The ongoing easing cycle will boost business confidence and help speed up the recovery of private investment, which has yet to recover to prepandemic level and make bigger contributions to economic growth, Metrobank Research said.
In a commentary, Metrobank said the Bangko Sentral ng Pilipinas’ (BSP) cuts to policy interest rates and banks’ reserve requirement ratio should help stoke business sentiment, allowing companies to secure funding for expansion on relatively cheaper terms.
READ: Marcos successor seen to inherit faster growing economy
Article continues after this advertisement“Private investment has so far lagged other economic-growth legs—household and public spending—and has yet to recover to its prepandemic levels,” the Ty-led bank said.
FEATURED STORIES BUSINESS East DR Congo grapples with Chinese gold mining firms BUSINESS Building a nation of homeowners: SMDC turns over first vertical socialized housing in Iloilo City BUSINESS BIZ BUZZ: Ares invests in Belo Medical GroupGovernment data showed gross capital formation (GCF)—a gauge of investments—grew by 5.4 percent year-on-year in 2023 to P4.9 trillion, still below the 2019 level of P5.1 trillion.
But the GCF in the first half of 2024 had shown improvements after expanding by 6.5 percent to P2.6 trillion, larger than the P2.4-trillion private investments recorded in the same period in 2019.
Article continues after this advertisementAs it is, better days may be ahead as a recent BSP survey of companies showed businesses were more upbeat about the final quarter of 2024 and in the next 12 months on expectations of lower interest rates and easing inflation.
Article continues after this advertisementOn Oct. 16., the policymaking Monetary Board (MB) cut the benchmark rate—which banks typically use as a guide when charging interest on loans—by a quarter point to 6 percent.
Article continues after this advertisementREAD: BSP delivers 25-bp rate cut; more to come
Unlike in the United States, where a slowing job market had prompted the US central bank to deliver a jumbo 50-basis point (bp) rate cut, the BSP entered its easing cycle with a modest quarter point reduction last Aug. 15. What gave the BSP enough room to further slash the key rate was a softening inflation that retreated to a four-year low in September.
Article continues after this advertisementMoving forward, Governor Eli Remolona Jr. had said another 25-bp rate cut was possible at the Dec. 19 meeting of the MB, adding that the BSP will aim for a “measured” shift to a less restrictive monetary policy.
Meanwhile, Metrobank said easing price pressure would also provide a springboard to consumer confidence.
“For the rest of the year, consumer price rise will stay within BSP’s 2 to 4 percent target range due to favorable base effects and the harvest season helping ease pressure on food costs,” the bank said.
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“Upside risks to inflation chiefly come from overseas, including geopolitical tensions causing volatility in oil prices and the results of the upcoming US electionsacegame,” it added.
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