World Economy

Philippines to Keep Key Rates Steady

The central bank of PhilippinesThe central bank of Philippines

Capital Economics said the Bangko Sentral ng Pilipinas is set to keep interest rates steady amid robust domestic demand and the stable inflation environment.

In its latest Emerging Asia economic outlook, the think tank said low interest rates would continue to provide support to the domestic economy while inflation would remain within the 2-4% target range of the BSP, PNA reported.

Capital Economics said the country’s gross domestic product growth would ease to 6.5% this year and next year from 6.9% last year while inflation would accelerate to an average 3.5% this year before slowing down to 3% next year from 1.8% the previous year.

“Accordingly, the central bank is likely to keep its policy rates at their current low, supportive levels,” the think tank said.

Save for the operational adjustments last June with the launch of the interest rate corridor system, the BSP’s Monetary Board has kept interest rates steady since September 2014.

According to Capital Economics, stronger global growth should provide a boost to export demand over the next year while strong income growth, healthy household balance sheets and buoyant remittances would help support private consumption growth.

It added government spending would remain strong after President Rodrigo Duterte announced his intention to build upon the efforts of his predecessor in increasing infrastructure spending to address the historical problem of underinvestment.

The think tank said the low level of government debt means there is scope for the government to increase spending. “Healthy fundamentals mean the economy is well-placed to grow strongly over the medium term. The Philippines has some of the most growth-favorable demographics in the region,” it said.

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