MANILA -The faster-than-expected readout on the growth of the Philippine economy in the third quarter of 2023 gives the Bangko Sentral ng Pilipinas (BSP) the leeway to make policy changes in the upcoming Monetary Board meeting on Nov. 16, according to Citigroup.
This observation was put forward as the Economist Intelligence Unit (EIU) said in a fresh report on the global economic outlook that worldwide growth “will be sedate but not recessionary.”
Also, the EIU is convinced that policy tightening is done, at least among the influential central banks, although consideration of rate cuts is still tricky.
Nalin Chutchotitham, Citi’s economist covering the Philippines, said in a commentary that they see the BSP standing pat during the policy meeting next week, after going for an off-cycle rate hike of 0.25 percentage point that brought the benchmark interest rate to 6.5 percent.
Still, Nalin said that “[s]ome risks of another hike remain as the BSP aims to better anchor inflation expectations.”
She noted that the BSP reiterated preparedness for follow-through monetary policy action — as necessary — to prevent additional second-round effects.
“(W)e believe Q3 GDP (third-quarter gross domestic product) data would help the BSP decide,” Nali said.
“In our base case, we think the BSP could wait-and-see for a bit, after having brought forward its rate hike to October and that real policy rate is in a restrictive zone,” she added.
READ: Rate hike pause seen likely in November
In its outlook report, the EIU said policy makers like the United States Federal Reserve and the European Central Bank — whose decisions might sway those of others like the BSP — are done with policy rate increases, although lingering demand-side pressures mean that they are unlikely to begin lowering rates until the second half of 2024.
“There will be more rate rises in 2024 if inflation is not brought under control. There is a moderate risk that inflation will re-accelerate in 2024, driven by firm global demand (as labor markets remain tight) and an upswing in key commodity prices due to supply shortages.
READ: PH inflation eased to 4.9% in Oct
Still, EIU said potential disruptions in global oil supply such as widening conflict in the Middle East and stronger-than-expected effects from El Niño on agricultural production would push up food prices, especially in developing economies.
“There is a moderate risk that demand will prove more resilient than we expect in developed markets,” the group said.
“This would result in further monetary policy tightening by major central banks, which will further slow growth next year.”