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MUFG Global Markets Research analyst Sophia Ng. (File photo)
MANILA – An economist at MUFG Global Markets Research forecasts a further cut in key Bangko Sentral ng Pilipinas (BSP) rates, but this is forecast to happen in 2021, when domestic liquidity growth (M3) has slowed to around 10 percent.
In a virtual briefing on Thursday, Sophia Ng, an analyst at MUFG Global Markets Research, said she expects the central bank’s accommodative policy to hold for the next two years.
“The way forward is to cut rates. I think in terms of M3 growth I guess the BSP comfort level could be below 10 percent for M3 results, so they could be comfortable with another rate cut, ”he said.
To date, the BSP’s Monetary Board (MB) dramatically lowered the central bank’s key rate by a total of 175 basis points in an attempt to help boost the national economy from the impact of the pandemic.
Preliminary BSP data on M3 growth for August 2020 shows a year-on-year increase of 14.2 percent, a slight change from 14.7 percent in the previous month.
Internal liquidity continues to be ample and the BSP ensures that this is maintained through a combination of policy rate cuts, as well as the reduction of the banks’ legal reserve ratio (RRR), among others, to boost economic activity. in the middle of the pandemic.
The national economy entered a technical recession in the second quarter of the year, when the 0.7 percent contraction in the first quarter was followed by a deeper impression of -16.5 percent in the following quarter.
Economic managers aim for production this year to be -5.5 percent, but a recovery of between 6.5 and 7.5 percent is expected by 2021.
Ng said MUFG forecasts that domestic production, measured by gross domestic product (GDP), this year will be -6.3 percent.
He said that domestic demand is expected to remain soft as the community quarantine is still in place in Metro Manila, which accounts for more than half of the country’s annual production.
For 2021, Ng said his growth forecast for the Philippines is higher than the government’s target at 7.2 percent. (PNA)
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