THE Bangko Sentral ng Pilipinas (BSP) is not expected to move aggressively again along with the rising cases and stricter lockdowns early this year, as it is not afforded last year’s policy space due to rising inflation.
Economists forecast a quiet BSP in its upcoming meeting this week, with all policy levers seen to remain unchanged due to the rising prices of goods in the economy.
Moody’s Analytics recently said the Philippine Central Bank is expected to keep its key overnight borrowing rate unchanged at 2 percent at its March 25 meeting.
“The near-term prospects remain worrisome for the Philippines as it copes with an intensifying virus outbreak that shows no signs of abating. Although the country’s fiscal spending has been more conservative relative to its Southeast Asian counterparts, the scope to deliver through a more expansionary monetary stance is relatively limited at this stage,” the think tank said.
“We expect that the Central Bank will opt to preserve ammunition for now and stall a rate cut until the next quarter if the domestic situation deteriorates,” it added.
Fitch Solutions also forecasted BSP’s next move to be a hike in 2022.
“We forecast the BSP to hike 75 basis points in 2022, taking the key policy rate to 2.75 percent, which should calm fears of the economy overheating in late-2022,” Fitch Solutions said.
In a recent economic assessment, ING Bank economist Nicholas Mapa also said that now that the BSP has run out of ammunition to help lift the economy, local economic managers should step up and try a new strategy.
“Authorities have been attempting to ‘push start’ their way to revive the stalled Philippine economy, a tack that has helped the country save face with debt ratings agencies but ultimately still has the car sitting idle on the driveway.
The longer the economy remains in recession, the more vulnerable it will be to the scarring effects from the pandemic with business closures mounting and unemployment at elevated levels,” Mapa said.
“With monetary policy hitting the inflation wall early in 2021, the only move the ‘whole of government approach’ may have left is to go for the ‘jump start,’ a move that would be viewed as ‘costly’ but one that may be more effective than what has currently been rolled out,” he added.
Mapa has been arguing for more fiscal spending to help the economy, saying the government has been “deploying modest fiscal spending” in the hopes that the vehicle would start itself and that they are “shelling out the bare minimum to preserve fiscal metrics.” The BSP is expected to hold their next monetary policy meeting on March 25.
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