Maynila, the Philippines’ economy will likely recover according to central bankers in the second half of 2019. While other Asian economies start to struggle and slow down, growth in the Philippines will likely bounce back.
According to the Francisco Dakila, BSP deputy director, the central bank will be able to differentiate its policy from peers once the Philippine economy eases.
On an interview, Dakila said that the boost in government spending will help support the country’s economic growth. The interview is also the first appearance of Dakila to international media since his term began.
The BSP deputy governor said that the budget delay is the main reason for the “slower-than-expected growth” of the Philippine economy.
As the US-China trade war dents the global economies, most central banks are starting to cut rates. But based on Dakila’s statement, the Bangko Sentral ng Pilipinas wants to take a different route from other central banks.
Asian economies have started to falter as the global slowdown and the trade conflicts worry businesses across the globe. Countries have started to depend on their exports to drive their economic growths.
Central banks across Asia have also started to slash interest rates, including Bangko Sentral ng Pilipinas. Just recently, Maynila experienced an interest rate cut by 50 basis points this 2019, a big leap in the country’s monetary policy.
Dakila clarified the cut, saying that it was a part of a “normalization” process to redo last year’s rate raise of 175bps.
Budget Delay Equals Subdued Inflation
The four-month budget delay caused the Philippine economic growth to slow down to 5.5% in the second quarter of 2019. The growth appears to be the slowest pace of the country in more than four years.
With the stalemate now resolved, central bankers in the Philippines are expecting a smooth recovery.
Monetary policy makers in the Maynila will make deeper cuts in their September 26 meeting. The forecasts of further slashes came after BSP governor Benjamin Diokno said that there will be another quarter-point cut before the year ends.
BSP governor Diokno also promised to continue reductions in deposits banks must have in their reserve. The measures of the Bangko Sentral ng Pilipinas will reach its target inflation rate.
BSP deputy governor Dakila said that the inflation rate for 2019 will likely come below the BSP’s target of 2%-4%. The slowdown will be party due to the base effects and low prices of oil and rice.
On an optimistic note, Dakila also said the inflation will remain within the central bank’s target rate throughout 2020.
Asian Central Bankers
Some 11 central bank governors in Asia, including Diokno, met in Shenzhen, China last Thursday for the 24th EMEAP or Executive’s Meeting of East Asia Pacific Central Bankers.
Views on the global economic outlook and monetary policy developments were shared during the meeting. The 24th EMEAP was chaired by Yi Gang, governor of the People’s Bank of China.
Trade conflicts are detrimental to the global economy said the 11 governors in a joint statement. The effect of the dispute has reduced the markets’ confidence, intervened in global supply chains, and slowed global growth.