British banking giant HSBC sees resilient overseas remittances giving the Bangko Sentral ng Pilipinas enough leeway to keep its benchmark interest rate – the overnight borrowing rate – at a record-low of 3.75 percent.
In a commentary issued after Monday’s release of the latest remittance data, HSBC economist Trinh Nguyen also said the government’s 5-6 percent gross domestic product (GDP) growth target for the year was attainable.
“The recent acceleration of remittances points to robust third quarter private consumption growth. At the same time, fiscal spending is also supporting public spending and investment. Growth, therefore, is expected to reach the government’s 5-6 percent target,” she said.
HSBC’s forecast is a GDP expansion of 5.7 percent for 2012.
The HSBC economist said the better-than-expected 7.6 percent growth in August overseas remittances would “provide ample support for the consumption-driven economy.”
She noted that the remittance data were in stark contrast to the 9-percent year-on-year contraction in export earnings for the month.
Exports make up 21 percent of Philippine gross domestic product while remittances account for 9 percent, based on 2011 data.
With global demand weak and inflation expected to be on target for the rest of 2012, Nguyen said the BSP would have room to hold rates low at 3.75 percent at its next meeting.
The BSP has two more policy rate setting meetings for the rest of 2012, one on Oct. 25 and the last on Dec. 13.
Monetary authorities, however, have recently signaled willingness to further cut interest rates.