Wanted: ‘Sooner than later’ Bangko Sentral rate cuts

MANILA, Philippines — Cutting the key interest rates of the Bangko Sentral ng Pilipinas (BSP) ahead of any easing by the United States Federal Reserve would help the Philippines reverse a slowing economic growth trend, an economist from Dutch financial giant ING said.

“Cuts sooner rather than later will finally bring some relief to the consumers and corporates who have been under the weight of restrictive monetary policy for more than two years now,” ING Bank Philippines senior economist Nicholas Mapa said in a comment sent to reporters on Friday.

“We note that one of the missing pieces to the Philippine growth story post-COVID has been investment activity, which remains at 2015 levels of spending while consumption and government spending have both handily reverted to levels seen before COVID,” he added.

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Mapa said further that monetary policy easing by the BSP could help revitalize the economy and help deliver a sustainable pace of expansion.

Economic growth

The country’s gross domestic product (GDP), or the sum of all goods and services produced within the country, grew 5.7 percent year-on-year in the first quarter. This was faster than the revised 5.5-percent expansion in the fourth quarter of 2023 but slower than the Marcos administration’s 6 to 7 percent target.

The first quarter GDP performance was weaker than the 6.4-percent expansion recorded in the comparable period last year. It also fell below the market consensus estimate of 5.9-percent growth.

READ: BSP hints at policy rate easing by August

During its monetary meeting earlier this month, the policy-making Monetary Board left its overnight borrowing rate at a 17-year high of 6.5 percent.

However, BSP Governor Eli Remolona Jr. hinted at monetary easing as early as August for as much as 50-basis point reduction this year.