Nomura Sees PH ‘Growth Disappointment’ In 2021, Further Rate Cuts

MANILA – Philippine economic growth next year is likely to disappoint due to limited fiscal support, and this will lead the Bangko Sentral ng Pilipinas to cut rates, global financial services firm Nomura said on Tuesday.

Nomura said that the BSP will likely lower its policy rate by another 50 basis points in the first quarter to support the Philippine economy.

The BSP has already cut interest rates by a cumulative 200 basis points this year and cut the reserve requirement ratio for banks by 200 basis points to 12 percent.

The BSP took an unexpected 25 basis point policy rate cut during its last rate-setting meeting in November, its fifth rate cut of the year, as it saw the need for further relaxation to prop up the economy after a GDP worse than expected. contraction in the third trimester.

Nomura said Asia’s central banks are likely to be hesitant to undo their easy policies due to the uncertainty of vaccinations in the first half, negative output gaps, below-target inflation, currency appreciation and rates. policy of the US Federal Reserve No change.

“We expect further easing in parts of ASEAN by the first quarter of 2021, and rates unchanged elsewhere. With more certainty of the vaccine in the second half, some central banks are likely to give a gradual change in tone, but through a normalization of excess liquidity and macroprudential tools to begin with. “Nomura said.

Philippine business leaders have previously said that the amount the government planned to spend by 2021 was not enough to stimulate the economy.

However, the government’s economic managers refused to consider increasing the planned fiscal stimulus package saying that the government had no more funds to spend and that they did not want to risk the country’s credit rating by borrowing more.

The World Bank further lowered its outlook for the Philippines this year, citing the lingering effects of the pandemic, as well as the impact of recent storms.