BANGKO SENTRAL MAY LIKELY KEEP RATES STEADY
AMID robust Philippine demand to propel growth this year, the Bangko Sentral ng Pilipinas (BSP) will likely keep rates steady in its second meeting in March, the Hongkong and Shanghai Banking Corp. (HSBC) said.
Trinh Nguyen, HSBC economist, said that domestic demand will continue to drive growth for the country, which should ease pressure for Philippine monetary au- thorities to cut rates.
Fourth quarter growth accelerated to 3.7 percent year-on-year on the back of strong consumption and fixed investments.
Much of this was bolstered by strong remittances and increased government spending in the last quarter of 2011.
”As such, we expect the BSP to hold rates steady in March,” Nguyen said in a commentary. In the fourth quarter, private consumption rose 6.7 percent year-on-year from 7.1 percent in the third quarter, and government consumption expanded by 5.8 percent versus 7.1 percent in the previous quarter.
Exports of goods declined by 10.8 percent year-on-year, while service exports jumped by 18.5 percent versus a 5.6-percent expansion in the third quarter. Total imports declined by 3.3 percent in contrast to the third quarter when it expanded by 0.4 percent.
” It is no surprise that growth slowed in 2011. In fact, fourth quarter growth was more robust than we had anticipated given the collapse in exports and impact of recent natural disasters. For much of the year, manufactured exports recorded negative growth due to the impact of both Japan-related supply chain disruptions and low external demand for Philippine electronics,” Nguyen noted.
With exports expected to continue to contract for most of the year, HSBC projects economy to grow by 3.6 per- cent this year, with domestic demand both from private and government consumption to act as counterbalance to preserve positive growth.
”Monetary officials have already eased liquidity conditions once by cutting key interest rates by 25 basis points in January 2012. Looking ahead, given that liquidity remains ample in the system, we do not expect further cuts from the BSP. Moreover, the acceleration of growth in the fourth quarter and an upward revision to third quarter’s growth print would have helped to temper pressure for monetary officials to accommodate growth,” Nguyen said.