RRR cuts to support PH 6% growth, peso

MANILA - An economist of a local bank expects better results for the Philippine economy and the peso this 2019 following the series of cuts in banks’ reserve requirement ratio (RRR).

Rizal Commercial Banking Corporation (RCBC) lead economist Michael Ricafort, in a reply to an e-mail from the Philippine News Agency (PNA), said a 1 percentage point reduction in RRR is projected to bring in additional PHP110 billion into the banking system.

“This will further spur greater loan growth and more economic activities and faster GDP growth,” he said.

“Recent sharp growth in government spending especially on infrastructure, together with RRR cuts and policy rate cuts would further raise the odds of GDP growth of at least 6 percent for 2019,” he said.

To date, Bangko Sentral ng Pilipinas’ (BSP) policymaking Monetary Board (MB) slashed by 400 basis points (bps) the RRR of universal and commercial banks (U/KBs) and thrift banks (TBs) while it is 300 bps for non-bank financial institutions with quasi-banking functions (NBQBs), 200

bps for rural banks (RBs), and 100 bps for cooperative banks (coop banks).

The initial reductions were implemented last May to July while some will take effect in the first week of November and the first week of December.

By the end of this year, the RRR level of U/KBs will be 14 percent, RBs, 3 percent; TBs, 2 percent; and NBQBs, 14 percent.

These reductions were made to make Philippine banks’ RRR level at par with their counterparts in the region.