BSP weighs...

would come out of its own dividends which would not materialize with higher interest expense from its TDF operations.

The BSP is currently reviewing how much the banks, and market, can handle as RRR reduction, particularly as the economy will not grow as much as expected this year since key rates are still high after the BSP’s 175 bps increase last year.

During Diokno’s first Monetary Board policy meeting as chairman last Thursday, the former budget secretary said a delayed national budget would not be positive for economic growth and could be looking at a much moderate growth this year. “There are risks to economic growth in 2019 if the current budget impasse in Congress is not resolved soon,” he said. He also said previously that he is only assuming a seven percent GDP growth this year, against the official target of 7-8 percent.

Guinigundo, while emphasizing the BSP’s “singular” focus in ensuring price stability, said containing inflation also means price stability conducive to growth. He said a reenacted budget’s impact to the BSP’s own GDP assumptions – as it relates to its assessment of inflation expectations – “will not be non-negligible”.

Still, Guinigundo said economic growth will continue to be resilient with consumption “very much encouraged by lower inflation” while investments in the country will get a boost by several factors such as the amended negative list of foreign investments, improvements to ease of doing business in the Philippines and the payments and settlements system, as well as the amended BSP Charter.

Guinigundo said the updated BSP charter is “very important” because it is what credit rating agencies have been waiting for and is a credit positive since future ratings’ upgrade will reduce the government’s cost of borrowings. Highlights in the charter that credit rating agencies emphasized includes the higher capitalization and the BSP's restored authority to issue its own debt instruments for monetary stabilization purposes.