Metrobank said BSP's cuts to policy interest rates and banks’ reserve requirement ratio should help stoke business sentiment.
MANILA: The ongoing easing cycle will boost business confidence and help speed up the recovery of private investment, which has yet to recover to pre-lockdown levels and make bigger contributions to economic growth, according to Metrobank Research.
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.
“Private investment has so far lagged other economic-growth legs – household and public spending – and has yet to recover to its pre-pandemic levels,” the Ty-led bank said.
Government data showed gross capital formation (GCF) – a gauge of investments – grew by 5.4% year-on-year in 2023 to 4.9 trillion Philippine peso, still below the 2019 level of 5.1 trillion Philippine peso.
But the GCF in the first half of 2024 had shown improvements after expanding by 6.5% to 2.6 trillion Philippine peso, larger than the 2.4-trillion Philippine peso private investments recorded in the same period in 2019.
As 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.
On 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%.
Moving 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% target range due to favourable base effects and the harvest season helping ease pressure on food costs,” the bank said.
“Upside risks to inflation chiefly come from overseas, including geopolitical tensions causing volatility in oil prices and the results of the upcoming US elections,” it added. — The Inquirer/ANN
