More BSP rate cuts on the table to spur growth

MANILA, Philippines — The disappointing growth last year increased the likelihood of another interest rate cut by the Bangko Sentral ng Pilipinas (BSP), analysts said.

Jun Neri, lead economist at Bank of the Philippine Islands (BPI), said the next rate cut could come as early as the Feb. 13 meeting of the policymaking Monetary Board, which might move to give the economy a much-needed boost as inflation remained within the BSP’s 2 to 4 percent target band.

But Neri said the hawkish pivot of the US Federal Reserve and the peso’s weakness against a rallying dollar might prevent the BSP from making big easing moves.

READ: BSP finishes 2024 with third rate cut

“With inflation still within the target, the central bank may put more priority on growth and support the economy with more liquidity. However, we continue to see risks that could limit the BSP’s rate cuts to just 50 bps (basis points) this year,” he said.

“Aggressive rate cuts from the BSP may exert pressure on the peso,” he added.

The BSP delivered total cuts amounting to 75 bps last year in a bid to boost an economy that expanded at an average rate of 5.6 percent last year.

While that pace of gross domestic product (GDP) expansion was a little faster than the 5.5-percent growth in 2023, the latest reading fell short of the revised 6-to-6.5-percent goal of the Marcos administration, marking the second year of below-target growth.

Data showed the economy was not able to muster enough power at the last minute to hit at least the low end of the official target range.

The statistics agency reported that GDP had expanded by 5.2 percent in the fourth quarter, unchanged from the preceding three months and lower than the year-ago print of 5.5 percent.

That said, BSP Governor Eli Remolona Jr. had hinted at additional easing moves this year, even floating the possibility of another rate cut this month as financial conditions are still “somewhat tight”.

Jojo Gonzales, research analyst at Bank of America, said consumer recovery “looks delayed.”

“If any consolation, the weaker fourth quarter GDP print may encourage the BSP to lower its policy rate within the first half of 2025,” Gonzales said.