BSP’s policy easing expected to support economy in 2024

THE WIDELY expected monetary policy easing from the Bangko Sentral ng Pilipinas (BSP) next year will likely spur economic activity especially if inflation is kept in check.

However, the BSP and the banking industry should remain vigilant against risks amid a prolonged period of volatility and uncertainty, analysts said.

Security Bank Corp. Chief Economist and Senior Assistant Vice-President Robert Dan J. Roces said the BSP is expected to start monetary policy easing by mid2024.

“It’s expected that there might be a shift towards policy easing, potentially starting in mid to late 2024. Such rate cuts could stimulate economic growth by encouraging consumer spending and business investments, provided that inflation is kept under control,” he said in an e-mail.

At its last meeting for the year, the Monetary Board maintained its target reverse repurchase rate at a 16-year high of 6.5%. The BSP has raised borrowing costs by a cumulative 450 basis points from May 2022 to October 2023 to curb inf lation.

Bank of America Country Executive for the Philippines Vincent Valdepeñas said he expects the BSP to start rate cuts by the second quarter.

“A moderate acceleration of rate cuts can further increase economic activity and can help boost growth. We view a 100-basis-point (bps) cut in 2024 starting second quarter next year, which will bring down the key policy rate to 5.5%,” he said in an e-mail interview.

Mr. Valdepeñas said Philippine gross domestic product (GDP) will likely expand by 5.5% in 2024, lower than the revised 6.5-7% government target for next year.

Krisjanis Krustins, director for Asia Pacific sovereigns at Fitch Ratings, also see a 100-bp worth of rate cuts from the BSP next year.

“We assume BSP will cut rates to 5.5% by end-2024 and 4.5% by end-2025, under our forecast of consumer price inflation moderating to an average of 3.5% by 2025 on lower commodity prices, base effects and monetary tightening up to 2023,” he said in an e-mail.

Headline inflation slowed to 4.1% in November, which marked the 20th

AN AERIAL VIEW shows the Ortigas business district in Pasig City, Philippines, June 10, 2022.