to release the preliminary third-quarter readout by Nov. 9, a week before the Monetary Board’s (MB) next policy meeting set for Nov. 16.
“If we’re right, this would bring year-over-year growth down to just 1.8 percent, from 4.3 percent in the second quarter, representing the weakest print since the Global Financial Crisis [of 2007-2008], leaving aside the pandemic-era recession,” Pantheon Macroeconomics said.
“As regards inflation, it appears the government’s Executive Order imposing a ceiling on rice prices—the main culprit behind the hot August inflation print—is quickly bearing fruit,” it added.
Rice prices
The UK-based group said the price of regular milled rice in Metro Manila, for example, had fallen by nearly 25 percent from its peak in mid-August and was now just a touch above the P41-per-kilo price cap.
Also, the think tank noted that the MB was now sounding consistently more concerned about the state of the economy, as the committee observed that recent indicators of domestic economic activity pointed to waning pent-up demand, even as the impact of prior monetary policy tightening continues to weigh on credit.
READ: BSP chief ‘honestly’ eyeing November rate hike
“For now, we are—just—maintaining our base case that the BSP will start cutting rates in November, in spite of Governor [Eli] Remolona Jr.’s explicit rebuttal [that there will be no rate cut until year-end],” Pantheon Macroeconomics said.
In an interview with BloombergTV last week, Remolona said they were “honestly” considering a resumption of rate hikes in November, which he said would probably not be the last one. INQ