The Bangko Sentral ng Pilipinas is unlikely to tweak its monetary policy stance until the last part of 2021 amid the manageable inflation environment and signs of economic recovery from the health crisis, Fitch Solutions, a unit of Fitch Group, said in a report Monday.
Fitch issued the statement after the BSP decided to keep the record-low borrowing rate of 2.25 percent during the Monetary Board meeting on Thursday.
“The decision to hold was in line with our view that the BSP will maintain its key policy rate at 2.25 percent through to late 2021, where the next move would be a hike,” Fitch Solutions said.
“Indeed, the key policy rate is at an all-time low and the BSP has boosted credit conditions and supported financial stability via reserve requirement cuts of 200bps for commercial banks and a P300-billion government bond purchasing program. Alongside this, several macro-prudential measures have been taken to relax loan repayment rules and capital ratios for banks given the sudden shock from the pandemic,” Fitch Solutions said.
The Monetary Board will meet on Nov. 19 and Dec. 17. Fitch Solutions it would watch how strong the domestic recovery would be in the fourth quarter, “given Philippine authorities’ difficulties in controlling the pandemic”.
BSP Governor Benjamin Diokno said he expected a continuous recovery of the economy from the devastating impact of COVID-19, as more people returned to work following the easing of quarantine restrictions in Metro Manila and in the provinces.
Diokno said six months into the pandemic, people learned how to live with the virus that already claimed thousands of lives in the country.
“We expect our recovery process to continue as more industries re-open following the relaxation of the quarantine measures,” Diokno said during the 52nd Annual Financial Executives Week Conference.
“We are learning how to strike the delicate balance between saving lives and protecting livelihoods and businesses,” he said.
He said the pandemic hit the economy hard, contracting by 9 percent in the first half, following 21 years of uninterrupted growth. This was mainly due to the strict lockdown implemented in March to June to save lives and to boost the country’s healthcare capacity.
He said the sharp contraction in the first half of this year was not in any way a reflection of the country’s macroeconomic fundamentals, which remained strong.
“But now, we are seeing early signs of recovery. For instance, the manufacturing purchasing managers index has improved from 27.5 in April to 47.3 in July and to 50.2 in September,” he said.